According to reports, Mercom Capital says that Indian policymakers have been unable to navigate rapid changes in the global solar market and that protectionist policies have “all but paralyzed the sector”, in its latest quarterly report on India’s solar market.
Mercom notes that only 73 MW of solar capacity has been installed in India in the last three months. The company blames a number of factors, including a weak national currency, an estimated 10% increase in PV module prices, and state bidding practices which drive down prices to unsustainable levels.
“With the government desperately looking to attract foreign direct investments due to deteriorating economic conditions, India is sending the wrong message to investors with the anti-dumping case and domestic content rules,” states Mercom CEO Raj Prabhu. “Instead, they should provide long-term policy visibility and a growth roadmap.”
Mercom reports that most of the solar photovoltaic (PV) projects authorized under Phase 1 Batch 1 and Phase 1 Batch 2 of the nation’s National Solar Mission (NSM) have been commissioned, for a total of 130 MW completed in Phase 1 Batch 1 and 300 MW in Phase 1 Batch 2.
Additionally, 48 MW of PV has been commissioned under the Migration Scheme, and 91.8 MW under the Rooftop PV and Small Solar Power Generation Program (RPSSGP).
However, to date only one 50 MW concentrating solar power (CSP) project of the 470 MW authorized under the NSM has been built. Other project developers have been given a 10-month extension to March 2014.
Rollout of the second phase of the NSM has been delayed and is awaiting final approval. Guidelines for the new phase include a controversial and complex funding mechanism called viability gap funding.
State solar policies have been much more effective on the ground, with state and other policies resulting in 1.21 GW of development – more than double the NSM. This is led by Gujarat, which has commissioned 857 MW of PV plants to date under its policy.
However, Mercom warns that the L1 bidding method which has been adopted by a number of states is making for very slim margins. Prabhu warns that banks are beginning to question project viability due to the low tariff levels, and calls the L1 policy the biggest problem in project financing through state policies.
Mercom also notes that Maharashtra has issued an order of enforcement for renewable purchase obligations (RPOs), including a threat of fines to non-complying entities, and says that this could lead to similar actions in other states.