In Double Delight For RE Developers, R.K. Singh Confirms ALMM Exemption, CERC Relaxes DSM Conditions

Highlights :

  • The announcement at an industry event grants a key concession demanded by developers, who have consistently claimed that domestic capacity of high quality modules was inadequate on both quality and quantity fronts.
  • Combined with the news from CERC on Deviation settlement mechanism for RE projects, it underscrores the fact that the government does not want to see momentum flag in terms of capacity additions, after the strong recovery in 2022.
In Double Delight For RE Developers, R.K. Singh Confirms ALMM Exemption, CERC Relaxes DSM Conditions

The Union Cabinet Minister and the Minister of Power and New & Renewable Energy, R.K. Singh has confirmed that a 2 year exemption for buying exclusively from ALMM (Approved List of Module Manufacturers) will be coming for large renewable energy projects.

Speaking at a conference, Singh, while taking credit for introducing the idea of expanding the scope and reach of ALMM, admitted that domestic capacity for 500 Wp modules had barely touched 10 GW, leaving a severe shortage of high quality modules for many utility projects that have been bid out and have to be completed soon. Indian developers who won projects after April, 2021 had been mandated to provide for the BCD on imports, while all almost projects post  April 10, had to procure modules from the list of ALMM manufacturers, made up exclusively of Indian players. Later, projects that had applied till October 1, 2022 for key approvals were exempted from the ALMM net.

Claiming that the decision on ALMM had been opposed by Niti Ayog when he proposed it, Singh pointed out that tendering had been expanded so fast that 17 GW of solar was under implementation and would take several years to be completed at this rate. In that context, the government has relaxed the ALMM condition for two years, to enable developers to import modules and complete projects. However, there was no mention, or indication of any relief on the 40% duty on imports, in an apparent effort to balance out the interests of the manufacturers and developers. That means that domestic manufacturers will continue to benefit from the 40% protection of BCD on modules, and 25% on solar cell imports. Thus, like a good politician, the Minister has made even this decision appear to be necessitated by their own ‘success’ at bidding put projects so fast.

The minister’s clarification, which will hopefully be seen in a formal notification soon, will be welcomed by developers, although it remains to be seen if the temporary exemption will be enough to save all the projects in the pipeline, considering the bidding levels in many of them, and the rising interest rate regime. Developers have pointed out in private discussions that projects won by bidding at between Rs 2/kWh to Rs 2.30 remain a challenge considering current prices, even as projects beyond those levels are viable, especially if the current price softening continues.

For domestic manufacturers, the strong growth in the C&I market should keep demand going, even as the larger, more competitive ones export to markets offering higher margins too.

In an unrelated but equally positive move for developers, the Central Electricity Regulator (CERC) has also relaxed the deviation settlement norms for the sector, bringing some relief from proposed norms that were considered constricting. The tightening of tolerance band for deviations accompanied by an increase in penalties was seen as an invitation to find unscrupulous workarounds , be it in terms of overscheduling and underinjection of power into the grid.

In amendments announced on Feb 6, effective Feb 8, the CERC has considerably reduced the penalties and the loss of revenue due to forecasting and scheduling deviations for RE generators.

The more stringent rules will apply to solar and wind hybrid projects now, which in any case have a much better capability of delivering on committed output.

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