Foreign PV kit dodges India ban

India has confirmed that its upcoming PV tender will reserve a separate pool of projects for which developers will be required to use domestically-made kit – a decision that amounts to a victory for foreign suppliers.

When the National Solar Mission (NSM) was launched several years ago, Delhi indicated it would steadily step up the local-content requirements for all PV projects. (Thin-film modules represented a key initial exception.)

However, the Ministry of New and Renewable Energy (MNRE) has confirmed that rather than applying the domestic-content rules across the full 750MW of capacity it is expected to put to tender next month – the first batch within Phase 2 – it will instead carve out a separate tranche of projects which will be required to use India-made components. 

The exact size of the tranche has not been revealed.

In taking that decision, the government has effectively acknowledged that India’s manufacturers are not yet capable of supplying cost-competitive PV components – and that its own ambitions for solar energy would be jeopardised by placing too much emphasis on local production.

The decision could have a significant impact on thin-film suppliers like First Solar and Solar Frontier, which have benefitted greatly from being exempt from the domestic-content rules that Delhi has imposed on their crystalline silicon rivals.

Ultimately, the decision could also mitigate trade tensions between the US and India. They were ratcheted up yet another notch this week when India filed a complaint with the World Trade Organization regarding the way some American states support their PV manufacturing base – two months after the US took India to the WTO regarding similar accusations.

India also confirmed a new tender system for the first batch of projects within phase 2 of the NSM, called the Viability Gap Fund scheme.

Off-takers will be required to pay 5.45 rupees ($0.10) per kWh of power generated at NSM projects. Using that as a baseline, developers will then bid on how much additional financial support they will need from the government – in what effectively amounts to a twist on the previous reverse-auction process.

The average bid for projects in the second batch of Phase 1 projects was 8.77 rupees per kWh, with the lowest coming in at 7.49 rupees.

Analysts have expressed concern that the new system may encourage short-term speculation at the expense of the long-term quality of projects, and does not do enough to encourage a geographically diverse base of projects – with many developers likely to focus on Rajasthan.