India to add 5.4GW of PV in 2016 — Bridge to India

Bridge to India expects India to install 5.4GW of PV capacity this year, but says limited access to financing could slow annual growth in 2017 and 2018.

The forecast is slightly higher than the 4.8GW outlook the Gurgaon-based consultancy issued in January.

“There is burgeoning investment interest both from Indian and international developers in the sector,” the research firm says, arguing that Indian PV is in “full bloom,” as annual solar installations are set to trail only China, the US and Japan this year.

About 25GW of capacity is now under development throughout the nation, with 35 tenders — or 15.5GW of new capacity — announced over the past year.

An additional 5GW of new tenders will be announced in the coming months.

Bridge to India’s 2016 forecast marks a significant shift from the average annual installations of roughly 1GW seen in the three straight years to 2014.

However, its installation estimate for the current year is sharply below the 12GW of additions that the Ministry of New and Renewable Energy (MNRE) is targeting through fiscal 2016-17.

One of the reasons growth could start to slow after this year is that many developers are now struggling to raise capital, as banks are becoming increasingly wary of lending to the solar sector. 

In addition, Bridge to India expects the country to install just 57GW of  solar capacity by 2022, which is far below the MNRE’s target of 100GW.

Part of the problem is the rooftop PV segment, which has not been growing as quickly as initially hoped.

The government’s target of 40GW of rooftop capacity by 2022 now appears to be “a very remote prospect,” the research firm says, attributing this to lacklustre policy support.

“This should be an alarm call, particularly for the government and all policymakers,” Bridge to India says. “Most of the government focus so far has been on large policy-driven, ground-based projects.”

Despite this, the current economic climate bodes well for future rooftop PV deployment, with the segment set to expand at a compounded annual growth rate of 58% per year, it says.

At the utility scale, the government will need to oversee the strengthening of the national grid and facilitate access to financing to ensure future growth.

“Policy interventions to address these challenges together, with demand growth measures, will be key to the sustainable growth of the sector,” it says.

Under the central government, National Thermal Power Corp. (NTPC) and Solar Energy Corp. of India (SECI) have announced project tenders exceeding 9GW to date.

And southern states such as Karnataka and Andhra Pradesh are increasingly turning to solar to cover power shortages.

“But with power demand showing slow growth and grid stability issues growing more important over time, particularly in areas of high renewable penetration, we expect a slowdown in the sector after 2017 and 2018,” Bridge to India says.

However, it also says that financially strong international utilities and IPPs will likely play a bigger role in future development.

“Overall, the growth prospects for the India solar market are very bright, providing an immense opportunity for investors, developers and equipment suppliers. But a dose of caution is needed as the market will remain very price sensitive and with its share of challenges.”