After the COVID-19 pandemic, the current power shortage situation in China has increased the cost of solar manufacturers, and at the same time has a knock-on effect on Indian developers, which once again highlights the danger of relying on a single solar supply chain.
China’s energy crisis has affected the cost of solar projects in India, because India’s photovoltaic power generation installations rely heavily on Chinese components. Manjesh Nayak, co-founder and chief financial officer of Oorjan Cleantech, stated that the cost of photovoltaic projects in India has risen by 10-15%, which in turn has led to an increase in the power purchase agreement (PPA) price of solar power by about 0.20-0.30 Indian rupees (0.003-0.004 US dollars) ).
“China’s coal shortage and power cuts have severely affected China’s production lines and schedules, which have triggered rising pressure on solar hardware prices and uncertainty in delivery time. Because Indian solar hardware brands rely heavily on Chinese imports, such as solar hardware industry of batteries, wafers and inverter hardware has also been adversely affected.” Nayak said.
The timing of the price increase in India coincides with photovoltaic developers eager to complete the projects that were delayed due to the new crown epidemic blockade, and try to take advantage of the safeguard duty imposed on imports from China, Thailand and Vietnam at the end of July. It will expire in April 2022. Tax-free opportunities between basic tariffs will be imposed on solar products on the 1st.
Nayak said: “As India proposes to impose a basic tariff of 40%, consumers will be in a dilemma. On the one hand, the goods and services tax (GST) [general sales tax] tax rate increased, on the other hand, is uncertainty facing the Chinese supply chain.”
The solar developer called for urgent geopolitical intervention to ease the pressure on installers, such as relaxing imports from non-Chinese OEMs and delaying tariffs on solar energy.
In order to avoid the recurrence of China’s industrial blackouts, India has recently increased its coal-fired power generation efforts, because India’s domestic coal supply continues to increase, although the heavy rains in August and September hindered mining activities; the resumption of the new crown epidemic has driven a sharp increase in power demand; And the price of imported coal is getting more and more expensive.
This is related to the cost of imported coal, because India’s domestic supply of coal is only enough to meet 60-65% of the country’s annual demand, and about 70% of its power generation still depends on fossil fuels that cause environmental pollution. For the Indian representatives who went to Glasgow this week to attend the COP26 climate change summit, just in time for the increase in domestic coal production and use will put them in an embarrassing situation.
“As India gradually recovers from the second wave of the new crown epidemic, its electricity demand has continued to grow from August 2021. Since June 2021, electricity demand has been soaring, and peak demand exceeded 200 GW in July 2021. Between August and September 2021, electricity consumption increased from 106.6 BU [billion units] per month in 2019 (the year before the COVID-19 outbreak) to 124.2 BU per month in 2021. With the demand for electricity (India) coal-based power plants are unable to prepare coal reserves before the arrival of the monsoon season due to skyrocketing global coal prices and freight rates. This situation puts pressure on these power plants because they will be in April 2021. After the second wave of the new crown epidemic in India, with the increase in vaccination and the full opening of enterprises, the increasingly frequent economic activities have made the country’s electricity demand continue to rise.”
Alternative Energy
Pinaki Bhattacharyya, managing director and CEO of the Indian business of Canadian solar developer Amp Energy, said that this situation urgently requires the Indian government to accelerate the deployment of renewable energy. He also said that the authorities should help renewable energy generators by changing their tax and tariff plans so that they can immediately deploy 20 GW of project capacity reserves and provide much-needed electricity.
“This has also sounded the alarm for us, reminding Indian state-owned power distribution companies and enterprises to immediately sign renewable energy power purchase agreements (PPA) and power sales agreements (PSA), and remind consumers to use renewable energy for a long time at a predictable price. Energy and electricity to hedge the continued rise in coal prices and the short-term power market… As the cost of renewable energy is bound to continue to rise, now is a good time to lock in long-term renewable energy.”