India Solar Compass Q1 2021

This report provides a detailed update of all sector trends and developments in the quarter –capacity addition, leading players, tender and policy announcements, equipment prices, financial deals and other market developments. The report also provides market outlook for the next two quarters.

As the first wave of COVID-19 subsided, construction pace picked up gradually and India added 2,105 MW solar power generation capacity in Q1 2021. Total installed capacity stood at 44,241 MW, with utility scale solar installations rising by more than 33% QOQ in Q1 2021.

Figure: Total installed and pipeline capacity by 31 March 2021, MW

Short-term market outlook is murky because of increase in project execution costs and delays arising from second wave of COVID-19. We expect construction progress to slow down considerably in Q2 2021 due to lockdown across states. Reluctance of DISCOMs to sign PPAs also continues to be a major concern with as much as 20,000 MW of auctioned projects yet to be tied-up contractually.

Tender issuance and project auction activity was relatively robust in Q1 at 10,801 MW and 8,560 MW respectively. The quarter was also notable for two major policy announcements – Basic Customs Duty of 25% and 40% on solar cells and modules respectively along with production-linked incentive scheme worth INR 45 billion (USD 602 million) for domestic module manufacturing. Trade barriers and incentives would lead to scaling up of domestic manufacturing capacity in the short-term but we believe that goals of self-sufficiency and making India a global manufacturing hub are unrealistic.

Module and equipment prices were relatively stable in comparison to previous quarter but risk of delays in module shipments is rising. Many international module suppliers are believed to be renegotiating module prices and/ or delaying shipments to India because of local supply chain constraints.

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