A recent ICRA assessment — that the recent rise in China’s PV module prices could scupper the costing of India’s fast growing solar sector — comes as a dampener. India’s solar sector is now exploring bids well below ₹3/kwh (or about 4.5 cents). As analysts have pointed out, the latest bid finalised at ₹2.44/kwh (Bhadla phase III solar park in Rajasthan in May 2017) levelised and fixed over 25 years compares well with world levels of ₹1.75/kwh. ICRA observes that the rise in imported PV module prices between May and August, from 30-32 cents per watt to 35-37 cents per watt “will adversely impact the viability of recently bid solar projects, where bid tariff is below ₹3.5 per unit”. Buyers have also reported Chinese suppliers reneging on supplies and seeking renegotiated contracts. This is not to suggest that India’s solar story, of a fall in module prices by 70 per cent since 2010-11 and an increase in capacity from 22 MW in 2011 to 13 GW today, is coming unstuck. But these are uncertain times, since it cannot be said whether the firm prices will last for months or years. The recent rise is being driven by a sudden spurt in buying in the US, in anticipation of a trade ruling against China’s solar module makers. Two bankrupt US panel manufacturers, Suniva and Oregon World, have moved the US’ International Trade Commission for protection against Chinese imports. If the President intervenes, as he well might given his predilections, the US may see a slowdown in demand for Chinese panels. This could lead to lower prices for India’s solar producers, who are reliant on China’s modules. Protectionism in Europe too will have a similar effect.
India’s solar programme has been based on a transparent bidding system where the onus is on the operator to bear the currency risk (an appreciating rupee is a favourable factor at present) and ensure higher panel yields. The States have ensured investor interest by providing land and ensuring payment security against defaults by discoms. The share of renewables in total electricity generation is 6.7 per cent, with wind power accounting for over 50 per cent of this (Prayas estimates). For solar power to raise its presence, the industry will have to step up installations and improve panel efficiencies. Discoms would need to learn adjusting the grid to fluctuations due to solar and wind, in keeping with global practices.
India will emerge as one of the world’s largest markets for PVs. The annual imports of solar equipment amounts to over $2 billion at present. Developing an indigenous solar capacity to cope with financial and trade shocks should be considered, even if it ramps up costs by 10 per cent.