Under the first batch of Phase-II of the Jawaharlal Nehru National Solar Mission (JNNSM), a total of 750-mw of grid connected solar photovoltaic was offered under the viability gap funding (VGF) mechanism. This batch of bidding assumes significance as 50 per cent of the capacity offered (375 mw out of 750 mw) was reserved under the domestic content requirement (DCR) route. This meant that solar cells and modules for this 375 mw of capacity should be procured from domestic manufacturers. The DCR regime reflects the government’s intention of gradually making a sound manufacturing base for solar photovoltaic equipment in India. The intention is noble but is practicality, or even utility, needs objective probing.
Interacting with select media at the recently-held “Inter Solar India 2014” event in Mumbai, Tarun Kapoor, Joint Secretary, Ministry of New & Renewable Energy, fielded questions on various aspects of the solar power industry, including the sensitive DCR regime. Kapoor strongly held the view that bidding under the DCR route was successful; the entire 375 mw of capacity was taken up by 22 projects according to official information released by MNRE. “Our intervention has been successful,” noted Tarun Kapoor. He added that given that a market for 375 mw worth of PV capacity was assured, factories that had shut operations have revived. Indo Solar, understood to be amongst the largest domestic producer of solar cells, restarted its operations after years of hibernation. So did Kolkata-based Jupiter Solar Power Ltd, observed Kapoor.
However, the fact remains that Indian solar cells and modules offer low efficiency, when it comes to converting solar energy into electricity, and are expensive. The government will have to foot a higher bill under viability gap funding for DCR projects. Kapoor explained that while non-DCR projects will have a VGF of around Rs.1 crore per mw, DCR projects will need over Rs.2 crore per mw. In other words, the viability gap funding is more than twice in the case of DCR projects. He was referring to 750-mw of projects awarded recently under the first batch of Phase-II of JNNSM.
In an independent panel discussion at the same event, Jagdish Prasad Agarwal, Senior Vice President, Welspun Renewables Energy Pvt Ltd, was not very supportive of the DCR ideology. He felt that India’s focus should be more on harnessing solar energy by hastening the pace of project implementation. Insisting on domestic equipment did not serve the purpose. He argued that even when it comes to employment, project sites offer more opportunities than factories. This apart, there will be heavier burden on the government while offering subsidies or viability gap funding to projects that use domestic PV cells and modules. It is estimated that Indian solar cells have a conversion rate of 14-15 per cent, while imported ones have it higher at 16-17 per cent. Conversion rate refers to how much solar energy is finally converted into electricity. In an interaction with Electrical Monitor, at the event, Reinhard Ling, Managing Director, IBC Solar Projects Pvt Ltd, the Indian subsidiary of German-based IBC Solar, explained that conversion rates can have a profound overall impact when large nationwide capacities are involved. He recalled that during the 1980s when solar energy was just picking up in Germany, the conversion rate was barely 8 per cent. It was widely felt that technology would improve the conversion rate to 20 per cent in a matter of a few decades. However, till today, the 20-per cent mark eludes.
The photovoltaic value addition chain starts from silicon, which is converted into its hyper-pure form called polysilicon. After melting, polysilicon is converted into ingots and then sliced into silicon wafers. The wafers are processed into solar cells, which in turn are strung together to form solar modules. Experts point out that the 60 per cent of the value addition comes in the silicon-to-wafer stage while only 40 per cent comes in the cells and module stage. Hence, the DCR norms address only 40 per cent of the value added chain.
When asked about India’s competitiveness in the solar PV equipment industry, Kapoor admitted, “Some people do feel that quality is an issue with Indian solar cells but I think we can overcome it.” The DCR norms were introduced essentially to provide a sufficient market for Indian PV manufacturers, he explained.
An industry player said that Indian solar cells could be 30 per cent costlier than imported ones. Hence, they not only add to the capital cost of domestic solar PV projects, they do not have an exports market either. Indian solar cells can be exported only to countries that have imposed antidumping duties on cheaper cells, Chinese for instance.
Agarwal from Welspun Renewable Energy explained that government funds must be channelized into R&D activities at the grassroots level. This could possibly make Indian solar PV cells more effective, from a technical and commercial perspective. Tarun Kapoor accepted that the issue of DCR is a debatable one. “One thought is that we should have self-sufficiency from the silicon level. At the same time why should the government subsidize something that is not competitive?” he said, bringing out the dilemma. Although there is R&D support provided to manufacturers by the ministries of new & renewable energy and also science & technology, the R&D is not directed towards fundamental technology. Indian manufacturers are not trying radically different technologies to make solar cells more efficient. Such R&D perhaps takes place in Germany and USA. In India, manufacturers are more involved in understanding foreign technology and adapting it to Indian conditions, Tarun Kapoor elaborated.
It is estimated that India has a nameplate solar cell manufacturing capacity of 1,300 mw out of which only 270 mw is functional. In the case of PV modules, the total capacity in India is 1,750 mw out of which 80-90 per cent is functional. Capacity utilization in solar cells has been very low at around 30 per cent since 2010 while the corresponding global metric has been 60 per cent. Indian solar cell manufacturers are beset with issues like small scale of operations and lack of R&D. There is also excessive reliance on contracting which means that solar cell manufacturers also undertake turnkey contracts, which assures them of a market for their solar cells even if their product was not technically efficient on a standalone basis.
Though DCR does not seem a case to be supported strongly, some experts feel that India must work towards creating a self-sufficient and sustainable ecosystem for solar PV equipment. According to Ivan Saha, Chief Technology Officer at Kolkata-headquartered Vikram Solar Ltd, the issue of DCR might not be of much relevance today but creating domestic manufacturing capabilities for solar PV cells and modules is necessary if solar energy were to be made a sustainable activity. Relying on government subsidy or support for 3-4 GW of solar capacity is quite understandable. However, the revised JNNSM target of 100 GW of grid-connected solar capacity by 2022 cannot happen without self-sufficiency, Saha averred.
Tarun Kapoor stressed that India has tremendous solar potential and that the industry must be made sustainable, from both the equipment manufacturing and project development perspective. On part of the government, there would be assistance in the form of VGF, tax incentives like accelerated depreciation, etc. However, much of the envisaged capacity should come on its own through better technology, better project financing, better economies of scale like solar parks, etc. As far as manufacturing of solar PV cells is concerned, Kapoor shared his concern that manufacturing of polysilicon was an extremely energy-intensive activity. He however balanced his apprehension by assuring, “some people recently came to me saying that something competitive can be done with government support.”
It should be remembered that DCR is a policy that is only applicable to some schemes under the JNNSM. No state government, on the other hand, has come up with anything on the lines of DCR. As such the impact of DCR would be limited because the contribution of Central government schemes to total solar capacity is only around 25 per cent. Currently, India’s grid-connected solar capacity stands at 2,738 mw out of which Central schemes account for just 674 mw.
The real debate is whether India should focus its energies on development of solar PV manufacturing capabilities or simply pursue vigorous new installations of grid-connected solar power projects without fretting about where the equipment comes from. At the moment at least, it strongly appears that India could gloss over the source of the PV cells and modules, as long as the equipment is technically sound and commercially competitive. The Indian solar PV equipment industry is today what the automobile industry was till the 1980s—small in size and with technology that was nowhere near global standards. It was joint ventures with foreign companies that changed the complexion of the Indian industry that is today a global manufacturing hub for most automobile giants of the world. Tarun Kapoor summed up his views on such a possibility in the solar PV equipment with, “Yes, we are open to joint ventures.”