By Srabani Sen
Wednesday, February 02, 2011: India’s Jawaharlal Nehru National Solar Mission (JNNSM) has set itself a goal of creating an enabling policy framework to deploy 20 GW of solar power by 2022. The government’s objectives and intentions are commendable. But the solar manufacturers are faced with a number of challenges, which need to be overcome so that the market can grow faster.
Acknowledging the government’s support, Ashok Thangavel, DGM, operations and support, XL Telecom and Energy Ltd, says that the government is encouraging the solar manufacturers, but the policies are still not clearly chalked out, which adds to the problems faced by this sector.
One of the key challenges is the fact that while the manufacturers have to pay import duty on several inputs, such as aluminium, glass, silver paste, tedlar, and various chemicals, there is no import duty on finished goods (solar modules). “This immediately puts the Indian manufacturers at a disadvantage vis-à-vis imported goods. We hope the government will set right this inverted duty structure soon. We have repeatedly brought this to Ministry of Non Renewable Energy (MNRE)’s attention,” says K Subramanya, CEO, Tata BP Solar India Ltd.
Availability of technical manpower is very critical for the solar photovoltaic (PV) industry, and this shortage of good quality, industry-ready human resources at different nodes of the value chain is another key challenge faced by manufacturers. This makes it difficult to identify and recruit high quality talent. The trend in the PV manufacturing sector is to go in for higher degrees of automation, calling for the substantial requirement of trained manpower. The shortage is also reflected in the high attrition rates among experienced professionals since the same set of people are being chased by different companies.
There is an acute shortage of trained personnel to implement the ambitious initiatives undertaken by the government. This area needs urgent attention as a number of scientists and engineers are required to convert these initiatives into reality. Training centres must be set up to train professionals about the efficient utilisation of this technology. Also, local industrial institutes should be offered incentives and laboratories to train students for the solar industry and bridge this gap.
A third challenge, of course, is that the Indian manufacturers enter into the solar manufacturing value chain only from the cell manufacturing stage. Owing to the small market size so far, there has been no investment in polysilicon and wafer production, which has to be sourced globally. Now, with a 20 GW solar market insight over the next 12 years, there is a good case for India to attract investments in the entire value chain starting from polysilicon manufacturing.
“The overall cost of doing business in India is very high, since the cost of finance at 12 per cent and above, puts us at a big disadvantage vis-à-vis other countries including the European Union and China, where finance is available at less than 5 per cent. This is exacerbated by the overall state of India’s infrastructure in terms of the availability and quality of power, water and roads. It is a wonder that some leading Indian manufacturers like us can still churn out products which compete globally,” says K Subramanya.
On a cumulative basis, domestic market sales account for less than 35 per cent of the overall sales of Indian manufacturers. The solar PV market is highly underdeveloped, with applications limited mainly to the railways, telecom industry and defence. Some of the key reasons for the slow development of the domestic market are the low commercialisation levels of PV based generation, low awareness across end users, and limited government projects.
Says Sanjay Aggarwal, marketing manager, Kyocera, “The biggest challenge is the low volumes in the domestic market. The government has announced many big schemes but projects are not taking off the way they ought to. Another challenge is the sharp drop in profits as competition gets tougher and capacities have started building faster than the demand.”
There is no manufacturing base in India for the basic raw material—silicon wafers. The industry, hence, relies on international markets to source it. The silicon market has been fluctuating a lot in the past, leading to an imbalance in the demand-supply equation. Currently, the silicon production capacity is much higher than the demand, and prices are at significantly low levels compared to the scenario a year back. In the past, some of the solar PV firms have entered into rate contracts with silicon wafer suppliers to ensure availability. With a sudden reduction in prices, the contracts now prove to be a loss making proposition for these firms.
Financing solar initiatives is one area that is in need of urgent attention. The solar sector needs massive funding. Bodies like the Indian Renewable Energy Development Agency (IREDA) should help manufacturers by providing funds and strengthening the industry. “We offer complete solar energy solutions for power generation and lighting. We are trying to get subsidies and bank loans for our customers for hassle-free delivery. But our biggest challenge is in getting a subsidy from the government and in processing bank loans,” says Kunwer Sachdev, managing director, Su-Kam Power Systems Ltd.
“I think government schemes should be practical, logical and should address all the issues being faced by the industry, especially by developers. Help is needed particularly in arranging finance at economical rates, providing an assurance of payments by discoms, ensuring transparency, and simplifying the procedure for availing subsidies. The government can also adopt common and international technical specifications while enforcing strict quality parameters, which will result in long lasting high quality projects and products,” opines Sanjay Aggarwal.
Creating an awareness about energy efficiency is another hurdle that manufacturers need to cross, feels Vivek Chaturvedi, global head, sales and marketing, Moser Baer Solar Ltd. “There is an overall need to build awareness about these products and the associated technologies in India. The world over in developed nations, these products have been in circulation for some time. Given the renewed focus on climate change and the need to generate green and clean energy, there has been some more interest generated about renewable energy formats. Grid parity is another issue. As long as the costs of these products are higher due to obvious reasons, it may take some time for them to take off on a mass scale,” he adds.
There are no easy solutions. Companies should remain totally focused on the markets and on customers. They should have the vision and foresight to plan for the long term while addressing the day to day issues.
While the Indian government needs to make certain fiscal policy corrections to reverse the inverted duty structure, it is also extremely important that it creates a level playing field for Indian manufacturers vis-à-vis foreign players by ensuring that only ‘made in India’ products are allowed to be used in the solar mission. The same principle needs to be immediately applied by the state governments also, and states like Gujarat, which are creating a big solar market, need to introduce a ‘made in India’ clause in their projects as well.
“The game changer for the solar industry will be grid parity—when the price of solar power becomes equal to conventional power, which the government is aiming to achieve by 2022 through the National Solar Mission,” informs Subramanya.
How are companies handling these challenges?
Says Subramanya, “We have learnt our lessons the hard way over the last two decades, and have grown to become a cost competitive company with products that are sold in the most quality conscious markets like Germany, Spain and the US. For us, there is no alternative but to produce world class products at globally competitive prices; otherwise, we would not be in the market. The Indian market is only opening up now. We have been in this business since 1991!”
One of the most important tools that helped Tata BP compete globally is its business model, which impelled it to be a customer centric organisation focused on offering its products with a high lifetime value and low lifetime cost. “We are driven by our vision to touch a billion lives through world class solar solutions,” says Subramanya.
Electronics Bazaar, South Asia’s No.1 Electronics B2B magazine