With the announcement of the JNNSM Phase 2 draft policy and the initiation of investigation into dumping of PV modules by a few global companies, lot of discussions have been centered around the Domestic Content Requirement in the policy. Will the DCR be waived in Phase 2 or will Thin Films also be included in the DCR? How will DCR impact the module pricing? These are a few questions that await answer.
Hari Manoharan, Consultant at RESolve shared some of the implications of the DCR for the solar sector in India during an interaction with pv-magazine. He also told pv-magazine that JNNSM Phase 1 should be considered a remarkable success(at least for PV), how the DCR could impact the Ex-Im bank financing from US and stressed the importance of the Renewable Purchase Obligations(RPO) in the success of the Phase 2. Some of the highlights on DCR are reproduced below.
Q. Do you think under this phase 2 draft Solar Mission, it is likely that domestic content requirements will be waived?
A. I would imagine that this would be unlikely. In fact, MNRE has given six different options on how the domestic content requirements are likely to be imposed in the draft document itself. The various DCR options proposed are as follows:
- For all PV projects, cells and modules produced in India shall be used.
- Price preference for domestic manufactured cells/ modules.
- Percentage of domestic content in cost terms (say 50%) for both PV and thermal technologies.
- Percentage of cells manufactured in India.
- Some batches with 100% domestic content requirement.
- For thermal technologies material equivalent to 50% of supply costs (excluding land, taxes, erection, financing, soft costs, etc.) should be manufactured in India during phase 2.
Q. What effect do you think these options can have?
A. I am going to assume that thin film technologies would also fall under the DCR this time round (thin film was exempted under phase 1) even though this has not been mentioned explicitly. So these are my thoughts on the likely implications of the various DCR options mentioned previously:
Option 1,2 and 5 would mean that most of the modules would be procured in India and would directly translate to increased manufacturing capacity additions in the country (currently, it stands at about 1500 MW). This would also greatly benefit the domestic inverter manufacturers and we could see some drastic growth in this sector in India.
Option 3 is very intriguing, the cost contribution for modules (as a percentage of total project cost) has dipped below 50% on average. In this scenario, developers could still import modules (at low interest rates from U.S. Ex-Im bank for instance) and ensure that other components used are manufactured locally. This could mean that inverter manufacturers (the next biggest contributor to cost of PV power plant) with manufacturing bases within the country are likely to be the biggest winners.
Option 4 – presently, the PV cell production capacity in India is rather low (less than 700 MW). If this option is implemented, then it would be very hard for developers to source the cells within the country. This also means that the cells would not be price competitive with the offering from the rest of the world, perhaps affecting the cost of solar PV in India.