Interventions to boost PV sector

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The Cabinet Committee on Economic Affairs (CCEA) approved Rs 8,580 crore for solar power projects developed under the second phase of the Central Public Sector Undertaking (CPSU) scheme, which is expected to add 12 gigawatt (GW) capacity to the power grid between 2019-20 and 2022-23.

With this, the long-standing ‘import versus manufacturing’ debate that has dogged India’s solar sector has resurfaced. The domestic photovoltaic (PV) manufacturing sector has struggled to capitalise on the solar boom — 88 per cent of solar modules are still imported, with China supplying the lion’s share.

Buoyed by oversupply at home along with state support, Chinese manufacturers are able to supply solar panels significantly cheaper, contributing to falling solar power tariffs in India’s competitive reverse bidding auctions.

In another blow, the Domestic Content Requirement (DCR) — a component that lays down that a certain percentage of modules will have to be made in India — in the National Solar Mission and state auctions ran into trouble with World Trade Organisation (WTO) regulations, and was scrapped in 2017.

After the Indian Solar Manufacturers Association (ISMA) sought an anti-dumping duty on modules from China, Malaysia and Taiwan, a safeguard duty of 25 per cent was levied. It is to be progressively lowered to 15 per cent over two years. Subsequently, 2018 saw a significant fall in imports. The new funding approved by CCEA is to take the form of capital subsidy i.e. Viability Gap Funding (VGF), which averages at 15 per cent of the total cost per megawatt, at current capital expenditure. 

The broader issue of making India’s solar equipment manufacturing competitive and world-class, however, remains unresolved. The last few years did see the largest manufacturers increase capacity. Despite a 2 GW installation by new entrant Adani, the PV cell manufacturing capacity is still a maeagre 3.164 GW.

The implementation of the safeguard duty has also not been smooth. Arguably, two years are too little for investors and manufacturers to plan long-term for large production capacities. Also, there has been a surge in PV imports from Thailand, Vietnam, and Singapore — that are not subject to the duty — a financial daily recently reported.

“India is a technology adopter. We don’t have domestic Research and development (R&D), technology or even testing labs for certification of modules and inverters,” Vinay Rustagi, managing director at Gurugram-based solar consultancy Bridge to India, said at the State of Renewable Energy in India conference in New Delhi last month.

Will the interventions make for a robust domestic PV sector? India could have put a process in place for indegenous development back in 2013-14 when the Indian solar market became a reality, Upendra Bhatt, co-founder and managing director at consulting firm cKinetics, said.

“We didn’t put up comprehensive interventions for that, except for introducing DCR, which … essentially goes back to the old habits of creating a protectionist environment, so there is no desire to go after efficiency or scale,” he added.

“Today, the tenders don’t allow for the use of high-efficiency modules because the cost of balance of systems is the lowest in India,” Arul Shanmugasundaram, Chief Operating Officer at Tata Power Solar, said.

“Putting a higher efficiency module that is more expensive doesn’t work from a levelised cost of energy perspective. If we adopt the latest technology, it is for export and not for local use,” he added. The new funds allocated for the CPSU scheme, however, is a welcome relief for existing manufacturers, given the slowdown that has hit the sector.

source@millenium post

Categories: Solar