A Decline in Solar Growth: Root Cause Analysis

Although India currently has ~24 GW of installed grid-connected solar power capacity, the country needs to install near about 18 GW of solar energy capacity for the next 4 years to reach the set 100 GW target. In such a scenario, slowing down solar panels installations should be considered as a threat to the solar mission, that promised to bring ‘Power for All’.

However, considering India’s recent decline in solar panel installation growth, it presents an issue for the Government and the country to focus on. Although it is clear that solar energy system is getting nationwide acceptance, it is important to note that decline in solar growth will only delay reaching the set energy targets, and bring a larger gap between energy requirements and deficit.

solar energy

Decline in Solar Installation

Solar panel installations in Q1 2018 stood at 3.3 GW, which was higher than Q1 2017 (3 GW). However, further into the year, the installation rate dipped considerably, showing only 1.6 GW in Q2 and 1.5 GW in Q3. To draw a perfect comparison we need to highlight that solar panel installation rate had fallen in 2017 as well, but in 2018 the decline rate is much higher than its previous years (30% year-over-year). Although rooftop solar panel system installation growth in 2018, has shown a better trajectory than 2017, the bigger picture still remains dull.

Reasons behind the Decline

solar panel installation

2018 had to suffer from a slowdown in tender and auction activity that started in last year, However, the impact of a few policies like safeguard duty, that were initially thought to be protectors of the industry eventually presented huge hurdles for its growth.

Imposition of Safeguard duty, lack of clarity on GST rate applicability on solar power projects unavailability of land and evacuation facilities are the major hurdles responsible for sluggish growth of the solar power sector.

Frequent project cancellation- Government of India trying to reduce the solar tariff continuously is another issue that is halting the growth of solar, as seen when solar energy projects standing at the cumulative capacity 3.9 GW was cancelled in 2018 by GUVNL, UPNEDA, SECI in a bid to drive down the tariff even lower.

States failing to reach RPO obligation- Nearly, 25 Indian states are behind in reaching set RPO targets. Sates have been failing to reach the targets for quite a while now (5 years in a row). Rajasthan, Gujarat- states that are doing well in solar and have huge potential in leading solar energy in India, are surprisingly in the list of states that are failing to meet RPO targets.

As it seems, combined opposition of all these issues is unfortunately strong enough to slow down solar power growth in a willing and capable country. The only way out of this cycle is to focus on manufacturing and solar panel manufacturers in India to reap that advantage that Solar has to offer.

Way Forward

solar energy system

Solar energy stands as a great opportunity for developing countries to phase out fossil fuel and its growing expenses while transforming the country with industrial, social, and economic growth. However, India spends more and more foreign currency, importing green energy components, allowing foreign suppliers to control India’s energy future. Focusing on manufacturing by supporting domestic manufacturing industry with investment will help India scale great heights, just as China enjoyed claiming foreign markets by undercutting their market prices. By growing its solar panels manufacturing capacity, China was able to support its own solarisation, ring in revenues from foreign export and create jobs, furthering industrial growth.

Although Indian solar power industry’s growing percentage within country’s energy capacity addition is a win, India needs to achieve this in a self-sustainable manner by deploying solar projects based on domestic manufacturing industry.