Lack of photovoltaic modules slows down projects in solar power sector

Developers of solar power projects are facing uncertainties because the supply of solar photovoltaic (PV) modules has fallen way behind the demand, with significant cost hikes to boot.
 

Sources said leading project developers, including state-owned NTPC, were not getting enough domestic suppliers for their tenders to procure solar modules.

This has hit close to 20 Gw of solar power capacity in the pipeline since last financial year and several project developers could look at a cost hike, resulting in revisions in tariffs at which they won the projects.
 

This list includes record low-tariff projects such as the 200-Mw one NTPC got at Rs 1.99 per unit, said senior company executives.
 

Sector experts pointed out the supply of domestic modules was less than half the demand of the sector.
 

At the same time, the price of solar modules has shot up by 30-40 per cent. The cost of Indian solar modules is usually 10-15 cents higher than those from China, which is the largest supplier globally. The cost of solar PV modules in the global market is in the range of 28-30 cents per kWh while Indian modules cost around 40 cents per kWh, said sector executives.
 

While project developers say the supply of domestic modules is weak, they are under compulsion to procure domestically.
 

Projects awarded after April 2021 have been mandated to procure solar equipment from the Approved List of Models and Manufacturers (ALMM), drafted by the Ministry of New and Renewable Energy. In order to support the domestic solar manufacturing industry, the ones on the latest ALMM of 58 companies are all indigenous ones.
 

According to JMK Research, India’s solar cell (component of module) manufacturing capacity stands at 4 Gw while that for modules is 18 Gw. Also, Indian module makers import cells, which have also witnessed price hikes along with supply-chain

hiccups.
 

“Apart from companies which have their in-house manufacturing, pure play project developers are in a catch-22 situation. Domestic supply is deficient and also the cost is high. At the same time imported cells come with BCD (basic customs duty) attached to them. Also, one has to adhere to the ALMM procurement as well,” said a senior executive of a leading solar power

company.
 

The Centre has imposed 25 per cent basic customs duty on imported solar cells and 40 per cent on imported modules from April 2022 onwards to support domestic solar manufacturing.
 

Close to 85 per cent of Indian solar capacity is built on imported cells and modules, a majority of them from China.
 

Last year, the ministry sanctioned Rs 4,500 crore for solar equipment manufacturers under the production-linked incentive scheme of the Centre under its flagship Aatmanirbhar Bharat initiative.
 

For the second tranche, the corpus has been increased to Rs 19,000 crore.
 

“Several project developers have requested the Centre to put the ALMM in abeyance till the time domestic manufacturing scales up. The BCD should have also been staggered along with the growth of the indigenous manufacturing and progress of the PLI scheme,” said a senior executive.
 

ICRA Ratings recently said projects with a tariff lower than Rs 2.5-2.2 per unit faced moderate returns owing to increases in prices of solar cells and modules.
 

“Solar projects awarded over the past 12-18 months are facing cost pressure. While bid tariffs have increased the extent has remained lower than what is necessary to mitigate the increase in module prices. The risk of moderation in returns is significant for projects aggregating 4.4 Gw awarded over the past 18 months where the tariffs are below Rs  2.2 per unit,” said Girishkumar Kadam, senior vice-president & co-group head (corporate ratings), ICRA.