International Market Review
Total global solar PV installed capacity surpassed 300 GW by the end of 2016. 77 GW was added in 2016, a year-on-year growth rate of 34%. China led with 34.5 GW, followed by the USA (14.5 GW), Japan (10.2 GW) and India (5 GW) in fourth place. In 2017, about 79 GW capacity is expected to be added globally, registering marginal growth over 2016. The stagnation is mainly due to policy pullbacks across major markets including China, Japan, the USA and most parts of Europe.
Meanwhile, India is expected to continue its rapid growth. With 8.8 GW of projected capacity addition (growth of 76% over 2016), it is set to become the third largest PV market in 2017, overtaking Japan. India can take the lead in driving the energy transformation both regionally and globally with one of the largest, and most ambitious, renewable energy programmes anywhere in the world. India has set a target of 175 GW of installed renewable energy capacity by 2022, including 100 GW of solar, 60 GW of wind, 10 GW of biomass and 5 GW of small hydropower.
Other key trends shaping the global solar industry include:
- Asia continues to dominate the solar industry while Europe continues to fall in rankings.
• Auctions are gaining universal acceptance – number of countries using auctions to allocate solar capacity has increased from 14 in 2014 to 22 in 2016.
• Solar module prices continue to fall faster than most experts had anticipated. Prices in India fell to 32 ¢/Wp in Q1 2017 (– 29% over last year). Such a rapid fall has made solar PV the cheapest new source of power in most countries and provided demand boost in emerging economies.
• Developed countries are slowly shifting towards utility scale projects whereas in emerging markets, governments are trying to encourage more rooftop solar growth. In India, rooftop solar has maintained a 10-12% share of overall solar capacity. This is much lower than other key markets such as US, Germany, China, Spain and Australia.
Figure 1: Capacity addition in leading international markets
Figure 2: Share of utility scale vis-à-vis rooftop solar
Indian Utility Scale Solar Market
As of March 31, 2017, India had installed 12.2 GW of utility scale solar PV capacity.
Project development landscape
As the Indian solar market grows and project sizes increase, international developers and private equity funded IPPs are playing a greater role.
Comparison of ‘Balance of System’ costs of utility scale solar in India with other countries
As evident from the Illustration 1, India is competitively placed with regard to cost of BOS in comparison with several developed countries.
The Government of India has been offering several financial incentives to promote the solar sector. But as cost of solar power is coming down, these benefits are being slowly phased out.
Viability gap funding (VGF): Solar Energy Corporation of India (SECI) has allocated 4,835 MW of project capacity under the VGF route, whereby a capital subsidy is provided to project developers bidding for projects at a predetermined tariff. As of March 31, 2017, another 785 MW of tenders under SECI VGF scheme are under process.
Accelerated depreciation: All solar projects have been historically eligible to avail depreciation of 80% of asset value but this rate has been reduced to 40% from April 2017 onwards.
Ten-year corporate tax holiday: A 10-year income tax holiday has been offered to solar projects so far, but this benefit has been withdrawn from April 2017 onwards.
Figure 3: Commissioned capacity as of March 31,2017
Figure 4: Capacity addition in leading states
Figure 5: Commissioned capacity
Figure 6: Capacity under development as of March 31, 2017 (12,381 MW)
Development of solar parks
The Government of India has sanctioned development of 40,000 MW of solar park infrastructure by the year 2020 with a financial support of M 81 billion (US $ 1.2 billion). Solar projects with a total capacity of 8,900 MW have already been allocated in eight solar parks.
Figure 7: Rooftop solar annual capacity addition
Figure 8: Rooftop solar capacity addition projections
Figure 9: India rooftop solar EPC price index
Indian Rooftop solar market
India’s total installed rooftop solar capacity is estimated at 1,247 MW as of December 31, 2016.
11.9 GW of new rooftop solar capacity addition is expected in India between 2017 and 2021.
Net metering: 29 states and 7 union territories have notified grid connectivity regulations with provision for net/gross metering but on-the-ground implementation remains patchy.
Subsidy for residential, institutional and government consumers: Ministry of New and Renewable Energy has sanctioned INR 50 billion ($ 750 million) funding for 30% capital subsidy for rooftop solar for residential and institutional consumer segments. In addition, up to 30% subsidy is also available for government projects.
Boost in government demand: Government is expected to become a major demand source for rooftop solar in the coming years. All building facilities under different central government departments are being urged to adopt rooftop solar and a potential of 6 GW capacity has been identified so far. SECI has already announced 500 MW of tenders for such buildings.
Concessional debt financing: The Government of India, with assistance from multilateral financial institutions such as Asian Development Bank, The World Bank and New Development Bank has earmarked US $ 1,470 million of concessional credit lines for the rooftop solar market.
Building bye-laws: The Government of India has recommended mandatory rooftop solar installations for buildings exceeding specified size and/or power consumption thresholds under the model Building Bye Laws. Fours states and union territories – Uttar Pradesh, Haryana, Chandigarh and Chhattisgarh – have adopted these regulations so far.
