ALMM Extension to Boost Growth of Indian Solar Industry but Slow Down Investments by Domestic Manufactures

The ministry had introduced the ALMM list to boost domestic manufacturing reducing the country’s dependence on imports. However, the domestic capacity was not being able to meet the demand for solar PV in India.

April 26, 2023. By News Bureau

The ministry had introduced the ALMM list to boost domestic manufacturing reducing the country’s dependence on imports. However, the domestic capacity was not being able to meet the demand for solar PV in India.

In a bid to boost installed solar capacity in India, the government has decided to relax the Approved List of Models and Manufacturers (ALMM) for two years. The Ministry of New and Renewable Energy (MNRE) has issued an office memorandum on its website.

The official notification came almost a month after Power Minister R.K. Singh announced the relaxation of the Approved List of Models and Manufacturers (ALMM) during a conference.

“With reference to the Approved Models and Manufacturers of Solar Photovoltaic Modules (Requirements for Compulsory Registration) Order, 2019 and subsequent amendments and clarification thereto, the undersigned is directed to convey that subject Order is hereby held in abeyance for one financial year, i.e. FY 2023-24. Thus Projects commissioned by 31.03.2024 will be exempted from the requirement of procuring Solar PV modules from ALMM,” stated the official notification.

The ministry had introduced the ALMM list to boost domestic manufacturing reducing the country’s dependence on imports. However, the domestic capacity was not being able to meet the demand for solar PV in India.

In the conference held in February, the power minister announced that India has around 70 GW of solar capacity under implementation but the manufacturing capacity of 500 Wp (modules) and above is just 10 GW. He further added that it would take around seven years to complete the solar power projects with ALMM in place.

India has ambitious plans to install 280 GW capacity of solar power by 2030. The relaxation of the ALMM mandate is anticipated to have a positive impact on the solar energy projects in the country.

Energetica India interacted with the key industry players to know their views on the ministry’s decision.

Srivatsan Iyer, Global CEO, Hero Future Energies

‘A much-needed respite for solar power developers who will now be able to procure modules at competitive prices’

Such a measure is certainly a long-awaited move in the right direction. Implementation of BCD and ALMM, especially in the wake of the global supply chain crisis have impacted almost the entire 50 GW projects currently under execution today both in terms of cost escalations and schedule delays.

The decision to relax ALMM will provide a fresh lease of life to several solar power projects which were stalled or postponed. This is a much-needed respite for solar power developers who will now be able to procure modules at competitive prices. However, had the ALMM been kept in abeyance for two financial years instead of one, it would likely have had a greater impact as the bigger sized RE projects realistically require more time than a year for commissioning.  Also, it would be good if the ALMM exception can apply to modules imported before the expiry date, rather than demonstrate COD before it expires.

While a competitive domestic supply chain may be a key contributor for sustained long-term growth, the short-term disruptions, if not addressed with a sense of urgency, could have cascading effects on the ability to achieve the ~30 GW annual capacity addition required to meet the goal of 280 GW of solar capacity by 2030. The truth is that at present, domestic manufacturing capacity of solar modules falls far short of what is required to feed the pipeline of projects. Not surprisingly, we saw a lull in solar installed capacity addition in the last year or so.

Till such time the announced domestic manufacturing capacity under the manufacturing linked tender and PLI schemes become operational and domestic output is of comparable price and quality, the GOI must find a reasonable path forward, including measures like deferment of ALMM to meet the ambitious RE targets and not slacken the momentum that India gained in the last few years of RE deployment.

Today, India is at the forefront of the global energy transition and has set itself a target of going net zero by 2070 and setting up 280 GW of solar capacity by 2030. In its recent push towards Make in India, we have seen the GOI impose a multitude of tariff and non-tariff barriers like BCD and ALMM which have led to a stifling of RE capacity growth. A developing economy of our size cannot afford any deceleration in the impressive pace of RE deployment seen over the past few years.

Today, several projects are stuck in limbo due to the implementation of BCD and ALMM, especially more detrimental as the industry looks to recover from the impact of the global pandemic in terms of schedule and cost impacts.

While BCD is a tariff barrier and can hypothetically be factored in the financials, non-tariff barriers like ALMM have been crippling in the way they limit the supply of high-quality modules available for use in Indian RE projects. Presently, the manufacturing capacity for high efficiency mono PERC modules (>500 Wp), which is now the global standard, is hardly ~2-3 GW compared to ~20 GW of current annual demand and ~50 GW of projected annual demand.

Out of the already constrained supply, manufacturers choosing to export an unusually large percentage of their production to the US this current year has further throttled the capacity to deploy solar projects. This deferment will provide respite to some projects, and we hope that the same shall be extended till the time the manufacturing capacity catches up with the domestic demand.

While government support is essential for setting up of a successful manufacturing ecosystem, in order to become a truly global manufacturing powerhouse, there also needs to be a sunset date for such incentives as in the case of VGF and other similar schemes meant to boost RE installations, in order to compete effectively in global trade with China. We believe demand side incentives for domestically produced equipment would be more effective in keeping the manufacturing setup lean and efficient and would be the quickest forcing mechanism to enable manufacturers to accelerate up the learning curve and invest in the best technologies providing the lowest LCOE.

