Will BCD Slowdown Solar Business in India?

Commenting on the disruptions caused by the announcements of basic customs duty and PLI benefits, energy experts express optimism in the face of displeasure about the growth of the solar business in the coming years

Solar is now widely regarded as the new king of the electricity markets. This is despite the fact that capacity is being added in the solar industry and across the overall energy sector. In 2019, India installed 138 GW of renewable energy capacity, with solar accounting for about 39 percent of the worldwide market share, followed by 114 GW of wind energy (33 percent), gas, hydro, and all other renewable energies.

Finance Minister Nirmala Sitharaman assured in the recent Union Budget that basic custom duty on solar modules will be implemented on April 1, 2022, saving domestic players from stiff price competition from imported modules.

500 GW of Renewable Energy targets 

According to Amit Barve, Head – Solar Business Unit, Panasonic Life Solitions India Limited, “India’s goal of achieving a target of 280GW or 300GW is quite difficult, but we will surely reach at 200GW. However, if we not accept the challenge till then. It’s even more difficult to achieve. Previously, a target of 100 GW, or even 10 GW, had been set as part of the national solar mission. People were initially sceptical of our ability to accomplish this. And when it got raised to 100 GW, I think it was even more sceptical about how we were going to do it. But today we stand at 50 GW, which has been done. It’s not a small achievement that has been done in a few years when we really started this journey towards renewable energy.” 

According to Raghavendra Mirji, Sr. Vice President & Head – Power Infrastructure & Renewable Energy, Godrej Electricals & Electronics Ltd., “India announced its commitment to becoming net-zero by 2070 at COP26 in 2021, as well as its ambitious target of adding 50 percent renewable capacity by 2030. And we have achieved this eight years in advance. I consider this to be an opportunity for India. India has a great advantage in leveraging renewables in a great way. Also, not many people have discarded hydro, but I personally feel the capacity to expand hydro still exists as part of renewable energy. In recent additions, the government has added even the big hydro into the renewable bracket. And then the north-eastern states have great potential. Moreover, I think more than 10,000 megawatts of power projects, pro hydro, have already been announced by the government. As a result, there is significant potential to expand hydroelectricity to the renewable arms.”

Impacts of solar schemes on renewable energy sector

Today, the industry is really gearing up as PLI’s schemes have come up, noting the same, Barve feels that we need to look at expanding our manufacturing capacity, as we still lack there. “But with the entrance of PLI Scheme the entire ecosystem and value chain will expand, which is the need of the hour.” Adding just the capacity of module manufacturing won’t help as we still are largely dependent on import material. Until we don’t gain expertise on its value chain, capacity addition won’t be able to serve the purpose. 

“PLI has set aside ₹4500 crores for high efficiency solar production,” Mirji claims. So far, we’ve seen the large industrialists come out in front and make investments in this; but, creating jobs is a completely different benefit.

“The PLI programme will surely drive some new manufacturers to enter the sector, allowing us to capture the capacity required for India till 2030,” says Amit Arokar, Founder & Managing Director, ECE India Energies Pvt. Ltd. However, rising costs are posing challenges, are the impacts of the BCD, or tax effect, despite the fact that raw material prices in the key industrial sector have been rising for the previous two years.

Adding more to Arokar’s statements, Barve considers this a positive step and says that it would take time to witness progress in this section. For instance, we are working on having a polysilicon unit in the coming years, 2 years, which might even take 5 years before production is established in that unit. But at least once we have this base level manufacturing established in India, the sky’s the limit and probably the expansions beyond 2030 can go faster than what we have today, till 2030”, Barve adds.

Opportunities and challenges of Basic Customs Duty (BCDs) on solar cells

Prices will surely be increase with the implementation of BCDs. However, the manufacturer’s capacity growth may result in the fulfilment of whatever market demands are now in place says Arokar. 

On a brief note, Barve believes there will be a short-term disruption because today we have only 4-5 GW of cell manufacturing capacity. Majority of the cell manufacturing is again polycrystalline, and not on monocrystalline. Today you are getting the wafers of polycrystalline, an absolute technology, is also another challenge. So, we will see a couple of disruptions, including the availability of wafers which is imported in India of polycrystalline; the prices at which it will be imported; parity between the polycrystalline and monocrystalline, which was one of the deciding factors on why major projects were being undertaken; polycrystalline will continue to be reduced as poly prices rise.

