Rooftop solar manufacturing to hit all- time high

“MNRE should actively engage with and sensitise the Fls, banks and foreign investors to launch dedicated financing packages for rooftop solar in the country”
N. Yuvaraj Dinesh Babu, Senior Advisor, EY India

N.Yuvaraj Dinesh Babu, Senior Advisor, EY India in an interaction with Athira Bejoy discusses how enforcing use of indigenous solar modules and incentivising through subsidies for its use has motivated the growth of the indigenous manufacturers but not at the levels which the private sector expected.

Energy storage is increasingly becoming a decisive cost in a cost conscious market like India. What’s your view on the price trends, when it comes to storage costs between now and say, 2030?
The cost projections for energy storage have always shown an aggressive downward trend for the several years. Leading manufacturers are working around the clock to make that happen. A few large scale installations within a shortest span of time have taken the market by surprise. But what we all need is a matured scaling and relevant battery technologies addressing the needs of the utilities, electric mobility, renewable hybrid etc.

According to BNEF 2018 survey published during Dec 2018,the volume weighted average lithium-ion battery pricedropped 85 per cent from 2010-18 to reach an average of USD 176/kWh from USD 1,160/kWh.

The reduction in the price is largely due to the volumetric increase of lithium-ion dominant battery market. Again, BNEF reports that with the learning rate of 18 per cent, the price fall percentage is 18 per cent for every doubling of the cumulative (sales) volume. While Tesla Founder has indicated achieving the much awaited price reduction to USD 100/kWh by 2020, the market remains conservative that it may be in 2024.

Given that we are half a decade away to reach the magical number USD 100/kWh, my bet is that India may see a price between USD 60 – 75/kWh by 2030. This is, however, subject to accelerated uptake by automobile sector and utilities and an enabling environment with robust policy & regulations.

Do you think only indigenously manufactured PV modules should be used in Solar PV systems power plants for subsidised sector?
Provision of requirement of domestic content (in a WTO compliant manner) for setting up solar power projects was kept by MNRE with a view to develop indigenous capacities and generate employment. In the process, MNRE also encouraged local manufacturing of cells and modules. In the upcoming Phase II Grid Connected Rooftop Solar Program, MNRE is learnt to have stipulated for use of domestically produced cells as well and not just modules.

Enforcing use of indigenous solar modules (and cells in the immediate future) and incentivising through subsidies for its use has definitely motivated the growth of the indigenous manufacturers but not at the levels which the private sector expected. The local manufacturers weren’t given a level playing field to compete with the overseas developers in terms of price, innovation in technology etc. The safe guard duty, import duty (of raw materials) exemptions, ease of doing business etc., weren’t available to Indian manufacturers on a preferential basis. As a result, key Indian manufacturers focused on exporting their modules as they couldn’t compete with the low cost imported modules.

While MNRE’s mandate promoted many new indigenous manufacturers, there remains an argument on whether it enabled domestic production to meet the demand. Whether MNRE’sannual target subsidy were utilised, is another question as subsidies were returned by thestates(to MNRE)when they are unable to meet the target. There could be several reasons for this unutilised subsidy but whether this domestic content requirement was one of these reasons is yet to be validated. In the meanwhile, MNRE issued a warning via a circular, during Feb 2018 to the developers with penalty provisions if they were found not using the indigenous modules.With local manufacturing of cells and modules starting in a noticeable manner, there are hopes that indigenous manufacturing will hit an all-time high soon with overseas manufacturing firms also establishing their shops in India.

What more measures need to be taken to achieve the target of 40GW of rooftop solar by 2022?
Distribution companies have a critical role to play in accelerating rooftop solar deployment. DISCOMs should carryout detailed analysis of the impact of rooftop solar, devise strategies and design business models to stabilise (and even overcome) the impacts and lead in the front. The recently launched “Phase II Rooftop Solar Program of MNRE” will be enabling and incentivising DISCOMs for the next three years (till 2022) to achieve the 40 GW target.

Under this program, MNRE has allocated a budget of   11,814 crores out of which   4,950 crores is allocated for incentivising DISCOMs based on the incremental annual rooftop solar installations. This move is considered to be crucial as the current sluggish growth is largely attributed to DISCOMs limited engagement in rooftop solar implementation. It is too early to comment on the success but several DISCOMs who are seriously engaged in promoting rooftop solar will gain from this program. It is essential that DISCOM needs to be an integral part of this rooftop solar movement as otherwise they will be left out very soon by their own consumers.

