The pipeline of utility-scale projects currently stands at about 10.6 Gw, with another 4.3 Gw of tenders pending auction. Solar was the fastest-growing in the country's renewable energy space in 2017, accounting for over 45 per cent of all new power installations. This robust pace of installations also made solar the largest single source of new power capacity additions in 2017.
In 2017, Telangana and Karnataka installed over 2 Gw each, making up approximately 50 per cent of all installations across the country. Telangana became the first Indian state to surpass 3 Gw of cumulative solar installations during the year.
However, despite the encouraging installation numbers, many completed projects were unable to get commissioned before year end due to evacuation and grid connection delays. This, and a host of other challenges currently facing the sector, are key reasons Mercom has forecasted a decline in solar installations during calendar 2018.
The lower forecast reflects a smaller pipeline of projects scheduled for commissioning in 2018. Auction activity was not very robust in 2017 and though there was a surge in activity towards the end of the year, most projects that were tendered are not likely to be commissioned until 2019, a factor that is reflected in Mercom's five-year forecast.
Solar bids and tariffs stabilised at around the Rs 2.5 ($0.039) per Kilowatt Hour (kWh) mark, since the lowest solar tariff of Rs 2.44 ($0.0370) was quoted by ACME Solar in Bhadla Phase-III solar park auction held in May 2017.
Meanwhile, there are several challenges facing the industry that threaten to slow installation growth in 2018. In January this year, the Directorate General of Safeguards Customs and Central Excise recommended imposing a 70 per cent safeguard duty on solar cells and modules imported from China and Malaysia for 200 days. The Madras High Court temporarily stay this recommendation, but the sudden and aggressive manner in which was made brought the industry to a standstill.
An unresolved anti-dumping case, which made no progress in the fourth quarter of 2017, is another issue that may impact the sector. The Directorate General of Anti-Dumping (DGAD) is expected to issue a recommendation in the second half of 2018.
Port duty is another hurdle for solar developers as the unexpected 7.5 per cent (plus education cess) tax came after Indian ports abruptly began reclassifying solar modules in the second half of 2017. Though the government has stepped in to make it possible for developers to furnish a bank guarantee or a provisional bond to have their modules released from port custody, the issue is yet to be fully resolved.
Chinese-module average selling prices (ASPs) rose for the second consecutive quarter in Q4 of calendar 2017, affecting developers who won projects at extremely low bids. ASPs were up approximately four per cent during the fourth quarter, and by as much as 19 percent during the second half of 2017.
"The imposition of any additional duties would make solar more expensive and potentially scare away financially strapped distribution companies (discoms), which are looking to procure the cheapest power source available. On the positive side, more than 3 Gw of large-scale solar projects were tendered in December 2017 alone. Once the cloud of uncertainty passes, most of these projects are likely to come up for commissioning in 2019 and beyond – a factor that is reflected in our forecast," Mercom said.