Mercom Capital Group has once again revised its estimates for solar power capacity addition in India for the calendar year 2017. The research group had earlier estimated that more than 9 gigawatts of solar power capacity would be added this year.
According to the latest revision, India will likely see an addition of 10.5 gigawatts of solar power capacity in 2017. The jump in installation forecast, Mercom says, is the strong project pipeline that exists at present. This optimistic picture is likely to change next year, in which the company expects only 8 gigawatts of capacity addition.
The 24% decline estimated by Mercom would likely be due to the uncertainty around the implementation of a 5% Goods & Services Tax (GST) on the solar power market, and efforts by many state power utilities to renegotiate the tariffs of solar power projects.
India has already seen 4,102 megawatts of solar power capacity during the first six months of 2017, compared to 3,459 megawatts during the same period last year.
Mercom, however, warns that if market conditions and policy directions change, it may have to revise its projections downward for the current year. Continued lack of clarity on taxation matters under GST regime could jeopardize current and planned construction of power plants.
Another looming threat to project developers is the ongoing anti-dumping investigation by the Directorate General of Anti-Dumping and Allied Duties into Chinese solar module imports. Last month, the Indian government announced that,
it shall undertake anti-dumping investigations into solar modules imported from three countries – China, Taiwan and Malaysia. The investigation shall look at the period between 1 April 2016 and 31 March 2017 however, data for three previous years shall also be looked at.
Cheap Chinese solar modules form an overwhelming part of India’s solar imports, and any negative impact on these imports will have direct consequence on the finances of solar power projects. A 2013 government study had proposed a levy of $0.11 to $0.81 per watt on Chinese modules imported into India. This levy was never implemented though.
States like Uttar Pradesh, Tamil Nadu and Jharkhand are pushing project developers to reduce tariffs for their power projects.
Competitive auctions held in 2015 in Uttar Pradesh saw utility-scale solar power projects allocated to 15 developers in a tariff range of ₹8.60/kWh (13¢/kWh) and ₹7.02/kWh (11¢/kWh). All these projects are now nearing completion and 14 of the 15 developers have been asked to match the lowest bid of ₹7.02/kWh. This means a reduction of up to 18% for the highest successful bidder.
A similar attempt has been made in Tamil Nadu, where lawmakers are pushing Adani Green Energy to revise down its tariff of Rs 7.01/kWh (11.00¢/kWh). Adani Green Energy operates 648 megawatt solar power project in Tamil Nadu, the largest solar project in India.
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