For solar panel makers, low tariffs no cause for cheer

New Delhi: The falling price of solar power is boosting demand for the local renewable power industry but is bruising local solar panel makers who are struggling to compete with low-cost imports from China.

Local producers of batteries and convertors are adding capacities to meet increasing demand at a time solar power tariff has fallen to Rs3 a unit in the latest auction in November from what used to be over Rs12 a unit six years ago. Industry executives said local panel makers are hoping for intervention from the government.

Eighty percent of the panels used in solar projects are from China and the low cost of imports amounts to dumping, said Gyanesh Chaudhary, managing director of Vikram Solar Pvt. Ltd, a producer of solar panels.

“There is undue competition from China because of the incentives Chinese companies get, the effects of which we cannot deal with because of our limitations. For a domestic company of our stature, the interest cost is in low double digits, while Chinese companies get credit at 2% and sometimes at 1%, which is a very big difference,” said Chaudhary.

India has close to 9 gigawatt (GW) of solar power capacity and domestic manufacturing capacity of about 6 GW of modules (panels) a year by close to 100 producers. India will add 8-10 GW a year every year from next year onwards, according to Bridge to India, a clean energy consultant.

Raj Prabhu, chief executive and co-founder of consultant Mercom Capital Group Llc said global solar demand will cross forecasts next year due to an unprecedented level of activity in China. “Record installations in China followed by a slowdown resulted in an oversupply situation, which led to a module price crash. Low module prices are helping demand recovery going into 2017,” Mercom said in a statement on 1 December citing Prabhu.

Cost is saved through efficient project designing, equipment sourcing, project implementation and operations, said Sanjeev Aggarwal, managing director of Amplus Energy, which won projects last month to supply solar power at Rs3 a unit for 25 years in Uttarakhand, Himachal Pradesh and Puducherry.

“As a project developer, we are indifferent across panel makes. We choose modules based on the life cycle cost analysis factoring in the module efficiency, warranty terms, track record of operation, and module durability, keeping the site conditions in mind,” said Aggarwal, adding that global producers have a longer history and a bigger market share in India, which gives them greater acceptance among lending agencies.

Aggarwal said that at current module prices and based on the terms of the Solar Energy Corp. of India Ltd (SECI) auction, a tariff of Rs3 per unit was remunerative. SECI on Friday invited bids for 1,000 MW of solar projects, the largest tender issued by it so far.

Local producers of transformers and power storage systems, however, are benefiting from the solar expansion. According to Rajesh Gupta, director of battery maker Okaya Power Ltd, the local storage systems industry is globally competitive and is poised to grow.

“We are intending to invest about Rs8,200 crore shortly for doubling our solar battery production capacity in Himachal Pradesh to two million units a year. The market is expanding and it is in government focus,” said Gupta.

According to Sanjeev Sharma, CEO and managing director, ABB India, there are market segments beyond panels that provide a huge opportunity in terms of local manufacturing and supply, which include inverters, low-voltage products, monitoring and control systems, relays, transformers and solutions for complete electrical balance of the plant. “There are also a wide range of support and maintenance services, including remote operations and diagnostics, that will help ensure solar installations deliver optimal performance,” said Sharma.

According to Indian Electrical and Electronics Manufacturers’ Association, demand for transformers, conductors and energy meters has grown in double digits in 2015-16. Transmission and distribution equipment account for over 70% of the Rs1.28 trillion electrical equipment market.