Why has Solar Growth slowed down

India installed around 8 GW of solar capacity last year which was a fall from 2017, as rising duties on solar panel imports and tender cancellation led to the dampening of growth. However, despite the fall in growth, India was the third largest country in the world in terms of solar capacity additions and even in India, solar power accounted for more than 50% of new capacity addition, far eclipsing thermal power capacity growth around 4 GW and wind power at less than 2 GW.

Solar Panel Duties

Gas and nuclear have become marginal in India’s power generation sector with hardly any new additions. The solar safeguard duty of 25% imposed in July last year, has raised solar project costs and with Indian buyers loath to pay more than INR 3/kWh for solar power, the overall sector growth has been hit. Many of India’s developers and utilities are looking at 2020 for pushing growth when the safeguard duty becomes zero. This year should see installs between 7-8 GW again, with rooftop solar becoming a contributor of around 25-30%. While ground mounted installs fell last year, rooftop solar continued its rapid growth driven by favorable policies and falling prices. The economics of rooftop solar is very good as it does not require transmission and can be put up by consumers themselves.

Southern states have reached a Saturation point

Solar power faces another major challenge as some states have reached saturation in terms of solar power capacity. India’s southern states, which used to be the most power deficit before the solar revolution, have installed a large number of solar power plants. Karnataka has more than 5 GW of solar power installed and does not want to install any more large capacity as it has become more or less power surplus for the next 3-4 years. Same is the case with some of the other states though on a lesser degree. This means that some of the biggest drivers of solar power like AP, Telangana, TN and Karnataka will no longer take the leadership in growing solar power. This means slower times for solar power developers.

Land and transmission are the other perennial challenges that limit solar power growth from the supply side. However, solar power is expected to accelerate next year as the economics become more compelling and the safeguard duties go away. The push from rooftop solar and other forms of off-grid solar products is also expected to heavily drive the growth in solar power installations.