[SMM analysis] China’s module exports may shrink, Indian government announced ALMM list officially implemented from April 1

On March 29, India’s Ministry of New and Renewable Energy (MNRE) issued its latest policy statement, officially announcing that the Approved List of models and manufacturers (ALMM) would take effect from April 1, 2024.

According to the latest ALMM list updated by MNRE on March 22, a total of 80 Indian module manufacturing companies are included, with a total production capacity of 37.7GW. However, there is still no Chinese module manufacturing company included in the list. The introduction of the ALMM list aims to reduce India's dependence on imported modules in photovoltaics.

The ALMM order declared a moratorium for one financial year from March 10, 2023, i.e., 2023-24. Therefore, projects commissioned before March 31, 2024 will be exempt from the requirement to purchase solar PV modules from ALMM. Only models and manufacturers included in the ALMM list are eligible for use in Indian government PV projects, government-sponsored or subsidized PV projects, open access/net metering projects under government schemes, and related supporting and rooftop PV projects under the Indian government's PM KUSUM scheme, including projects where the government and its agencies procure distribution through distribution companies. Private projects, such as those constructed under open access or privately controlled, are not affected by the ALMM list.

According to SMM, the Indian photovoltaic market has always been dominated by government photovoltaic projects. In particular, India's large-scale ground photovoltaic projects are the main force driving the country's installed capacity growth. The support of the Indian government has driven the development of the country's photovoltaic market. To promote the development of photovoltaics in the country, various government initiatives have been planned, including rooftop photovoltaic plans, photovoltaic park and ultra-large photovoltaic project development plans, agricultural photovoltaic plans. However, these government-planned projects have not yet started or are in some intermediate construction stage. This may mean that more than two-thirds of India's photovoltaic projects may not be able to obtain imported modules before March 31, 2024.

Developers of most government-backed projects are required to purchase modules listed on the ALMM list. Although the ALMM list lists an annual production capacity of nearly 38GW, and India's module production capacity expansion is relatively clear, the operating rate of India's local module factories remains at around 50%. At the same time, about 50%-80% of India's domestic module output is exported by various companies, and most of the exports are to the United States. Against the background of falling prices of imported photovoltaic cells, India imports large quantities of cells to meet module production, and the operating rate is expected to rise. However, it is expected that it will not be able to fully meet India's current photovoltaic project installation needs in the short term. This restriction on module procurement will once again put India's large-scale photovoltaic projects at risk of delays. India's photovoltaic technology is somewhat lacking compared to China, and its supply chain is not yet complete. It only has a good foundation in the module link. Therefore, factors such as whether its local module production capacity expansion can be implemented on time, whether the actual module output capacity can be rapidly improved, whether the technology route switch and power generation efficiency can meet the current photovoltaic demand, whether the upstream link can stably and continuously supply module output, etc. It is the key to the development of India's photovoltaic installed market.

India's manufacturing industry is growing rapidly, and commercial and industrial power consumers are increasingly interested in purchasing photovoltaic power through on-site systems or private power purchase agreements. By not being subject to ALMM listing requirements, these segments of the PV industry are able to benefit from possible imported modules in 2024. Therefore, India's PV deployment will further diversify across different market segments.

According to SMM, in Q3 and Q4 of 2023, China's module export volume will be approximately 50.21GW and 46.7GW, of which approximately 3.7GW and 9.01GW will be exported to India, accounting for 7.4% and 19.3%. In January 2024, China's module export volume was approximately 21.12GW, of which approximately 4.15GW was exported to India, accounting for 19.6%. In February 2024, China's module export volume was approximately 20.91GW, of which approximately 2.62GW was exported to India, accounting for 12.5%. However, in Q1 and Q2 of 2023, China’s module exports to India will average only about 0.4GW per month.

In summary, it can be seen that since the suspension of the ALMM list in April 2023, from the third quarter of 2023 to the beginning of 2024, India has begun to maintain a high ability to purchase Chinese modules. However, the uncertainty about the ALMM list will intensify the wait-and-see mood of Indian photovoltaic project developers. Judging from the export volume in Q2 2023 and February 2024, when policy conditions were unclear, Indian project developers had a conservative attitude with imported modules.

India's MNRE officially announced the restart of the ALMM list on April 1. It is expected that India's imports of Chinese modules will shrink significantly starting April, returning to an average monthly import level of 0.5-1GW, and will mainly supply private projects.

On the other hand, the implementation of the ALMM list is also a measure taken by the Indian government to protect the price of local modules in India. Affected by the low prices of imported modules, photovoltaic modules manufactured in India lack competitive advantages in terms of price due to cost reasons. The restart of the ALMM list is conducive to the price recovery of local photovoltaic modules in India. But this will also limit the procurement options and construction costs of local photovoltaic project developers in India. It can be seen that the ALMM list is a "double-edged sword" for the current Indian photovoltaic market. Regarding the follow-up trend, the policy changes of the Indian government are the focus of the development of photovoltaic in India.