The growing market sentiments in favour of green energy have put solar energy at the forefront of power generation. Market movement over the last few years are indicative of strong growth potential in this segment. However, one particular roadblock is impeding the adoption of solar energy by the masses which is the profitability of DISCOMS. Eighty percent of the parts required to set up a solar power generation plant are imported, thus making it an expensive affair. As a nation, a renewed focus on the inhouse generation of solar power can make its distribution financially feasible.
The government of India has been actively working on drafting policies to significantly boost the sector. Financial aid, reducing imports and promoting domestic manufacturing of parts are among the key issues that the Government of India is striving to address. The imposition of Basic Customs Duty on all imported parts from 2022 onwards is a policy measure that should bolster domestic manufacturing. It will not only reduce foreign dependence but also cut costs.
Our entrepreneurial capabilities have been established for a long time. Given the right kind of administrative and financial support, we are ready to enter global value chains. The cost of solar power has also touched its lowest rate ever in 2021, which means that the setting up of solar projects will have to become financially viable for developers.
In order to achieve cost competitiveness, India will have to adopt the China model. China derives its cost-advantage from two factors:
1. Core competence:
The six largest Chinese manufacturers had developed expertise in semiconductors before they migrated to the manufacturing of solar panels when the tide turned. In 2011, when the solar industry in India started growing, there was no technical knowledge about semiconductors. On the other hand, China was ready with the technical knowledge before the solar industry grew in the country.
2. Cost of Capital: The cost of debt in China is only five percent as opposed to a whopping 11 percent in India which is the highest in the APAC region. History indicates that over a decade ago, the Chinese reliance on Korea and Germany could have been sustained, but they proactively broke out of that dependence. Similarly, in the case of India, banking heavily upon imports will only fix the problem in the near term. If this trend were to continue, the solar industry will become a sister of the defence industry — highly capital-intensive.
On the bright side, the Indian government has given a massive push to the Make in India initiative under the mission of Atmanirbhar Bharat. The gates have been opened for 100 percent foreign investment in the renewable energy space.
Another major area of focus is the encouragement of the build-own-operate approach wherein foreign investors can set up an energy generation plant, own it and operate it as well. India holds tremendous potential to step in and bridge the supply-demand gap, not just in domestic waters but globally as well.
—The author, Gautam Mohanka is MD, Gautam Solar. Views expressed are personal
(Edited by : Ajay Vaishnav)
Leave a Comment