Even as apprehensions over safeguard duty settled somewhat, manufacturers continued to face certain challenges. These were lack of a robust supply chain, high cost of borrowings and uncertainty in getting adequate business. Despite the issues in the manufacturing space, the response to Solar Energy Corporation of India Limited’s manufacturing-linked solar tender was impressive. The tender guidelines and capacity provisions were revised a number of times to incentivise bidders and the auction, which took place in November 2019, was oversubscribed. Renewable Watch interacted with senior executives of leading manufacturers at the Renewable Energy India Expo 2019. They shared their views on the key developments, outstanding issues, and the short- and medium-term demand outlook for the sector. Excerpts…
What were the significant developments in the renewable energy manufacturing space in India in 2019? How have these impacted the segment?
Niranjan S. Nayak
The solar inverter segment has grown by eight times between 2014 and 2018. India installed over 11,600 MW of renewable energy capacity during the financial year 2017-18. Power generation from renewable energy sources reached a record 101.84 billion units (BUs) in 2018 and 107.22 BUs between April 2018 and January 2019.
The government has committed to intensify the use of clean energy resources and has taken various initiatives to give a fillip to the renewable energy segment. A major initiative is the goal to set up 175 GW of renewable energy capacity by 2022. I believe that the Indian renewable energy sector will attract significant investments in the coming years and create many employment opportunities, especially in rural areas.
The percentage of domestically manufactured modules used in solar projects set up in India has seen a year-on-year growth over 2018. This has been enabled through an increase in local module manufacturing capacities, upgrades in latest manufacturing technologies and better control on the included bill of materials. Additionally, Indian domestic solar manufacturing has seen considerable support from local manufacturing-linked tenders floated by central public sector units and under the KUSUM scheme. The levy of safeguard duties on imported cells and modules, supply delays, and forex fluctuations have been other key factors driving the preference for domestically manufactured modules.
What are the outstanding issues in the manufacturing segment?
Niranjan S. Nayak
The foremost issue is supply chain management. Electric components can be imported or manufactured locally but sheet metals, inductors and busbars are not easily available. Moreover, ensuring good quality of these materials is hard. Therefore, we want the supply chain in India to become robust. Also, the products imported from China are cheaper. Unless manufacturing in India becomes competitive, companies will not find it profitable. In order to improve the manufacturing segment, the government should extend more incentives. It should promote research and development in components used in renewable energy projects. This will help avoid the mere assembly of products designed in foreign countries. Meanwhile, the technical knowledge of operators and engineers based in India can be harnessed to take the Indian renewable energy sector forward.
The primary concerns are related to procurement (absence of a strong local sourcing ecosystem), financing costs (high borrowing rates and fluctuating foreign exchange rates), technology obsolescence (rapidly changing technologies such as bifacial and heterojunction), uncertain end markets (changes in sourcing norms), and high costs associated with testing and certifications. Domestic manufacturers will be able to plan better if a stable long-term demand outlook is available. This will enable better planning regarding investments, manufacturing technologies, capacity building, and the associated local supply chain to control the overall product cost and develop quality products.
Do you have plans to expand your manufacturing capacity in India?
Niranjan S. Nayak
Delta has been manufacturing central inverters in India. We have a manufacturing capacity of 1.5 GW per year. Our interim manufacturing plant is located at Hosur, Tamil Nadu. We are planning to set up a new plant at Krishnagiri in the state for manufacturing string inverters from 2021. However, for that to take place, we first need to ensure that the volume of orders increases and the inherent supply chain issues are resolved. When we expand our manufacturing capacity in India, we would make sure that our inverters are exported to European, South American and even North American countries.
What is the short- and medium-term demand outlook for renewables manufacturing in India?
Niranjan S. Nayak
In 2017, there were sufficient installations of solar projects. In 2018, the growth in installed capacity reduced and, in 2019, it plummeted further and was probably the lowest in the past few years. With many auctions being carried out in 2019, we expect over 9 GW of capacity to be installed in the next financial year. Interestingly, the rooftop solar market is growing despite a drop in installation of utility-scale projects. And despite the supply chain management issues discussed, it will still be profitable to manufacture inverters in India only if the volume of projects goes up.
Indian manufacturers currently have a 15-20 per cent share in the overall demand for solar PV modules. While several government tenders and schemes require locally made modules, other factors including safeguard duty structures and fluctuating import prices are also driving the demand for locally made cells and modules. Moreover, Indian companies are seen to be investing in capacity enhancement, resources, quality, reliability and technologies to compete with Chinese players both from the cost and quality standpoints.