India’s decision to make the use of domestic contents mandatory in generating solar power under its national solar programme may lead to trade disputes instead of helping domestic manufacturers, according to US-based clean energy consultancy Mercom Capital Group.

The first batch of the second phase of the country’s Jawaharlal Nehru National Solar Mission requires half of its targeted 750 MW of solar deployment to include local contents.

In its outlook, ‘Indian Solar Market – Forecasting a Better 2014 after a lacklustre year’, the consultancy said the decision to mandate domestic contents may be enough to cause a trade dispute, but not enough to help domestic manufacturers.

It is an unnecessary risk that raises uncertainty with minimal reward, the firm said, adding: “Because of the delay in announcing the second phase, these projects are not expected to be commissioned until at least May 2015.”

Half of the 750-MW will have a separate bidding process and will mandate the contractor to use solar cells and modules made in India. Developers can bid for either the domestic content category or the open category.In the initial batch of the first phase, power purchase agreements were signed for 610 MW (140 MW-photovoltaic and 470 MW solar thermal). While 140 MW of PV projects have been commissioned, only one 50 MW solar thermal projects are completed.

Originally, the 470-MW solar thermal projects were due to be commissioned by May 2013. The remaining projects have been given an extension until March 2014.

“Our due diligence indicates that 150 MW of the 470-MW solar thermal projects are in advanced stages of development,” Mercom said.

Once commissioned, these projects will receive tariffs between Rs 10.49 a unit and Rs 12.24 a unit, a premium of almost 40-50 per cent over new PV projects (most of which are currently bidding in the Rs 6.50- Rs 8 a unit range).

“These (solar thermal) projects will not be penalised for delaying up to a year. It is time to eliminate the required photovoltaic-solar thermal ratio for good and let the market decide on the best and most cost-effective technologies,” it said.

It has been a quiet year for the Indian solar sector, which saw installations of 900 MW. India is not unlikely to see any significant growth in solar power capacity in 2013, even as the global market is expected to grow 20 per cent, Mercom said.

Source: Business Line