India to realistically install 31 GW of solar until 2019: BRIDGE TO INDIA

Last week, BRIDGE TO INDIA released the yearly India Solar Handbook (2015 edition) at InterSolar, Munich (download the report here). While the report examines various aspects of the Indian solar market, one of the most commonly asked questions that it tries to answer is: How much solar will India really install?

BRIDGE TO INDIA expects the solar market in India might fall short of the government’s ambitions but the good news is that the market will still grow at an impressive pace
We expect India to realistically have around 31 GW of installed solar capacity by 2019
Of this 31 GW, we expect 27 GW to come from utility scale projects and 4 GW from rooftop projects

There is good news and bad news. The bad news is that BRIDGE TO INDIA expects the solar market in India might fall short of the government’s ambitions but the good news is that the market will still grow at an impressive pace and provide immense opportunity for businesses to flourish.

According to the proposed amendments to the National Tariff Policy 2005, the government wants India to generate 8% of its electricity from solar by 2019. That would require around 69 GW of installed capacity (refer). However, based on an analysis of the market fundamentals as well as announced and anticipated central and state government policies, BRIDGE TO INDIA expects India to realistically have around 31 GW of solar capacity by 2019.

Of this 31 GW, we expect 27 GW to come from utility scale projects. While the central government has put its foot on the accelerator and wants to allocate 10 GW of new capacity this year, BRIDGE TO INDIA believes that it will be a number of leading Indian states that will be the main market driver over the next four years. We estimate that until the end of 2019, 7.6 GW will be installed through central government and 11 GW through state government allocations. A third category that will contribute to utility scale solar growth is that of renewable generation obligation (RGO) and non-policy projects.

The distributed solar market will grow even faster, but from a small base. We project 4 GW of rooftop solar capacity addition until 2019. This is way short of where the government wants it to be (40 GW by 2022). Currently, the policy framework in support of distributed is still weak and projects will be driven by the commercial case for complementing expensive grid power for some tariff groups in some states with competitive solar power.

Of this 4 GW, we expect 50% to come from industrial consumers, 30% from residential consumers and 20% from commercial consumers. In the initial years, commercial and industrial consumers will dominate. Later on, the share of commercial installations will reduce, while the residential market will pick up. Commercial consumers account for 15% of the power consumption in the country vis-à-vis a much larger share of industrial and residential consumers.

Of course, the policy environment for solar is very dynamic right now and things can change very quickly. Thus, making accurate projections is difficult. We see the main risk for a smaller than estimated solar market, in possible delays in allocation processes (mostly linked to states’ willingness to buy solar power and availability of land and transmission infrastructure). On the other hand, the market might be significantly larger, if the government in the center and states puts policy meat behind the distributed solar targets. Other important factors that will determine the growth of India’s solar market are the pace at which vital overall electricity sector reforms are pushed through, whether consumer power prices are further rationalised (increased) and the speed at which transmission and distribution infrastructure will be improved and expanded.

Overall, our message is that the Indian solar market is going to be one of the most exciting ones globally, offering many opportunities across the value chain and in different end-markets for new and established companies.