India solar sector being hit by economic slowdown

The solar sector in India is being impacted by the economic slowdown in the country and the resulting slowdown of investments.

That’s the conclusion of a new report from analysts at research firm GlobalData.

The study states that the government’s Ministry of New & Renewable Energy has set a target of 8.5 GW of solar installations during the current financial year, of which around 3.5 GW were installed by October, which marked 41 per cent of the annual target installation.

The annual target for the 2018-2019 financial year was 11 GW, out of which the sector installed around 6.5 GW, contributing around 59 per cent of the targeted installations.

The report suggests that one of the primary reasons for the drop in installations is lack of investment in the sector because of the economic slowdown. 

GlobalData project manager Mohit Prasad said: “The economic slowdown is impacting the rooftop solar PV sector, which was the bright spot in the previous year. The sector has been hit by the slowdown, with installations dropping by 43.6 per cent in the quarter ended September 2019, on a year-on-year basis. The sector has achieved installations worth 482.45 MW till October-end against the financial year target of 1000 MW.”  

Prasad added: “The corporate and commercial customers, who are the key players in the solar rooftop space, are witnessing drop in their sales, and therefore subsequently in their investments and new rooftop solar installations.” 

The report states that the credit ratings of some of these customers have also been downgraded, making it difficult for them to get financing for the power projects. Banks and non-banking financial companies are also not funding the power projects at the same levels, which were witnessed last year. 

Solar installations in India are promoted through auctions. The slowdown is causing investors to shy away from bidding in the auctions. The rate caps associated with individual auctions are another reason for the reluctance of investors in the bidding processes, resulting in frequent cancellation of auctions.   

Regulations across different states vary and the frequent changes hurt business sentiments. Especially, the rooftop installations, which don’t operate in a streamlined environment, become easier targets for distribution companies to regulate. Commercial and industrial customers require protection from such interference. 

Prasad concludes: “Rooftop solar has been the fastest growing sector and it should increase the pace further in order to achieve the 2022 target of 40 GW. But with these challenges, the sector has been struggling to keep up the pace. The government must take measures to overcome the downturn and roll out streamlined regulations so that the sector can again contribute and help the country achieve its renewable energy target.” 

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