The year largely failed to live up to the expectations with solar installations expected to cross 7 GW for the year. Inconsistent policy implementation, trade policies, a slowing economy, and liquidity crisis, all played a role in the decline of installations by at least 2 GW from the initially estimated ~9 GW for the year. The attempt by Andhra Pradesh to renegotiate old signed power purchase agreements was the low point in 2019.

The year started on a slow note as auctions ground to a halt in Q1 due to upcoming elections. Rooftop installations fell quarter-over-quarter for the first time after a year of robust growth affected by elections and financing difficulties. About 800 MW of auctions were canceled in Q1 by government agencies citing high tariffs.

The liquidity crisis took hold among India’s Non-Bank Financial Companies (NBFC) after Infrastructure Leasing, and Financial Services (IL&FS) admitted to defaulting on several payments to its creditors. Financial institutions became reluctant to lend to solar projects.

Payment delays started cropping up in Andhra Pradesh, Tamil Nadu, Telangana, Madhya Pradesh, and Karnataka increasing project risks and slowing participation in tenders in affected states.

However, the solar industry was upbeat as the Bhartiya Janata Party (BJP) came back to power for a second term under the leadership of Prime Minister Narendra Modi.

Land acquisition became one of the single biggest challenges, and even the most experienced developers started having problems lining up land for projects.

Tariff caps became a contentious issue as government agencies began canceling auctions after they were conducted and winners announced. This created a lack of interest in many of the auctions.

More duties followed – in February, the government imposed an anti-dumping duty on the import of textured tempered coated and uncoated glass from Malaysia for five years. In April, the government also notified an anti-dumping duty on the ‘Ethylene Vinyl Acetate (EVA)’ sheets for solar modules imported from China PR, Malaysia, Saudi Arabia, and Thailand for five years.

As the year passed, the sector was burdened with yet another duty. In July 2019, the Directorate General of Trade Remedies imposed a provisional duty on the imports of aluminum and zinc-coated flat products (used in module mounting structures) originating in or exported from China PR, Vietnam, and Korea RP.

Meanwhile, the safeguard duty on solar cell and module imports from China and Malaysia stepped down from 25% to 20% in July. The duty will be in effect until July 29, 2020. Solar developers who were given refuge under the “change in law” clause since their projects were under development are still waiting for reimbursement.

The budget for FY 2019-20, was a disappointment; there was nothing for the solar industry beyond a slight increase in the budgetary allocation of funds compared to the previous fiscal period.

This year saw a major thrust by the government towards domestic manufacturing. Several of the government’s flagship programs, such as Kisan Urja Suraksha Evam Utthaan Mahabhiyan (KUSUM), have the provision for mandatory use of domestically manufactured solar PV cells.

In March, the government approved a plan to implement Phase II of the Central Public Sector Undertaking (CPSU) program to set up 12,000 MW of grid-connected solar power projects for self-use or use by government entities. In July 2019, MNRE issued a notification regarding the modalities and role of distribution companies (DISCOMs) to ensure the smooth implementation of Phase II of the CPSU program and issued a memorandum modifying certain provisions of its solar park program.

In September 2019, the MNRE issued a notification clarifying its earlier order regarding the compulsory registration under the Approved List of Models and Manufacturers (ALMM) of solar photovoltaic modules. The MNRE stated that the list will consist of List-1, which specifies the models and manufacturers of solar PV modules, while List-II will specify the models and manufacturers of solar PV cells. Both the lists will come into effect from March 31, 2020.

In October, the MNRE issued an important clarification stating that if imported diffused silicon wafer is used as a raw material for the manufacture of a solar PV cell, it will not be considered as domestically manufactured. A solar PV cell will be considered domestically manufactured only if it has been processed and made in India using undiffused silicon wafer or black wafer, classifiable under Customs Tariff Head 3818.

In October 2019, MNRE once again extended the deadline for the self-certification of solar inverters through the Bureau of Indian Standards (BIS). The deadline has now been extended from September 30, 2019, to December 31, 2019.

Apart from promoting local manufacturers, this year also saw the government initiating moves to safeguard the interests of developers. With the rising DISCOM dues and a slumping economy, the government tried to help the financial viability of developers through its ‘letter of credit’ initiative. That said, its implementation has been both patchy and delayed so far.

Andhra Pradesh became the biggest cause of concern for developers in 2019. The state’s newly elected Chief Minister Jaganmohan Reddy decided to revisit the power purchase agreements (PPAs) of solar and wind power projects that were allotted during the Chandrababu Naidu-led government. The matter dragged on from state commission to the courts, with the central government issuing several requests to the state to cease creating an unconducive environment for investors.

The rooftop solar market continues to be weak due to a lack of policy support, although the country crossed 4 GW of cumulative rooftop solar installations as the Q3 2019. Maharashtra and Karnataka have proposed removing the net metering facility for high tension customers. The decision has been met with a considerable backlash in both states.

During October, the Solar Energy Corporation of India (SECI) increased the capacity of manufacturing-linked solar tender, which it had initially floated in January 2019 from 6 GW to 7 GW. The amended tender calls for 7 GW of interstate transmission system (ISTS)-connected solar projects linked with 2 GW of solar manufacturing component. SECI set the maximum tariff payable to the solar developer at ₹2.93 ($0.041) from an earlier ₹2.75 ($0.039)/ kWh, an increase of 6.5%.

In November, the MNRE amended bidding guidelines that could affect short-term equity investment in solar projects. The amendment requires developers to maintain 51% shareholding in special purpose vehicles for three years, which developers say is too long.

Mercom India Research released its India Solar Market Leaderboard 1H 2019 in November 2019. The leaderboard report revealed an entirely new set of market leaders in almost every category in the first half of 2019.

As already established by now, the solar industry didn’t fare as expected in 2019. Overall, there were more downs than ups throughout the year, and it is evident from the scores of tender extensions, cancelations, reissues, and under-subscription of bids seen through the months.

“Overall 2019 was a year full of challenges and a year lost for the solar sector. Based on our forecast, installations in 2020 are expected to be a lot stronger. That said, economic growth and liquidity in the markets will dictate the direction of the coming year,” said Raj Prabhu, CEO of Mercom Capital Group.

Image credit: Invenergy