Strong growth expected in the solar sector in 2021
February 23, 2021 – India added 3,239 megawatts (MW) of solar capacity in the calendar year (CY) 2020, a 56% decline year-over-year (YoY), compared to 7,346 MW installed in CY 2019, according to the newly released 2020 Q4& Annual India Solar Market Update by Mercom India Research.
Large-scale solar projects accounted for 78% of installations with 2,520 MW and saw a 60% YoY decline. Rooftop installations made up the remaining 22% adding 719 MW, a 35% drop YoY.
Andhra Pradesh, Rajasthan, and Gujarat were the top three states for large-scale solar capacity additions, representing around 51% of 2020 installations.
"India's solar installations in 2020 were the lowest in five years. While other top solar markets in the world have experienced positive growth, India, which had one of the most stringent lockdowns in response to the pandemic, took a while to get back up and running. However, we expect the industry to experience significant positive growth in 2021," said Raj Prabhu, CEO of Mercom Capital Group.
The report highlights other short-term challenges such as the rise in module prices, increased shipping and freight charges in the range of 500%-800%, and a surge in raw material costs. As a result, the average large-scale solar project costs increased slightly by 2% quarter-over-quarter in Q4 2020. However, project costs were 2.5% lower compared to the same quarter in 2019, according to the report.
Once economic activity resumed post lockdown, installations picked up in the second half of 2020. The pandemic has made solar more valuable to commercial and industrial (C&I) customers, noted the report. Rooftop solar is one of the cheapest sources of power for C&I customers considering the high retail tariffs. Booming sectors like agro, textiles, chemicals, pharma, hospitals, and education were some of the industries that have been pushing to go solar.
The rooftop solar market is experiencing a turnaround, with installations improving significantly over the second half of the year. Fourth-quarter was the strongest for rooftop installations, and the report predicts momentum to continue into Q1 2021.
The biggest uncertainty looming over the rooftop solar market is the new net metering policy, which restricts net metering to rooftop solar systems of up to 10 kW and mandates gross metering on systems above 10 kW. The provision has caused widespread anxiety among stakeholders who fear that it may decimate the Indian rooftop solar segment.
According to the report, India had a robust large-scale solar project development pipeline of 47.5 GW, with another 24.5 GW of projects tendered and pending auction at the end of Q4 2020.
Mercom India Research is forecasting over 10 GW of solar installations in 2021.
"The solar industry has shown incredible resiliency amid all the chaos brought on by the pandemic. The market is on the verge of experiencing two of its best years-to-date in 2021 and 2022 unless further disruptions in the form of ill-conceived policies hurt growth," said Prabhu.
The share of solar power in India's installed power capacity mix reached 10.3%, exceeding that of wind-based power sources (10.25%) for the first time. Solar, with 48%, accounted for the majority of new power capacity additions in 2020. Renewable energy sources accounted for about 78% of the new power capacity added in 2020.
The Indian solar market added 1,505 MW in Q4 2020, a 244% increase, compared to 438 MW installed in Q32020. However, installations were down by 21% compared to 1,897 MW installed in Q4 2019.
Key Highlights from Mercom India Research's 2020 Q4 and Annual India Solar Market Update
- India added 3.2 GW of solar in CY 2020, a 56% decline compared to 7.3 GW installed in CY 2019
- Large-scale solar installations in CY 2020 accounted for 78% with 2.5 GW, and rooftop made up the remaining 22% adding 719 MW
- Cumulative solar installed capacity in India was approximately 39 GW at the end of Q4 2020
- The large-scale solar project pipeline in India stood at 47.5 GW, with another 24.5 GW of tendered capacity pending auctions at the end of Q4 2020
- Solar with 48% accounted for the majority of new power capacity additions in 2020
- Renewable energy sources accounted for about 78% of the new power capacity added in 2020
- Electricity generated from solar in CY 2020 crossed 58.2 billion units
Mercom's India Solar Q4 & Annual 2020 report is 128 pages and covers all facets of India's solar market. For the complete report, visit: https://mercomindia.com/product/2020-q4-annual-india-solar-market-update
About Mercom Communications India
Mercom Communications India, a subsidiary of U.S.-based Mercom Capital Group, is a clean energy research and communications firm in India recognized worldwide for its expertise in Indian cleantech markets. Located in Bangalore, India, Mercom has been providing communications and research services across India for clean energy organizations since early 2009. For more information, visit: https://www.mercomindia.com
About Mercom's India Solar Market Update
Mercom's India Solar Quarterly Update is the most in-depth and accurate report available on the state of the Indian Solar Market. The report covers the entire solar market, pricing, policies, and forecast that will help companies navigate the challenges as well as take advantage of opportunities in the market. For more information visit: https://mercomindia.com/research/
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