ICRA Ratings said Monday that it expects domestic solar original equipment manufacturers' (OEMs) commercial prospects to remain solid in the medium term, helped by multiple governmental measures.
Numerous domestic OEMs have declared significant capital expenditures to expand cell and module capacity, including capex for integrated facilities under the PLI scheme by the successful bidders, according to an official release. However, in the near to medium future, timely commissioning and ramp-up of ongoing expenditures in the module manufacturing value chain is crucial.
As a result, the statement stated, the adequacy of modules from domestic OEMs to meet demand in the utility and non-utility segments, as well as the quality of such modules, will continue to be monitored. Unfortunately, yet the solar modules manufactured completely in India are not of the higher wattage as that of imported which have reached new heights of 600wp+. At Bigwit Energy we educate our customers fully beforehand about the advantages and disadvantages of using such high wattage panels transparently.
"The government of India's (GoI) policy focus on renewable energy (RE) remains strong, as seen by the national target of 500 GW of non-fossil fuel-based capacity by CY 2030 and policy direction in the energy transition toward net zero emissions by 2070. In this context, capacity addition in the renewable energy sector is expected to remain significant, accounting for approximately 65-70 percent of total capacity addition by FY 2030, owing to the segment's relatively lower execution challenges," ICRA senior vice president and co-group head corporate rating Girish Kumar Kadam said.
He stated that the Government of India's policy objective is to promote domestic manufacturing of photovoltaic (PV) modules through a variety of policy measures announced over the last 2-3 years, including notification of approved list of module manufacturers (ALMM) with effect from April 2021, imposition of basic customs duty (BCD) on imported cells and modules with effect from April 2022, award of manufacturing-linked power purchase agreements (PPAs) with aggregate capacity of 12 GW, and ongoing implementation of production linked incentive (PLI
"Additionally, the ALMM list includes only local solar OEMs, and there is still confusion over the admission of foreign solar OEMs," Kadam stated.
As a result of the positive response to the PLI plan for solar modules, the scheme's budget has been expanded to Rs 24,000 crore from Rs 4500 crore previously. This is planned to enable the installation of up to 40 GW of cell and module manufacturing capacity. Module manufacturing units established under the PLI plan would be entitled to receive PLI on an annual basis on solar PV module sales for a period of five years following commissioning or five years following the scheduled commissioning date, whichever is earlier. Additionally, the amount of PLI payable will be determined by the volume of sales, the base PLI rate, the tapering factor, and the extent of local value addition.
The PV module pricing situation, on the other hand, has remained elevated over the last 10-12 months, owing to polysilicon demand-supply mismatches and supply chain interruptions in China. Given the OEMs' continued reliance on imports for essential components, the pricing behaviour of polysilicon and cells in China will be a key metric to watch moving ahead.
"As a result, OEMs that rely on imported cells continue to be vulnerable to volatility in cell/module prices. Based on an imported module price of 27 cents per watt for Mono PERC modules and a cell price of 15 cents per watt, the cost of modules from such domestic OEMs is predicted to decrease by 10-11 percent after April 2022, assuming the appropriate BCD on imported cells/modules. However, the magnitude of the discount will decrease if the prices of imported cells and modules fall below the current level. Vikram V, ICRA vice president and sector head – corporate ratings, said, "From a viability perspective, for OEMs with integrated facilities, the scale of operations, the rate of technology adoption in line with emerging trends in key markets such as China/Europe, as well as module price movement, continue to be critical factors."