India tipped to allow foreign PV cells, despite opposition
India is tipped to cave in to the demands of project developers and allow the use of foreign PV cells within its National Solar Mission after 2011, counter to the initiative's original guidelines, Recharge can reveal.
The move would make it easier and cheaper for India to meet its goal of 10GW each of installed PV and solar-thermal capacity by 2022..
But it will also set off a row with the country's leading PV manufacturers, many of which are part of politically powerful conglomerates that lobbied furiously to get local-content provisions into the solar mission to shield themselves from low-cost imports.
Farooq Abdullah, the Minister for New and Renewable Energy, has made clear his intention to leverage the 3trn rupee ($66bn) market created by the mission to transform India into a solar manufacturing powerhouse capable of competing globally.
A first phase of PV projects, totaling 500MW, will be allocated in two rounds. The first 150MW round is open to foreign cells and modules, but the next 350MW — as well as future rounds — is closed off. The mission will be installed in three phases.
While the government is unlikely to formally amend the guidelines until after the first batch of projects has been awarded, officials have privately acknowledged the likelihood that they will allow the use of foreign-made cells, sources tell Recharge.
The debate over local-content rules pits project developers against manufacturers such as Tata BP Solar and Moser Baer. Delhi-based developer Azure Solar chose Suntech modules for the 2MW array it commissioned last December in Punjab, saying they were cheaper than anything available locally.
The National Solar Mission is not solely intended to benefit a handful of Indian factory owners, says Azure chief executive Inderpreet Wadhwa. "The important question is: Are we building the right ecosystem so that the solar industry can thrive in India not just over the next few years, but over the next few decades? "[We] need lots of players, lots of competition and lots of projects," Wadhwa says. Manufacturers counter that they need time before they can compete on cost with Chinese export giants such as Suntech and Yingli, but they insist they will close the gap rapidly if given a window of protection.
"India has ample capacities to fulfil the objectives of the solar mission with [high] quality products, and therefore there is no need to allow the importation of PV products from outside," says Prakash Shrivastava, president of vertically integrated PV manufacturer Maharishi Solar.
Yet while Delhi appears ready to capitulate on the local-content regulations, it shows no sign of budging on its 5MW cap for all PV projects in the first phase.
This restriction is already scaring away prospective developers. Tata Power, India's largest non-state electricity developer, recently said it declined to bid due to the cap and the "aggressive" bids coming from other firms.
The Indian government set a maximum feed-in tariff for PV projects at 17.91 rupees per kWh, but most bids were in the range of 11-13 rupees.
Ironically, while the cap was designed to allow smaller companies and entrepreneurs a chance to participate in a new industry, it may make projects so economically unfavourable as to keep them out.
"A 5MW project doesn't justify the formation of a new company," Azure's Wadhwa says. "Generally, what you'll see in the first round are companies that are already in some other industry, and they're looking to test the PV sector and see if it makes sense for their business model."