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Cover Story | July 2018

In Need of Back-Up

In June 2018, the government has revised the targets for 2022 to increase the solar power capacity to 113 GW from the earlier set 100 GW. Though the industry has the capability to meet this, it is fighting policy-level challenges. <br /> <br /> Solar power has taken the centre stage, especially in the last few years. The segment is gaining prominence day-by-day as the government is betting big on renewables. Earlier, the target set by the government was 175 GW to be achieved by 2022, of which 100 GW was outlined for the solar sec-tor, including rooftop and utility-scale projects. That said, recently, in an unprecedented move, the government revised the total target of renewable energy from the current 175 GW to 227 GW, of which 113 GW will be from solar energy. The catch here is that although the government has scaled the renewable target, the period to achieve this daunting task remains unchanged. <br /> <br /> According to the Ministry of New and Renewable Energy (MNRE), the upward revision is the result of the pace seen in capacity addition in solar in the last two years. As per MNRE, if the current pace continues, the target of 100GW would be completed well before the deadline. However, POWER TODAY spoke to solar inverter players who certainly do not endorse the government ver-sion wholeheartedly. The solar value chain players feel that the government is a bit too aggressive on the targets.<br /> <br /> While solar panels and structures are the most crucial elements of any solar project, inverters play an equally important role.&nbsp; <br /> <br /> With such an aggressive capacity addition by the government, it is assumed that the solar inverter segment will also register a higher growth rate. However, the reality on ground seems to be quite opposite. The solar inverter segment, according to the stakeholders PT spoke to, is battling many challenges. Interestingly, the issues that hamper both the solar and electrical segments are stuck at the policy level. <br /> <br /> While on the one hand, the government revises the target to a higher number, Mercom Capital in February had forecasted that there would be a dip to the tune of 22 per cent in the capacity addition in the current year. The reason was attributed to the duty imposed on safeguard, anti-dumping, and port.<br /> <br /> <span style="font-weight: bold;">KN Sreevatsa, Head - Power Conversion and Electric Vehicle Infrastructure, ABB </span>raises concern on the lack of consistency and clarity at the policy level. Though these concerns mainly pertain to solar panels, the second principal component which is the solar inverters is also marred by issues. <span style="font-weight: bold;">Anurag Garg,Vice President of Solar and Energy Storage Business, Schneider Electric,</span> points out some of the critical issues. He said, 'The challenges are sector-specific and do not necessarily pertain to balance of payment (BoP) players. There is still an impending issue of safeguard duty, apart from other taxation issues and non-grantees.'<br /> <br /> He further added, 'Though the government has announced various schemes under capacity addition, the tenders are not happening as per the announcements. The auction lacks the required speed.'<br /> <br /> <span style="font-weight: bold;">Impediments</span><br /> The calendar year 2017 saw over 9GW of capacity in solar. India has crossed the 20GW solar capacity in the last quarter of FY18. However, according to solar inverter manufacturers, the industry was shadowed with significant policy and taxation-level challenges in the last one year.<br /> <br /> <span style="font-weight: bold;">MR Rajesh, Director, Power One Micro-Systems,</span> delineates the three major hurdles that the industry faced in the last one year. His words resonate the opinion of the solar inverter industry as a whole. 'It all started with the customs duty imposed on solar panels, followed by the rollout of Goods and Service Tax (GST).' He adds, 'Solar, in the beginning, was put under 18 per cent GST. There should be clarity, since the sudden changes in taxation create more confusion and losses.'<br /> <br /> He describes that the third major issue is the recent notification from MNRE on bringing solar in-verters under the wings of Bureau of Indian Standards (BIS) certification. Stakeholders point out the lack of lab facilities in India. Worth mentioning, all inverters supplied in the Indian markets are IEC certified. So, there should be relaxation, as BIS also follows IEC certification standards. This notification had a severe impact on the importers, as the goods were held up in the customs.<br /> &nbsp;<br /> Here, Sreevatsa, of ABB, brings in a new perspective when he points out that a gap exists in the system, especially in case of benefits. He says, 'In the current scenario, the benefits are limited to the solar panels and structure. They need to be extended to the equipment manufactures to promote manufacturing locally. Ironically, those who import finished inverters enjoy the benefit of reduced customs duty. This ambiguity in terms of promoting local production vis-a-vis importing fully-built inverters needs to be addressed.'<br /> <br /> <span style="font-weight: bold;">Sunil Badesra, Business Head, Sungrow India</span> attributes the challenges to the uncertainty prevailing in the tax regimes. He says, 'The major challenge which the solar industry and solar inverter producers are battling is the uncertainty due to tax and duties. This confusion results in a delay of tenders. Similar confusion prevailed even after the rollout of GST, and now that is happening with Antidumping and Safeguard Duty.'