China's Solar Appetite Eats Into India Renewables Effort

China's Solar Appetite Eats Into India Renewables EffortChina's Solar Appetite Eats Into India Renewables Effort

Indian solar projects banking on a continuous supply of ever-cheaper panels are now under threat, as China’s appetite props up prices.

The global spot market price for solar panels in the second quarter fell at the slowest pace since the three months ended in December 2015, according to data compiled by PVinsights.

While the decline has picked up slightly this month, they’re down 10% since the beginning of the year, compared with a 35% drop in 2016, Bloomberg reported.

The slowdown is complicating plans for solar developers in India, who were anticipating the cost of their panels would fall more quickly and are now facing an unexpected reduction in their returns. That is making the industry more cautious about future developments, adding a hurdle to Prime Minister Narendra Modi’s ambition for quick growth in clean energy.

“If the current module prices do not go down, the developers would take a hit on their expected returns as these bids carry razor-thin margins,” Allen Tom Abraham, a New Delhi-based analyst with Bloomberg New Energy Finance, said.

China, which accounts for more than 80% of global solar panel production, is also the biggest market for solar panels. It added 23 gigawatts of new solar capacity in the first half of this year, almost double the 13 gigawatts India has installed to date. The government in China is seeking to double installations by the end of 2020.

In India, developers have been bidding aggressively in auctions for power-purchase contracts, offering regulators some of the cheapest power from photovoltaics anywhere. Those calculations were made in anticipation of further sharp declines in PV prices. Now, developers are seeing their returns dwindle.

China’s demand and a reduction in the production of polysilicon, a raw material used in most panels, are contributing to the firming of prices.

It is not just India that’s seeing panel prices inch higher. They have also risen about 20% in the US since Suniva Inc., based in Norcross, Georgia, asked the government to impose duties on solar panels imported from China, according to BNEF’s third-quarter market outlook for the solar industry published on Aug. 18.

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