The 'hibernation period' of India’s solar sector is
coming to an end, believes Mercom Capital CEO and co-founder Raj Prabhu, who
has forecast the market to exceed 4 GW of solar PV installations in 2016.
The stirring of this sleeping solar giant will deliver a
significant boost to global installations this year and next, with India
forecast to double its 2016 capacity additions further in 2017, reaching more
than 8.1 GW of new solar installations.
In 2015, solar grew by 142% following three years of
relatively flat growth, the Mercom Capital report found. Last year’s solar PV
installations hit 2,133 MW, up from 883 in 2014 and 1,004 in 2013. This year,
Mercom is forecasting 4,054 MW of new solar additions.
Currently, India has just over 10 GW of
solar projects under development, and cumulative capacity stands at 5,632 MW,
the bulk of it solar PV, with solar thermal making up the numbers. Over the
coming few months, a further 8.4 GW of new PV projects are expected to be
auctioned off.
"There is cautious optimism in the solar industry as
aggressive bidding remains a major concern throughout the sector," said
Prabhu. India’s recent swathe of solar auctions delivered industry-beating lows
of INR 4.34 per kWh ($0.064/kWh), which represents a 6% price decrease in just
three months.
According to Prabhu, projects with tariffs of $0.0735/kWh
are "extremely risky and difficult to finance" unless they are built
at below a total cost of 5 Crores, which is $0.7 million.
The hope, however, is that most of these projects will be
commissioned in 2017, by which time the industry will have engineered greater
cost reduction in balance of systems (BOS) and further falling interest rates
in order to deliver viability to the projects.
New budget brings cheer
In this year’s recently announced Indian budget, a suite of amendments should serve to boost the solar sector, not least accelerated depreciation from 80% to 40% at the beginning of fiscal year (FY) 2017. Further, an increase in the Clean Environment Cess tax – from INR 200 (approx. $3) per ton to INR 400 ($6) per ton will make solar projects more competitive against coal, which will now be more expensive to produce and consumer.
In this year’s recently announced Indian budget, a suite of amendments should serve to boost the solar sector, not least accelerated depreciation from 80% to 40% at the beginning of fiscal year (FY) 2017. Further, an increase in the Clean Environment Cess tax – from INR 200 (approx. $3) per ton to INR 400 ($6) per ton will make solar projects more competitive against coal, which will now be more expensive to produce and consumer.
A downside of these efforts are likely to be higher
energy bills for consumers, Prabhu adds, with much of the additional tax
collected likely to be steered towards the Ministry of Water for its Ganga
rejuvenation project.
Further reforms outlined in January include an amendment
of the Renewable Power Obligation (RPO) policy, which now requires solar to
provide 8% of electricity generation by March 2022 – a significant step towards
the National Solar Mission’s goal of achieving 100 GW of solar capacity
nationwide by that date.
A recent World Trade Organization (WTO) ruling against
India’s domestic content requirement (DCR) for solar cells and modules will
likely have minimal long-term impact on the industry, harming instead only
those solar firms that have built their business model on the DCR in the
short-term.
Original Post: PV Magazine
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