Interview: Safeguard Duty Cost Impact on Rooftop Solar Could be as much as 20%

India’s rooftop solar sector has installed approximately 2 GW so far. Without a conducive environment and a variety of supportive policy initiatives for it to truly take off, it will not likely meet the ambitious target of 40 GW.

Amidst all the existing issues in the sector, the recent imposition of the safeguard duty is now the biggest short-term challenge for the rooftop solar sector. In light of the recent announcement by the Government of India to levy a 25 percent safeguard duty on solar cells and modules, Mercom’s news team spoke to Sanjeev Aggarwal, CEO, Amplus Energy Solutions, a rooftop installer, to get his take on how the rooftop sector was taking shape.

Here are the edited excerpts from the interview:

Do you think India can attain 40 GW of rooftop solar by 2022?

India has solar rooftop generation potential of 124 GW and even if only households are solarized, a large amount of energy capacity can be harnessed. To install more than 90 percent of the remaining targeted capacity of 40 GW within next four years, a focused approach promoting rooftop solar must be adopted. The government must draw up a long-term strategy outlining and implementing regulations and incentives for distributed solar and create an enabling environment by involving all stakeholders to work together towards achieving a common goal.

 What do you think of 25 percent safeguard duty which was recently imposed?

The recent development of a safeguard duty was unexpected and while it may prove to be a boon for manufacturers, developers are being adversely affected. Such developments tend to create doubt in the mind of developers, dampen investors interests, and question the viability of ongoing projects. The government must provide clarity on the pass through of such additional duties to keep the general sentiment optimistic.

How do you think safeguard duty will affect the cost of rooftop solar projects in India?

The capital cost of the domestic projects could increase by as much as 20 percent. This means an impact of approximately 45 paise/unit on the 17 GW that will continue to be imported, out of the 20 GW required per year to meet the government targets. The implication of the safeguard duty will help only 3 GW of the domestic manufacturers. Higher tariffs will be a major concern in such a cost-sensitive industry.  This might jeopardize the country’s move to boost its use of renewable energy and would push back the momentum around capacity building to achieve 100 GW of installed solar capacity by 2022. Hence, the new bids will have the safeguard duty factored in the tariff, so the projects under-construction and those bid recently will face the most impact.

What is Amplus’ existing solar portfolio (in MW)?

Amplus has a total portfolio of over 300 MW of operational and under construction solar capacity across 200 sites, and in 20 states in India. Out of the 300 MW, 280 MW have already been commissioned.

What do you think about the ease of open access in Indian states? Which states are more conducive?

While the open access solar market is still in an early stage, buying solar power from such projects is an increasingly attractive option for India’s corporates. And since these corporates are valuable customers to state distribution companies, they are reluctant to let them switch to solar. Hence, the ease of open access varies across different states with some states, such as Karnataka, Madhya Pradesh, Andhra Pradesh, Rajasthan and Telangana, being highly progressive, while other big states such as Maharashtra are not allowing long term open access at all.

In 2018, Amplus commissioned a solar farm of 175 MW in Gadag, Karnataka. This solar farm is supplying power exclusively to more than 30 industrial and commercial customers using the state grid transmission system under open access route.

Amplus has also developed a 42 MW solar park in Chitradurga, Karnataka. This solar farm provides solar power to clients such as Reckitt Benckiser, ABB, L&T, IFB and Honda.

Saumy Prateek Saumy is a senior staff reporter with MercomIndia.com covering business and energy news since 2016. Prior to Mercom, Saumy was a copy editor at Thomson Reuters. Saumy earned his Bachelors Degree in Journalism & Mass Communication from the Manipal Institute of Communication at Manipal University. More articles from Saumy Prateek.