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NEW DELHI: India's solar energy capacity addition dipped 12 per cent to 7,346 megawatts (MW) in the calender year 2019 from 8,338 MW in 2018, according to a report by Mercom India Research .

While 2019 was a lost year for the country's solar sector, Mercom India Research expects solar installations to rise by 17 per cent year-on-year (y-o-y) to about 8,500 MW by the end of 2020.

"The country installed 7,346 MW of solar in 2019, a 12 per cent decline year-over-year (YoY), compared to 8,338 MW installed in 2018," according to the report titled 'Q4 & Annual 2019 India Solar Market Update'.

It also estimates solar installations in the range of 65-70 gigawatt (GW) by 2022, based on the current market conditions. The government has set a solar installation target of 100 GW by 2022.

The large-scale solar projects accounted for 85 per cent of installations with 6,242 MW in 2019 and saw a 7 per cent y-o-y fall, and rooftop solar made up the remaining 15 per cent adding 1,104 MW, a 33 per cent drop y-o-y.

Karnataka was the top state for solar in 2019 with 1.8 GW, followed by Rajasthan and Tamil Nadu. Together, these three states accounted for almost 70 per cent of solar installations in 2019.

"The demand outlook for 2020 looks better with a stronger project pipeline, and we should see the solar market resume y-o-y growth again," said Raj Prabhu, CEO of Mercom Capital Group in a statement.

He also said that a lot will depend on the economy and lending situation getting back on track, the impact of coronavirus, and the outcome of the 20 per cent basic customs duty announced in the recent Budget.

At the end of 2019, cumulative solar installations reached almost 35.7 GW. Large-scale projects accounted for 31.3 GW (87.6 per cent), whereas rooftop solar installations accounted for 4.4 GW (12.4 per cent).

The large-scale solar project development pipeline stands at 23.7 GW, with 31.5 GW of projects tendered and pending auction at the end of the fourth quarter of 2019.

The Indian solar market added 1,897 MW in the October-December 2019 period, a 12.8 per cent fall as compared with 2,177 MW installed in the preceding quarter.

However, installations were up by 15.6 per cent compared to 1,641 MW installed in the fourth quarter of 2018.

In the fourth quarter of 2019, large-scale solar projects came to 1,593 MW, while rooftop solar installations came to 304 MW, an increase of 24.1 per cent compared to 245 MW in the third quarter of 2019, it added .

Multiple reasons led to the fall in large-scale solar additions in 2019 including elections, a slowing economy, liquidity issues, tariff caps, lack of financing, curtailment, payment delays, and power purchase agreements renegotiations in Andhra Pradesh.

Rooftop installations declined for the first time in five years. The report pointed to the slowdown in the economy in 2019 as a significant factor, along with liquidity issues in the market following the NBFC crisis that made it difficult for installers to finance rooftop projects in a tough economy.

"There are several challenges facing the industry but a few fixes, that could immediately turn around the sector, would be to remove tariff caps in reverse auctions, getting government agencies to make timely payments and facilitate lending to get the solar market moving in the right direction again," added Prabhu.

After five consecutive years of decline, coal accounted for a majority of the power installations with 7.8 GW and made up 44.1 per cent of the installed capacity, followed by solar with 7.3 GW.

Wind energy accounted for 2.4 GW followed by small hydro and other renewables with 154 MW and 82.5 MW, respectively. Even with coal installations rising, renewables collectively still made up a majority of the installations in 2019.