Vaibhav Roongta, Chief Business Officer, Rays Power Infra Pvt. Ltd.

‘Relaxation of ALMM mandate will help complete solar projects in time while fulfilling the norms of quality and quantity’

The decision has provided much-needed relief for the industry to survive but the extension is for a year, till March 2024. The domestic production of cells and modules can grow at the speed required to match the consumption and demand. There is a huge demand-supply gap and solar projects are getting delayed. This extension will allow imports from China and expedite the commissioning of projects.

The relaxation of the ALMM mandate will help complete solar projects in time while fulfilling the norms of quality and quantity. While we all want the Indian manufacturing industry to thrive and not be dependent on any other nation, we also need to ensure that the growth of the solar industry is not slowed down. Relaxation of the ALMM mandate is in the right direction, ensuring the planned growth and development of solar power in India.

In terms of performance, imported modules score slightly better than domestic modules. However, with new facilities and advanced technology being established in India, we will see similar or even better-performing modules to be manufactured by Indian manufacturers.

There will be a positive impact of the ALMM mandate on India's ambitious renewable energy target. This move secures the solar industry's growth as planned and simultaneously allows us to grow the domestic manufacturing capabilities and capacities.

Vineet Mittal, Director & Co-Founder, Navitas Solar

‘Such move will adversely affect the investments of domestic PV manufacturing and  percent

At Navitas Solar, we believe that extension of ALMM, a favourable policy for domestic manufacturers, would question about policy implementation by the Indian Government and its volatility. We believe that such move will adversely affect the investments of domestic PV manufacturing. It may risk job losses across domestic solar manufacturing industry in India.

India would require to invest INR 53,773 crore in upcoming 3-4 years to indigenize domestic manufacturing value chain. ALMM mandate is crucial to protect these investments. India is expected to have greater than 95 GW of domestic manufacturing capacity by 2025. With increasing domestic manufacturing capacities of solar cells and modules, India can stand at a stronger position in the global solar market. But with this decision, we surely think that delaying ALMM implementation would slow down the expansions of domestic manufacturers to a very large extent which will ultimately slow down the progress towards realising Atmanirbhar Bharat.

According to CEA, we have installed 122 GW of renewable energy including 64 GW of solar till now in India. The target seems difficult to achieve however it’s not impossible. The developers require favourable policies from the government in which the Indian Government can improve.

Manish Gupta, Chairman, Insolation Energy Ltd.

‘ALMM relaxation would delay Atmanirbhar Mission and slowdown investments made by domestic manufacturers’

This decision of the government is in appropriate and is not in line with the government own flagship mission of Sustainable India through Make in India. It has come at a crucial time when manufacturing capacity is in place of 20 GW of modules and 10 GW of cells. More importantly, the industry was in process of doubling and reaching out to 50 GW end-to-end, scaled up to all integrated 100 GW by 2025.

ALMM relaxation would certainly delay the Atmanirbhar Mission and slowdown the expansion and investments made by domestic manufacturers. Atmanirbhar Mission is delayed by 3 years as sector would need one year more after resuming.

It is doubtful and not practical to achieve 450 GW by 2030. Industry could not achieve 100 GW by 2022, when no such protection was in place to manufacturers. Developers won the bids in earlier years at unrealistic prices to the tune of INR 1.99 per unit. They couldn’t be executed even when no ALMM or BCD was there.

Most critical issue is the prices of solar wafer, cell and module which has gone up by 40-60 percent. This decision is the result of developer’s influence on taking excuses for not doing their projects by Indian manufactured modules.

Gautam Mohanka, Managing Director and CEO, Gautam Solar

‘Delaying ALMM implementation gives domestic manufacturers an opportunity to ramp up their expansion efforts and become more competitive’

The government’s recent decision for relaxation of the Approved List of Models and Manufacturers came as a bit of a setback for the domestic solar module manufacturing companies as it means that projects commissioned till March 31, 2024, will be exempted from the requirement of procuring modules from ALMM. But on the brighter side, it gives domestic module manufacturers a year’s time to ramp up their capacities and contribute significantly to the net zero targets taken up by the Indian government.

We, at Gautam Solar, believe in looking at the holistic view of a situation rather than dwelling on the negatives. Although there is a small chance that delaying ALMM implementation could slow down investments made by domestic manufacturers, we believe that solar energy is the future and will only grow more with continuous awareness among the public. Hence, it gives an opportunity to domestic manufacturers to ramp up their expansion efforts to increase their capacity and become more competitive with their Chinese counterparts. As for Gautam Solar, we are hard at work in increasing our annual manufacturing capacity to 1 GW by Q2 of FY 2024.

Overall, it will have a positive impact on India’s ambitious renewable energy target of 450 GW of renewable energy by 2030 as many dormant projects will be revived due to the increased availability of modules and even more new projects may be commissioned. As for the domestic module manufacturers, although it is a setback, it gives an opportunity to domestic manufacturers to become competitive with China through various schemes to boost indigenous module production including Production-linked Incentive (PLI) scheme. Thus, the government’s vision of Atmanirbhar Bharat and India’s ambitious renewable energy targets will be in sync.

- Energetica India
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