India adds 3.2 GW solar capacity in 2020; lowest in 5 years: Report

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India added 3,239 megawatt (MW) solar capacity in 2020, down 56 per cent from the previous year, according to a report.

The adding of 3,239 MW of solar capacity was the lowest addition in five-years-time, Mercom India Research said in its report on Tuesday.

"India added 3.2 GW or 3,239 MW of solar capacity in 2020, a 56 per cent decline year-over-year (YoY) compared to 7,346 MW installed in 2019," it said adding the country's total solar installed capacity was at 39 GW gigawatt (GW) as of December 2020.

The large-scale solar projects accounted for 78 per cent of installations with 2,520 MW, registering a 60 per cent year-on-year (y-o-y) decline. The addition of the remaining 719 MW rooftop installations was also down 22 per cent compared to the installation in 2019.

Andhra Pradesh, Rajasthan, and Gujarat were the top three states for large-scale solar capacity additions, representing around 51 per cent of 2020 installations.

"India's solar installations in 2020 were the lowest in five years. While other top solar markets in the world have experienced positive growth, India, which had one of the most stringent lockdowns in response to the pandemic, took a while to get back up and running. However, we expect the industry to experience significant positive growth in 2021," said Raj Prabhu, Chief Executive Officer of Mercom Capital Group.

According to the report, besides COVID-19, another significant bottleneck in the market has been the difficulty facing government agencies to get distribution companies (DISCOMs) to sign power sale agreements (PSA). This has left about 17-18 GW of projects without a PSA.

Other short-term challenges included the rise in module prices, increased shipping and freight charges in the range of 500 per cent-800 per cent, and a surge in raw material costs.

"As a result, the average large-scale solar project costs increased slightly by 2 per cent quarter-over-quarter (q-o-q) in Q4 (October-November) 2020. However, project costs were 2.5 per cent lower compared to the same quarter in 2019," according to the report.

On its outlook for 2021, the report said it expects the industry to experience positive growth in 2021. Mercom India Research is forecasting over 10 GW of solar installations in 2021.

The rooftop solar market is experiencing a turnaround, with installations improving significantly over the second half of the year. Fourth-quarter was the strongest for rooftop installations, and the report predicts momentum to continue into Q1 (January-March) 2021.