Renewable energy manufacturers continue to face certain challenges in the industry. Although they have gained maturity over the years, wind equipment suppliers continue to struggle with capacity restrictions owing to competitive bidding and thin margins, and sustain heavy losses. Meanwhile, solar module manufacturing has still not gained the scale required to sustain the growing demand. Further, the Covid-19 pandemic has slowed down operations with a wide-ranging impact across the industry. That said, there is still light on the horizon for the solar and wind manufacturing industry given the restrictions on imports, focus on domestic manufacturing, expansion of renewable energy capacity and India’s ambitious renewables target for 2030. Leading solar and wind manufacturers express their views on the journey thus far, the prevailing issues and outlook for the sector. Excerpts…
How has the renewable manufacturing sector evolved over the past 10 years?
Global perceptions with regard to renewable energy have undergone considerable change. Ten years ago, when even though the potential of renewable energy was widely recognised and accepted by the public at large, its large-scale deployment was yet to be witnessed. Now, 10 years later, the incredible potential of renewable energy has been widely demonstrated owing to ongoing technology advancements and the expeditious implementation of many renewable energy technologies, especially in the electricity sector.
Today, renewable energy technologies are useful instruments for enhancing energy security and combating climate change. In addition, they can be considered as investments capable of providing direct as well as indirect economic advantages by way of decreasing the reliance on imported fuels, refining the quality and safety of the local air, advancing energy access and security, driving economic growth and creating new avenues of employment. Dwindling costs are also a factor for the rapid proliferation of renewable energy in recent years. Notably, in the current environment, several renewable energy technologies are cost competitive with conventional generation technologies, even before the environment and other externalities are taken into consideration. Astounding development in renewable energy markets worldwide has also brought about a significant escalation in the number of manufacturers, the magnitude of manufacturing, an overall surge in the number of jobs for installing and servicing renewable energy technologies, along with diversification into new markets. This especially holds true for solar PV and wind power industries.
Suzlon was one of the first Indian companies to enter the wind energy segment almost 25 years back and we continue to be a dominant player in the industry even today. A significant portion of Indian installations and over 6,000 MW of exports to other countries have been undertaken by Suzlon. Our focus has been on developing more cost-effective solutions and taking care of competitiveness in the market. As the supply chain throughout the world changed, we ensured that with the help of 2,000 MSMEs in India, we continued to develop the supply chain for the industry and remained cost competitive.
The changes that we have experienced in the past few years have intensified over the past few months. Against that, when we look at the next decade, the wind resource and our ability to capture it as an industry come to mind. The resource as compared to the global scale is not fantastic, but it can be harnessed. With newer technologies being introduced, we now have the ability to capture the Indian wind resource cost effectively. At GE, two years ago, we launched one of the largest rotors in the market. Original equipment manufacturers (OEMs) have continued the trend to introduce bigger and technologies.
What were the significant developments in the Indian renewable energy manufacturing space in 2020? How have these impacted the sector?
India is the fourth highest attractive energy market in the world. It ranked fourth in wind power, fifth in solar power and fifth in renewable power installed capacity, as of 2018. With augmented backing of the government and developed economics, the sector has become more striking from investors’ perspective. The government strategises to establish 475 GW of renewable energy capacity by 2030. As of August 2020, the installed renewable energy capacity stood at 88.79 GW, of which solar and wind accounted for 35.73 GW and 37.99 GW, respectively. With a potential capacity and policies focused on the renewable energy sector, northern India is likely to become the centre for renewable energy in India.
There has been a focus on major investments and developments in the Indian renewable energy sector and key initiatives have been taken by the government to boost the sector. In August 2020, the government announced methods to offer land near its ports to companies for building solar equipment factories. It plans to add 30 GW of renewable energy capacity along the desert of Gujarat and Rajasthan. Indian Railways is taking several initiatives to increase the maximum usage of clean fuel by cutting down the emission level by 33 per cent by 2030. The government is dedicated to broadening the use of clean energy sources and has already taken the responsibility of numerous large-scale, sustainable power projects.
Renewable energy can create many employment opportunities at all levels, especially in rural areas. The Ministry of New and Renewable Energy has set up a determined goal to set up renewable energy capacities to achieve the target of 175 GW by 2022, including 100 GW for planned solar projects, 67 GW for wind and the remaining for other sources. India’s renewable energy sector is anticipated to draw a venture worth $80 billion by 2024.
“The development of storage systems is necessary in order to ensure round-the-clock power supply using renewable energy sources.” Amit Gupta
What are the challenges facing the renewables manufacturing sector?
