March 30, 2020
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While The Sun Shines

The dip in solar-panel prices is a shot in the arm for India’s renewable energy plans

While The Sun Shines
Small Is Big
The 600 MW Charanka Solar Park at Radhanpur, Gujarat
Photograph by Mayur Bhatt
While The Sun Shines

Solar Pros & Cons

The gains

  • 15-30 per cent drop in ­equipment price will cut project costs and benefit developers
  • Slide in solar power tariff to below Rs 5/kWh will enhance ­the appeal of going solar
  • In two years, cost of rooftop ­installation has slid from Rs 1,20,000/kW to Rs 70,000/kW
  • Rise in use of green power will reduce environmental pollution

The risks

  • Domestic manufacturers will be further hit by competition
  • Squeeze on price factor will ­reduce investment returns, hit R&D
  • Lack of quality certification of imported products remains a cause of concern
  • Import dependence is open to currency fluctuation and price risk


A steep fall in the global prices of ­solar panels is all set to give a boost to India’s ambitious plans to optimally harness sunlight as an alternate source of energy. The prevailing low-price scenario could boost the efforts to achieve the target of 1,00,000 MW (100 GW) power-generation ­capacity by 2022 and turn solar power into a viable option. The prices of photovoltaic (PV) panels and other components of solar power production have taken a dip across the globe over the past three months, making it the right choice for reducing peak load ­demand and power bills, and replacing the polluting diesel gensets. The latest indication of the trend has come from the UAE, where the lowest bid for an Abu Dhabi Electricity and Water ­Authority (ADEWA) tender was a world-­record low price of 2.42 cents per kilowatt hour (kWh).

Plummeting prices at the international level have also impacted India, where the cost has declined sharply from Rs 17/ kWh in 2010 to Rs 5.30/ kWh in 2015 and Rs 4.30-4.80 this year. The low-price situation, therefore, appears ripe for the central and state governments to give a push to rooftop solar installations and achieve the 40,000 MW target from the existing 315 MW levels.

Everybody, however, is not enthused. Even as solar power developers appear set to benefit from the 15-30 per cent drop in prices of various components due to a glut in supplies, mainly from China and the US, it has left the domestic manufacturers worried and the policy makers in a fix. “The lower panel and other material costs certainly help the sector grow as everybody is aspiring to bring down the expenditure,” points out A.K. Tripathi, director, ministry of new and renewable energy. “But lower international prices do affect domestic manufacturers. You can’t stop imports, certainly. The local manufacturers have to compete with them. The competition helps bring down in-house costs. But sometimes, it limits the scope for the manufacturer. And if the price is too low, it can impact R&D efforts as well.”

The Indian Solar Manufacturers’ Association has been seeking anti-dumping duties to safeguard local industry from the adverse impact of imports and dumping from China and other countries. Such fears are not unfounded, points out Ramesh Kymal, chairman and managing director of renewable energy company Gamesa India, and chairman of CII council in Chennai.

“The Chinese prices are extremely low. In fact, they are selling their wares cheaper in India than in the European Union,” says Kymal. “That’s not all. The panels that are being imported do not have any quality certification that we have been seeking for a while.”

“A lot of big manufacturers, mainly from China, are trying to offload their inventory in markets like India that are showing good demand.”
Sujoy Ghosh, Country Head, First Solar, India

India currently imports almost 95 per cent of the components required for ­installation of solar projects. Pointing to the excessive dependence on imports—unlike in the wind power sector where India is a major exporter—Kymal says the government should focus more on ­domestic manufacturing to protect the solar sector from exchange rate fluctuations, poor quality and any sudden price play by the Chinese.

The current supply glut has come in the wake of a slowdown in the accelerated solar power capacity addition in China and the US, says Sujoy Ghosh, country head, First Solar, India. “In 2017, both the US and China markets are expected to shrink from the levels in 2016, which might lead to more supply than demand,” he says. “So a lot of large manufacturers, predominantly from China, are trying to offload their inventory in markets like India that are showing good demand.”

Citing the eagerness to offload the inventory as the primary reason behind the decline in prices, Ghosh insists nothing has changed on the manufacturing cost side. A leading project developer and module supplier in India, First Solar has manufacturing units in the US and Malaysia.

As part of its global commitment, India has raised the target for share of ­renewable or green power in the overall generation capacity from 13 per cent currently to 40 per cent by 2022. Simultaneously, under the revised Renewable Purchase Obligations (RPOs), the states have been given targets for installation of renewable energy and purchase of green power through state utilities.

With many states having to buy ­expensive power through the power ­exchange to meet their peak demands, the ministry of new and renewable energy is pushing them to boost their solar- and wind-power capacity, which is ­helping many government institutions and industries to reduce peak demand and bring down electricity charges. Unlike domestic consumers, commercial consumers sometimes have to pay Rs 12-13 per unit.

The fall in solar module prices is ­expected to benefit not just the developers who had bid for projects barely two months ago, but also those getting into the procurement cycle. It is also ­expected to slash the overall cost of many projects in the pipeline. K. Subramanya, former CEO of Tata BP Solar India Ltd, says, “This (price decline) is a golden opportunity for everybody, including manufacturers, to ramp up production and have a long-term outlook.”

A pioneer in the solar power sector, Subramanya sees irony in the stark ­difference between China and India in solar power generation, considering that Tata Solar had in 2008 partnered global energy giant BP in setting up the first Chinese manufacturing unit and helped instal solar rooftop units in China. Recognising the solar potential, China had fast ramped up both the manufacturing capacity and project development.

Last year, China had outpaced Germany as the biggest solar power generator with 43 GW generation capacity. According to Chinese media reports, China installed 20 GW of solar power capacity in the first half of this year, three times of what was achieved during the corresponding period in 2015. In contrast, India’s solar power capacity is 7,805 MW out of which 4,131 MW has been installed in the past two years. During the current fiscal, India has set a target of 12,000 MW of solar generation, of which 315 MW has been installed under solar rooftop scheme, both for domestic and captive use.

On the manufacturing front, not a single Indian company has the ­capacity to produce even 1 GW machinery, unlike China, which alone makes and consumes 15-18 GW machinery annually and exports the surplus. Indian manufacturers currently provide only 30 per cent of the value chain and depend on imports either from China or Germany for the remaining components.

Still, Subramanya sees no reason to despair, given the current solar policy thrust. Underlining the unregulated nature of solar business, he feels that Indian manufacturers have abundant ­opportunities to partner with anyone in the world for upgrading technology. Meanwhile, they need to implement what is known globally and also focus on R&D. Prafulla Pathak of Solar Energy Society of India points out that while subsidies for commercial activities hardly exist now, individuals and ­INS­titutions using them for non-­com­mercial activity are being offered varying incentives by many states to promote rooftop installations.

The emerging solar scenario is encouraging more investments with some banks also offering support. But what is awaited is a new, more competitive manufacturing policy, besides installation of smart metering to help individuals sell surplus power and buy back cheaper electricity from the grid. That should prove to be a great incentive.

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