Solar Installations Expected To Double In 2016, Says Mercom Report

Solar projects worth a capacity of 4 GW are expected in India this year, representing an almost 100 per cent growth from last year's 2,133 MW installations, Mercom Capital said in its quarterly market report on clean energy.

"The Indian solar sector is finally coming out of hibernation," said Raj Prabhu, CEO, and co-founder of the clean energy communications and consultation firm.

"Solar installations in 2015 increased by 142 percent after three years of remaining flat, and we expect 2016 and 2017 to record strong growth," he said.

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

"There is cautious optimism in the solar industry as aggressive bidding remains a major concern throughout the sector," said Prabhu.

Most projects under way are 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.

Mercom says that the recently announced budget did not give much for the solar industry to cheer about as accelerated depreciation will be reduced from 80 per cent to 40 per cent beginning in FY 2017.

It says that this reduction will most likely affect rooftop solar, some large-scale projects, and the wind sector.

In January, the Union Cabinet had approved amendments to the revised tariff policy. One of the most significant revisions is a Renewable Power Obligation (RPO) which would require that eight percent of electricity consumption be procured from solar energy by March 2022. This, Mercom believes, is an important step towards achieving the 100 GW goal. The firm, however, does caution that without strict enforcement this would just remain a goal.

The World Trade Organization recently ruled against India's domestic content policy for solar cells and modules after the US brought a complaint against New Delhi's policies. In the short term, Mercom says that this will affect manufacturers who are overly dependent on the Domestic Content Requirement (DCR) market.