The ALMM was introduced by the Ministry of New and Renewable Energy (MNRE) in 2019, and it is managed by the Solar Energy Corporation of India (SECI). The mandate states that only ALMM approved solar panels and manufacturers can be used in government, open access, and net metering utility-scale solar projects. The ALMM mandate is a kind of non-tariff barrier designed to ensure that solar modules used in government-funded projects meet certain criteria, such as efficiency, durability, and safety. To be listed in the ALMM, solar panel manufacturers in India must meet specific quality and performance standards Thus, ensuring that India's growing solar industry needs are met.
ALMM triggered a surge in domestic manufacturing and a downturn in solar imports
Based on the latest ALMM list of module manufacturers and models, the total capacity listed by Feb 2023 is approximately 22GW, with 91 PV module manufacturers included. As of September 2022, the total photovoltaic (PV) module capacity, including PV module manufacturers not listed in the Approved List of Manufactures and Models (ALMM), was reported to be 39 GW. A couple of years ago, India had a relatively small domestic solar PV module manufacturing capacity of less than 10 GW. As a result, India had to rely heavily on imports, with almost 80% of the solar equipment needed for projects being sourced from China.
The combination of the Basic Customs Duty (BCD) and ALMM policies in India has effectively halted the import of solar modules into the country. The imposition of 25% BCD on solar cells and 40% BCD on solar PV modules has acted as a significant price barrier, whereas the mandate to use only ALMM listed Solar modules & manufacturers for government-funded projects has barred the import of modules from non-enrolled Chinese suppliers.
According to data from the Department of Commerce, imports of solar cells and modules in India amounted to 2.6 billion dollars (218. 5 billion) in 2022, reflecting a YoY decrease of 25%. This figure represents a significant decline compared to the previous year's imports, which amounted to $3.5 billion (₹292 billion).
Why MNRE decided to extend ALMM mandate for 1 year till FY24
As of March 10th, 2023, the Ministry of New and Renewable Energy (MNRE) has announced that the Approved List of Models and Manufacturers (ALMM) will be put on hold until the conclusion of the 2023-24 financial year (FY24). The decision to put the ALMM on hold was taken after a thorough review of several factors and challenges.
India missed the 100GW target for 2022
Despite substantial solar PV module manufacturing capacity growth, India missed its 100GW solar energy target for 2022.
According to recent reports, the country had installed 62 GW of solar power capacity by the end of the year 2022, which is significantly less than the target of 100 GW.In 2022, India added 11.3 GW of new utility-scale solar capacity, a 47% increase from the previous year. Rooftop solar saw a 42% decrease with 1.9 GW added, and off-grid/distributed solar added nearly 700 MW, a 50% decrease from 2021. India has set a goal to achieve a total installed capacity of 280 gigawatts (GW) of solar power By 2030, requiring an addition of approximately 27 GW each year.
Concerns of the project developers
- The industry is still in its early stages and doesn't have the same level of quality and efficiency that imported modules currently offer.
- The increased Indian solar module manufacturing capacity was diverted to the US and European markets with higher prices, resulting in a shortage of modules in the domestic sector as imports were shut out.
- Developers demand 400W+ modules for higher efficiency and cost reduction, but only about 3 GW of ALMM listed modules meet this requirement.
- Domestic modules with quality equivalent to Chinese tier 1 and tier 2 modules are being sold at a higher price than Chinese tier 1 modules.
- Developers find it challenging to execute solar projects with low tariffs along with the ALMM restrictions
ALMM suspension good or bad for PV module manufacturers
The government's decision to suspend the Approved List of Models and Manufacturers (ALMM) policy for a year prioritizing rapid solar capacity expansion is creating uncertainty among solar PV module manufacturers in India. There were differing opinions on the magnitude of the impact that the government's decision would have on the solar industry. While some solar panel manufacturers referred to the decision as "disastrous" for the industry, others believed that it would only result in "somewhat inconvenient" consequences for them. Let’s have a look at their opinion.
The Adversity of Indian Solar PV Module Manufacturers
The lower capacity notion is misleading :
Manufacturers claim that the notion of lower capacity in domestic modules is a misnomer and not reflective of the current state of module manufacturing in India. Most Indian module manufacturers are currently operating at a lesser capacity, which indicates that there is ample room to produce modules based on specific orders.
Long ALMM listing process created a demand-supply gap:
Manufacturers argue that the ALMM approval process is redundant as the Bureau of Indian Standards (BIS) certification already exists. This additional process has contributed to the market's demand-supply gap, as the enlistment and inspection procedures took several months, leading to a shortage of solar modules in the market.
Frequent policy changes hurting the business:
Some believe that this ALMM suspension has created an uncertainty that could adversely affect those manufacturers who have already invested in capacity expansion or are in the midst of such efforts to cater to the anticipated domestic demand.
Impact on PV module exports
However, PV module manufacturers who have export orders are not worried about the ALMM extension, given the recent surge in exports. The US (United States) been the primary market for Indian solar modules in 2022 due to imposed sanctions on Chinese imports. In 2022, the value of solar PVs and modules exported by India was ₹4,640 crore, which is a significant increase compared to the previous year's figure of ₹1,100 crores in 2021.
Are project developers satisfied with the ALMM suspension for 1 Year
The decision to prioritize India's goal of installing 280 GW of solar power by 2030 over short-term manufacturing policies is a commendable move that demonstrates the policymakers' commitment to achieving their renewable energy targets at all costs. Markets do not feel confident when policies change unpredictably from year to year. The other points of concern are as follows:
- ALMM suspension is for just 12 months is not much helpful as it does not align with the 18-24 month timeline of solar project development.
- Developers’ troubles have been compounded by the ministry's latest decision on blacklisting developers who do not complete projects on time.
- The modification of eligibility criteria from the date of application of the connectivity to the date of project commissioning.
For instance, if a project constructed with non-ALMM modules was scheduled to be commissioned before March 24th but got delayed by a day and commissioned on April 1st, 24, it would not be eligible for approval under ALMM, and thus, it would be considered stranded.Conclusion
To sum up, the temporary exemption of the ALMM (Approved List of Models and Manufacturers) mandate for the financial year 2023-24 can be seen as a positive development for the solar industry, as it could provide some much-needed relief to manufacturers and project developers. Nevertheless, it's important to note that there is still a long way to go in terms of promoting domestic manufacturing and ensuring the successful execution of existing solar projects.
While the suspension of the ALMM mandate might ease some of the regulatory burdens on the industry, policymakers must continue to focus on creating a conducive environment for domestic manufacturers to thrive. This could include measures such as providing tax incentives, developing local supply chains, and investing in research and development.
Furthermore, it's equally important to ensure that ongoing solar projects are implemented smoothly and efficiently. This involves addressing issues such as land acquisition, grid connectivity, and financing, among others. Only by tackling these challenges head-on can India truly harness the potential of solar energy and achieve its ambitious renewable energy targets in the years to come.