Quality v/s Quantity: Low Quality Modules Threaten the Indian Solar Market

With India moving towards country wide solarisation to provide ‘Power for all’, future is looking bright for us. However, it is important to note that green energy transition can only be possible if it offers reliable performance. And, performance reliability is closely connected with the quality of the solar technology.

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Our Indian solar vision has led the country to stand at ~25 GW of grid connected solar capacity. This is quite impressive, but we need to focus on the primary idea behind the Indian solar vision, which was ‘energy sustainability’ and ‘initiating internal industrial growth’ to control the nation’s own solar future. Importing and installing solar panels are obviously increasing the green energy generation rate in the country. However, it is not helping India to build industrial infrastructure required to deploy solar energy in a sustainable manner and according the climatic conditions of India.

Low Quality Modules are Introduced Through Imports

Stakeholders of the Indian Solar industry have time and again pointed that most imported modules deployed do not meet the benchmark of Quality standards. Subsequently, they are found to generate lesser Solar Power for the stipulated period. It has also been highlighted that low quality imported modules being used in the grid can damage the energy transmission and jeopardize sustainability.

However, there still is a huge influx of imported modules in the Indian market. Approximately 161.5 million solar panels were imported in India in FY 2014–15 amounting to almost $821 million. Scaling up to FY 17-18, the expenditure jumped to $3.8 billion in solar equipment imports. India imports solar modules at $0.32- $0.35/Wp. Which is 8-10% cheaper than industry average domestically manufactured modules. Although, it is cheap, it is putting long-tern energy reliability into question. Additionally, with China’s recent solar policy, the price of solar modules are expected to dip far lower, pushing domestic manufacturers out of market. Most importantly, 25% safeguard duty imposition on SEZ based solar manufacturers is summing up to be quite a threat to Indian solar manufacturing industry. Although, 25% safeguard duty on solar module and cell imports (mainly modules) would have helped the industry and the domestic manufacturing sector by creating demand. But as the duty targets domestic solar manufacturing units within the special economic zones (SEZ) as well, it might do more harm to the domestic industry than good.

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In current form of this duty, there is no exemption to SEZ based manufacturing units, which is the hub of solar manufacturing in India. 40% of Solar panel Manufacturing Units and 60% of Solar Cells Manufacturing Units are located in SEZs.

Therefore, currently, safeguard duty does not present any opportunity. Imposing 25% safeguard duty on SEZ based domestic solar module and cell-manufacturing units will increase solar module production price and push domestic manufacturers in India out of business. The duty will also bring in issue of job losses, as the demand for domestically manufactured modules and cells fall.

Factoring in the safeguard debacle, if we consider the quality issue, we can assume that India is spending a huge amount of money to deliberately hand over the green energy future of the nation to foreign suppliers and securing an unreliable future.

Threat to Investments

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Although the Indian solar industry has stepped into maturity, we must realise that we are still dependant on investors, financiers, and lenders to make solar energy bankable. For a country that is trying to build investor’s confidence in the solar sector, using low quality solar equipment is potentially a big step back in the shadows. And although, India has invoked quality standardization rules, lack of MNRE accredited testing facilities (only 5 in India) will surely delay the project timelines or introduce low quality modules in the projects.

This way, low quality solar equipment will definitely cost India its financiers, as they depend on consistent performance of solar modules to get return on investment, which low quality equipment fail to offer. Besides the initial loss of financial aids, India will also stand to lose billions of dollars in maintenance, repair, and replacement of low quality modules, eventually missing its target of ‘Power for all’ initiative. In the same breath, we also need to highlight that continuously falling solar tariff and Government’s decisions like- asking developers to setup manufacturing bases to be able to win the bid, have sapped the interest of the developers in bidding for projects, as example we can highlight SECI’s failure to bring in bidders for its latest 10 GW solar project.

In this scenario, shrinking solar module import ratio, stabilizing solar tariff, and re-prioritizing solar manufacturing seems the best option to protect solar industry in India.

Way Forward

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Indian solar vision is all about building energy reliance and initiating socio-economic growth. However, being dependant on importing solar modules, have increased our import dependency, increased our exposure to volatility in currency and risk of involvement of low quality solar modules has increased significantly. It literally threatens to put project reliability and energy security in danger. Therefore, Government of India needs to focus on solar manufacturing, exempting domestic manufacturers from taxes and duties that threaten to dismantle the industry and building more testing facilities to maintain quality and reliability of solar components.

A strong domestic manufacturing eco-system is imperative to push a nation through socio-economic growth barriers. Research reveals that focusing on domestic manufacturing can save India more than $42 billion by 2030, which otherwise would be wasted on imports, to bring in possibly low quality modules. Domestic solar growth has already created more than 416,000 jobs in India within 2015 and 1,017,800 jobs are expected be created within 2022. Taking a more aggressive initiative towards enhancing the domestic solar manufacturing capacity can also help in meeting the solar energy implementation target and prepare India for the mantle of solar super power.

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