There Must be a Penal Mechanism on Discoms for Delay in Signing PPAs, Payments Release
April 27, 2021. By Manu Tayal
Q: “Module Prices to Remain Higher in Near Term”
Ans: After the Chinese New Year, glass prices did not fall a bit from their autumn highs. Glass continues to remain in shortage for the downstream demand, but the situation is expected to get better. 80% of the price of a PV module is based on the cost of raw materials. The turbulence of the solar PV supply chain will last at least three months or longer till supply and demand will further improve and rebalance again. We can expect the module prices to be on the higher side until that happens, says Manish Narula, Senior Director of Business Development (India) & Sales Head (West/South), JinkoSolar, in an exclusive conversation with Manu Tayal, Associate Editor, Energetica India. Narula also discussed about his company’s presence in the Indian market, its product offerings, industry bottlenecks, expectations etc. Here’re the edited excerpts:
Q: “Kindly shed some light on JinkoSolar’s presence in the Indian market.”
Ans: JinkoSolar has been a consistent leader in the Indian market both in terms of shipments and technology. Jinko captured a market share of 22% with shipments reaching 1200 MW+ just in 2020. In addition to this, Jinko has also been recognized as the top supplier to India in the last quarter (Q4) of 2020 with a 650 MW shipment number across all segments.
To put things into perspective – Jinko has touched the 70 GW+ installation record across the globe and is the first company ever to achieve this amazing feat. As we continue to increase our market share in India, we have added some of the best clients and projects to our kitty. Jinko boasts of a rich customer mix between major IPPs, C&I Developers, EPCs, and Rooftop players. We have been able to penetrate in the distribution segment as well with our Tiger and Tiger Pro Series modules which are already class performers in the utility segment.
Jinko has been a market leader when it comes to orchestrating a technology shift from poly to mono in India. We have been the advocates of Bifacial technology and its rampant adoption in all future utility-scale projects. Jinko has supplied huge capacities to the likes of Azure Power, Adani Green, Fortum, ReNew Power, Mahindra Susten, CleanTech Solar, Amplus Solar, Hinduja Group, EDEN, and KEC International among others which speaks volumes about Jinko’s presence and its part in India’s solar journey.
Q: “With the change of time, what kind of changes you observed in the Indian renewable energy industry?”
Ans: During the past several years all the stakeholders - Govt, IPPs, Lenders and Discoms were sceptical about the growth potential of Solar Energy against other renewable sources like Wind, Hydro etc. However, due to advancement of technology and mass adoption, Solar Energy emerged as the most preferred choice by all. Steep drop in tariff over the past few years has made Solar more acceptable for end buyers and hence, the best choice among global investors. Also, the recent push by Indian Govt to announce 450GW target, thereby keeping 300GW for Solar is the most aggressive push by any Govt towards Solar globally. Renewable energy capacity is becoming more prominent in the overall energy mix of the country. Hence, we can say with confidence that barring a few hurdles, the Indian renewable energy industry is well positioned to implement the announced targets.
Q: “On the technological front, how do you see the Indian renewable energy market is frequent in adapting to new advancements? Reasons behind this behaviour?”
Ans: Indian renewable energy market is adopting high-efficiency technologies which allow low maintenance costs and overall lower LCOEs for renewable energy projects. Among Wind and Hydro, various new turbine frames have been adopted, which lead to an overall improvement in CAPEX and OPEX. Talking about Solar, almost all the major Top-Tier panel manufacturers are now offering Mono PERC, Bifacial, using the latest 182mm cell technology. Almost over 90% of the IPPs are considering such innovative technologies, which have pushed the tariffs to historically low levels. Coupled with this, the acceptance of tracker technology is also gaining prominence leading to better yields and innovations in robotic cleaning systems are also helping the case.
Q: “Currently, what kind of modules have been demanded by Indian customers i.e. mono, poly, bifacial, etc? Which grades? Explain.”
Ans: The Poly technology is gradually obsoleting, primarily because it can’t produce higher wattage modules due to technology limitations. Mono PERC technology is the most preferred choice today. Within the Mono PERC technology, we have several options such as Standard Flat Ribbon, Tiling Ribbon, etc. Then with the option to choose between mono-facial and bi-facial variants of one make. Within Bifacial technology, we have options with the type of back cover - glass-glass or glass-transparent back sheet. For the most efficient technology of modules, which can produce 550Wp to 580Wp power, only top-Tier (Super League) players have large production capacities to the tune of over 100-150GW globally. This means that IPPs can benefit immensely from the large volume availability and the resulting optimised BoS costs. We have been seeing this trend around the globe and India is not lagging anymore in adopting the latest technologies. Recently, Mono PERC with Tiling Ribbon & Bifacial with dual glass or transparent back-sheet have been the top choices by IPPs.
