Indian solar installations are forecast to be approximately 1,000 MW in 2014, according to Mercom Capital Group. Solar installations in India totaled 1,004 MW in 2013 compared to 986 MW in 2012.

In line with Mercom's forecast, there was very little growth in installations year-over-year. The firm's detailed survey of the market revealed that growth in installations might be elusive again in 2014 with numbers forecast to be similar to 2012 and 2013.

According to Mercom, there are several factors behind the slow solar growth. With a few exceptions, there are no Jawaharlal Nehru National Solar Mission (JNNSM) PV projects expected to come online until at least mid-2015. Most CSP projects have stalled, state policies are all over the map, and as the company has warned for some time, India is now in a trade dispute with the U.S. in the World Trade Organization (WTO).

"It is time for developers to go directly to consumers, there is a large power-starved market waiting to be served that looks better and better every day as diesel prices keep climbing," commented Raj Prabhu, CEO and Co-Founder of Mercom Capital Group.

The United States recently announced its request for WTO dispute settlement consultations with India regarding the Domestic Content Requirement (DCR) in JNNSM Phase II projects. The United States claims that DCR rules discriminate against U.S.-manufactured solar cells and modules. In Phase II, India has extended DCR rules to include thin film technology.

In addition to difficulties with project economic viability stemming from reverse auctions that have pushed down project margins, state policies have been delayed frequently, there is no real Renewable Purchase Obligation (RPO) enforcement in place, and national elections are fast approaching adding more uncertainty to India's solar market which could result in a slowdown in large-scale solar project installations.

Nevertheless, Mercom stressed that India's solar market potential remains as large as ever, even in a slower-growing economy. As power shortages continue, peak shortage is a critical problem that has stifled industrial growth, and back-up generation is becoming increasingly expensive.

The government of India announced partial deregulation of diesel prices in January 2013, by incremental price increases of ~?0.50 (~$0.008)/month for retail customers, as the government tries to get subsidized diesel to a market-based price.

This rise has resulted in a ~15 percent increase in diesel prices over the last 13 months, making solar a very attractive option. Meanwhile, coal has not been the answer to the country's energy problems with its own supply shortage issues, and coal power plants are increasingly dependent on imports as prices continue to climb.

"The case for solar in India will remain strong as long as the relevant policy goals address power shortages that affect millions of Indians, businesses, industries, and agriculture," added Prabhu.