The Indian solar power industry has grown in leaps and bounds, especially in the past five years. From a cumulative installed capacity of 160 MW in 2010, India has reached an incredible 8.06 GW in 2016, and this is just the beginning of a very progressive trend. The solar project pipeline in the country already stands at 22 GW, with over 13 GW under construction. Needless to say, this has been possible only due to the joint efforts of the government and the industry.
The central government, with directions from the Prime Minister’s Office, has initiated several policy provisions and incentives to enhance and expedite the development of solar energy in the country. To begin with, a highly ambitious target of achieving 100 GW of solar power generation by 2022 has been set. And in order to achieve the same, policies and campaigns such as the Jawaharlal Nehru National Solar Mission, Power for All and Make in India have been launched to provide an impetus to the objective. Even in the international arena, India has taken a leadership position by driving the International Solar Alliance, and initiating a worldwide campaign for awareness and development of solar energy.
However, such ambitious and long-term visions, if not complemented by measures at the manufacturing and operational levels, would prevent the realisation of such targets. Currently, the country is faced with such a situation, where short-term profit-making measures are hurting long-term objectives critically. The invasion of cheap solar modules, mainly from China, is impeding the growth of domestic manufacturing in the country. At present, eight out of 10 module sellers in the country are Chinese. These Chinese module suppliers have raised their market share from 50 per cent to 75 per cent in the past year, while Indian domestic manufacturing currently claims a meagre 13 per cent share in the solar industry (down from 26 per cent a year ago). Moreover, with more imported modules arriving in the market, the share might fall even further, and considerably. Hence, India’s short-term focus on capacity enhancement through imports is sabotaging its eventual dream of becoming solar reliant.
It is surprising to note that despite more than 34 solar parks having been approved in 21 states across the country and huge solar tenders (aggregating nearly 20,766 MW) having been issued, India’s domestic module manufacturing capacity still stan-ds at a meagre 6.5 GW (as of December 2016). This is a grave situation indeed, when it comes to promoting Indian manufacturing at a global level. The government’s intervention at this stage is critical to address this potential catastrophe. In my opinion, the government also realises that focusing on domestic manufacturing of solar modules can help create jobs, build a better economy by saving money on solar imports (a massive $42 billion can be saved in equipment imports by the solar industry alone by 2030) and, in turn, claim a significant portion of the global market as a solar module seller.
Further, one must consider that importing solar modules will only centralise power in foreign countries and allow them to decide the pricing and selling terms, thus controlling India’s solar future. Although initiatives like Make in India reflect India’s idea of nationwide industrial reform, which basically is a path to bring an economic revolution in the country, surprisingly, India is still spending millions (in the first half of 2016-17, solar imports in India reached $949 million) on solar module imports. The share of Chinese manufacturers in the Indian market is 87 per cent or $826 million.
Aside from the economic implications of the issue, it is also pertinent to note that there is a big issue with regard to the quality of the material coming into the country. Since imported modules (being sold at $0.39 per watt) are 8-10 per cent cheaper than Indian ones, they are more budget friendly for solar project developers. However, imported modules are mostly substandard in quality and hence, lack long-term sustainability, which is crucial for India for replacing fossil fuel usage in the long term. The absence of a standard quality checking protocol or anti-dumping duties for solar module imports is the reason why foreign countries (mainly China) are finding it easy to cut corners on their products and practically dump their low-end modules in India.
Surveys show that low quality imported modules lack performance consistency. Since India is trying to deliver energy to the farthest corners of the country, reliable and consistent energy supply, which depends on efficient infrastructure and components, is the most important factor to fulfil this objective. Imported modules that stop working unexpectedly and add to repair or replacement expenses cannot be the tool to light up the country’s 18,452 unelectrified villages. Focus on the sustainability of the energy transition system is as important as meeting the 100 GW target, and one factor cannot be ignored while the other is being fulfilled. Or else, our green energy revolution will always be under the control of foreign manufacturers and we will continue to bear the repair/replacement costs and loss of energy.
There are gaps in the government’s policy framework, which need to be filled. In addition, since progress in domestic manufacturing and growth in the country’s solar industry are interconnected, policies should be formulated and implemented to address manufacturing issues involving infrastructure, transport, power outages, taxation and labour laws.
As a first step, the government should consider imposing anti-dumping duties on imported modules as has been put into practice by the US and Europe. The former determined that Chinese and Taiwanese solar imports are being dumped in the country at margins ranging from 18.32 per cent to 249.96 per cent with the help of subsidies ranging from 14.78 per cent to 15.97 per cent. Based on this revelation, the US imposed 44.18 per cent duties on solar equipment imported from Taiwan. In 2015, the United States International Trade Commission further investigated this issue and imposed 50 per cent duties on Chinese imported solar equipment as well. Europe too imposed duties on solar imports and, judging from the domestic solar growth, it is working for them. Imposing anti-dumping duties on imported modules increases the cost of imported products and thus creates a demand for domestic modules. Currently, this seems to be the most effective way to promote domestic manufacturing, while at the same time restricting the inflow of substandard modules into the country.
The incredible growth story of the solar power industry in India should not be marred by a short-term approach, which puts the long-term goals and sustainability of the segment in jeopardy. The solar segment in India is thriving and its future looks promising. With the government backing its growth, the investment scenario has improved considerably. According to surveys, reaching 100 GW of capacity would require investments of around $900 billion in the next few years. To this end, the government has sanctioned 100 per cent foreign direct investment in renewable energy generation projects. And the outcome is encouraging as India is receiving huge investment commitments from across the globe. The World Bank has sanctioned $625 million for the Grid Connected Rooftop Solar Programme and expressed its willingness to offer $1 billion for renewable energy growth. This is the time to convert these great opportunities into marked progress and create a path for technological and business excellence in this domain, aspiring towards global competition.
Hence, it is imperative to realise that meeting the 100 GW target should not override the focus on making India globally competitive in the solar segment. And subsidies alone cannot achieve this result. India needs to align its manufacturing plans with global growth and develop a technology roadmap to firmly plant its feet in the global solar market. To this end, a supportive policy framework and a progressive roadmap are vital.
By Gyanesh Chaudhary, Managing Director and Chief Executive Officer, Vikram Solar