Will the MNRE change the DCR for the upcoming second phase of the NSM?
Mr. Kai Bollhorn covers the solar manufacturing industry as a consultant in the Market Intelligence team at BRIDGE TO INDIA.
Mature markets suffer from cut backs of Feed-in-Tariffs (FiT) and module suppliers are looking to India to buffer the low demand in these sectors. India released the National Solar Mission in 2009 and introduced a “Domestic Content Requirement” on international c-Si modules to protect the Indian module manufacturing industry.
Facts and key learning’s from Phase 1 of the NSM
- The NSM sees an installed capacity of 127MW (13% of the overall installed capacity) in June 2012
- Projects with a volume of 340MW are allocated under Phase 1 Batch 2 and will be commissioned in 2013 to 2014
- The reverse bidding process for projects resulted a price decrease from INR17.91 ($0.39) in 2009 to INR8.7 ($0.19) in December 2011
- Key Learning: The planned capacity expansion is on track and the government is paying low tariffs
- Project Developers used international suppliers of thin-film modules – US based First-Solar supplied modules to 80-90% projects under the NSM.
- Key Learning: The DCR did not achieve the goal of developing a safe harbour for Indian module sales
In May 2012 the Ministry of New and Renewable Energy (MNRE) founded the ‘Solar Energy Industry Advisory Council’ (SEIAC). The SEIAC consists of executives from leading Indian project development, EPC and module manufacturing companies, like Moser Baer and Indosolar. The SEIAC advises the MNRE on the overall development of the solar industry in India and is building a road map to develop a 4-5GW manufacturing industry by 2020.
When compared to leading international suppliers, Indian manufactures are not price competitive ; they face disadvantages due to government subsidies that international competitors receive. Also the larger Indian manufacturers like XL Energy or Moser Baer have annual production lines of 192MW and 150MW compared to 1.7GW of First Solar. They also face a cost disadvantage of 30% as compared to internationally manufactured modules.
On the one hand the Indian industry is not competitive in price or on quality, while on the other hand the central government wants to develop a domestic industry. To merge the economic situation of non-competitiveness with a political motivated goal, the MNRE will have to take further steps to protect the Indian industry. The government may introduce a pre-defined quota on thin-film modules to limit the market share under the DCR. It is also possible that there will be an incentive based support for project developers that use Indian modules. This support would compensate the higher costs of Indian modules over a percentage mark-up on the FiT.
The key question of the July 2012 edition of the INDIA SOLAR COMPASS concludes that the international and Indian economic drivers as well as lobbies are influencing the MNRE in its decision process. The INDIA SOLAR COMPASS develops a thorough analysis on the future of the Domestic Content Requirement, which is essential for every international module supplier that wants to be successful in India.