PV Talk: New module-buying strategies in India

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Sujoy Ghosh, country head, India, First Solar, discussed module procurement, trackers, power demand

PV Tech caught up with Sujoy Ghosh, country head, India, for US-based thin-film PV manufacturer and project developer First Solar, in the firm’s Delhi office to discuss signs of developers in India engaging in new module-buying strategies, the country’s lukewarm relationship with trackers, and what India’s real power demand looks like. We’ve already published Ghosh’s views on the multiple gigawatts of ISTS-connected solar projects out for tender and how hardening interest rates could affect India’s PV market.

How do the US solar tariffs from Section 201 affect First Solar’s supply in India, given that Bridge to India named you in the top three module suppliers to India in 2017?

Sujoy Ghosh: The characteristics of demand between the US and India are very different. Procurement cycles are a lot more compressed in India, where developers would bid into a PPA then get just 12 months to commission the project, or 15 months in a state programme, and they would procure the modules on [a] spot basis 4-6 months ahead of the COD. Whereas in the US, Japan, Australia or the Middle East you typically develop a site, get permits, bid into a PPA, and if selected, get up to three years to commission the project.

Indian developers have also been used to a declining price curve on PV modules for most part in the last five years, and hence there is a tendency to delay or defer the module procurement, and hence for module suppliers, the book-to bill cycle for Indian supplies is 3-6 months. Contrast that with the US or Europe where the book-to bill cycle is 15-24 months, considering that in some cases the module technology forms part of the permits.

However since July 2017, the threat of the US 201 action which coincided with the sudden upsurge in domestic capacity additions in China triggered a reversal in the demand-supply dynamics for modules, creating a situation where the decline in module prices stopped and due to demand side pressure, the spot pricing went up. In the specific context of the impact of the US 201 trade case, given that First Solar’s Thin Film PV technology was not included, it was a risk-free option from any impact of the ruling of the case, and hence the company booked over 5.7GW of orders in the third and fourth quarters of 2017. The consequence of this upsurge in bookings is that our production capacity for the next two years is allocated against firm demand, and it impacts our ability to support spot procurement.

Given that environment and First Solar announcing that it was sold out into 2020, how have developers reacted?

We are witnessing a significant scale up in the India based platforms, many of whom are now diversifying geographically, whereas we also see some of the large European based IPP’s like Fortum, Engie and EDF scale up their India focus. With scale and geographical diversity, we also are witnessing early signs of a shift from spot procurement of modules to a more strategic and long-term procurement framework where the developer is providing visibility to a longer term project pipeline and trying to secure their supply and price risks on the module. The situation of 2H 2017 has helped in shaping some of this thinking amongst the long-term players.

Despite the current  constraints in our ability to support spot procurement, India remains a very important market for us because of the long-term demand and our technology incumbency in this market due to the superior energy yield our technology delivers in the hot and humid climates. The company has already announced plans to scale up our global manufacturing footprint to 7.4GW/year and we do believe that in the medium to long term we would definitely have the ability to support our Indian clients.

First Solar has started producing its larger-sized Series 6 Modules and announced a partnership with tracker supplier NEXTracker. How do you view India’s relationship with PV trackers?

The Indian market is predominantly fixed tilt as compared to parts of the US, Mexico and the Middle East. There are clear contrasts in (a) the DNI of the sunlight, (b) installation labour costs and (c) cost of capital which impacts the Levelised Cost of Energy (LCOE). Simply put, these factors influence the economics towards fixed tilt in India as opposed to trackers in the other markets mentioned above. First Solar’s Series 4 modules with the smaller form factor has a higher BOS penalty against polysilicon modules when considered for tracker applications as opposed to fixed tilt. With the larger form factor of the Series 6 module, the historical BOS penalty has been nullified, whereas the energy gain in hot and humid climates is still retained. Hence now we have the ability to demonstrate an entitlement benefit over polycrystalline silicon technology in both fixed tilt and tracker systems. Our view is that India will still remain predominantly a fixed tilt market with only few locations or specific sites that can offer a higher entitlement for tracked solutions, as opposed to fixed tilt.

In light of this, what led to the partnership agreement with NEXTracker?

We have launched a program of qualifying eco-system partners who manufacture BOS components that are compatible with our new Series 6 PV module offering. This includes module mounting system suppliers, cable and harness system suppliers and other BOS Component OEMs’. NEXTracker is a First Solar Eco-system partner as are other mounting system suppliers (both trackers and fixed tilt). The Series 6 Eco system portal offers access for First Solar module buyers to all pertinent information regarding compatible BOS components with which they can assemble a PV power plant. The procurement of the trackers or for that matter any BOS component is between the customer and the supplier directly.

Are you expecting more trackers in India therefore?

As explained above, we believe that the Indian market will remain predominantly fixed-tilt with tracked systems as an outlier unless there are specific sites that offer better economics with the trackers. The deployment of trackers would also be a function of the extent of localisation and consequent cost reduction that tracker OEM’s can achieve if they want to scale up. Given the tariffs are around 4¢/kwh, with a 10% cost of debt and no tax credits, the economics for justifying trackers over a fixed-tilt system is challenging at current tracker costs (especially if one wants to deploy a tracker technology that’s bankable), for the 15%-18% extra energy it’s supposed to generate under Indian conditions.

Is India’s overall power demand rising slower than expected?

There are a few different ways to look at this. Prima-facie, the demand-supply deficit for grid-connected consumers has changed and we have a situation where there is adequacy for baseload demand, while the peak still has a deficit. But this is on aggregate. As one peels the layers off this scenario there is still a large unmet demand for energy from underserved consumers which was traditionally being supported by diesel and/or kerosene and we see that shifting to distributed solar solutions, some of which are off-grid. Also while demand has grown, the measures initiated by the Federal and State governments on improving energy efficiency on the demand side have also started to impact the demand-supply dynamics.

On the distributed solar, First Solar has a partnership with Husk Power who are operating hybrid mini-grids (biomass, solar PV, energy storage) in underserved regions like Northern Bihar, Eastern Uttar Pradesh and Jharkhand. In their experience, the load growth has been at 25% y-o-y on their mini-grids as opposed to a national average of 5% y-o-y as projected in the Niti Aayog reports for rural energy growth. Several state governments are implementing schemes where the rural and agricultural feeders are being exclusively supported by distributed solar generation and then the solar pumps are certainly displacing demand for grid-connected pumps.  

So in summary while the demand growth for grid-connected loads has been sluggish, in the recent past, there is significant activity taking place whereby distributed solar is displacing that demand with local supply solutions. Hence the overall demand growth and need for energy for India’s growing population is still very robust.

PV Tech will soon feature a project briefing on a Husk Power decentralised project using First Solar modules in a remote region of Uttar Pradesh.

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