The Approved List of Models & Manufacturers of Solar PV Modules deepens uncertainty over solar capacity addition
India has announced the installation of over 100 GW of renewable energy. This feat was considered impossible a few years ago, and has been a result of over 10 years of work on an innovative bidding framework, effective dispute resolution and easy availability of land through the solar park model. India ranks third-most attractive country in the recent EY renewable energy survey and is one of the hottest investment destinations in this space.
The success of our capacity addition and fulfilment of our ambitious 450 GW target depends upon our ability to provide a stable yield to global capital and Indian bank finance. High-end solar panels are a prerequisite for a world-class solar market. Unfortunately, in the last few months, the government’s approach to making high-quality solar panels available has been inconsistent and perplexing.
Earlier this year, the government had introduced the Approved List of Models and Manufacturers (ALMM) of Solar Photovoltaic Modules and made it mandatory for all manufacturers to get themselves empaneled before selling in the Indian market. The minister confirmed the stated intent of the ALMM is to have ‘make in India’ panels, thereby preventing Chinese imports. This has created great uncertainty in project developers’ future capacity-addition plans.
In both scale and technology, India’s manufacturing capacity is currently inadequate to power her renewable targets. For years, most Indian manufacturers have been operating in a protected environment, with their capacity earmarked for government subsidy schemes where Indian panels are mandatory. Indian manufacturers do not have the scale to provide for the 10,000 MW of annual utility-scale capacity additions that have been lined up in India. Reliance on Indian manufacturers alone would result in immediate supply constraints. The elephant in the room is the quality of Indian panels. There have been several instances of significant solar panel degradation in 4-5 years from commissioning when Indian panels were used. At scale, this could prove catastrophic to the stability of India’s utility grid.
Also, while Chinese players are on the cutting edge of technology and have moved to high-end 540-590 watt peak (Wp) panels, Indians are barely able to manufacture 440-450 Wp panels. These lower-end panels require more space and increase non-panel cabling and structure costs, adding to project costs. This results in a higher project cost, which eventually the consumers of power end up paying for.
The ALMM stipulation is also creating challenges in the planning of utility-scale projects. Most projects take 18-24 months to plan and commission from the bid date. Most developers tie-up with large vendors before the bid and plan their installation based on state-of-the-art technology; in some cases, technology that is not yet launched. Global manufacturers have a 10-year horizon and plan accordingly. Under the ALMM framework, Indian manufacturer needs to set up a plant, manufacture sample modules, obtain BIS certification and then apply for the ALMM, which itself is expected to take 6-8 months. This creates uncertainty on the timeline of module availability for developers who want to plan their procurement at the bid stage. A ridiculous situation has emerged where bidders are bidding blind by tying up with Indian manufacturers who have not even broken ground on new facilities required to manufacture the committed panels 18-24 months later.
In sub-sectors like rooftop and third-party PPAs, the government seems keen to make the ALMM mandatory as well. This would be ill-advised since developers in these areas operate with space constraints on client premises and need high-efficiency panels to close business. Working with lower-efficiency Indian panels results in suboptimal designs, which could drive customers away from solar. Also, dealership of imported solar panels is a large business opportunity for small and medium traders. The ALMM would put a large number of market participants out of business.
The ALMM needs to be reconfigured. Chinese and other Asian manufacturers should be freely allowed to set up factories in India so that we can access their technology. Manufacturers should be provided ‘provisional’ ALMM so that their plant does not lie idle while BIS and ALMM is awaited. The ALMM can gradually be applicable for solar sub-sectors, giving time for India’s manufacturing capacity to catch up with demand. A holistic approach is needed and nationalism must not come in the way of our energy security.
The author is the CEO of Oakridge Energy, a rooftop solar developer