New China policy may hit domestic solar manufacturing: Icra

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New Delhi | Published: June 7, 2018 5:31:10 AM

China has turned away from the feed-in tariff regime and restricted new capacity addition of distributed generation solar projects to 10 GW in 2018.

icra, china policy, domestic solar manufacturingChina’s measures to disincentivise solar power capacity building might lower solar costs in India, according to Icra Ratings. (Reuters)

China’s measures to disincentivise solar power capacity building might lower solar costs in India, according to Icra Ratings. China is the world’s largest solar equipment manufacturer and India imports more than 85% of solar modules from the country. China has turned away from the feed-in tariff regime and restricted new capacity addition of distributed generation solar projects to 10 GW in 2018. It has also removed the target-based system for utility scale solar projects. While these may lower costs for Indian developers, higher imports would put added pressure on domestic module and cell manufacturers.

“The policy changes in China are likely to impact the domestic demand for solar PV modules and consequently result in a softening of export prices for Chinese PV module manufacturers, said Sabyasachi Majumdar, senior vice-president, Icra Ratings. Icra estimates that every 8 cent/watt decrease in module prices would lower capital cost by about 13%. However, it noted that if the recent trend in depreciation of the rupee against the dollar continues, it will partially offset the benefit of module price reduction. Low renewable power tariffs discovered in recent auctions, coupled with uncertainties related to proposed duties on solar components, were the main reasons behind India coming down two spots in the renewable energy country attractive index in a year.

The country now ranks fourth, trailing China, the US and Germany. Lower tariffs do not favour Indian module makers as prices of their products are higher than Chinese players. Domestic manufacturers have been calling for imposing duties on such imports to sustain the industry.

As FE recently reported, the threat of safeguard duties on solar panels has had a dampening effect on bidders for new projects, with states postponing and cancelling solar auctions. The directorate general of safeguards in January recommended a provisional safeguard duty of 70% on solar cells and panels. A public hearing on the issue is scheduled for June 26.

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