Market Growth Expectations
Solar PV has a capacity factor ranging from 16% to 19% and is estimated to produce around 350 TWh/yr of power, making up around 10% of India’s power supply. So the impact of this addition on the grid will be limited
Rooftops in densely populated cities are an important element in the availability of space for solar PV and thermal systems. By 2030 around 40% of buildings would have either a solar thermal or solar PV system on their roofs. The estimate is based on the availability of rooftops in New Delhi: at present they amount to around 31 km2, which could take an estimated 2.5 GW of solar PV modules (Greenpeace, 2013). As Delhi makes up around 1% of India’s total population, the total Indian rooftop potential may be around 250 GW. If it is assumed that there is around 50 GW of distributed rooftop solar PV (including solar home systems), around 20% of India’s available rooftop area would have a solar PV system in 2030. With around 150 million m2 of solar thermal residential and commercial systems, an estimated 20% of buildings would have them.
Besides this very significant growth in solar PV, an addition of 10 GW is also expected from concentrated solar Power (CSP). Although a growth to 10 GW may seem modest compared to the increase in PV, it still implies building 20-50 large CSP plants within the next 15 years. Gujarat and Maharashtra in the west of India, Jammu and Kashmir, Himachal Pradesh and Uttarakhand in the north, and Karnataka, Andhra Pradesh and Tamil Nadu in the south, as well as Rajasthan, are favourable locations for CSP with high direct solar radiation.
Solar capacity addition by March 2022
The industry is more optimistic than last year and expects India to add a total of 60 GW solar capacity by 2022 (+5% over last year) but still considerably below the government target of 100 GW.
Rooftop solar capacity addition by March 2022
We see the same positive trend for rooftop solar capacity addition. Average of all the responses indicates estimated rooftop capacity of +14 GW by 2022. Rapidly falling costs and government efforts to boost demand in the public sector have improved growth prospects in this market.
Challenges and Opportunities
SWOT analysis for the Indian Solar PV Industry.
Key challenges facing the growth and development of PV in India include:
- Cost and T&D Losses: Solar PV is some years away from true cost competitiveness and from being able to compete on the same scale as other energy generation technologies. Adding to the cost are T&D losses that at approximately 40 percent make generation through solar energy sources highly unfeasible. However, the government is supporting R&D activities by establishing research centres and funding such initiatives. The government has tied up with world-renowned universities to bring down the installation cost of solar power sources and is focusing on upgradation of substations and T&D lines to reduce T&D losses.
• Land Scarcity: Per capita land availability is very low in India, and land is a scarce resource. Dedication of land area near substations for exclusive installation of solar cells might have to compete with other necessities that require land.
• Funding of initiatives like National Solar Mission is a constraint given India’s inadequate financing capabilities. The Finance Ministry has explicitly raised concerns about funding an ambitious scheme like NSM.
• Manufacturers are mostly focused on export markets that buy Solar PV cells and modules at higher prices thereby increasing their profits. Many new suppliers have tie-ups with foreign players in Europe and United States thereby prioritizing export demand. This could result in reduced supplies for the fast-growing local market.
• The lack of closer industry-government cooperation for the technology to achieve scale.
• The need for focused, collaborative and goals driven R&D to help India attain technology leadership in PV.
• The need for a better financing infrastructure, models and arrangements to spur the PV industry and consumption of PV products.
• Training and development of human resources to drive industry growth and PV adoption.
• The need for intra-industry cooperation in expanding the PV supply chain, in technical information sharing through conferences and workshops, in collaborating with BOS (balance of systems) manufacturers and in gathering and publishing accurate market data, trends and projections.
• The need to build consumer awareness about the technology, its economics and right usage.
• Complexity of subsidy structure & involvement of too many agencies like MNRE, IREDA, SNA, electricity board and electricity regulatory commission makes the development of solar PV projects difficult.
• Land allotment & PPA signing is a long procedure under the Generation Based Incentive scheme.
Challenges in the utility scale solar market
The biggest concern for the sector is grid integration of growing renewable capacity followed by poor financial condition of Distribution Companies (DISCOMs).
Challenges in the rooftop solar market
Net metering implementation as the most important challenge.
Government of India is leading by example through installation of solar rooftops widely on government buildings, airports, railways network, educational institutions, residential sector and commercial complexes. Though high growth is expected and cost wise, it can reach parity with coal based power generation very soon, it is to be noted that unlike thermal power plants, rooftop PV generation (RTPV) is consumers dominated and therefore, peoples’ participation and acceptance are critical issues for its success. At the national level, manufacturing capacity, investment in R&D, investor friendly environment, skill development, low voltage grid connectivity of variable solar resource and regulatory decisions are major challenges to be resolved. As the penetration of RTPV has to increase, boost to manufacturing capabilities not only in solar modules but also in inverters and batteries is must. In skill development, providing skills for jobs of engineers, manufacturers, suppliers, repairs, maintenance, testing facilitators are some of the important challenges before the state agencies.
An outlook for linking of solar energy targets with the current missions on ‘Make in India’, ‘Smart city mission’ and ‘Digital India’ as a promise for developing capabilities and transformation of entire power system in the country is recommended. Development of off-grid systems that are ‘Grid ready’ for rural and remote areas, and making by-laws for new buildings for grid connected as ‘Rooftop ready’ should be the suggested goals for the future. If these initiative works are executed as envisaged, it is only a matter before India becomes one of the world leaders in Solar Energy.
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