Low quality Chinese products to flood Indian markets

India has seen the sharpest expansion in its solar pipeline over the last one year, with almost 15 GW of solar tenders being floated by various government owned companies and state governments. With the PM’s vision of vaulting India’s capacity by 25x from 4 GW to 100 GW in seven years, all state organs are firing on fully cylinders. However, the competition for these reverse auction tenders has been intense leading to extremely low tariffs being bid. There are real concerns on how these projects can be built based on such low revenue streams. Many foreign investors such as Softbank, Trina Solar, Rosneft and others who had set up base in the country with high hopes, have yet to win a single MW in these tenders.

India’s 100 GW target would need around $125 billion in money with around $25 billion in equity. This equity capital is being scared away by the irrational bidding, with the recent NPTC tender seeing an all-time low of just Rs 4.63/kWh (7c/kWh). This is amongst the lowest tariffs in the world which does not make sense, given that Indian interest rates at 10-12% are more than twice the rate at which developed countries get funding. China tariffs are much higher despite being comparable in costs to India and with much lower interest rates.

“The government asked us to run and the industry sprinted. The sector has not learnt lessons from the thermal power sector and most solar power developers are bidding very aggressively. If their call goes wrong, it will have a far-reaching effect,” said Sunil Jain, chief executive officer at the renewable arm of Hero Group-Hero Future Energies. “This business has become like the ecommerce game – people are not playing on bottom line but are trying to build high valuation by adding large capacities so that they can exit later.”

Source – ET

These low priced projects will necessarily have to compromise on quality given the low bids. There are already reports that major Chinese panel makers are looking to ship their low efficiency panels to India. The Chinese government has recently tightened its regulations with regards to the technical specifications of solar equipment being used. Solar cells above a certain efficiency levels are only allowed, in order to weed out the weaker second tier companies. However, India has not improved its technical specs since the JNNSM tender in 2009. While the quality certificates from TUV and others are required, there are no efficiency requirements. Chinese solar panels have now found a good alternative to support their older cell lines, which make solar panels with lower efficiency. The Indian market is also now sufficiently large for Chinese companies to increase their utilization.

China makers whose PV modules may not be able to meet the government’s procurement requirement are looking to ship their products to India, which has set a target PV installation of 12GWp for 2016, according to industry sources.China-based state-run enterprises’ PV module procurement for 2016 requires minimum power generation of 260W for a PV module made of 60 crystalline silicon solar cells, increasing by 5W from 2015, the sources said. India is promoting PV power, but has no comprehensive rules in place to regulate PV power generation in the country. Therefore the technical requirements for PV modules will not be high in 2016, the sources indicated.

Source – DigiTimes