Domestic content requirement tenders are all but disappearing: Mercom

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According to Mercom, domestic solar manufacturing capacity is almost 6 GW in a 10 GW market, however, Indian manufacturers managed to corner only about 10-15 per cent of the Indian market share raising doubts about their future.
Kolkata: Domestic solar power equipment manufacturer are in for difficult times unless they reinvent themselves says Mercom India in a recent report. In fact, the days of the government willing to paying more for domestic modules may be done feel the analyst firm.

According to Mercom, domestic solar manufacturing capacity is almost 6 GW in a 10 GW market, however, Indian manufacturers managed to corner only about 10-15 per cent of the Indian market share raising doubts about their future. The situation could worsen as Indian manufacturers continue to announce capacity expansions despite a small market share.

“On top of that there are no government programs to help domestic manufacturers. Considering where the market is today, they will find it is extremely tough to compete with the Chinese players on price,” said an analysts from Mercom India.

Mercom analysts have gathered from government sources that unless the capacity tendered is for direct government use or for captive use by government departments, there is lack of enthusiasm for domestic content requirement with implementing agencies.

According analysts, if the government mandates domestic content requirement on modules for railways, airports, ports, and other sectors, Indian manufacturers could have some market share, but it would not like earlier years when capacity tendered under domestic content requirement was at par with open category.

The domestic content requirement (DCR) category, the mandate for solar projects in India to utilize domestically manufactured solar modules and cells, was instituted in the Jawaharlal Nehru National Solar Mission (JNNSM) from the beginning of 2010 in an effort to create a healthy and robust indigenous manufacturing base and to elevate India’s status as a solar hub. But due to constantly changing market dynamics and the rise of China as the world’s manufacturing center, the DCR category is all but done, with DCR tenders almost at a standstill.

The DCR policy was always at risk of running afoul of WTO rules, but the government kept pushing it to protect local manufacturers. It was always a balancing act, protect local manufacturers and pay a higher tariff, or let developers purchase modules from abroad and bring tariff rates down, to save the government and consumers millions on power purchase costs.

For solar projects selected in the first Batch (during FY2010-11) of the JNNSM policy, it was mandatory for projects based on crystalline silicon technology to use modules manufactured in India. This was also true for solar projects selected in the second batch during FY 2011-12, but there was a clause that stated PV modules made from thin film technologies or concentrator PV cells could be sourced from any country.

According to Mercom’s India Solar Project Tracker in FY 2010-11, 150 MW of solar was tendered, of which 140 MW were auctioned under the DCR category (NSM Phase-I, Batch-1).

In FY 2011-12, 350 MW of solar was tendered out of which 330 MW were auctioned under the DCR category (NSM Phase-I, Batch-2).

In FY 2013-14 under NSM Phase-II Batch-1, the Solar Energy Corporation of India (SECI) tendered 750 MW of solar: 375 MW under the open category and 375 MW under the DCR category.

This was the turning point where DCR requirements started trending down. Developers realized that they could increase profits by sourcing material under the open category, stated a Solar Energy Corporation of India (SECI) official.

The result was seen the next year when a total of 3,000 MW was tendered under NSM Phase-II Batch-2, but DCR projects accounted for only 400 MW. The share of DCR projects tendered versus solar capacity has been gradually declining ever since.

Out of the 2,510 MW of solar tendered under NSM Phase-II Batch-3, only 200 MW fell into the DCR category. Under NSM Phase-II
Batch-4, 225 MW of DCR projects were tendered, out of which only 25 MW were auctioned.

From the beginning of 2011 through the end of 2012, module prices fell from $1.80/W to $0.65/W, a 65 percent drop. Chinese manufacturers captured most of the global market at the cost of manufacturers elsewhere, including Indians, with cheap Chinese modules flooding the market, developers did not need to buy expensive domestic panels anymore.

Mercom estimates, Indian non-DCR modules typically cost about 10-15 percent more compared to Chinese modules. Auctions are getting highly competitive, and it seems these projects would be viable only with Chinese panels prices of which keep falling every quarter.
Source : Economictimes

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