India Could Be A Bright Spot For The Global Solar Market In 2017

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2017 is poised to be a difficult year for the global solar industry, with an oversupply of panels and policy headwinds in major markets. China, the world’s largest solar market, is expected to see solar installations slow to around 17.5 GW in 2017, well below the 30+ GW the country is expected to install this year, driven by feed-in-tariff cuts. The United States is also expected to see installations trend lower, due to weaker power plant contracting activity and increased regulatory uncertainty. However, India is likely to emerge an important source of growth for solar companies over the next few years, driven by a mix of favorable government policy and the increasingly viable economics of solar power.

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Aggressive Installation Targets, But Challenges Remain

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India is an ideal market for solar power given its high insolation, low electrification levels, relatively high energy costs and growing concerns about greenhouse gas emissions. The country is projected to install about 5.4 GW of photovoltaic capacity this year. However, the Ministry of New and Renewable Energy is projecting installations of 15 GW and 16 GW over the next two years, beginning from April 2017. This would translate to roughly 22% of global demand for 2017. The government aims to install a cumulative 100 GW of solar capacity by 2022, driven partially by subsidies, incentives and streamlining of policy. According to the government, this would require investments to the tune of about $90 billion, which could make India a huge growth market for global solar equipment manufacturers.

That said, there are some challenges as well. Financing for solar projects has remained fairly limited and expensive, as banks have been somewhat averse to lending to the solar sector.  The Indian market is also extremely price-sensitive, with systems costs for some of the most recent utility-scale projects coming in at just over $1 per watt. Additionally, rooftop solar, which accounts for roughly 40% of the government’s 2020 solar target, has seen relatively slow growth amid weak policy support, as ground-based projects remain the key focus area for the government.

First Solar Could Be A Big Beneficiary

First Solar – a vertically integrated solar player – could stand to benefit significantly, on account of its track record in the Indian market and also due to its technology. The company’s panels – which are manufactured using cadmium telluride (Cd-Te) thin film technology – experience a relatively lower level of performance degradation in hot and humid climates, making them well-suited for conditions in India. The firm also has relatively strong distribution in India and currently has roughly 250 MW of projects in various stages of development. China’s Trina Solar, which is one of the largest suppliers of crystalline silicon panels in India, could also benefit significantly, with plans to establish production facilities in the country. SunPower could also benefit by selling its recently launched P-Series polycrystalline panels, which are priced competitively compared to its monocrystalline offerings, in the Indian market.

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