More than 3 GW solar projects held up due to rising module prices: Industry

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July 30, 2021 1:00 AM

The rising prices and net metering cap have even impacted the ground-mounted players, with many taking a cut and working on margins as low as 10% compared with a high of 16% a few years ago.

More than 3 GW solar projects held up due to rising module prices: IndustryFor a competitive market like India, where independent power producers play on lower margins and modules represent 60% of the project cost, even a modest increase in module price will make projects unsustainable.

The rising costs of solar panels and components like glass, wafers and silicones, which are mostly imported from China, have forced contractors to hold up more than 3,000 MW of ground-mounted and over 300 MW of rooftop projects, eventually leading to renegotiation of contracts.

Solar module prices have been trending high since mid-2020 and have risen around 17% year-to-date. At the beginning of the year, module prices hovered around Rs 18 per watt peak, and companies that bid aggressively expecting prices to fall are finding it difficult to keep their projects viable.

Puneet Goyal, director and co-founder of SunAlpha Energy, told FE that more than 300 MW of rooftop projects have been held up due to the rising price of panels. The problem is compounded by a lack of clarity on the extension of safeguard duty, which ends on July 31.

“The indecisiveness on when and where to purchase the panels has delayed the projects. The cap on net metering by various states — albeit increased by central government to 500 kWh — has dented developers’ capacity expansion plans in the rooftop segment,” Goyal said.

If the safeguard duty is not extended after July 31 — which is likely, as it cannot be extended more than once — the government may bring in an anti-dumping duty. If there is no extension for the nine months up to April 2022, when the basic customs duty will be levied, Chinese panel manufacturers are expected to dump their panels in India, driving down the cost and affecting domestic manufacturers.

While the rising global commodity prices of steel, copper and aluminium have contributed to the overall price pressure, experts said suppliers have already factored in the basic customs duty in the solar panel prices. For a competitive market like India, where independent power producers play on lower margins and modules represent 60% of the project cost, even a modest increase in module price will make projects unsustainable.

Gautam Das, founder of Oorjan, which offers turnkey renewable energy solutions including funding, said increasing cost of solar panels and components is an uncertainty to the ecosystem. It eats up the incentive of investors, consumers and the installers. An increase in input cost by one rupee impacts PPA tariff or production cost by about 10 paise per unit. Transparency in pricing with customers and improved operating efficiency of the installers are key to managing the risk to avoid adverse impact. “We try to share the cost impact, be it positive or negative, with customers in case there is any meaningful change in input cost,” Das said.

He said net metering policies should be forward looking and consumer focused, irrespective of the capacity. “Enforcing gross metering to protect discoms is regressive and avoidable. Policy makers should make discoms collaborate with consumers in solar adoption and discoms should be incentivised on exported (banked) units — say about one rupee per banked unit,” Das said.

The rising prices and net metering cap have even impacted the ground-mounted players, with many taking a cut and working on margins as low as 10% compared with a high of 16% a few years ago.

A Mumbai-based official from a solar EPC firm said, on the condition of anonymity, that more than 3,000 MW projects in the ground-mounted segment have been held up, as the impact is much severe on this segment compared to rooftop. The rooftop segment is believed to have partially benefited from the government notification increasing the net metering cap to 500kWh. However, power being a state subject, it is not mandatory for states to follow the notification.

“Going ahead, the viability of these projects will be a major concern. I still believe 50% of projects will be able to keep themselves viable depending on the number of days they get to work after the delivery of panels,” the EPC official said.

Prashant Khankhoje, senior advisor to IPPAI, said large project developers who normally buy panels in the last phase of construction activity, i.e. after 10-12 months of signing the PPA, are finding it difficult to keep projects viable. “The steep increase in steel prices and the uncertainty on safeguard duty have also added to their agony,” he said. “The recently announced PLI scheme will increase the availability of solar panels in India, which will stabilise the project cost going ahead.”

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