Solar Industry in India
Solar power in India is one of the fastest growing energy industry and with the prices of solar energy falling continuously; it is poised to keep growing for a long time. However the small Indian solar panel manufacturing industry has been decimated with most of the solar companies either already shutting down or working at very low utilization. Crisil had come out with a dumb report some time ago and now CSE has come out with even a worse report.
Solar Industry research is quite abysmal especially in India where research agencies and market analysts have very little clue of what’s going on in the global solar industry. They are not only unaware of the current state, they have absolutely no clue about the future. However the mainstream media which is equally clueless keeps churning out these useless research reports. Crisil had recently come out saying that Indian solar projects would lose money at Rs 8/ kwh and the prices would rise in the coming days. Read my thoughts on solar myths and misinformation. Crisil which is a S&P subsidiary (of the AAA US sub-prime crisis fame) has come out with a report saying that 13-14c/Kwh costs for solar power is risky for companies to bid during solar auctions. Like others it is woefully short on details and analysis. The report fails to look at:
a) Chinese crystalline solar panel costs, going down by 20% in 2012. Note prices are down by almost 50% as compared to the last year
b) There exists a massive oversupply which will not end in 2012 itself despite growing demand
c) It is hard to find a sustained period in which solar panel prices have increased from previous levels, except for a quarter or two
d) Demand is getting destroyed in Europe facing a fiscal/monetary crisis which helps keep the prices down
e) Protectionist policies in US will force Chinese solar panel prices to keep to a low level
f) First Solar which is the leading thin film solar player has already got costs at 11-12c/KwH. Chinese solar companies can build plants with even lower costs.
CSE is blaming the death of the Indian solar panel manufacturers on imports of cheap thin film panels from the USA backed by cheap long term loans by Exim bank. However the reason is dead wrong and CSE report lacks in a basic understanding of the global solar panel industry. It fails to mention that some of the thin film solar panel exporters of the USA are now bankrupt as well (Solyndra, Abound Solar). The only survivor First Solar has stopped selling solar panels to 3rd parties because it cannot compete with crystalline solar panels from China. Solar panel manufacturers are going down like nine pins around the world due to a massive solar panel glut fueled by cheap loans and massive expansion in China. This has led to a crushing of solar panel margins and revenues and led to the death of hundreds of solar companies.
Another thing it fails to mention is that these cheap loans have been instrumental in setting up many of these solar power plants. Note many of the solar farms in JNNSM are running into losses as the interest rates are too high in India making the capex heavy solar plants unprofitable. Without these cheap loans and cheap solar panels, the solar costs of Rs 8/kWh would have been impossible. While CSE is a good organization and has done a lot for the Indian environment movement, this report is sadly lacking in decent analysis and depth.
Indian solar panel manufacturers are also clueless in what is happening, note they are not blaming the US solar panel makers. They have been trying to get duties imposed on solar panel imports without much success.
The Indian solar industry does not possess any competitive advantage of scale, cost, technology etc. It has been fruitlessly trying to get some sort of import duty imposed on cheap solar panels from abroad. Even while solar panel prices have gone down by 50%, the industry has not managed to cut costs by that much. Solar plant developers are logically importing panels from China where prices are much lower and have managed to pass the benefits to the consumers through lower electricity tariffs of around Rs 8/kwh which is almost half what was offered in 2009. While the solar panel manufacturers are continuing bravely it seems more foolhardy to continue in this business given that they are hopelessly behind in every aspect.
The Delhi-based Centre for Science and Environment says conditions placed by the US as part of its climate fast-start finance initiative is killing the Indian solar panel industry.
According to the CSE, the US Exim Bank and the Overseas Private Investment Corporation are offering low-interest loans to solar project developers in India only is they buy the equipment, the solar panels and cells from US companies. As a result most orders are being bagged by US companies rather than local manufacturers, putting the domestic solar photo-voltaic industry at risk, says CSE deputy director Chandra Bhushan.