India’s Solar Sector

India crossing 30 GW Solar PV installation in the early part of 2019 is truly a remarkable feat. Though the last few quarters temporarily slowed the momentum owing to various policy changes including implementation of GST, SGD, and BIS, the situation seems to have settled down to a large extent and the market is expected to pick up. The majority of the demand is expected to come from the government-driven utility-scale projects but other segments such as rooftop, open-access and floating PV applications are expected to play a bigger role. Further growth, however, will require policy stability, stronger infrastructure (robust grids, testing facilities, skilled workforce, etc.), encouragement for the adoption of newer technologies (high-efficiency modules, storage, smart grids, floating PV, etc.), and efficient financing mechanisms with increased access to lower-cost capital. While there has been a strong focus on reducing costs in India over the last few years, there is a need for enhanced quality consciousness in the entire solar ecosystem (developers and financial institutions alike). Developers should focus on increasing the module lifetime and efficiency of their projects to minimize the LCOE and maximize returns. Having a long-term view is crucial for the sustainable growth of the solar industry, given that there are still 70 GW of installations to be completed in the current target. 

 

From the PV module standpoint, SGD has certainly helped Indian manufacturers to get a bigger pie of share in solar installations in 2019. Increasing the on-ground presence of locally made modules will also instill confidence among downstream value chain to source made in India modules for their projects, which is extremely critical for sustainable demand for made in India modules once the price impact of SGD on Chinese modules starts to diminish. Long term demand for locally made modules will also depend on Govt. initiatives, trend of module prices in China, and investments made by Indian manufacturers for scaling up capacities to meet short lead-time requirements of large scale utility projects, improving quality and reliability, emphasis on R&D, wafer, and cell manufacturing to be competitive with Chinese players both from cost and quality standpoint.  

 

An interesting technology trend, which can have implications on the cost-sensitive India market, is the shift from poly to mono PERC. The global demand for high-efficiency technology is increasing due to which major Chinese suppliers are gradually phasing out poly cell production. Mono PERC technology is currently 15-20% higher in cost as compared to poly at module level and doesn’t match up to fit the solar tariffs in India. Since some demand for poly modules will continue to be there over the next few years, scarcity of poly wafers is expected to create demand-supply imbalance and subsequent increase in the price of poly modules as well. The increase in price due to this technology shift, however, seems to be temporary and would subside with an increasing supply of Mono-PERC cells. 

 

Considering short term volatility in the price of modules due to policy changes in China, the tariffs are expected to remain stable in the near term. It will be also interesting to see if the government will do away with reverse bidding and adopt FiT. Solar has already reached grid parity and there is no real need to further reduce the tariff and put more cost pressures on the value chain. Stability in tariffs can mitigate the impact of expected volatility in price (which depends on China policies, global demands, change in technology), increase investor’s confidence, and ensure participation of serious long-term players, which are critical for the healthy growth of PV in future. Better focus on quality infrastructure through stringent specifications and standards in tenders is also the need of the hour. While the introduction of BIS standards is the first step, they need to be strengthened and made more suitable to Indian climatic conditions. 

 

With more solar plants getting older, India’s solar industry is entering a critical stage of its PV journey. The next few years will show a true picture of where India stands in terms of developing robust projects, the impact of higher focus on “price” rather than on “quality”, what works and what doesn’t, etc. It can be a great learning curve that might change the way future projects are deployed in the country. Hopefully, the field performance data, especially failures, is not confined to the plant owners and shared with the larger audience in the value chain, and steps are taken to plug the gaps and mitigate risks for long term performance and efficiency of solar projects.