Indian solar power developers are looking for ways to keep input costs down after device tariff barriers go into effect from April next year, said two people who were aware of the development.
In order to avoid higher taxes after the government imposed a basic tariff of 25% on solar cells and 40% on modules from the next fiscal year, some developers are planning to import solar cells and then have them assembled into modules by local manufacturers.
This should save the higher tariffs for solar module imports. This is important because solar panels account for more than 50% of the total cost of the project.
Developers are trying to keep costs down while solar power tariffs have hit record lows ₹1.99 per unit.
Despite the world's largest green power program, India has a domestic production capacity of only 3 gigawatts (GW) for solar cells and 15 GW for solar modules.
“A lot of developers are looking at this, some domestic module manufacturers are ready to assemble it for them. They are also considering this strategy given the way Chinese providers have raised module prices, “said the CEO of a solar company, one of the two above, on condition of anonymity.
Chinese providers have raised the prices for solar modules from 19 cents to 25 cents per kWh. Suppliers terminate their contracts for the delivery of devices that have already been contractually agreed, even at the risk of their bank guarantees being redeemed.
Indian solar developers also plan to avoid shipments from Xinjiang, China, after reports of alleged use of forced labor by manufacturers, Mint previously reported.
A high solar module price of 25 cents per kWh can not only lower the return on tender projects by 200 basis points, but also increase solar power tariffs on future bids by 10-15 Paise per unit, Crisil Ratings said in a recently released report.
Indian solar developers can also only choose from a few providers, as the Ministry of New and Renewable Energy (MNRE) has prescribed that they buy devices from a list of approved photovoltaic models and module manufacturers.
According to Icra Ratings, the expansion of renewable energy capacities in India will improve from 7.4 GW in FY21 to at least 10.5 GW in FY22. There is a strong project pipeline of 38 GW and another 20 GW of clean energy projects that are being tendered, it said.
India has a solar power generation capacity of 41.09 GW with plans to reach 100 GW by 2022. According to the Central Electricity Authority, India's electricity needs would reach 817 GW by 2030, more than half of which would be clean energy. In addition, a green energy capacity of 30 GW is required to produce around 1.1 million tons of green hydrogen annually to meet the proposed requirements by 2030.
“We estimate the growth in power demand for all of India for FY22 at 6% yoy, given the favorable base effect, the relatively smaller impact of the second wave on power demand, and the increase in the vaccination program. “Icra said in a statement on Tuesday. The power generation capacity expansion is expected to recover to 17-18 GW in FY22, which will increase 45% year over year, led by the green energy segment.
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