Viability of Indian Solar Projects amid Trade Shocks

Why in news?

Rise in Chinese solar module prices could hurt India’s solar parks.

What is the background?

A recent assessment was made by “Investment Information & Credit Rating Agency” (ICRA) on solar investments.
It says that the recent rise in China’s Photo-Voltaic (PV) module prices could make the costing of India’s solar sector unviable.
Solar projects in India is now seeing bids well below Rs. 3/kwh, with the lowest being Rs.2.44/kwh at Bhadla phase III in Rajasthan.
The rise in imported PV module prices between May and August, has been from 30-32 cents per watt to 35-37 cents per watt.
This is expected to impact the viability of all projects where bid tariff is below Rs. 3.5 per unit.

Why has this unexpected price spike emerged?

It has been attributed to the sudden spurt in buying in the US, as a trade ruling against China’s solar module makers is anticipated.
Two US panel manufacturers, Suniva and Oregon World, have moved the US International Trade Commission for protection against Chinese imports.
If the President intervenes, the US may see a slowdown in demand for Chinese panels.
That could lead to lower prices for Indian panel buyers.
But uncertainty prevails currently since it cannot be said whether these price spike will last for months or years.
In this backdrop, some Chinese suppliers are reported to be delaying on supplies and are seeking renegotiation of contracts.

How does the future look?

For solar power to raise its presence, the industry will have to step up installations and improve panel efficiencies.
The annual imports of solar equipments, amounts to over $2 billion at present.
India is touted to emerge as one of the world’s largest markets for PV modules in future.
Hence, indigenous solar equipment production capacity needs to be enhanced to cope with financial and trade shocks even if costs go up a little.

Source: Business Line