By: Rahul Koul
Last updated : September 04, 2021 11:24 am
During the first half of 2021, India added 4,578 MW of solar capacity, growing 251% over the same period last year
In encouraging news, India has added 2,488 MW of solar in the second quarter (Q2) of the calendar year 2021, a 19% increase quarter-over-quarter, compared to 2,090 MW installed in Q1 of 2021.
According to Mercom India’s newly released ‘India Solar Market Update’ report, a total of 4,578 MW of solar capacity was added during the first half of 2021, growing 251% over the same period last year, surpassing installations in all of 2020.
The new solar capacity additions in the first half of 2021 were the highest ever for any year at 53% of the total power capacity additions. Renewables, including solar, wind, and hydro, made up 71% of total capacity additions in the first half of the year.
The report states that solar installations were up by 1,114% year-over-year compared to 205 MW added in Q2 2020. The cumulative solar installations at the end of Q2, 2021 reached 43.6 GW.
While the installations in Q2 2020 were adversely affected by the COVID-19 pandemic, the capacity additions in Q2 2021 were, comparatively, the highest in a quarter since Q2 2018. As per the report, installations increased despite the second wave of the Covid-19 pandemic and the lockdown imposed by various states during the first half of 2021. The growth was attributed to targeted lockdowns this year, enabling the solar industry to better deal with the contingencies.
“Even with a strong quarter, the industry continues to battle uncertainties around higher component costs and logistical issues. With duties and import restrictions, purchasing quality solar components at the best price will be the biggest challenge for the industry going forward as solar system costs ticked up for the fourth quarter in a row. The demand for building large-scale projects is extremely high, while auctions have slowed down. The government focus has shifted towards building domestic manufacturing capacities,” said Raj Prabhu, CEO, Mercom Capital Group.
Solar installations worth 9 GW predicted in 2021
According to the report, large-scale solar project development pipeline stood at 52.8 GW, with 28 GW of projects tendered and pending auction at the end of Q2 2021. Gujarat and Rajasthan were the top two states in installations, followed closely by Uttar Pradesh and Andhra Pradesh. The top ten states accounted for 95% of the total installations during the quarter.
Going forward, the report forecasts solar installations in the range of 8-9 GW in the year 2021, as the industry fared much better during the second wave of the COVID-19 pandemic.
India is aiming to achieve 227 GW of renewable energy capacity (including 114 GW of solar capacity) by 2022, more than its 175 GW target as per the Paris Agreement. In this direction, the Indian Renewable Energy Development Agency (IREDA) has invited bids from solar module manufacturers for setting up solar manufacturing units under the central government’s Rs. 4,500 crore Production Linked Incentive (PLI) scheme.
Many experts, however, have expressed their reservations on the feasibility of achieving the target due a host of challenges. The Mercom research report also states that the average selling prices of solar modules have risen for the fifth quarter in a row, and this trend would continue for another couple of quarters. Similarly, freight charges are also moving up, showing no signs of recovery in the short term.
Over the last six months, the rising price trends in commodities, including steel, aluminum, and copper, have started to take a toll on solar developers. In addition, the spike in steel prices has exacerbated the situation for engineering, procurement, and construction players and module manufacturers in the solar space.
“Although the component costs continue to rise, bids have fallen recently, bucking the trend as developers are taking a win-at-all-costs approach as new projects are not being auctioned at the required pace for the developers to sustain their operations,” added Prabhu.
During the year so far, a number of big ticket projects have been either commissioned or announced by big players in the segment.
Recently on 21st August, 2021, NTPC commissioned India’s largest floating solar photovoltaic (PV) project of 25 MW on the water reservoir of its 2 GW Simhadri project at Visakhapatnam in Andhra Pradesh. Again on 24th August, Tata Power Renewable, a subsidiary of Tata Power commissioned a 150 MW solar power project in Loharki, Rajasthan.
Earlier in June 2021, Tata Power Solar secured a contract worth Rs. 686 crore from the NTPC to build 210 MW projects in Gujarat. In March 2021, Adani Green Energy announced plans to acquire a 250 MW solar power project in the northern state of Rajasthan.