Solar cell makers flag investor jitters over sourcing rule relief

New Delhi: India's decision to extend the exemption from mandatory domestic sourcing of solar cells for select renewable energy projects has drawn concerns from some local manufacturers who see implementation changes in timelines affecting investor confidence as they ramp up investments.

Last week, the renewable energy ministry extended by seven months till December the exemption from the Approved List of Models and Manufacturers (ALMM) List-II requirement for open access and net-metering projects. These largely comprise commercial and industrial consumers.

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The ALMM policy mandates sourcing of approved modules and cells and serves as a non-tariff measure to promote domestic manufacturing. While the module list has been in place for some time, the mandate for solar cells is still in the process of being implemented.

The exemption allows open access and net metering solar energy projects to continue using modules made of imported solar cells even as the government maintains there is no change in its broader policy of promoting local manufacturing.

The Indian Solar Manufacturers Association (ISMA) said the domestic industry had made significant investments in backward integration into cell manufacturing based on the certainty of the government's policy framework and announced implementation timelines.

"The recent exemption for certain projects from ALMM List II is expected to shift an estimated 8-10 GW of demand from domestically manufactured solar cells to lower cost imports from China, disrupting production planning and affecting investor confidence in India's upstream manufacturing ecosystem," Amit Manohar, Secretary General, ISMA, told ET.

Some integrated manufacturers, however, said the seven-month extension would have a limited impact as it was not a policy reversal but only a deferment of implementation.

India's solar manufacturing ecosystem comprises standalone module makers as well as integrated manufacturers that produce both cells and modules under backward integration. A significant portion of the cells produced by integrated manufacturers is consumed internally for module production, limiting the availability of cells in the open market. The country currently has about 32 GW of solar cell manufacturing capacity and over 200 GW of module capacity.

The government had earlier expected cell capacity to reach around 40 GW by June. However, the remaining capacity has been delayed due to factors including the West Asia crisis, delays in equipment deliveries, and commissioning challenges which also led to the relief to the industry.

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"As long as we have companies manufacturing both cells and modules, a large share of cell production will continue to be consumed internally, and the problem may persist," another industry executive said.

The government has maintained that the extension is intended to protect investments made by standalone module manufacturers by allowing them to utilise existing inventories while creating additional demand. "Investments have also been made by developers and some of the module makers which need to be taken into account," a government official told ET. The renewable energy ministry has said the extension would also provide developers additional time to transition to sourcing cells from ALMM-listed manufacturers as domestic capacity continues to increase.