According to Mercom’s 2017 Q4 and Annual India Solar Market Update,  the average selling price (ASP) of Chinese modules rose to $0.36 (~₹23.45)/W in Q4 2017 from $0.35 (~₹22.80)/W in Q3 2017, an increase of four percent quarter-over-quarter. The increase was less steep than the 14 percent rise in ASP logged from Q2 to Q3, however, it marked the second quarter in a row of module price increases.

In total, Chinese module ASPs are now about 19 percent higher than they were in Q2 2017. This is an unprecedented development for the sector because module prices had previously declined like clockwork every quarter, no matter the level.

The price rise came on the back of a record 53 GW of Chinese solar installations in 2017, the highest installation total ever logged by any country in just one year. Demand from the U.S. was also strong leading up to the Suniva Section 201 case decision and provided manufacturers with ample business to overlook the low‑cost Indian market.

Indian developers are now hoping that module prices will again start to recede in March 2018. However, some Chinese suppliers are wary of shipping to India with the uncertainty surrounding the safeguard duty, the anti-dumping duty, and the port duty.

Indian module ASPs were hovering at $0.40 (₹26.05)/W in Q4, a slight increase over Q3.

Chinese module ASPs in Q4 2016 and Q4 2017 were essentially the same, upending the calculations of many developers and putting project economics at risk.

“We expect market activity to remain frozen until there is more clarity about the safeguard and anti-dumping duties. The actual duties are less of an issue than the uncertainty around them, which has ultimately been most toxic for the markets,” said Raj Prabhu, CEO of Mercom Capital Group. “Lower global demand in 2018 could mean lower module prices eventually but if a tariff is imposed, India will not benefit from lower component prices.”

A Mercom survey of solar companies regarding current module prices found that many Engineering, Procurement, and Construction (EPC) companies and project developers expect module prices in India will hover around the $0.34-0.38 (~₹22.14-24.75)/W mark for Chinese modules (depending on the tier of module utilized) and $0.40-0.45 (~₹26.05-29.31)/W for Indian modules.

A top executive at an Indian rooftop solar developer told Mercom, “Depending on the past contracts that have been executed and the relationships between the firms, Chinese module prices can vary from $0.34 (~₹22.14)/W to $0.38 (~₹24.75)/W. The upward trend has not slowed, and new issues have ensured increasing speculation in the sector. The anti-dumping duty investigation has not yet concluded and now we have a (proposed) safeguard duty. We do not think Chinese module prices will be coming down anytime soon.”

The executive also confirmed that Indian module prices have been near the $0.40 (~₹26.05)/W mark without much change.

Another executive at a major EPC contractor said, “Since April 2017, Chinese module prices have been increasing. To complete our projects, we had procured modules at rates of $0.36 (~₹23.45)/W, $0.37 (~₹24.10)/W, and now $0.38 (~₹24.75)/W in this quarter. Looking at the situation, I can say that in the coming few months this upward trend will continue. There’s a safeguard duty coming up and the anti-dumping duty investigation results are not yet out. There is huge uncertainty in the market.”

In a conversation with Mercom, another executive at a large rooftop solar company commented on the trend saying, “Indian module prices have been around the mark we had expected, it is the Chinese module prices that are troubling us. We thought maybe it was an anomaly in the second quarter, but Chinese module ASPs are showing no signs of subsiding. The current ASP for Chinese modules, according to us, is in the range of $0.37-$0.38 (~₹24.10-24.75)/W, and for Indian modules it is $0.40 (~₹26.05)/W and above on average.”

An official at another EPC firm likewise opined that the upward trend of module prices has continued.

“The trend grew stronger in the third quarter and we thought, perhaps by the last quarter prices would go down, but that has not happened. Chinese module ASPs are being sold anywhere between $0.36 (~₹23.45)/W to $0.38 (~₹24.75)/W and this spells trouble for EPC contractors as our margins have been highly reduced,” he added.

Another official working with a rooftop solar project developer said, “Compared to the previous quarter, module prices haven’t gone up much, but they have not come down either. The ASP of the Chinese modules has stabilized around $0.36 (~₹23.45)/W and this is affecting profits.”

This upward trend is not good news for the sector, the official opined. Indian modules are priced higher than Chinese modules but not all of them are top quality. If the cost of Chinese modules keeps increasing, once the anti-dumping and safeguard duties are imposed, developers and contractors will turn to Indian modules to protect their profit margins, potentially compromising project quality in the process.

An executive at one of the largest Indian solar project developers said, “Chinese module prices have settled around the $0.36 (~₹23.45)/W to $0.37 (~₹24.10)/W mark and Indian modules are priced 2 to 3 cents higher.” This situation will only worsen if the safeguard and anti-dumping duties are imposed.”

For the past two years, Mercom India Research has been stressing that aggressive bidding to capture market share with the assumption that component costs would continue to fall was a risky strategy.

Moreover, the issue of the continued misclassification of solar modules at the country’s ports continues to irk project developers. The 7.5 percent (plus cess) duty has still not been eliminated even though the government is now allowing developers to pay a bank guarantee or a provisional bond to get their modules provisionally released from ports.

All of these developments point to a challenging year for Indian solar installations in 2018.