China’s hunger has become a threat to the continuous supply of cheap solar panels to India’s solar projects as the prices rise.The second quarter of 2015 faced slow price drop in solar panel market. After December the pace picked up slightly. The drop this month was 10 percent which is less in comparison to the 35 percent price drop in 2016.
The slowdown has become a problem for solar developers of India as the price drop has been slower than their expectations. The industry has become more cautious and thus it is adding another hurdle to Narendra Modi’s targets for clean energy.
Tom Abraham, analyst in Bloomberg New Energy Finance thinks that if the prices of module don’t drop then the developers will lose interest as they already have very slim margins.
China is not only the biggest producer of solar panels but also one of the biggest markets for solar panels. China added 23 Giga-watts of new solar capacity in first half of the year which is twice what India has installed till date. Chinese government looks to double it by 2020.
Many companies promised supplying solar power at 2.44 Rupees per kWh, which would have made India one of the cheapest solar power providers in the world, but those offers banked upon the assumption that module prices would fall, according to Sujoy Ghosh, Country Head for India at Tempe.
Concerns about Price
According to Bloomberg New Energy Finance the main reasons behind the price rise are increase in China’s demand and fall in production of Poly-silicon, raw material for solar modules.
Suppliers are not delivering at rates that were assumed by Indian Developers that makes any offer less than three rupee per unit questionable, according to Anish De, partner and head of Infrastructure Strategy and operations at KPMG.
US is also facing rise in price since Suniva Inc. appealed to government to impose duties on solar panels imported from China, according to a report in BNEF’s market outlook.
In India, domestic suppliers are too small to meet the demand but in order to protect them an anti-dumping investigation into Chinese cells has begun.
Because of a border dispute in Himalayas there is political tension between the two nations, while China offered to ease friction in trade.
According to BNEF, Indian developers bidding in auctions based on price in low 20 cents per watt are worried.
Rajiv Ranjan Mishra who is the managing director at Indian Arm of Hong-Kong based CLP Holdings Ltd said that it was difficult for Indian developers to meet the bids that won the auction, even after evading risks.
“Margin of safety would eventually return as company start experiencing issues during construction of projects,” Sanjay Aggarwal, Managing Director for India at Finnish power utility Fortum OYJ, said on the phone. “When I say margin of safety, one assumes on a piece of paper that everything would go as predicted and it never happens.”