Prices of solar modules imported from China are trending downward, worrying domestic manufacturers because they can’t compete if prices keep declining.

Imported module prices went up after the imposition of basic customs duty (BCD) in April 2022 but have decreased in recent months, with increased polysilicon production coming online and inventories building up in China.

Chinese module average selling prices have dropped by almost 17% since the start of the financial year, nearly matching the prices offered by domestic manufacturers.

Domestic manufacturers may also need to contend soon with the possible removal of the Approved List of Manufacturers and Models (ALMM) mandate for up to two years. A notification about this is expected soon.

More price drops expected

Industry stakeholders, especially developers, hope the trend will continue throughout the year.

Naresh Baluja, Chief Commercial Officer at ENGIE, a renewable energy developer, thinks the current trends may be an outlier but does not rule out a further price cut with the rise in polysilicon capacity.

He said, “When the prices plummeted in January this year, we all thought it was because of the Chinese New Year, but even post that, the prices have declined. Based on market sources and the discussions with Chinese suppliers, prices may follow a reverse trend in March, April, and May.”

“This could mean that January and February were outlier events. But as polysilicon capacity ramps up in the second half of the year in China, we believe the prices of wafers, cells, and modules will drop.”

Rajaraman Jayaraman, National Head for Canadian Solar, a solar module manufacturer, says there is a steady demand for the import of modules as domestic manufacturers are unable to meet the demand and deliver on time.

“The recent steep price drop is for a short time and might be looked at as a price correction, and going forward; it should be a stable decline. Imported modules have always seen a great response. The first quarter is usually low in price, and the current downward trend is due to the decline in the cost of raw materials,” he said.

Parag Sharma, CEO of O2 Power, a Gurgaon-based independent power producer, said price movements depend on supply demand, capacity buildup, and price control tendencies by key players. “After being on the higher side for more than a year, the module prices are witnessing a downward trend. Module prices are mostly related to polysilicon prices, but the extraction/production cost of polysilicon has not changed significantly in recent times.”

The recent price dip has been a welcome reprieve for the industry after 18 months of the relentless increase in module costs.

K.R Harinarayan, CEO & Founder of U-Solar Clean Energy, a renewables engineering, procurement, and construction (EPC) company, said, “Although the decrease of 5-8% is still smaller than the 30% increase seen last year, we anticipate further reduction in the year ahead. The dip is a sign of the market finally stabilizing and offers a great opportunity for those in the industry to capitalize on the more favorable conditions.”

Competing with Imported Technology

Domestic module manufacturers have been trying to compete with the technologically advanced imported modules.

Baluja feels that even though the Indian independent power producers prefer domestic module manufacturers, quality remains a concern.

He said, “Chinese modules are known for their quality and bankability. Indian module manufacturers do not conduct all the tests that Chinese manufacturers do unless it is specifically mandated under the module supply agreement. If there is no strong quality inline inspection and pre-dispatch inspection, Indian module manufacturers will not be able to match the quality of Chinese manufacturers. Chinese modules over time have displayed higher efficiencies.”

According to him, lenders prefer Chinese module manufacturers because globally, tier 1 companies like LONGi, Jinko, JA Solar, and Trina Solar offer far better performance than Indian manufacturers have been able to provide over the years.

The BCD Impact

Although the government has put in place barriers such as basic customs duty (BCD) to prevent imported modules from suppressing the growth of local manufacturing, the recent price drop could pose a challenge for manufacturers while providing a reprieve for manufacturers.

As the Chinese upgrade to the n-type modules, most manufacturers are clearing the stocks for the older technology, in this case, p-type modules, throughout the year.

Industry stakeholders believe the n-type modules will be priced much higher than their predecessors. After adding the BCD, they will not be able to compete with the modules offered by the Indian manufacturers.

Sharma noted that even though the prices are returning to a more rational level, it will still not allow the current price range to be at the levels where projects were constructed before ALMM or BCD were implemented.

He went on to say, “For projects that are ready to be executed, any decline is good news, and people are once again initiating contracts and negotiations with suppliers. However, certain long-awaited announcements from the government, like the decision on grandfathering of BCD, would fast-track the negotiations and project execution process.”

With ALMM exemption in consideration, BCD remains the only hope for domestic manufacturers to compete with their Chinese counterparts. But with decreasing polysilicon prices in China, price competition could start escalating, which developers will welcome.

According to Mercom India Research’s ‘State of Solar PV Manufacturing in India’ report, India’s solar photovoltaic module manufacturing capacity is poised to increase exponentially over the next three years. However, if ALMM is removed for up to 2 years, the pace may slow down.