Solar power’s gap year
The solar sector cannot continue its record streak every year and even 7.5GW is a sizeable quantity to add, but there is a visible loss of steam
Solar power is facing wind energy’s predicament, though for different reasons. Solar capacity additions this year are estimated to drop 22% to 7.5 gigawatts (GW), forecasts Mercom Capital Group Llc, a clean energy communications firm. One GW equals 1,000 megawatts.
In 2017, the sector added 9.6GW, a record. “The lower forecast is underpinned by a smaller pipeline of projects scheduled for commissioning in the coming year. Auction activity was not very robust in 2017 and, though there was a burst in activity at year-end, most of the projects tendered are not likely to be commissioned until 2019, a factor that is reflected in our five-year forecast,” Mercom said in a report.
The lower forecast comes amid a sharp slowdown in wind energy capacity additions due to the transition from preferential feed-in tariffs to auction-based power procurements. Of course, the solar sector cannot continue its record streak every year and even 7.5GW is a sizeable quantity to add. But there is a visible loss of steam.
Several smaller intermediaries who execute projects are scaling down, either due to falling profitability or intensifying competition. Further, even as the asset owners are trying to come to grips with evacuation, grid connection and payment delay issues, concerns about imposition of duties are casting a shadow over the sector. “The solar sector is also facing several major headwinds in 2017 that are creating a shadow of uncertainty for investors and threatening to slow new project activity,” said the Mercom report.
“These challenges include the possible imposition of a safeguard duty, a pending anti-dumping case that could result in higher tariffs, the levy of an unexpected port duty on imported modules that has not yet been resolved,” it added.
The Directorate General of Safeguards, Customs and Central Excise recommended imposing a 70% safeguard duty on solar cells and modules imported from China, Taiwan and Malaysia. This came as a major shock to the industry as it will not only drive up project costs but also raise questions about component supplies as India lacks sufficient local capacities to meet the ambitious 100GW installation target.
“Developers are afraid to start projects and suppliers are hesitant to ship panels until they know just when or how the duty will be imposed,” said the Mercom report.
That said, as in the wind sector, which is expected to see a rebound in capacity additions in fiscal year 2019, solar capacity additions are also projected to gain momentum from next year onwards. Also, as in the case of wind energy, the current transition may well improve supply-chain efficiencies and bring best value for consumers.
To be sure, the government is trying to clear the uncertainties. But progress is rather slow and the delay is having a noticeable impact on the sector. If the sector continues to face such challenges, achieving the stiff 100GW target of solar installation by 2022 may prove to be a Herculean task.