Solar installations in India to double to 4GW in 2016: Mercom Capital

Virendra Pandit Updated - January 27, 2018 at 12:03 PM.

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Mercom Capital Group, a global clean energy communications and research firm, on Wednesday, forecasted that India’s solar installations would double to 4 Giga Watt (GW) in the calendar year 2016, a nearly 100 per cent year-over-year (YoY) growth from the 2015 total of 2,133 MW.

“The Indian solar sector is finally coming out of hibernation,” said Raj Prabhu, CEO and Co-Founder of Mercom Capital Group, in the quarterly update on Indian solar energy market. “Solar installations in 2015 increased by 142 per cent after three years of remaining flat, and we expect 2016 and 2017 to record strong growth.”

There are currently just over 10 GW of solar projects under development, with cumulative solar installations in the country totalling 5,632 MW and about 8.4 GW expected to be auctioned off over the next few months.

The latest auctions have hit new lows at ₹4.34/kWh, a drop of about six per cent in the last three months. Projects with tariffs under ₹5/kWh, unless built at a cost of ₹5 crore or below, are considered extremely risky and difficult to finance by lenders and most developers. Most of these projects are, however, expected to be commissioned in 2017 and developers hope that in the time period between bidding and procurement, module and balance of system (BOS) costs will continue to drop along with interest rates to make these projects feasible, he said.

Accelerated depreciation will be reduced from 80 per cent to 40 per cent, beginning FY 2017. This reduction will mostly affect rooftop solar, some large-scale projects and the wind sector. The Clean Environment Cess has been doubled from ₹200/tonne to ₹400 /tonne, making solar power more competitive by increasing the cost of coal. But, increased costs are expected to be eventually passed on to consumers in the form of higher electricity bills.

“Furthermore, nearly half of this tax in the past has gone to the Ministry of Water Resources for the Ganga rejuvenation project and we cannot assume that the entire amount collected from the new coal tax will go towards renewable energy.”

In January, the Cabinet approved amendments to the revised tariff policy, envisaging that eight per cent of electricity consumption be procured from solar energy by March 2022. This is an important step towards achieving the 100 GW goal.

Published on March 9, 2016 09:43