Anti-dumping duty on solar cells poses risk for recently bid projects
The solar industry is getting jittery over a move to impose anti-dumping duty on solar cells. The move comes at a time when the viability of the recently awarded projects at tariffs below ₹3.5 per unit is being questioned by analysts due to rising prices of solar modules sourced from China.The lowest solar tariffs of ₹2.97 and ₹2.44 per unit, arrived at earlier this year in the Rewa Ultra Mega Solar Park and Bhadla Phase III solar park auctions, respectively, were based on assumptions that solar module prices will drop by another 10-15 per cent to $0.26-$0.28 a watt.
According to Animesh Damani, Managing Partner at Artha Energy Resources, for a bid of ₹2.44, every 10 per cent increase in solar module prices will lead to a decline of around 0.7 per cent in internal rate of return (IRR), which is already low at about 7 per cent. “The module price has been rising over the last three-four months mainly due to demand-supply mismatch,” Manish Karna, AVP – Business Development at ACME Cleantech Solutions, told BusinessLine.
The prices of Chinese modules have increased to $0.35-0.36 per watt and more due to various reasons. These include rising domestic demand for solar panels in China; a decline in domestic production of poly-silicon; and the possibility of the US imposing tariffs on imports of solar panels from China starting from next year, which will lead to sharp surge in the demand from the US in the next quarter.
However, Indian solar project developers consider all these factors temporary and expect the prices to return to the previous levels. “If the demand from the US doesn’t play out, the prices are expected to start falling post-September to the level they were before. We do think there can be a sharp correction because the increase has also been very sharp,” said Jasmeet Khurana, Associate Director at consultancy firm Bridge to India. He added that even if the US imposes the duty, the prices will correct in the beginning of next year.
“The trend has started showing signs of easing out. You could see $0.30-0.31 next year,” Sunil Jain, CEO, Hero Future Energies, told BusinessLine. He added, however, that the prices of imported modules are unlikely to fall to $0.26, as projected by developers that bid the lowest tariff in Rewa and Bhadla. Khurana, too, believes these bids were made on highly optimistic assumptions, hence the risk of prices not coming down as sharply as developers expected still exists for these projects. “But I don’t think this risk goes up substantially because of this short-to-medium-term movement in pricing,” an industry expert added. Kunal Chandra, Director, PROINSO India, also expects the prices of solar modules to start dropping from the beginning of 2018. The recently bid projects are unlikely to be impacted by the current upward trend given the long execution deadlines of as much as 18 months for which the procurement will start in the mid of next year, he said.
Industry players fear the real risks for recently bid projects come not from the global factors, but from India’s domestic policies.The possibility of anti-dumping duty on imported solar cells is worrying developers as it will increase the price of imported solar modules to around $0.40 (even after they fall to the previous levels) while locally-made modules are unlikely to become cheaper than the current prices of imported modules.
Moreover, India does not have enough manufacturing capacity to cater to the demand — provided that India sticks to its goal of reaching 100 GW of solar energy by 2022. “The cost of local manufacturers is nowhere near the prices that the Chinese manufacturers are able to offer,” Artha Energy’s Damani said. “The size of the Indian solar module manufacturing industry is very small compared to the economies of scale the Chinese manufacturers enjoy. Moreover, polysilicon, which is a major cost component in the price of the solar module, is not manufactured in our country.”
Hero Future’s Jain believes the anti-dumping duty will make the recently bid projects unviable and create havoc in the industry. “If we want to bring anti-dumping, we first need to have a complete supply chain for manufacturing of solar panels in India,” he said. Industry players point out that the only way to prevent recently awarded solar project from making losses, in case India decides to impose the anti-dumping duty, is exempting these projects from its effect. However, so far there is no clarity on this from the policy-makers.
Source – The Hindu Business Line