This will cause short-term disruptions because, for us expanding the manufacturing capacity of cells to that level of module manufacturing capacity will take at least one and a half years to two years. We need to understand that establishing a cell line takes minimum seven months, in terms of installation of production, getting the production commenced, and then stabilising the production, getting the production within requires additional efficiencies will require more time. So, in a nutshell, there will be short-term disruptions leading to price rise, further making the projects unviable.  

Agreeing with what Barve mentioned about the implementation of BCD, Mirji terms it a very wrong decision to bring the policy on BCD at this juncture where we are setting an ambitious target. Yes, there are issues with the domestic manufacturers, the production is also legitimately taken up. “I believe the government should have somewhere balanced in the short-term plans on how to cater to the demands versus, how a long-term benefits can be provided to the manufacturers. These could have addressed through regulatory policies. 

Commenting on the present situation here, Mirji further adds that there is a large amount of rush to accumulate the stocks provide BCDs, which led to a price rise, coupled with unprecedented rally of polysilicon’s raw material, along with the closure of Chinese manufacturing plants due to environmental concerns. “Somewhere I am optimistic that the accumulation won’t happen and everything will be out in open. People will further come to the terms with the realistic way to manage the demand and supply needs. And if the project unviability becomes evident, then how will a manufacturer manage the price rise. These issues will probably be reduced in the coming months”. 

Manufacturing solar panels and cells through automatic assembly

“Right now, there is no alternative to move with automated facilities because of the multi-bus bars and gaps, the manual involvement, and the technique of manufacturing solar cells and solar panels,” Arokar explains. Our current manufacturing capacity is roughly 16 GW, but in order to meet the predicted objective, we will need to double our current manufacturing capacity by 2.5 times in the next years. So, 50 percent can be used to make solar panels, and if you want to manufacture solar cells independently, our current manufacturing capacity is only 4 GW, and it needs to be improved by at least 50–57 GW every year. It must be repeated ten times. Manufacturing possibilities are given more thought than the expected outcome.

The solar cell production plant, according to Barve, is totally automated. Older cell lines, perhaps ten years ago, had some manual components, but today, all cell lines created and commercialised in India, as well as all growth plans in which all manufacturers are building solar cell facilities, are completely automated. There will be no uncertainty now, and they will continue to be fully automated to handle the quantity and size of cells that are being created correctly.

The final word 

There are numerous obstacles on the way to 500 GW of renewable energy and 300 GW of solar power, as we perceive them. However, this has been a defining feature of the last ten years. We’ve also faced a number of obstacles that we were able to overcome. And it’s for this reason that even Barve is confident and optimistic that, in the next ten years, Indian entrepreneurs will overcome the challenges they’ve faced. And they will make it a success storey and one of the shining stars, most likely in the field of renewable energy.

In light of the government’s policies, EPC’s role as one of the EPCs that rates volatility, and other factors, Arokar believes that everyone must work together to reach the 500 GW target.

There is a tremendous government intent. There is a need for us to have the additional energy and a need for a green power. So cumulatively all put together I’m sure that India will be rising star as far as renewables is concerned, and solar will play the major role in this transition from the carbonise to the decarbonised society or the green society in the future.

Moreover, this decision will add dearness to the imported solar modules and solar cells, especially from China. Further, leveraging its expanding green energy market to enhance the manufacturing sector in India. With these advancements, India is expected to play a pivotal role in the global supply chains. 

 

The PLI Scheme, on the other hand, will grow the entire ecosystem and value chain, which is exactly what is needed now. Amit Barve, Head – Solar Business Unit, Panasonic Life Solitions India Limited.

Also grid security and overall security is the future and we definitely need to address it in different ways. Raghavendra Mirji, Sr. Vice President & Head – Power Infrastructure & Renewable Energy, Godrej Electricals & Electronics Ltd.

The consequences of the BCD, or tax pricing, as well as rising costs, pose issues. Amit Arokar, Founder & Managing Director, ECE India Energies Pvt. Ltd.