Solar Project Cost to Increase by 24% with Basic Customs Duty on Modules: Interview
Extensions to project commissioning dates must cover Change in Law events
September 24, 2021
The Indian solar industry is gradually returning to normalcy after facing several challenges in the past two years due to the Covid-19 pandemic and adverse market conditions. The second quarter (Q2) of 2021 witnessed a 19% quarter-over-quarter growth
According to Mercom’s Q2 2021 India Solar Market Update, India added 2.48 GW of solar in Q2 2021 compared to 2.09 GW capacity installed in the previous quarter.
Solar producers like Azure Power, one of India’s largest solar power portfolios, were recently awarded 150 MW capacity in the Solar Energy Corporation of India’s auction for 1.2 GW of the interstate transmission system (ISTS)-connected wind-solar hybrid power projects.
As of Q2 2021, independent solar power producer Azure Power has 2 GW of operational solar capacity, and another 5.4 GW capacity is in the pipeline.
Mercom spoke to Ranjit Gupta, Chief Executive Officer of Azure Power, to discuss the company’s plans and his perspective on the solar industry and existing policies.
1. How is the solar market for Azure in India currently?
Azure Power has been a pure-play solar power producer, and at present, we have one of India’s largest solar power portfolios. With the recent win in the hybrid and wind projects, Azure is diversifying into other renewable energy domains. With the Government’s renewable energy target of 450 GW by 2030, the share of renewable energy is only expected to increase in the overall energy mix in the country. Azure will also continue participating in solar, wind, and hybrid projects with or without storage opportunities and maintaining its leadership position. We are also witnessing a push for green hydrogen demand and expect stabilization of storage costs over time. Azure will keep a close watch on the opportunities to increase the size of our addressable market by foraying into other areas of renewable energy.
2. Could you shed light on Azure’s agreement with OMERS Infrastructure? How will it help Azure?
OMERS is one of the largest pension funds from Canada with a long-term view on infrastructure investments. OMERS recently acquired a 19.3% stake in Azure Power, earlier held by International Finance Corporation (IFC) and IFC Global Infrastructure Fund (GIF). This was a private transaction between OMERS and IFC, and there was no agreement with Azure as such. IFC has been a supporter of Azure since 2010 and has paved the way for patient pension fund investors like OMERS, with which we expect long-term capital support to continue.
3. Do you expect procurement challenges as ALMM takes effect?
We view the Approved List of Models and Manufacturers (ALMM) as a positive step towards maintaining quality renewable energy assets in India. Currently, the ALMM list has a capacity close to 8 GW, which may be constraining and pose near-term challenges for developers while planning their procurement. However, we believe this is temporary. With domestic manufacturers’ capacity ramp-up plan, more capacity will be added to the ALMM list. With the right policies in place for these supply transitions, it is a matter of time that these challenges become streamlined.
4. Do you think domestic module manufacturers can meet the demand of solar developers?
The domestic manufacturing industry has limited annual operational capacities of around 2.5 GW for solar PV cells and approximately 8-10 GW for solar PV modules. India has an ambitious target of setting up 450 GW of renewable capacity by 2030. To achieve the target, around 25-30 GW solar energy capacity will need to be installed every year till 2030. With the Government’s introduction of the PLI scheme, we expect an additional 8-10 GW of solar modules capacity addition by next year. The Government is focusing on making India a manufacturing and export hub in the long run. The Government should also focus on the energy demand plan.
5. How do you see BCD affecting the solar market in 2022?
The imposition of basic customs duty (BCD) on solar cells and modules will increase solar tariffs because of a rise in overall project costs. The 40% BCD on solar modules is expected to increase the capital cost by 23-24% as modules account for approximately 55% of the capital cost. The imposition of BCD on imported solar cells and modules is a positive for domestic solar manufacturers as it is expected to improve the competitiveness of domestic cell/module manufacturers. However, the extent of benefit would also depend on imported PV module prices, especially from China.
6. What issues are solar developers currently facing? Do you suggest any changes to address these issues?
Since the pandemic, developers have faced multiple issues like raw material shortage, supply chain disruptions, sharp price rise, renegotiations of supply contracts, high manpower cost, and increased overheads. Restrictions during the pandemic have caused delays to projects, which have received scheduled commissioning date (SCD) extensions on the power purchase agreements; however, they still await alignment with Long-term Access (LTA) timelines as per the revised project SCD.
With the implementation of BCD from April 2022, the industry is also witnessing arbitrary price hikes and renegotiation of supply contracts by module manufacturers, which is putting the already stressed under-construction projects at huge risk. The industry would also need Government’s support in monitoring and regulating the arbitrary price rise across the supply chain. Action has to be taken to discourage such suppliers from non-adherence to contractual terms.
The Ministry of New & Renewable Energy (MNRE) has supported the industry by giving extensions for projects. However, the extension is conditional and does not cover ‘change in law,’ which may adversely impact developers from future tax and duty impositions. The extension should be unconditional as these projects are already stressed due to multiple lockdowns, supply chain disruption, and an exponential increase in commodity prices.
