Solar capacity addition to be down 40% in FY2019, says ICRA

The solar capacity addition is estimated to decline by 40% to 4-4.5 giga watts in FY2019 from last year, according to ratings firm ICRA.

“The estimated fall in capacity addition in FY2019 is mainly on account of subdued trend in tendering of solar projects since June 2017 in the midst of several factors such as GST roll-out in July 2017, an upward pressure on PV module price levels internationally and continued uncertainty on safeguard duty and anti-dumping duty post the petitions filed by solar module manufacturer associations between June and Dec 2017,” Girishkumar Kadam, sector head and vice-President, ICRA Ratings, said.

Subdued trend in award of solar projects is also evident from the fact that only 4.5 GW capacity was auctioned and awarded in CY2017 as against 7.3 GW in CY2016, he added.

With expected decline in PV module price level, long-term debt availability at cost competitive rate and aggressive bidding by independent power producers, weighted average solar bid tariff during CY 2017 declined sharply to ₹ 3/unit from ₹ 5/unit in CY 2016.

“Though the declining solar bid tariffs levels remain favourable to state-owned distribution utilities, the hardening of module prices over the last 6 to 9 month period along with import duty incidence on module imports (to the extent of 7.5% since October 2017) has led to viability related concerns especially for the projects with tariff below ₹3/unit, also given the uncertainty on safeguard duty front” Mr. Kadam.said.

In this context, the viability of such tariffs critically hinged on structuring of debt with longer tenures, competitive funding costs and the ability of the project developers to keep the cost of modules within the budgeted levels, he added.