India’s solar power capacity addition targets are way beyond what the domestic solar module manufacturing base can support, a recent report has suggested.
The Indian government is set to transform the solar power sector as it plans to substantially increase the capacity addition targets. Under the National Solar Mission, India had initially planned to achieve an installed solar power capacity of 22 GW by 2022. The new government, however, has given strong indications to increase this target.
The government has announced plans for several ultra mega solar power projects with capacity of up to 4,000 MW. Work on some of these projects has already started. Additionally, the government will allocate several projects through competitive auctions which could be worth tens of gigawatts over the next few years.
According to data released by the Ministry of New and Renewable Energy earlier this year, only 660 MW of the installed 2.3 GW module production capacity is operational in India. Just about half of the companies with manufacturing facilities are actually producing modules.
When the National Solar Mission was launched, prospective project developers were required to procure crystalline modules from domestic manufacturers and had the option to buy thin-film modules from other countries. A majority of the solar PV project developers opted for imported modules which came bundled with very cheap debt financing from development banks like the US Ex-Im Bank. US-based First Solar was actually one of the leading suppliers of modules during the first phase of the solar mission and the projects commissioned under the Gujarat solar power policy.
The government tried to correct this bias by introducing an obligation for prospective project developers to use domestically manufactured equipment. Of the 750 MW capacity auctioned during the first tranche of the second phase of the solar mission, 50% capacity was reserved to be commissioned using domestic content. Developers complied and have started placing orders with Indian module makers.
Future auctions may not include an obligation for prospective developers to use domestic content, as India looking to avoid international trade confrontation especially after the United States dragged the Indian government to the WTO over what the former calls discriminatory practices.
Indian solar module manufacturers have been waiting for years for any kind of boom in sales from the Indian project developers. Several manufacturers are under significant financial strain and have either reduced production facilities or have shifted focus to international markets.
Domestic manufacturers hope to cash in on the possible spike in demand from government-controlled companies. The Indian government has asked public sector companies and the Indian Army to set up large-scale power projects. As per government sources, these entities can give preference to and use domestic content and they would still be in compliance with the WTO regulations.
Image Credit: Tata Power Solar
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