India adds 1.1 GW of solar in Q1 2020: Mercom India

Our Bureau Mumbai | Updated on May 20, 2020

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India has added 1,080 megawatts (MW) of solar in the first quarter (Q1) of 2020, a 43 per cent decline compared to 1,897 MW installed in Q4 2019, according to a report by Mercom India Research.

Solar installations were down by 39 per cent year-over-year (YoY) compared to 1,761 MW added in Q1 2019. Solar capacity additions in India in Q1 2020 were the lowest in a quarter since Q4 2016. In Q1 2020, large-scale solar projects totalled 886 MW, and rooftop solar installations added up to 194 MW.

“The lockdown in the country disrupted the supply chain, lowered power demand, resulted in currency fluctuations making component costs unpredictable, and has exacerbated the liquidity issues. We are cutting our solar demand forecast by about 40 per cent from our previous estimates based on the Covid-19 effect on the market,” said Raj Prabhu, Chief Executive Officer of Mercom Capital Group.

The report forecasts solar installations of about 5 gigawatts (GW) in 2020 as project timelines are extended and moved to 2021.

Supply disruption

The report identifies the lockdown from March 25, and the supply disruption caused by the shutdown in China as the reasons for solar installation declines in Q1 2020.

The disruption in India’s solar supply chain began with the work stoppage that started in China in February 2020. As a result of the supply shortage, construction activity was affected even before the lockdown was imposed in India.

The report noted that components shipping from China are yet to resume. Logistical issues are preventing goods from reaching project sites. Labour issues are also looming; most of the companies do not have the labour force to begin construction or production right away.

“As the market gets ready to open back up, we can expect to see shortages resulting in an increase in labour and component costs in the near-term. The next couple of months are critical, and any further extensions could mean further reductions in our forecast,” said Prabhu.

As at the end of Q1 2020, cumulative solar installations reached 36.8 GW. Large-scale projects accounted for 32.2 GW, whereas rooftop solar installations accounted for 4.6 GW.

The large-scale solar project development pipeline stands at 36.9 GW, along with 38.8 GW of projects tendered and pending auction at the end of Q1 2020.

Karnataka topped the list of states for cumulative large-scale solar installations accounting for about 23 per cent of the total installed capacity in the country. Rajasthan was ranked second with 15 per cent of installed capacity. Andhra Pradesh, Tamil Nadu, and Telangana rounded out the top five states for large-scale solar.

Rooftop installations were severely affected as businesses have been under lockdown. The commercial and industrial segments, which made up 96 per cent of installations in Q1, were especially hard hit. However, demand has started picking up, and some key industries like textiles and pharmaceuticals are ramping back up, in a positive sign for the industry.

“The next phase, when the country opens back up in stages, is important to monitor. If the outbreak intensifies after re-opening, then all bets are off. But if things go as planned, the solar industry should be up and running fairly quickly,” Prabhu added.

Despite a tough quarter, solar installations accounted for 65 per cent of all power capacity added in Q1 2020. Renewables as a whole, including wind and hydro, made up for a record 95 per cent of capacity additions in the quarter.

In Q1 2020, investments in the India solar sector totalled over $970 million (~₹72.9 billion), 40 per cent lower compared to Q4 2019.

Published on May 20, 2020

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