The transition of the Indian solar market from an incentive driven market to a parity driven market

02 January 2014 |

The January 2014 edition of BRIDGE TO INDIA’s quarterly publication, the India Solar Compass, has been released. The new edition focuses on the current state of the Indian solar market which is in transition from being an incentive driven market to a parity driven market. A gist of this edition of the Compass is given below.

  • A positive implication of the transition is a possible shift from utility scale market to a more distributed generation market
  • A drawback of the state rooftop policies is that most of them rely largely on funding support from the MNRE which is suffering a funding crunch
  • NSM will not result in any capacity addition in 2014 but will provide a renewed vigour for investments and rapprochements in the second half of 2014

A positive implication of this transition is a possible shift from utility scale market to a more distributed generation market. It is expected that 2014 will lay the groundwork for the rooftop solar market in India. Net-metering will be a crucial determinant of the same. In the policy space, it is encouraging to see that several state and central policies have announced measures to promote the rooftop solar market. Subsidies, feed-in-tariffs (FiTs) and net/gross metering concepts are being introduced across different policies.

One drawback of the state rooftop policies is that they rely largely on funding support from Ministry of New and Renewable Energy (MNRE) which has been suffering a funding crunch. With the general elections around the corner in India, no new fund allocations are expected before the new government is formed.

Outside of the rooftop sector, there has also been some action in ground mounted projects for captive consumption or third-party sale of power. Most of these projects are driven by accelerated depreciation (AD) or Renewable Energy Certificates (RECs). Given the challenges facing the REC mechanism, future of these projects is uncertain unless they can sign commercially viable PPAs with bankable counterparties. State level incentives such as a waiver of open access charges can play a significant role here.

In 2014, new solar PV capacity of 750 MW is expected in India. Tamil Nadu, Andhra Pradesh, Uttar Pradesh and Punjab will likely sign PPAs within the next few months. NSM will not result in any capacity addition in 2014 but will provide a renewed vigour for investments and procurements in the second half of 2014 with capacity additions materialising in 2015.

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