Solar costs soar, completion rates slow down

As per the reports submitted by the Investment Information and Credit Rating Agency of India Limited (ICRA), the completion pace of solar energy projects has slowed down. Developers are grappling with a shortage of workers and restrictions on the import of solar cells and modules.

Ministry of New and Renewable Energy (MNRE) has granted a six-month extension to developers for finishing under-construction projects affected by the national lockdown. The industry experts predict that this six-month grant might extend further.

One sign of this slowing pace is seen in the trade data of solar imports. The data shows that project completion is taking more time this year as compared to last year. In the third quarter, the country's solar imports stood at around $140 million. This was 77% less than the $598 million imported in the previous year.

In the second quarter, a fall of 83% was recorded. This year the industry imported only $69.2 million as compared to $399 million in the preceding year. As per the data collected by Mercom India Research, pandemic restrictions have reduced the mobility of both goods and people, domestically and globally. This delay has considerable damaging repercussions on the developers.

Vinay Rastogi, Managing Director of Bridge to India, a renewable energy consultancy, said, "The government has been accommodating with time extensions; however, the developers are still bearing extra expenses arising from delays. The deadline extension guards the developers against delay penalties, although all other costs still have to be borne."

He further added, "There is also a higher risk of increases in module costs, adverse changes in the exchange rates etc. The developers have been granted a six-month extension, but given the continuous execution constraints and challenges in getting the workforce mobilized, the deadlines may have to be extended further".

India is driving one of the biggest renewable capacity extension programmes in the world., It is targeting to reach 175 gigawatts (GW) capacity by 2022. Out of this 175 GW, 100 GW will come from solar energy.

At present, India continues to depend heavily on China for the imports of solar cells and modules to accomplish these targets. According to the trade data, imports from China is estimated for 88% of the total imports.

The government has decided to reduce the dependence on China for solar imports. To encourage domestic manufacturers, a basic customs duty was planned to be introduced, although that did not happen yet.

Vikram Solar CEO Saibaba Vutukuri asserted that the decrease in imports has not led to an augmented demand for modules built in India. Vikram Solar is currently providing capital expenditure to increase its manufacturing capacity from 1.2 GW to 3-4GW capacity in the next 3-4 years.

Vutukuri said, "We are moving ahead with our expansion plans, although other manufacturers are still waiting for the government to give clarity on whether it will support the domestic industry through a customs duty."

Due to covid restrictions, domestic manufacturers are striving to get raw materials, and the costs of inputs are increasing. Developers are not executing projects completely, leading to cost overruns on these projects.

The current pandemic can act as a trigger for the government, the solar industry and associated stakeholders to chart the right roadmap for achieving India's solar energy targets.