India to add record 10 GW solar capacity in Q1 2024, representing nearly 400 per cent year-on-year growth

India achieved a milestone by adding more than 10 GW of solar capacity in the first quarter (Q1) of 2024, the highest quarterly installation ever.

According to Mercom India Research’s recent Q1 2024 India solar market update, this figure represents nearly 400 percent year-on-year (YoY) growth compared to more than 2 GW installed in Q1 2023.

Quarter-on-quarter (QoQ) capacity additions also saw a dramatic increase of 414 per cent, rising by nearly 2 GW in Q4 2023.

In the first quarter of 2024, India will install 9.7 GW of large-scale solar capacity, including 1.8 GW from open access solar projects. This represents 524 percent QoQ growth and approximately 534 percent YoY growth.

Priya Sanjay, Managing Director, Mercom India, said, “The surge in installations in Q1 2024 was driven by the commissioning of several delayed projects, which had received extensions in previous quarters due to higher module prices. The fall in module prices and the suspension of orders on the Approved List of Models and Manufacturers (ALMM) helped developers import modules at lower costs, making it easier to complete projects.

Many projects were started early to take advantage of the ALMM order suspension.

Additionally, providing grid connectivity to previously stalled projects in the Great Indian Bustard habitat significantly contributed to the record breaking installations.

“There is a huge pipeline of large-scale projects scheduled for 2024, setting India up for a record-breaking year by a significant margin. Assuming stability in policy and supply chains, and if government agencies continue to auction projects and meet set targets, India is poised to be one of the top three solar markets globally”, Mercom Capital. Group CEO Raj Prabhu commented.

In the first quarter of 2024, India added 15.2 GW of new power capacity, of which solar power accounted for 66 percent.

Rajasthan and Gujarat led the way in large-scale solar installations, contributing 38 per cent and 35 per cent respectively to the capacity addition, while Madhya Pradesh stood second with 8 per cent.

By March 2024, India’s cumulative installed solar capacity to reach 82 GW. Solar power represents 18.5 percent of India’s total installed power capacity and 43 percent of the total installed renewable energy capacity.

Rajasthan has the highest cumulative installed large-scale solar capacity, at 29 percent of the national total, followed by Gujarat and Karnataka at 14 percent each.

According to Priya Sanjay, Gujarat’s proactive approach with renewable energy, especially residential solar and wind-solar hybrid power projects, enabled it to overtake Karnataka. “Gujarat’s foresight and supportive infrastructure and policies have attracted many large-scale projects.” he/she said.

By the end of the first quarter of 2024, India’s large-scale solar project pipeline stood at 143.3 GW, with an additional 93.1 GW projects pending tender and auction. The average cost of large-scale solar projects declined by 7 per cent QoQ and 28 per cent YoY, significantly improving the internal rate of return of projects.

“The main reason for the decline in the average cost of large-scale solar projects is the falling prices of solar modules,” said Priya Sanjay.

During the quarter, a total of 30.7 GW of tenders were announced, up 122 per cent year-on-year and 92 per cent quarter-on-quarter. Additionally, 25 GW of solar projects were auctioned, which is a 229 percent QoQ growth and 2,957 percent YoY growth.

Priya Sanjay said the surge in tendering activity was driven by agencies adhering to defined targets and timelines. Earlier, delays in auctions and signing of power purchase agreements (PPAs) discouraged bidders as it led to funds getting stuck.

However, streamlined auctions and attractive tariffs have revived the process, speeding up the signing of PPAs and increasing developer interest.

However, inadequate transmission infrastructure and delays in land acquisition may hinder timely commencement of the project.

Developers are racing to complete the projects before the June 2025 ISTS fee waiver deadline.

The rising cost of land and lack of prime sites for solar power could further complicate the scenario.