Indian Government Announces Solar Tender to Support Domestic Manufacturers of Solar Modules

Indian Government

The Solar Energy Corporation of India (SECI) is in a tender spree this 2019. Recently, a solar tender was issued by the SECI to set up 2 GW grid-connected solar power project. The project is the second phase of a program for setting up 12-GW proposed by the MNRE. Having got the Cabinet Committee on Economic Affair’s (CCEA) approval, the tender is an invitation for project developers and a sign of support for Indian manufacturers of solar photovoltaic cells and solar modules.

According to the detailed RfS made available on 25th March 2019, the project can be initiated anywhere in India within 4 years from 2019 to 2023 and the generated power being procured by central government-owned companies i.e., the public sector companies.

These companies can get hold of the generated power either directly or through grid-connectivity with the final cost being less than 3.50/kWh. Irrespective of the mode of procurement, the price of electricity is cheaper than other sources.

Important takeaways from the SECI’s tender announcement for the project developers:

Project developers will be free to choose the site for the project and can bid for capital expenditure support to set up projects with a capacity between 10 MW and 2,000 MW. The maximum bid allowed is ₹ 7 million per MW.

Project developers will get to sign Power Purchase Agreements (PPAs) with SECI which in turn would sign Power Sale Agreements (PSA) with the public sector undertakings. The mode of signing the agreements could be either directly or through electricity distribution companies. There are high chances that the solar power sale mechanism could be similar to other SECI national-level solar power projects.

Important takeaways from the SECI’s tender announcement for the domestic manufacturers:

The tender is a boon for the Indian manufacturers because it is mandatory for the participating project developers to use only Indian-made solar PV cells and solar modules. This initiative is to uplift the condition of domestic manufacturers who have been financially struggling for several years completely uninfluenced by the sharp increase in operational solar power capacity in India. A recent report by the Indian Solar Manufacturers Association (ISMA) states that the share of domestically manufactured solar photovoltaic cells has dropped to 7% of India’s total demand. The share of cheap imported solar photovoltaic cells increased up to 90% in FY2017-18 from the previous share of 86% in FY2014-15. Capacity utilization, on the other hand, drastically dropped to 51% from 72% (FY2016-17) in FY2017-18. One can conclude that frequent fluctuation in capacity and tariff bid is highly attributable to the wave of cheap imported solar PV cells and solar modules.

For years together, India had tried implementing mandatory provisions for the use of domestically manufactured solar cells and modules. Such initiatives were confronted and crushed by the U.S. at the World Trade Organisation (WTO). A loophole in the WTO’s rule book was identified wherein domestic product usage can be mandated under conditions where the project serves the government or its subsidiaries. Our government has called upon WTO’s exemption to support our domestic manufacturers of solar photovoltaic cells and modules.