To encourage domestic manufacturing in the wind energy sector, the government is likely to withdraw Customs duty concessions on wind turbine components next year. Unlike the solar sector, where about 90% of the modules come from China, nearly 85% of wind-turbine manufacturing takes place in India, except some vital parts that are imported from China because they are cheaper.
Talk of withdrawing Customs duty concessions reportedly started after the border issues between India and China. Some experts see it as a setback for the wind power, which forms the biggest chunk of India’s renewable energy sector. They said the move will increase costs, while matching expertise and skillset in India within a year would not be possible.
India extends safeguard duty on solar imports, will it boost domestic manufacturing?
India extended the safeguard duty (SGD) on solar imports from China, Thailand and Vietnam by another year from July 30, 2020. Solar imports will attract 14.9% SGD in the first six months, followed by a reduced 14.5% SGD for the next six months ending July 2021.
Mercom reported that the government plans to keep the effective duty on Chinese imports at 25% for which it may announce an additional basic Custom’s duty (BCD) of 10%.
Government was supposed to implement the BCD on August 1, but it has postponed the plan by two to three weeks over the issues of power purchase agreements that have been signed before August 1. The effective duty is expected to rise up to 40%. The World Trade Organisation’s (WTO) rules do not allow more than four years of safeguard duty.
Experts said that the extension of safeguard duties won’t do much to boost domestic manufacturing in the short term. Locally produced solar cells and modules will initially cost about 20% more than Chinese imports. Around 80% of India’s solar imports are from China. The rest are sourced from Thailand and Malaysia, which are mostly made by Chinese-origin companies. With India being the signatory to the ASEAN Free Trade Agreement, it cannot impose the basic Customs duty on these two countries. Experts point out that Thailand and Malaysia cannot keep up with India’s requirements in the short term.
India’s distributed renewable energy sector sinking in financial crisis
Covid-19 restrictions have hit the distributed renewable energy sector badly. The industry complained of a major dip in revenue in the past few months. The sector is vital for the energy needs of farmers in rural India.
The market for distributed solar products such as solar lanterns, pump sets and mini-grids was estimated to grow to ₹10,117 crore by 2023 before the pandemic hit. Investment experts said financiers, despite having unutilised credit limits, are expecting the current outstanding loans to be retired first. They pointed out that the bad loans are not getting reflected due to an extended moratorium.
Rooftop solar rates decline 22%, India may still miss 40 GW by 2022 target
Government’s benchmark rates for rooftop solar have fallen 22% for the projects between 1KW and 10 KW, and 20% for over 10 KW. This is a fourth successive annual decline except in the hilly regions of the Himalayas where the rates are higher by up to Rs5 because of the absence of an operational network.
Experts said India will miss its 40 GW by 2022 rooftop solar target, with current capacity at less than 3 GW. The sector is facing implementation challenges, despite CFA (central finance assistance) schemes and net metering regulations.
Experts said discoms are reluctant to back rooftop solar projects as they have to bear maintenance expences and they end up losing high paying customers. To cite an example of just one state, the report of Maharashtra chief engineer states that the consumer applications have been pending for two years. This despite the regulator MERC has already prescribed stage-wise time limits for processing applications all the way to their commissioning stage.
In January, the discom MSEDCL shocked consumers as it decided to levy heavy grid support charges for net metering rooftop solar systems with a capacity of over 10 kW. Since the Covid-19 pandemic the state decided to not levy any grid support charges on rooftop solar installations until the cumulative rooftop capacity of the state reaches 2 GW.
Maharashtra discom MSEDCL has asked its engineers to speed up clearing the applications of rooftop installations online within the time limit because an inspection revealed that applications have been pending for over one or two years.
Kolkata-based Vikram Solar to set up massive 3 GW solar manufacturing unit in Tamil Nadu
India’s Vikram Solar will invest US$726 million to set up a solar equipment factory in Tamil Nadu as India encourages manufacturing to reduce imports. The massive 3-gigawatt plant will be ready by 2025. It will make wafers, cells and modules. The government is encouraging investors to back domestic manufacturing by imposing duties on cheaper imports of solar cells and modules.
The state incentives are beginning to draw investors. Earlier, ReNew Power Pvt announced plans to invest as much as ₹20 billion to set up a 2-gigawatt cells- and modules-making facility. The renewable power producer is in talks with various Indian states for the venture, it said. India’s installed manufacturing capacity is about 3.1 GW of solar cells and 11 GW of solar modules. India’s annual demand is 10 GW solar PV equipment, nearly 85% of which is met via imports.
Rajasthan draft policy increases solar tariffs for open access consumers
According to a draft policy, Rajasthan is planning to increase tariffs by at least half-a-rupee on big consumers trying to purchase renewable energy through the open market. This way, the most sun-rich state will join Maharashtra, Andhra Pradesh, Karnataka and Telangana, which are restricting large consumers from buying power from the open market to protect their power distribution companies.
Experts said the draft of the renewable energy regulations is not aligned with the state’s solar policy released last year. The renewable energy lobby in the state said open access projects run well, but the draft policy will worsen the future for open access.
UK’s offshore wind farm power costs so cheap the developers will pay to produce power: Study
Once backed by subsidy, the offshore wind power farms in the UK will soon be paying to produce power after a dramatic drop in the offshore wind power costs. According to a study by Imperial College London, the latest offshore wind farms will operate with “negative subsidy”.
Between 2015 and 2019, the price paid for power from offshore wind farms across northern Europe fell by 11.9 ± 1.6% per year. Researchers said at this rate, UK schemes may become the first to cross the threshold of ‘negative subsidy’ even before Europe does.
In the 2019 auctions, the cost came down to around £40 per megawatt hour. The study expected wholesale electricity prices to rise above this level over the lifetime of the projects, so wind farm operators will have to pay the government the difference between their £40 ‘strike price’ and the wholesale energy price. The savings will be passed on to households via their energy bills.