India’s solar power producers face an unexpected increase in costs during the pandemic as Chinese module makers want to renegotiate prices.
China’s Longi Green Technology Co., the world’s biggest producer of solar cells, said in a statement that suppliers were renegotiating contracts as prices of modules have surged 35% as the cost of polysilicon, glass and silver paste rose. Higher freight rates due to shortage of shipping capacity during the pandemic also fuelled hikes.
The clarification came after multiple media reports, including from the Economic Times, said that Chinese suppliers unilaterally cancelled contracts with Indian power producers. The problem is that Indian solar firms have bid and won projects from the Solar Energy Corporation of India quoting lowest possible fixed tariffs.
Solar modules account for nearly half the cost of a power project. And imports from China meet about 80% of the demand in India. The nation, home to some of the world’s most polluted cities, has been focusing on increasing the share of solar and wind power in its energy mix.
Chinese vendors renegotiating contracts is extremely worrisome for the industry, especially projects to be commissioned between July 2021 and March next year as this would lower yields, said a senior executive at one of the largest renewable power producers in India—he didn’t want to be identified out of business concerns. Lack of alternatives means the producers will have to take a hit on their margins, he said, adding that Chinese firms have increased prices by at least 15-20%.
Subrahmanyam Pulipaka, chief executive officer at industry lobby National Solar Energy Federation of India, admitted that the sudden surge in module prices has disrupted Indian supply chain when local firms are already under pressure during the pandemic. While the association will soon approach the Ministry of New and Renewable Energy, he said Chinese vendors seeking higher prices has the potential to cause a big dent for the industry, which will be forced to pass on the burden to utilities and eventually to consumers.