<br /> <br /> The change in tax regime with the rollout of GST had a severe effect on the sector in the beginning. One of the impacts of GST is slowdown in the overall market. Unfolding the reason, <span style="font-weight: bold;">Hemant Joshi, Chief Executive Officer, TMEIC, </span>reveals, 'Earlier RE segment was free of all excise duties. But with the introduction of 5 per cent GST, the feasibility of projects was reworked, which led to slowdown. The positive is that we also import a lot of components into our solutions. The new regime, slightly improved our cash flows.' <br /> <br /> <span style="font-weight: bold;">Effect of tariff decline </span><br /> Depending on the size of the business in solar, the market is witnessing a surge in the number of players both in solar panel and the BoP segment. The net result is that a large number of non-related people have entered the market. It is a new market and very attractive too. The cycle time to set up a plant is also very low; it takes only six months to set up a 100 MW plant. There is pressure on de-velopers as the tariff has declined significantly. That translates it to putting pressure on engineering procurement and construction's (EPC's) equipment manufacturers to reduce the cost.<br /> <br /> Rajesh adds, 'New players enter the market aggressively. They lack knowledge and quote prices, which ultimately brought down the solar prices to the current level. The decline in prices is taken as a positive step, but on the flip side, it would eventually reflect on the quality of materials used.<br /> <br /> The new entrants also brought in a considerable amount of completion. However, many of the long-time suppliers of solar inverters feel that people enter and exit at the same time. <br /> <br /> 'We are seeing irrational behaviour in the Indian market now. I would say this is because of the new entrants to the market. The biggest problem is that of sustainability of these new players. What we have seen in the last 4-5 years is that they disappear within a couple of years,' points Hemant Joshi.<br /> <br /> Everyone unanimously agreed that the price competition is putting pressure on companies. <br /> <br /> <span style="font-weight: bold;">Shekhar Singal, Managing Director of Eastman Auto and Power, </span>is quick to add, 'The competition in India revolves around pricing and quality for solar power products. High raw material prices and inflationary pressures are making it difficult for companies to stabilise the prices of products in the country.'<br /> <br /> <span style="font-weight: bold;">Technology</span><br /> The technologies used in inverters are more or less the same, whether it is domestically produced or imported. Especially in the case of solar, though we say it is a mature technology, the reality is that it is still evolving. Even the electrical equipment is still being improved. Innovations and technology have enhanced the efficiency of products in a significant way. This enables developers to tap higher volumes of energy using small-sized equipment. <br /> <br /> Anurag Garg elaborates, 'Over the years, we have seen a lot of improvement in the two major components of solar - panels and inverters - because of technology. Technology has brought in better performance, cost, and increase in the life of solar plants.' He further adds, 'In case of inverters, earlier we had only KW size inverters, now we get 2 or 3 MW capacities. Instead of four inverters, the same energy can be supplied using a single inverter with higher capacity.'<br /> <br /> While the Indian markets have a variety of inverters available from KW to MW capacity, the question remains on how well they get synchronised with the grid. Indian grid has a peculiar voltage range, which is different from the global networks. Some of the manufacturers highlight the issue of variability in grid voltage. It is seen that most of the imported inverters come with European or Chinese technical specifications. The synchronising voltage range for these inverters are 180-230 V and the range of the Indian grid is between 150-230 V. <br /> <br /> Hemant Joshi, continues, 'It is in the nature of RE that there is a lot of fluctuation in the generation sources. For example, in Bengaluru, we have 40 MW solar plant, where the generation drops in the rainy season and the demand remains the same.'<br /> <br /> The reference is to manage such kinds of variability in grid management so that sudden drops do not lead to major disruptions. We need IT solutions to manage power grids.<br /> <br /> 'One of the things we can potentially do is to improve storage, so that it can act as a buffer in times of drops. It is a combination of storage solution and of how you manage the grid by deploying technology that would help in attaining flexibility. This layer of solution, in my view, is not fully developed in India,' Joshi adds. <br /> <br /> That said, considering the growth potential in the Indian solar segment, big boys like Schneider and ABB have enhanced their manufacturing capabilities in <br /> India in the last two years. TMEIC has just made their biggest facility operational in 2017. A company like Sungrow, which also holds a significant share of the inverter market is planning to set up the manufacturing facility in India.<br /> <br /> <span style="font-weight: bold;">Way forward</span><br /> Whether one agrees or not, solar power has matched the grid parity. The demand is more in the rooftop segment, probably because it is relatively free from some of the constraints like power purchase agreement (PPA), land, evacuation etc. This segment also enjoys more policy support. The grid-connected project segment has equal momentum. The MNRE forecast to add 10 GW in the current year appears to be achievable, as the country has already achieved 3GW in the first quarter itself. So, the outlook remains positive for the next four years.<br /> <br /> <span style="font-weight: bold;">- Renjini Liza Varghese </span><br />
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