Cheap Chinese imports burn domestic solar cell, module makers

Manufacturers were hoping for incentives to scale up production, but Union Budget disappointed them

Indian solar cells and modules manufacturers have not able to cash in on the opportunity of rising solar power installations thanks to Chinese competition. Between April and October 2016, India imported solar power material worth more than $1 billion.

Solar power installations in India reached 4 GW in 2016, up from 883 MW in 2014. Installations are expected to surpass 9 GW in 2017. The Centre wants to ramp up domestic manufacturing to reduce imports of solar modules but the challenge is competition from Chinese manufacturers.

Also, the World Trade Organisation (WTO) ruled last year that India’s domestic content requirements discriminated against US manufacturers.

The Indian solar cells and modules industry mainly focuses on exports to Europe. India had exported almost $1 billion in solar modules before the National Solar Mission was set up. Exports boomed in 2008 due to global demand, but slowed down thereafter.

As manufacturing took off in China, prices dropped to record low levels. From the beginning of 2011 through the end of 2012 module prices fell from $1.80/W to $0.65/W. State funded Chinese manufacturers captured most of the global market.

The installed capacity of domestic solar cells and modules in India was estimated to be 2,815 MW and 8,008 MW, respectively, while the operational capacity of solar cells and modules was 1,448 MW and 5,246 MW, respectively, in December 2016.

However, manufacturers said the working module manufacturing capacity was approximately 3 GW at the end of 2016. This disparity in figures is due to obsolete manufacturing lines that are still being counted by manufacturers as operating capacity, according to Mercom’s Manufacturing Tracker.

In April-October 2016, export and import activity totalling $1.22 billion was registered in the sector. Of this, India imported solar materials worth more than $1 billion. “The problems plaguing the sector are lack of scale, insufficient government support and an underdeveloped supply chain,” a manufacturer said.

Manufacturers were hoping for incentives to scale up production, but the Union Budget disappointed them. They also wanted more clarity on state-level incentives so that they could determine the states in which to locate new manufacturing units.

According to Mercom, Indian modules typically cost 10 per cent more than Chinese ones. With highly competitive auctions for solar parks, like the one in Rewa, Madhya Pradesh, solar energy tariffs have fallen below Rs 4/kWh. Such tariffs are only viable with cheaper Chinese panels.