Lower Solar Tariffs Leading To Declining Solar Project Quality

Posted by Shweta Pokhriyal on October 4th, 2019

Are lower tariffs affecting solar power plant quality

The introduction of National Solar Mission in 2010 induced confidence among investors about solar project quality. The gradual increase in the scale and size of solar power projects in India attracted large global and domestic players towards Indian solar market. Now India is fast moving towards its target of 100 GW of installed solar capacity by 2022. According to a Mercom India research report, India Remained the third largest solar market after China & the US in Q1 2019. However, the increase in competition among developers and adoption of the competitive bidding framework for the allocation of solar power projects has led to a significant decline in the solar tariff levels. So much so that solar power has now become cheaper than thermal power in the country.

The Present Scenario

In recent years, the reduced tariffs have also led to increased number of solar power plant installations, but it has also raised concerns over the long term viability of these projects. The current trend of competitive bidding & constantly falling tariffs has brought about a price war and has reduced project developer margins, compelling them to reduce costs in various areas, leading to compromise in project quality that can be seen in installations across the country. The lack of regulations for product quality certification, intense competition, and absence of requisite awareness has only emboldened the problem.

A report of study published by German PV risk management company PI Berlin in July 2018 has exposed the reality of low solar system costs in India and its resulting impact on the project quality and investors’ return. Risk mitigation measures have also been highlighted in the report. 

Studies & Revelations

PI berlin team with support from of Solar Energy Corporation of India (SECI) and KFW, in cooperation with the Ministry of New and Renewable Energy (MNRE) and the National Institute for Solar Energy (NISE) in India, surveyed six projects installed in recent years. The team visited two rooftop and six ground mounted projects. On the basis of their observation, they raised serious concerns over project development in one of the world’s biggest and cheapest solar market.

Monkeys in India are a threat to more than just solar PV Cables. They derailed Prime Minister Narendra Modi’s plans to bring provide wireless internet to Varanasi, his parliamentary constituency, by repeatedly chewing through the fibre-optical cables, according to a report by the Delhi-based Centre for Science and Environment. In addition to PV Cables acting as a delicious treat to monkeys, the team also showed concern over installers’ walk across PV Modules, lack of warranties, sub-standard installation practices, system output monitoring and safety.

Monkeys: Potential threat to solar panels & PV cabling

They also found no EPC or O&M contracts on the rooftop projects and negligible warranty requirements on the larger schemes – with a legal gap on one project, after the main EPC contractor had gone bankrupt. It has also been observed that no specific certifications beyond IEC (International Electrotechnical Commission) certifications has been requested by owners. Even SECI never emphasized on asking companies for other certifications to apply for projects. They also raised question on validation of tender compliances as it was observed that commissioning certificate was issued even when a part of tender requirement was not fulfilled.

Another survey of solar projects conducted by scientists from Indian Institute of technology (IIT) Bombay and National Institute of Solar energy, New Delhi at 51 locations across India revealed that PV Modules degrade faster in hot places, rooftops and in installations of smaller sizes. Researchers observed that installations in hot and dry locations showed solder joint failure and yellowing of encapsulant materials. In such case where installations would typically be in hot and dry areas, it is very important to ensure that high quality PV Modules are used accompanied with proper handling techniques and best installion practices.

A report from Mercom India stated that the cables used in rooftop solar systems can often be found to be thin in diameter and of poor quality. Many customers do not realize that they are getting lower quality cables that are 1.2 MM, 1.3/1.4 MM regular cables instead of the preferred fire-proof cables.

Recently, aggressive bidding has impacted the quality of module mounting structures which are considered as the backbone of any solar power project whether ground mounted or rooftop. Quality is being compromised to cut down the cost of the solar project. According to mounting structure suppliers module mounting structures are the significant part of a solar power project and they account for 3% to 5% of the total cost of the solar project. Module mounting structures should be able to withstand the weight of solar panels, high wind speeds, and temperature variations.

Solar power plant damaged due to storm

This year we have observed various cases in Odisha where cyclone Fani damaged rooftop and ground mounted projects. Some solar power projects in Rajasthan and Tamil Nadu has also faced similar consequences. Module mounting structure need to be customized as per the topography of the land, module design, and the climate of the region. They are also expected to have excellent electrical and thermal conductivity apart from being corrosion resistant and durable.

Raj Prabhu, CEO of Mercom Capital Group said “There is an industry-wide concern that several` companies are compromising on module quality, which could lead to the collapse of structures and turn the perception of consumers and investors negative about solar project investments. Module suppliers are blaming the pressure from EPCs and developers who are in turn pointing fingers at the government agencies who they say are forcing their hand with low tariff caps and low bid matching”.

Also there is no benchmark to assess the quality of solar panels. Suppliers who are tier-I today, fall out of that position later, and there is difficulty in ascertaining the qualiy. Some solar power project developers are said to be buying cheaper and poor quality Chinese solar modules to meet cost and deadline pressures.

“There has long been a festering issue with quality of imported modules in India. In particular, the smaller and second-tier developers, under pressure to cut back on costs, are known to skimp on quality. The result is poor quality projects with lower than expected power output," said Vinay Rustagi, managing director at solar energy researcher Bridge to India.

Poor quality PV Modules impacting the power output

The current trend of constantly falling tariffs has brought about a price war that has pressurised EPCs to reduce the cost of the project. “Unless the industry reacts quickly and self-corrects, we are going to see unnecessary regulations put in place, further burdening the industry. Insurance costs will also go up if mounting structures start to fail,” said Prabhu.

What we can conclude

India has set an ambitious clean energy target of 175GW by 2022. Of this, 100GW is to come from solar projects. Overall, the solar power goals of the Government are commendable and capacity addition in recent years has been impressive. Lower tariffs are no doubt welcome, however, not at the cost of long term development of a healthy and efficient solar power sector that sustains better economies of scale. The government must lay down strict technical standards for components, failure-free installation, and construction.