Q: “Do you have any plans to set up manufacturing in India in light of the Government’s encouragement for domestic manufacturing?”
Ans: JinkoSolar is a leading global player and we keep on expanding our manufacturing base year on year. We are evaluating the recent changes in Indian renewable energy policies and solar module import framework, and at an appropriate time will take a call on this.
Q: “How do you deal with the price pressure from customers?”
Ans: Jinko is catering to a diverse customer base from across the globe and within India as well. As mentioned before Jinko was No. 1 in India in overall annual shipments in 2020. We hope to stay on this course to maintain our position in 2021 too. We have always pitched for the technological strength and robust quality of our products. Our Indian clients face a difficult proposition to achieve lower tariffs yet better returns. It is only possible by using high-end technology when it comes to solar panels and JinkoSolar has always been at the centre of this offering, seldom leading the way with its technological breakthroughs and record efficiencies.
Q: “In the current situation amid Covid, how is the availability of raw material for your product? What is its impact on prices and how long it will take?”
Ans: The module makers are currently finding it very difficult to bear the cost pressure which is transmitted from the upstream sector as material shortages continue to ascend.
Polysilicon prices are continuously rising since last year. For instance, the recent polysilicon prices in Q1 announced by major suppliers were 10% higher compared to Q4 2020 despite their fabs running at 100% capacity. Pertaining to overseas markets, the prevention and control on the pandemic has decelerated the speed of logistics for imported polysilicon, extended the duration of clearance along with unresolved issues regarding the unmitigated shortages in shipping containers. This has resulted in a dramatic increase in purchase cost and is expected to be on the rise going forward as well.
After the Chinese New Year, glass prices did not fall a bit from their autumn highs. Glass continues to remain in shortage for the downstream demand, but the situation is expected to get better.
80% of the price of a PV module is based on the cost of raw materials. The turbulence of the solar PV supply chain will last at least three months or longer till supply and demand will further improve and rebalance again. We can expect the module prices to be on the higher side until that happens.
Q: “In your view, what are the key challenges in the Indian market which restrict growth?”
Ans: Presently there are some serious issues crippling the Indian renewable market, especially with regards to the implementation of solar projects. A few of them are - BCD, ALMM, low tariff expectations. Let us look at them one by one.
Basic Customs Duty - is a paradigm shift in the Indian solar program. Several global investors had made a conscious choice to invest in India looking at its progressive policies. However, BCD is appearing to be a disruptive step, which would support only a select section of the stakeholders, while posing hurdles to many. Independent Power Producers are always willing to take risks by offering lower tariffs, bid after bid. They could only achieve such lower tariffs due to certain positive and supportive policies. For example, the REWA solar park auctions also saw very low tariffs from the bidders at that point in time. It was only possible due to the hard work of policymakers while designing the bid document. It allowed lots of payment security, flexibility, government support, etc to the participating organisations. Today after the project has been successfully implemented, all the stakeholders are quite satisfied. Whereas, the same cannot be said for certain in the case of other low tariff investors from the recent auctions.
Approved List of Modules Manufacturers (ALMM) - is yet another initiative, which hasn’t seen any global player make its way into it so far. It could also mean that in the near future only Domestic Manufacturers could enjoy the free hand to serve the Indian solar market. This may lead to lots of uncertainty as well as doubt regarding project completion due to limited domestic capacity. It is not certain yet, whether the Govt will continue with the process of enlisting several global players who have subscribed to this program, but not received any positive response regarding the next steps.
Low Tariff Expectations by Discoms is a chicken and egg story. If Discoms will continue to delay pending payments and not sign auctioned PPAs, future bids may not enjoy lower tariffs anymore. As a broader policy structure, there must be a penal mechanism on Discoms for the delay in signing PPAs as well as delay in the release of due payments to IPPs. On the one hand, there are several stringent clauses in the PPAs to push IPPs to secure land and grid approvals, close financing and commission projects within the stipulated timeframe; and on the other hand, there are no stern enabling mechanisms in PPAs to put accountability on the off-takers for their serious lapses. Hence, it is expected that tariffs will stay above INR2 per unit for some more time, till there’s a certainty of capacity off-take as well as improvement in policy support towards IPPs and their key equipment suppliers like Solar Module Manufacturers.
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