Jan 24, 2017
The share of solar as a contributor to the overall power supply in India will only go bigger, writes Divyanshu Sachdev.
New Delhi: When we look back from a few years from now, the year 2016 will be looked at as the year which defined the solar industry. We have reached several milestones worth mentioning.
India crossed the 10 GW installed capacity number sitting royally in the company of the likes of China, Germany and the United States and non-utility rooftop solar alone crossed 1 GW installed capacity. Beyond the 10 GW cumulative solar capacity, there is another 22 GW that is in pipeline with 60% of which is already under the construction phase.
A major share of this pipeline will be commissioned in 2017 and 2018, only outlining the strong foundations that the year lay. Beyond the numbers, two inaugurations stole the big headlines with, the largest rooftop solar plant in the world inaugurated in Punjab and the largest utility scale project in the world made operational in Tamil Nadu.
From the achievements of 2016, one may conclude that solar went mainstream in 2016 and as we chase down the 100 GW target by 2022, the share of solar as a contributor to the overall power supply in India will only go bigger. There have been a lot of factors that have contributed to this prominent rise, some of these have been:
● A strong push by the government as well as active policy push by the state governments
● Steady decrease in the price of solar systems, lead by the falling module costs. The system price for a large scale solar project came down more than 16% alone in 2016.
● The project sizes on an average increased to about 50~100MW in India from 5-10MW about three years ago
● EPC costs fell from about 4.8Cr/MWp to 4Cr/MWp within 2016.
● An increased focus on implementation of rooftop solar with SECI offering major subsidy via their 500 MW and 1000MW tenders.
● Net metering policies of virtually every state has been rolled out already.
We have already witnessed solar achieve grid parity for all commercial, industry and most residential users. The falling costs of capital and equipment have lead to the Rs 5 kWh tariff becoming a norm, which when compared to the coal fuelled projects and their tariff of Rs 3.25 kWh shows how solar has gradually become not just a great source of savings but also a financial investment solution to most of the power consumption applications in India.
You could argue that until the parity on pricing is achieved, solar would remain an underdog, but not for long. One of the findings we discovered when we were studying the data of the users who have run our proprietary Solar Calculator on the website was that virtually 90% of the people reported a potential ROI in the range of 16~24% on their investment if they decided to go ahead with a rooftop PV system. Therefore, for majority of the people who are paying more than Rs 1500 in the electricity bill in India today, going solar makes a lot of financial sense, especially for the Industrial and Commercial segment.
On the policy front, the impending reduction in Accelerated Depreciation to 40% from the existing 80% from April 1’ 2017 as well as the roll out of GST will be worth keeping a close eye on in the coming months. It would also be worth watching the implementation of the net metering and gross metering policies under the watch of the local DISCOMs.
Demonetization, while on the face of it does not pose much of a challenge for the solar industry, the increased liquidity will bring easier interest rates allowing for cheaper capital. The year 2017 will no doubt be an year where a lot of consolidation will happen and you would hope that given favourable circumstances, it will only see solar being even more mainstream.
We have already started seeing a shift in the consumer mindset towards Solar but for it to become mainstream, much more needs to be done in the coming years.
Divyanshu Sachdev is the co-founder of MYSUN.