Regulatory overhaul will boost the manufacturing capabilities of the domestic solar industry and make it globally competitive, while ensuring bankability of installations in the country.
In a move to catapult India’s young solar industry into greater prominence by eliminating quality concerns, the Ministry of New and Renewable Energy on August 30, 2017 issued an order notifying new standard specifications governing six Solar PV products – PV modules, films, wafers, power converters, solar inverters and storage battery. To be enforced by August next year, the new regulations, legislated under the Bureau of Indian Standards (BIS) Act 1986 will mandate manufacturers engaged in the production, storage, sale or distribution of photovoltaic systems to register with BIS.
Sending a strong message on adherence to the quality norms, the order mentions that ‘the substandard or defective Goods which do not conform to the Specified Standard mentioned in Column (3) of the Schedule shall be deformed beyond use and disposed of as a scrap by the manufacturer or the representative of overseas manufacturer from liaison office or branch office located in India or by any agency authorized by the manufacturer as its authorized representative in India’ and ‘unclaimed consignment of such Goods shall be deformed and disposed as scrap by such agency or department or agency as may be authorized by Appropriate Authority’.
Given India’s aggressive solar mission, the Government’s bold push for standardization in the backdrop of plummeting tariffs must be lauded and welcomed by the PV industry. It sets the right precedent for the future growth of the solar sector by ensuring a minimum quality level of products employed in mushrooming installations across the country, enhancing the yield potential of the installations as a whole. Devised as per prevailing international norms, the new regulations will particularly benefit domestic module manufacturers, who will now gain a much awaited competitive edge both on home ground and the global market.
How do the upcoming standards allay quality fears?
Ensuring bankability of solar projects despite low tariffs – 2017 has been a dramatic year for the Indian solar industry, where tariffs have fallen as low as Rs. 2.44 / unit. This is a third of what they were a few years ago. While falling prices may be favorable for DISCOMs and consumers, it may push IPPs and developers to find cost competitive solutions that may compromise quality.
Further, in the current scenario where more than 85% of modules are imported, the absence of regulatory control has created a climate of doubt about whether the products are certified and if they would provide the necessary yield. In abiding by ground rules, the PV industry will benefit from making quality an uncompromising factor – resulting in bankability of projects, even in the face of attractive tariffs.
Debunking anxiety about impact on projects – Initial reactions to the upcoming regulatory regime indicate apprehensions about its impact on project time and cost and the adequacy of laboratory facilities to handle the surge in demand for testing. However, these fears are unfounded. Testing laboratories in the country are not only capable of handling the rising demand for their services, but are also gearing up to expand capacities within the one year window before the rules come into force. Further, the new regulations will undoubtedly foster the establishment of new testing facilities, both Government and private third party players, who will help create a dependable testing and certification infrastructure for the industry. It is critical for the industry to earnestly start complying with the requirements at the earliest rather than hurry at the eleventh hour, which has been the case with prior regulations, especially in other industries.
Winning investor and consumer confidence – Players in the Indian solar industry must comprehend that the regulations are not hindering their growth but consolidating it, and helping them ensure that the projects they are participating in will give the right return on investment for all stakeholders. Quality certification is not merely a document or label, it is a critical tool to leverage investor and consumer confidence in the project, an invaluable asset that comes at a fraction of the cost of the installation itself. For instance, for a 40 MW plant, the cost of compliance and other independent bankability studies would amount to approximately 0.1%-0.2% of the total cost of the project, a small price to pay to build investor and consumer trust and stimulate further growth.
Charting the future regulatory roadmap – incorporating the reliability factor
While the new regulation is a good step, it focuses on safety and performance criteria in the short term. India needs a mechanism to ensure that the plants are not only furnished with high quality equipment but are also designed & installed properly, and yielding the appropriate output as a whole. Reliability is a crucial aspect because no amount of operation and maintenance intervention will revive a low yielding plant. The project may then witness reduced output within 2-3 years itself, rather than the 18-25 years that it is designed for.
As solar projects increasingly become grid-connected, reliability tests will ensure that these plants do not threaten to destabilize the grid.The first steps taken through these regulations need to be followed-through with system level standards in future. Also, considering the high investment and risks involved in solar plants, there is a need for a market surveillance mechanism – for example, future regulation could consider including punitive measures to ensure that plants that do not meet the yield requirement are penalized for their inefficacy.
The regulation for solar equipment has heralded a new era for India’s solar sector. Being only about ten years old in the country, the industry is definitely malleable to withstand the temporary discomfort that comes with introducing regulatory control. Over the next decade, the Government will invest close to Rs. 5 lakh crores to fuel its solar journey. Robust standards and regulations will ensure that precious tax payer money is making meaningful contribution to the country’s renewable future.