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Despite dollar fluctuation, rooftop solar market continues to grow

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Considering a large proportion of the solar projects that are executed in India still use the imported components, dollar fluctuation is definitely a factor in prices pf projects fluctuating. Let’s get an insight on how the industry has grown in the past two years despite these fluctuations.

Prices of solar panels have dropped by approximately 35% in the last two years. If we attribute that drop uniformly so that would mean a drop of 4.375% every 6 months. This is drop in dollar rates. So, if we were at par with the U.S dollar, the price decline would have looked something like this.

Decrease in solar panels price

Source: Sunkalp tabulated data

The dollar fluctuations look as shown below. Mid-may the dollar rate came down a lot allowing the rooftop solar sector to breath a sigh of relief considering the industry is operating in very low margins. Profits increased to a certain extent for EPCs in that period.

 

Dollar fluctuation 2 years

Dollar fluctuations in the last two years

Source: Yahoo Finance

September 2013 however, was a tough time for the industry where dollar rate had shot up considerably in addition to which prices of solar were not as competitive as they are today. When figures for panels are converted to rupees taking into consideration the exchange rate, the graph looks as shown below. In September the dollar rate increased to an extent greater than the drop in the solar panel prices (in dollars) resulting in higher prices in INR.

Solar panel prices_rupee decrease

Source: Sunkalp tabulated data

So, projects that got converted say in August and were commissioned in October had to be installed at much lesser margins or at a loss since the effective price of panels went up. It has been a roller coaster ride for EPC companies and a lot of them have not even able to survive the journey. However, the demand has shown an increase and is expected to further grow every year for various reasons. Bridge to India predicts (refer) how this demand is expected to grow.Capacity additions_rooftop solar

Source: Bridge to India’s Solar Handbook

The reasons behind this expectation are briefly given below:

  • Government solar targets (refer)
  • Cropping of net-metering policy in every other state (Recently in Maharashtra- refer)
  • Improvement in getting approvals from the DISCOMs for net-metering and subsidies (our experience with BSES)
  • Increase in the air pollution levels in metros (refer)
  • Greater affordability of solar
  • Loans for solar at better rates (~9-10%) (refer)

Each of these factors could contribute to different proportions and extents and make the industry grow at a rate unimaginable. To think of it, the industry will need to grow at a fast pace to achieve the 40 GW rooftop target. Now, whether that happens with imported components or requires setting up of Indian manufacturing, the industry will grow nevertheless not just because of the incentives but importantly because of a linearly growing demand.

Tanya Batra

Tanya keeps a close track of policy updates in the field of Rooftop Solar in India and likes to write blogs on its application for the end customer

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