Report: Solar Becomes Fastest-Growing New Energy Source In India

Proving that solar isn’t booming in the U.S. only, Mercom Capital Group says that in India, solar power has become the nation’s fastest-growing new energy source.

According to a new report from the clean energy communications and research firm, solar installations in India will total approximately 5 GW this year. Cumulative solar installations in India crossed the 7.5 GW mark as of May, with about 2.2 GW installed so far this year – more than all of the solar installations in 2015. Mercom says India’s solar project pipeline has now surpassed 22 GW, with ~13 GW under construction and ~9 GW in the request for proposals (RFP) process.

“The Indian solar market is growing in size, but the question is: is it too much too fast, as infrastructure and systems have not kept pace with auction announcements. For the sector to move from 2 GW to a 10 GW a year market, work still needs to be done,” comments Raj Prabhu, CEO and co-founder of Mercom Capital Group.

Mercom says the Indian government has shown a strong commitment to renewables and its push toward solar is beginning to show results: At the end of FY2015-16, solar represented 2.5% of the net installed capacity in India, up from 1.4% a year ago – making it the fastest-growing new energy source in the country. Solar accounted for 17.4% of all renewable energy generation in FY2015-16, compared to 10.5% in FY2014-15.

However, Mercom notes that low bidding levels through reverse auctions have been a major concern at a time when the Indian banking sector is going through its own challenges, which could make borrowing much more difficult in the short-term.

Citing Reserve Bank of India (RBI) data, Mercom says bank loans worth Rs.7 lakh crore (~$103 billion) were under stress as of the end of 2015. Currently, 19 developers have bid for 2.9 GW of solar projects below Rs.5 (~$0.0735). About 1.2 GW of these projects have signed power purchase agreements (PPAs).

On a slightly positive note, Mercom adds, the lowest tariff of Rs.4.34 (~$0.0638) seems to have been an outlier, with all subsequent auctions coming in at Rs.4.66 (~$0.0685) or more.

“There is no set rule which says tariffs below Rs.5 (~$0.0735) cannot be financed. Some banks are seriously looking at projects in the Rs.4.5-5 (~$0.0662-0.0735) tariff range, but financing depends on sound project economics, borrower credibility, a strong balance sheet and the developer’s ability to service debt,” explains Prabhu.

Of the estimated $8 billion (~Rs.54,400 crore) collected under the Clean Environment Cess to date, only about $3 billion (~Rs.20,400 crore) is expected to be transferred to the National Clean Energy Fund (NCEF). The Ministry of New and Renewable Energy is likely to be allocated only 23% of the total amount collected so far under the Clean Environment Cess. With late tariff payment problems and rooftop subsidy delays, creation of a “reserve backstop fund” against non-payments or delayed payments by DISCOMs using NCEF funds could have an immediate positive impact, eliminating off-taker risk, reducing interest rates and increasing lending, concludes Mercom.


  1. Yes..! That’s True.. Solar Becomes Fastest-Growing in India. India is an economic powerhouse of the 21st century and there’s no stopping it. Yet, a large part of the population is still living like America did before the industrial revolution. 69-year old David Letterman says – India has enough generators to power all of Australia. He’s Impressed by India’s Push Towards Solar Energy.
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