ADD, GST and PPAs – Dampener in 2017

2017 was an important year for solar in India. The country achieved a historical low tariff of INR 2.44/ unit for solar power and also managed to become the cheapest place to install solar systems in the world. India currently ranks as the sixth largest solar power country in the world.

As of November 2017, solar energy projects with an aggregate capacity of over 16,611 MW (including 864 MW from solar rooftop projects) have been installed in the country.

The country has a huge potential for the solar market with around 300 sunny days a year – that’s more than 80% of the total number of days in a year. India is now estimating 40% of its cumulative electric power capacity to be generated from non-fossil fuel based energy resources by 2030. The MNRE intends a clean energy rollout trajectory involving setting up of 77 GW of solar capacity by 2020 at an approximate investment of INR 3, 50,000 crores.

Also, read A Happy New Year For India’s Renewable Energy Targets

However, the year also witnessed uncertainties around GST, ADD and signing of PPAs which led to delays in commissioning of several solar plants in the country. An overall slowdown in installations and a slowdown in tenders and auctions was witnessed in the country.

A lack of clarity around the Goods and Services Taxes (GST) is a concern for the solar sector. Initially, a rate of 5% was announced for all solar components, which was then clarified to 5% only for solar modules and 18% or more for other components.

With solar prices declining, the Indian utilities completely halted signing of new PPAs as they had paid too much for the power bought earlier. Signing long-term PPAs did not make much sense in a falling price scenario.

Solar prices reached historical lows of 2.44/kWh in 2017 (bid for a solar utility project in Rajasthan) from a price of INR 5/kWh by Sky Power (in 2016) which was then considered irrational too. If a utility had waited for a year, it would have seen its buying price cut in half leading to hundreds of crores in savings.

The Indian solar companies are suffering from cheap solar imports which are flooding the Indian market. India initiated a probe into Chinese solar panel imports after a petition by the Indian Solar Manufacturers Association (ISMA) to impose ADD (anti-dumping duty) on Chinese solar imports into India. The government is still to announce a decision on imposing anti-dumping duties on imports of solar panels from major Asian countries such as Malaysia, Taiwan, and China.

All these factors led to challenging conditions and delays in project commissioning in 2017. We hope 2018 will bring more clarity to these topics.