Solar Fastest Growing New Energy Source in India

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Solar represented 2.5 percent of the net installed capacity in India, up from 1.4 percent a year ago, and was the fastest growing new energy source in the country. Solar accounted for 17.4 percent of all renewable energy generation in FY2015-16 compared to 10.5 percent in FY2014-15.

India’s solar project pipeline has now surpassed 22 GW with ~13 GW under construction and ~9 GW in the Request for Proposal (RfP) process.

According to a global clean energy communications and research firm, Mercom Capital Group report, solar installations in India is likely to be 5 GW for calendar year 2016.

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Cumulative solar installations in India crossed the 7.5 GW mark as of May 2016 with about 2.2 GW installed so far this year, more than all of the solar installations in 2015.

“The Indian solar market is growing in size but the question is: is it too much too fast, as infrastructure and systems have not kept pace with auction announcements. For the sector to move from 2 GW to a 10 GW a year market, work still needs to be done,” says Raj Prabhu, CEO and Co-Founder of Mercom Capital Group.

The government has shown a strong commitment to renewables and it’s push towards solar is beginning to show results, at the end of FY2015-16.

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Low bidding levels through reverse auctions have been a major concern at a time when the Indian banking sector is going through its own challenges, which could make borrowing much more difficult in the short-term.

On a slightly positive note, the lowest tariff of Rs.4.34 (~$0.0638) seems to have been a outlier with all subsequent auctions coming in at Rs.4.66 (~$0.0685) or more.

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Of the estimated $8 billion (~Rs.54,400 crore) collected under the Clean Environment Cess to date, only about $3 billion (~Rs.20,400 crore) is expected to be transferred to the National Clean Energy Fund (NCEF).

The Ministry of New and Renewable Energy (MNRE) is likely to be allocated only 23 percent of the total amount collected so far under the Clean Environment Cess. With late tariff payment problems and rooftop subsidy delays, creation of a ‘reserve backstop fund’ against non-payments or delayed payments by DISCOMs using NCEF funds could have an immediate positive impact, eliminating offtaker risk, reducing interest rates and increasing lending.

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