Amendments in ALMM have led to a superficial rise in solar module costs due to gaps in the demand-supply of products, according to some stakeholders
The renewable energy sector in India is under significant market uncertainty due to the delay in enlisting the Approved List of Models and Manufacturers (ALMM) for solar photovoltaic (PV) modules. ALMM programme was intended to limit imports and boost domestic manufacturing.
On March 10, 2023, the Ministry of New & Renewable Energy (MNRE) maintained the ALMM for (PV) modules in abeyance for FY24. This means that for the projects that will be implemented by March 31 2024, there is no necessity to procure solar PV modules complying with ALMM.
The new order, however, would provide some relief to the solar sector as it allows the project developers to import solar cells and modules for their projects. This notification and the short-term removal of ALMM will increase the capacity additions in India.
India’s solar PV cell manufacturing capacity is only 3 gigawatts (GW), and the module manufacturing capacity depends on imported cells.
However, according to some of the stakeholders, ALMM would not be beneficial to the sector. A hefty application fee of Rs 5,000 per megawatt (MW) capacity of the cells and the modules is a burden for the manufacturers. This leads to an increase in the overall cost of the product, thereby increasing the project costs and the electricity charges.
For organisations based out of the country, huge inspection charges must be borne for each manufacturing facility, which is required as part of the listing procedure. The waiting time for getting listed in the ALMM is long, leading to project delays and supply chain disruptions.
The order includes solar PV cells and module manufacturers who meet the requirements of the Bureau of Indian Standards (BIS). The office memorandum issued on October 7 2022, includes the Renewable Energy (RE) projects as part of the amendment, which applies to net-metering or open-access facilities from April 1 2022.
Solar PV projects are installed for a specific period, and the solar PV cells and modules used in the projects require a long-term warranty. Thus, confirming that the cells and modules are manufactured in the facilities where they have been claimed to have been produced makes it imperative. Some companies assert they manufacture the cells and modules other facilities produce.
The ALMM’s main aim is to establish the manufacturing facility physically, and it is necessary for the manufacturers who supply for the government-run solar project programmes. This is in addition to the quality control mechanism operated by the government of India, which includes testing the cells and modules by BIS.
The burgeoning time and the expenses involved in producing high-performance PV modules tested and approved for BIS is a big deterrent as very few labs are accredited to perform the BIS testing.
The commercial and industrial (C&I) segment’s project developers are reeling under supply shortages and delays. Amendments in ALMM have led to a superficial rise in solar module costs due to gaps in the demand-supply of products.
An additional Basic Custom Duty (BCD) of 40 per cent is levied on the import of solar PV modules, and a BCD of 25 per cent is levied on the import of solar PV cells from April 1, 2022, further increasing the cost of the project.
Various rooftop solar PV projects are in different phases of development, with open access/net metering permissions granted based on the rules for the projects to be installed. The projects can incur huge losses for the developers and the consumers if they come to a halt.
C&I segment should not be included under these regulations as the government does not provide funds or subsidies to them compared to the other segments, according to project stakeholders.
The solar module supplies in the country are insufficient to meet the needs of government-owned projects leading to significant delays in the commissioning of the projects.
There were only 13 GW of capacity additions in the solar industry in 2022 against 10.2 GW of the installed capacity in 2021, which was a 27 per cent year-on-year increase, according to MNRE. The current cumulative solar installed capacity stands at 67 GW. Some 87 per cent of the installations were from large-scale solar, contributing to a 33 per cent year-on-year increase in 2022.
As of December 2021, the cumulative installed capacity for solar was 55 GW, with 77 per cent being contributed by the grid-connected utility-scale projects.
The remaining 23 per cent was contributed by the rooftop solar and the off-grid mini/micro grid segment. By December 2022, 57 per cent of the 100 GW target consisting of 60 GW of utility-scale and 40 GW of rooftop solar projects had been achieved.
About 13 GW of solar capacity was added in 2022, but even with this capacity addition, 33 per cent of India’s 100 GW solar target was unmet.
The shortfall from the 2022 target can be attributed to several challenges, such as regulatory issues, challenges owing to BCD on imported modules and cells and ALMM issues, banking-related problems, financing delays, rejection of the open access grants, unsigned power supply agreements and uncertainty of future open access tariffs.
The experts in the recently concluded MERCOM India Renewable Summit 2023 deliberated on the increasing numbers of voluntary consumers looking out for green power at the power exchange to meet their climate and net zero goals.
The green open-access rules have made it easy for consumers with low demand for power to opt for open access. The experts also discussed the shift to round-the-clock (RTC) renewable energy along with energy storage, which is economical and feasible and will meet the renewable purchase obligation and its sustainability goals.
For India to be a market leader, the jump from 10GW a year to 30 GW a year of module manufacturing needs to be made along with the associated policy, economic and physical infrastructure necessary for sustainable growth.
ALMM can be instrumental in improving domestic manufacturing capacity. However, it needs to be adopted in a phased manner.
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