What about financing the rooftop sector?
Access to financing is another important aspect and SBI and PNB lines of credit from The World Bank and ADB have seeded the market triggering low cost debt financing. However, low cost debt financing with no or limited collaterals/guarantees are the immediate need of the hour. The private sector financing has gained momentum recently and there is hope aplenty that rooftop solar developers will gain from this opportunity. While market is witnessing consolidation of the EPC players in the rooftop solar sector, focus on the developers from the MSME sector (small and medium developers) is increasing.

NBFC financing is picking up and overseas investors are already venturing into this space. Dedicated “Green Bonds” for rooftop solar projects by leading developers and financing institutions and banks will further ease funding but there are only few initiatives to be seen. Debt guarantee mechanisms and payment security mechanisms are being structured for implementation which is a good development for the RESCO developers including MSMEs. MNRE should actively engage with and sensitise the FIs, Banks and foreign investors to launch dedicated financing packages for rooftop solar in the country.

Other measures that need to be implemented to accelerate rooftop solar deployment include enabling DISCOMs implement business models, awareness creation, uniform regulations across the country based on recently approved Forum of Regulators’ Model Regulations 2019, standard and quality packages for residential sector and finally, training and building the capacity of DISCOM personnel, bankers and entrepreneurs.

Argentina blackout leaves tens of millions in dark. What do you think might have been the possible breakdowns with the electric grid?
Argentina’s massive blackout primarily happened because of collapse of the Argentine Interconnection System (SADI) (500 KV transmission network). The collapse of two critical routes of SADI that supplies power generated by the Yacyreta Dam in Paraguay and the Salto Grande Dam on the Uruguay River to consumption end led to Argentina blackout. In Argentina, 500 kV transmission line was established to link multiple generators. Two critical circuits went out of service triggering the automated protection system at generation end called the Generation Automatic Disconnection (DAG). The DAG scheme carried out generation disconnection to maintain the transient stability.  It led to surge of load to other generating plants also and causing tripping of their protection circuits resulting in fall of whole grid.

There were numerous cases in Odisha where Cyclone Fani damaged rooftop as well as ground-mounted solar projects. What do you think needs to be done by India to withstand such a situation?
The frequency of modules (both rooftop and ground mounted) getting damaged due to severe weather conditions has increased recently in India. There are several reasons attributed to this situation. The developers are allegedly deploying inferior quality materials and opting cheaper options for foundation and structural strengthening. The major reasons attributed to these are unrealistic rates bid by these developers, severe cost cutting, poor or wrong design and rushed implementation without deploying skilled workforce. The available expertise to consider the impact of severe weather conditions on solar panels seems to be inadequate to provide robust design to ensure structural stability.

Indian developers should understand that developing portfolios with aggressive bidding will not yield the desired returns from the projects implemented without quality in focus. MNRE and SECI should publish best practices on design and structural parameters for installations to be safe against extreme weather conditions. The compliance international and national standards should be enforced and developers should be penalised for non-compliance as damaged panels also cause danger to human lives. Details of lab tests on stable structures and proven structures (on ground) should be disseminated amongst developers. Success stories should be documented and shared widely in the public domain. Specific courses should be designed and developed to train the engineers to ensure robust design and construction team / installers to comply with standard construction processes.

MNRE should emphasise on quality beyond the modules and also ensure that outcome of bids ensure implementation of quality projects. Reverse bidding should be discouraged for rooftop solar projects especially. Alternatively, tender specifications should be strict and offer zero deviation on structural strength against withstanding extreme weather conditions.

Do you think India is prepared to deal with techno-traps of smart grid?
Smart grid deployment in India has improved the intelligence of grid system’s interoperation by facilitating multi-directional information flow. Such information flow also creates a need of huge infrastructure requirement for equipment, hardware and software which can tackle techno-traps arising out of it for which massive investment becomes the prerequisite. India needs a liberal investment approval from regulators as multiple intangible benefits are involved in it. Regulatory ambit must be expanded to cover cyber security regulations to ensure data protection. It may also amend grid codes to facilitate new entrants of smart grid such as EVs, IoT, etc. Creation and finalisation of cyber security standards for smart grid deployment, modification in Electricity Act, 2003 to address cyber security issues and capacity building are the areas in which steps needs to be taken on priority basis.