Marketing Department: Mr. Cai, what is your opinion on the recent safeguard duty (25% in the first year, 20% in the second half of 2019 and 15% in the first half of 2020) in India against Chinese and Malaysian solar modules and cells, valid in the period from the 30th of July 2018 until 29th, 2019?
Lewis Cai: Even though the Ministry of Finance approved the proposal from the Directorate General of Trade Remedies, to impose safeguard duties on imported solar cells and modules, imports from all developing countries (132 of them, to be more precise), except China and Malaysia, are exempt from this duty.
Considering that China and Malaysia accounted for more than 90% of all PV imports into India in 2017, this proposed duty will have a huge impact on the industry short-term.
Both Indian and overseas value chain from manufacturers, stakeholders and electricity distribution companies will be significantly affected by the new duty. Rooftop solar developers, IPPs, and EPC companies will probably end up consuming a part of this increase in costs so that they can save their project channels. I believe that there is a possibility of a 14.6GW project to be affected by this new duty.
Marketing Department: Apart from the Indian market, which other markets are the most likely to be affected by this duty?
Lewis Cai: China and its largest manufacturers are the most likely to be affected, they have around 12.5GW per year of cell manufacturing capacity outside of the mainland. Nevertheless, countries such as Vietnam, Philippines, and Thailand could potentially supply India as they have about 4.6GW per year cell manufacturing capacity. However, these countries are also meeting the demand from Europe and U.S. so their supply could be tight in the next two years.
If the European Commission brings the decision to remove the current import duties on cells and modules from China, Taiwan, and Malaysia (in its review in September this year), capacity in these countries could probably be freed up.
Southeast Asian manufacturers may be tempted to rebrand Chinese modules at their factories or to import cells from China in order to make modules so that they can avoid paying these duties.
South East Asian manufacturers could enter into contract manufacturing agreements with the manufacturers from China to produce modules and cells and then ship them without paying any additional duties in India. Such cells and modules will certainly be cheaper than the ones manufactured in India.
Marketing Department: What do you think about the price trend that is going to follow this released policy?
Lewis Cai: The decision made by China to limit annual solar installations has already influenced the prices to drop to $0.26/Watt last month from $0.34/Watt at the beginning of 2018. The prices could also touch $0.21-0.22/W which is the drop of 10-15% more.
Instead of $0.27/W for modules imported in this month from China, EPC and IPPs companies from India will now have to pay $0.34/W. The capital cost for Utility-scale solar plants and the LCOE could further increase by about 14% and 11.4% respectively. However, the influence of safeguard duty on LCOE could be further decreased to 8.1% by the end of next year.
My estimation is that the prices could be $0.23/Watt by the end of this year and this can help the Chinese manufacturers to lower the price gap with Indian manufacturers.
Marketing Department: How is VSUN going to address this change?
This is good news for VSUN and as we see it as an opportunity to ensure the presence in the Indian market and to secure the long-term sales orders. VSUN has reliable supply chain partners and has signed the long-term strategic contracts with the third party companies which are located in the anti-dumping and safeguard duty exempt countries. It can offer the best prices and high-quality products which are suitable for the needs of our Indian customers. Moreover, our company has just started the process of registering our products under BIS (Bureau of Indian Standards) and we expect to obtain this certificate in the next few months. Indian Government has a target for 100GW until 2025 out of which 30% has already been achieved, but there’s still 70% yet to accomplish so we are ready to meet demands not only for modules sales but also for large EPC projects.