India May Fall Short of its 100 GW Solar Ambitions: Wood Mackenzie

India’s installed grid-connected power generation capacity increased 4 percent from January to October 2018 to reach 347 GW.

India may fall well short of its 100 GW solar by 2022 target as it faces short-term uncertainty due to the imposition of various taxes, according to research and consultancy firm Wood Mackenzie.

Renewables accounted for 9.7 GW of the total increase of 13 GW, highlighting the significant investment flowing into the sector, it said in a note adding that India is, and will be, the third largest solar market globally in 2018 and 2019, respectively.

“As bid prices stabilise and costs continue to drop, long-term development remains positive but still not sufficient to meet the 100-GW solar target by 2022,” said Rishab Shreshta, solar analyst at Wood Mackenzie. “India faces short-term uncertainty due to the imposing of various taxes and levies on solar products, the cancellation of tenders and tariff renegotiations,” he added.

The year-on-year growth rate of annual solar install capacity is expected to reduce from 63 percent in 2017 to just over 1 percent in 2018 before rebounding to over 12 percent in 2019.

“Despite strong domestic demand and safeguard duties on imported solar modules, domestic solar manufacturers still struggle to compete with foreign suppliers,” it said.

Wood Mackenzie said India’s power sector is going through substantial changes with the government focusing on attaining ‘power for all’ and restructuring distressed distribution companies and power plants.

In September 2018, a draft amendment to the Electricity Act, 2003 was introduced to separate content and carriage, directly transfer subsidy benefits, obligate 24×7 power supply, penalise power purchase agreement violations, and set up smart prepaid meters along with regulations related to these matters.

“If implemented, these policies would change the structure of the power sector and bring much-needed efficiencies into the system,” it said. “We may not see full benefits accruing in 2019, but the amendment is long overdue and has been delayed several times. It is a crucial step towards strengthening power sector reforms.”