One of the challenges affecting the growth of the renewable energy market is low investor interest due to delayed payments or non-payment by discoms to clean energy develo-pers. The other major issues are import duty on solar panels and funding constraints. Besides, there are concerns related to storage of renewable energy. Energy storage technologies provide flexibility in the use of electricity to meet centralised and decentralised supply requirements. Advanced battery technologies can enable the fast distribution of rooftop solar installations, which are currently suppressed by the high cost of energy storage solutions. The government is also exhibiting interest in energy storage and pursuing innovative solutions. The development of storage systems is necessary in order to ensure round-the-clock power supply using renewable energy sources like solar and wind. The government is committed to the growth and development of storage systems such as lithium-ion batteries, pumped hydro and hydrogen.
Land for renewable projects is another key challenge in India as the high cost reflects on the price of electricity. To address these challenges, the government is looking at barren lands for building renewable energy projects so as to avoid any clash with agricultural production. Further, as mentioned by the CERC, cost reduction needs extensive engineering research and development for new storage concepts and the requisite materials. The future of the renewable energy sector is dependent on a marginal increase in tariff, innovative procurement, success of Make in India, and increased participation from international developers.
Even though the feed-in tariff route may be taken for some small-scale renewable energy projects, it is unlikely that the system will come back on a larger scale for wind power. From an OEM’s point of view, unless we have visibility of the capacity we are going to execute in the coming years, bringing down prices will be difficult. If we are confident of undertaking 3-5 GW of capacity addition annually over the next 5-10 years, it will be easier to work with lower costs. If the orders are not consistent, manufacturers shift to supplying to other industries. The annual capacity can be increased by setting up hybrids and developing wind projects in non-windy states under the interstate transmission system (ISTS). Given the latest technologies and tariffs under the ISTS tenders, non-windy states can also harness wind energy. With more certainty on yearly volumes, OEMs will respond by lowering their costs and passing on the benefit to the power generators.
Execution is the industry’s Achilles heel. The rebalancing of wind power plants has risks across the value chain as projects get executed. Further, even though low tariffs are an issue, auctions remain the means to an end. The assumptions going into the proformas should be realistic. They should take into account factors such as execution, availability of land and cost of imports. Predictability is an important aspect to consider for optimising the value chain. Another important aspect is value. India will need to choose what source of power will be used, which will be based on the aspects we value such as cost effectiveness, job creation and lower emissions. The discussion has to be on two aspects, cost and value.
“With more certainty of yearly volumes, OEMs will respond by lowering their costs and pass on the benefit to the power generators.” -Ashwani Kumar
What is the short- and medium-term outlook for renewables manufacturing in India?
Solar power capacity has grown tremendously in the past 10 years or so and it is now the fastest growing source of renewable energy worldwide. That said, in 2019, around 109 GW of new solar PV capacity was added worldwide, which was almost the same as that in the previous year. The reasons for the rapid growth in the sector are primarily policy support, decline in technology costs and growing concerns for the environment.
Covid-19 has brought about financial uncertainty and an economic downturn. Thus, the demand for the residential PV segment may get affected. Commercial and industrial installations will also be negatively affected to preserve short-term cash flows. Supply chain disruptions and weaker investment will lead to delays in project commissioning, thus affecting the utility segment as well.
The medium-term outlook for solar remains strong, as per a market intelligence report, despite a slowdown in 2020 due to the coronavirus pandemic. As the generation from solar PV becomes cheaper than from its alternatives, the market is expected to expand during the forecast period.
“Even though low tariffs are an issue, auctions remain the means to an end.” -Gilan Sabatier
We are very encouraged by the Indian government’s mission to reach an installed capacity of more than 450 GW over the next 10 years. We are certain that a significant portion of that will be wind energy since it is a complementary source as opposed to a competitive source. As compared to other renewable sources of energy, wind has a PLF and generation closest to the demand profile. Going forward, we not only see ourselves developing the Indian market, but also making India an export hub for the industry. The government needs to ensure that there is a significant domestic market as well. Despite the setbacks due to Covid-19, the continued auctions give us confidence in government support.
The demand is going to grow due to recovery from Covid-19 and rising peak power. Coal-based plants are old generation assets, which will eventually retire and the country will need to add more power generation capacity to meet the rise in demand. Wind, on its own, has benefits in terms of matching the demand profile. It generates power during different hours compared to solar and has different seasons as well. As the renewables mix is expanding, this complementarity is valuable. As far as the resource is concerned, we are able to generate much more kWh per metre square of land than other renewable technologies. This energy density is an added value, considering the land issues in India.
With a 10 GW manufacturing capacity per year, GE Renewable Energy has three factories in this space. The localisation of the industrial and technology footprint exists on a scale second to none in renewable energy. Going forward, the industry should not limit itself to what exists.