Get the most relevant India solar and clean energy news.
RECENT POSTS
LATEST HEADLINES
Government Clarifies ALMM Enlistment Guidelines for Co-branded Solar Modules
Mar 24, 2023
Intra-State Sections of Evacuation Infrastructure for Renewables Delayed
Mar 24, 2023
EnBW Takes €2.4 Billion Final Investment Decision on Offshore Wind Project
Mar 24, 2023
India Missed 2022 Renewables Target as Rooftop Solar and Wind fell Short
Mar 24, 2023
Researchers Aim to Accelerate Delivery of Space-Based Solar Power to Earth
Mar 24, 2023
India added an impressive 2.5 GW open access solar capacity in 2022, registering a growth of 92% year-over-year (YoY), according to the 2022 Q4 & Annual Mercom India Solar Open Access Market Report. Karnataka emerged as the to...
March 23, 2023
Markets & Policy
Government Clarifies ALMM Enlistment Guidelines for Co-branded Solar ModulesThe Ministry of New and Renewable Energy (MNRE) has modified the Approved List of Models and Manufacturers (ALMM) guidelines and provided exceptions to broaden the qualification criteria for modules produced under agreements betwe...
March 24, 2023
C&I
In Bengaluru, a 100 kW Solar System Can Save C&I Entities ₹1 Million AnnuallyMercom India successfully concluded the C&I Clean Energy Meet 2023 in Bengaluru, where stakeholders in the solar sector and commercial and industrial entities converged to enthusiastically discuss the benefits of renewable ene...
March 24, 2023
Other
Gensol Acquires Solar Tracker Maker Scorpius for ₹1.35 BillionGensol Engineering, a part of solar engineering, procurement, and construction (EPC) company Gensol Group, has acquired India-based solar tracker manufacturer Scorpius Trackers for ₹1.35 billion ($16.4 million). Gensol said the ac...
March 23, 2023
Trending News
Mercom Focus
Researchers Find Solution to Manage Load in Solar PV & Storage Systems
February 28, 2023
February 27, 2023
February 24, 2023
January 17, 2023
Magazine
Latest News
The Ministry of New and Renewable Energy (MNRE) has modified the Approved List of Models and Manufacturers (ALMM) guidelines and provided exceptions to broaden the qualification criteria for modules produced under agreements...
March 24, 2023
The Ministry of New and Renewable Energy (MNRE) told the Parliamentary Standing Committee on Energy that the intra-state stretches of the Green Energy Corridor (GEC) have been delayed due to various reasons, including...
March 24, 2023
German electric utility company Energie Baden-Wuerttemberg (EnBW) has made its final €2.4 billion (~$2.6 billion) investment decision on He Dreiht, a major wind project in the German North Sea. The project has a capacity of 960...
March 24, 2023
The Parliamentary Standing Committee on Energy report has isolated underwhelming progress on rooftop solar and wind energy projects as the primary reason for India falling short of achieving its renewable energy capacity target...
March 24, 2023
Researchers at Northumbria University are studying ways of producing wireless electricity from space to Earth by harvesting the Sun’s energy. U.S.-based aerospace, defense, and information security organization Lockheed Martin...
March 24, 2023
The Maharashtra Electricity Regulatory Commission (MERC) recently directed Hindustan Petroleum Corporation (HPCL) and the Maharashtra State Electricity Distribution Company (MSEDCL) to recompute the delayed payment charge from...
March 24, 2023
The National Renewable Energy Laboratory (NREL) has devised a new way to produce perovskite solar cells that could speed its commercialization. Different layers are typically added sequentially to a conductive glass substrate to...
March 24, 2023
Saudi Arabia-based energy company ACWA Power has signed power purchase and investment agreements with National Electric Grid of Uzbekistan, and the Ministry of Investment, Industry, and Trade to develop new solar and battery...
March 24, 2023
The China Securities Regulatory Commission has approved the registration of CSI Solar, the engineering, procurement, and construction arm of solar module maker Canadian Solar, to issue an initial public offering (IPO). The...
March 24, 2023
Renewable capacity grew by 9.6% in 2022, adding a record 295 GW worldwide. This accounts for 83% of all power capacity added last year and brings the global renewable generation capacity to 3,372 GW by the end of last year, a...
March 24, 2023
Get the most relevant India solar and clean energy news.
POPULAR POSTS
Government Clarifies ALMM Enlistment Guidelines for Co-branded Solar Modules
Mar 24, 2023
Intra-State Sections of Evacuation Infrastructure for Renewables Delayed
Mar 24, 2023
EnBW Takes €2.4 Billion Final Investment Decision on Offshore Wind Project
Mar 24, 2023
India Missed 2022 Renewables Target as Rooftop Solar and Wind fell Short
Mar 24, 2023
Researchers Aim to Accelerate Delivery of Space-Based Solar Power to Earth
Mar 24, 2023