Solar Can Run On Collaboration Not Competition

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The rising tide of growth that Indian solar sector resembles has promised to shift the weight of poverty, unemployment and social-cultural asymmetrical growth from India’s shoulder, willing an energy rich future into reality. Quite decisively, Indian Government has devised plans for leveraging this opportunity.

Net metering, mandating solar installation in Government buildings, introducing viability gap funding, long tenure loans, ‘Solar Park’ development are few of the many examples of Indian Government stepping up and trying to change the monopoly of conventional energy usage, that keeps draining economic reserves while spewing pollutants in the environment. India reaching 12 GW of cumulative solar power capacity in 2017 from a meagre 10 MW in 2010 obviously reflects a sound growth. And rooftop installation growth increasing from 72 MW per year to 227 per year promises to bring in common man into the green energy revolution.

India has scaled a great height competing with dominant solar industries (countries) in the world and currently is on the path to replace Japan as the third largest global solar market. Although such competitive attitude can translate into growth, intensifying competition within Indian solar industry is rapidly becoming a cause for concern.

Falling Tariff and Rising Competition

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Solar power tariffs in India are falling at a drastic pace (INR 2.62/per unit), creating real yet unreliable future for solar. We have seen the prices go down from Rs 10.95 to Rs 12.76 per kWh in 2020-11 to INR 2.62/per unit at the Bhadla Solar Park bidding in 2017. The current solar tariff is actually a 17 per cent decline within just a month from previously recognized tariff of Rs 3.15/ per unit, quoted at Kadapa project in Andhra Pradesh.

Although the Government is upholding this scenario as the premise to build upon ‘power for all’ a reality, close inspection would reveal damage to solar reliance vision. Higher plant load factor in certain places can explain the reason behind a certain degree of tariff shrinkage. However, the bid tariffs available right now breed the question of sustainable ROI generation (the carrot for the investors). The urge to build a significant solar portfolio quickly is creating the competition and it has allowed Government to drop the solar tariff at each stage, leading to the current number.

Additional Issues Adding Fuel to The Fire

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Indian solar modules are already 8-10 per cent costlier than that of foreign modules (Indian modules cost $0.35-$0.40 cents/per Watt p, while Chinese modules cost $0.33-$0.36 cents/per Watt p). With the industrial backing and huge subsidies, foreign solar module manufacturers can produce and sell the merchandise at a lower rate than Indian companies. As India lacks a uniform quality control process and has stepped back from imposing anti-dumping on Chinese modules, the level of opportunities for Indian manufacturers has decreased creating an unfair competition within Indian solar sector.

Government has tried to increase demand for the domestic manufacturers by bringing DCR-M (module) quota in the fold. However, percentage of the DCR category projects, which was 80 per cent in 2010-12, came down to 50% in the year 2013-14. Developers refusing to work with the DCR tenders has also increased the problem tenfold (as using Chinese modules is cheaper and assure a better profit), for instance only 696 MW projects were auctioned under DCR out of 1,037.26 MW of DCR projects. This has reduced demand for domestic manufacturers, slowing down India’s plan of claiming a large portion of the global energy market.

Delays in awarding contract, delay in new manufacturing policy implementation, and lack of focus on domestic manufacturing has added fuel to the fire intensifying the competition within the Indian solar sector.

Effects of The Competition

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This competition has raised question regarding timely completion of projects, financial feasibility of the projects, and quality of the modules. Although this competition is triggered to quickly reduce the cost of the renewable energy, making it cheaper than conventional energy, we have to understand that it might not be the result.

As solar tariff continues to fall, Indian solar industry might lose investors, which will slow down the solar growth. Additionally, developers favouring Chinese modules to get a better profit could unknowingly flood the solar industry with low-quality modules, putting Indian solar reliance on unstable grounds. These problems will certainly create hindrance in the path to reaching countrywide grid parity with renewable energy and keep 100 GW by 2022 target a dream.

What Do We Need?

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To get out of this bind, we need collaboration not competition. The Government and the private solar entities need to collaborate on deciding the solar tariff to keep it on a stabilized scale. The tariff stability will help domestic manufacturers claim a part of the industry and go toe-to-toe with the foreign module sellers. Tariff stabilization will also bring more investors, promising them healthy ROI, ultimately benefitting the nation through solar growth.

A strong collaboration will help Indian solar industry improve quality of solar modules. Currently India has only 5 MNRE accredited labs for module testing. Understanding the current rate of influx of foreign modules in Indian industry and making a unified decision on this, towards imposing anti-dumping can only happen through collaboration.

Through collaboration, Indian Government can create solar champions, picking domestic manufacturing companies and supporting them to spearhead the growth, while inspiring others.

A better focus on domestic manufacturing is also needed and can only work precisely through collaboration. Indian Government needs to understand the importance of backing domestic manufacturers just as US, China, Japan, and Germany have understood. And considering the growth said countries have displayed in solar industry, India can expect incredible changes introducing a more collaborative environment within the industry.

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Our country is at the stage where changes are evident; however, the right decisions can speed up the growth while others can slow things down. We have seen the effects and can suspect the future of this unhealthy competition. Therefore, it would be a good idea to incorporate collaborative tactics make the changes sustainable, reliable and profitable to Indian solar industry in the long run.

Bibliography:

http://www.livemint.com/Industry/dBHp9uYshdHYVCs9TDv2NJ/Indian-solar-power-producers-may-get-module-prices-relief.html

http://www.dnaindia.com/money/report-solar-tariff-hits-record-at-rs-262-a-unit-as-competition-heat-up-2434178

http://www.businessworld.in/article/-We-Are-Not-Fighting-With-Any-Company-But-The-Whole-Beijing-Factor-/17-05-2017-118353/

http://www.livemint.com/Industry/0Cj7S0TtuhZqA2OmCsEQyL/Solar-power-bids-unsustainable-Bridge-to-India.html

https://www.bloomberg.com/news/articles/2017-01-11/india-s-solar-prices-set-to-drop-amid-competition-lower-costs

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