Solar installations see 4% drop in Q3 due to lack of clarity around GST

The Indian solar market installed 1,589 MW (mega watt) in the third quarter of 2018. Installations declined by four per cent compared to 1,659 MW in the second quarter of 2018, while a year ago (Q3 2017) it was 2,278 MW.

Large-scale installations during the third quarter of 2018 totalled 1,154 MW compared to 1,244 MW in second quarter 2018 and 2,013 MW in Q3 2017, according to Mercom India Research report.

“Lower installation levels were not a surprise due to a slowdown in tender and auction activity last year. The safeguard duty, lack of clarity around GST rates and land and transmission issues have all sapped the momentum from the solar market,” said Raj Prabhu, CEO and Co-Founder of Mercom Capital Group.

He added, the Indian solar industry is trying to recover from the safeguard duty announcement. "An acceptable tariff for both project developers and government agencies has been an ongoing challenge since the inception of India’s solar program,” continued Prabhu

The report also found that rooftop installations grew 5 per cent quarter-over-quarter in the third quarter, totalling 435 MW compared to 415 MW installed in Q2 2018. Rooftop installations increased by 64 per cent YoY compared to 265 MW installed in Q3 2017.

India’s cumulative installed solar capacity reached 26 GW at the end of Q3 2018. The report forecasts solar installations of around 8 GW for the calendar year (CY) 2018.

Rajasthan emerged as the top state for large-scale installations with a newly added solar capacity of over 600 MW, followed by Odisha and Telangana in Q3 2018. Together these three states made up around 70 per cent of large-scale installations in the quarter.

Mercom reports claim nearly 4 GW of solar auctions have been cancelled by multiple agencies this year. The Solar Energy Corporation of India (SECI) also introduced a tariff ceiling, which has capped tariff levels that developers could bid for, making auctions somewhat controlled where bids can only move in one direction regardless of market conditions.

“After a year and a half, the solar industry is still not clear as to what the actual GST rates are. Land and transmission availability challenges have contributed to slower growth in large-scale projects. Rupee depreciation and higher interest rates have added to the headwinds faced by the industry.”

In the long-term, prospects for solar remain bright in the country. The energy transformation in the country continues and 2018 may be the first year where solar makes up over 50 per cent of new capacity additions in India. Companies need to be able to play the long game if they want to be successful in the Indian solar market, said Prabhu.