India pursues ambitious solar energy targets, but self-sufficiency remains elusive, ET EnergyWorld

India has persistently advocated for the adoption of renewable energy as part of its energy transition efforts. Among all renewable energy technologies, solar energy plays a key role in India’s journey towards achieving net zero emissions targets. With a more than six-fold increase in installed solar power capacity, from 12 GW in FY 2015 to over 75 GW in February 2024, India ranks third in terms of solar PV installations. However, this growth is mainly driven by imports. According to the Ministry of New and Renewable Energy Sources, India imported solar cells and modules worth $11.2 billion in fiscal years 2018-19 and 2022-23. As India aims to increase its solar capacity roughly four-fold to an impressive 290 GW by 2030, the import share of solar components could increase manifold if not for module production as part of self-sufficiency. Nearly 98 percent of solar modules are made of crystalline silicon. For this purpose, sand is crystallized into metallurgical silicon, which is then transformed into polysilicon, then silicon wafers, which are then made into cells, and finally culminating in the assembly of the final solar modules. Most of the value added in silicon core material occurs in polysilicon and wafer production – areas dominated by China. This dominance was due to China’s proactive approach to stimulating demand by installing over 600 GW of solar capacity, representing almost 60 percent of the world’s total capacity. This significant domestic market has led to the rapid emergence of fully integrated, large-scale manufacturing facilities in China, overseeing the entire manufacturing process from polysilicon to module production. It is worth noting that the 6 largest players in China boast individual capacities exceeding 60 GW each, which is 3-4 times greater than any other player in the world. This integrated approach provides China with a significant competitive advantage, driven by lower ecosystem costs that can be attributed to lower material resources, efficient labor, subsidized electricity and accelerated construction schedules. In the past, India has made significant efforts to develop an ecosystem for module manufacturing, starting with Domestic Content Requirements (DCR) and Modified Special Incentive Package (MSIPS) to secure duty in 2010-21, but have met with limited success. Currently, three key policies are driving the solar energy production landscape in India. Firstly, the basic rate of duty (BCD), introduced in April 2022, marked a significant change with the imposition of 25% duty on imported solar cells and 40% on imported modules, which reduced the cost advantage of imported modules. Secondly, the recently introduced effective Approved List of Models and Manufacturers (ALMM) policy will continue to shape the manufacturing industry by ensuring quality control and promoting the use of domestically produced modules. However, these two programs have primarily led to an increase in module assembly capacity in India. As of December 2023, India boasts a module production capacity of approximately 34 GW under ALMM, while cell production capacity remains much lower at 5.8 GW. By comparison, the capital investment to build these facilities will be equivalent to just 1-2 GW of fully integrated polysilicon-to-module manufacturing capacity. In contrast, China already dominates the solar production landscape with massive, fully integrated facilities. This gap is filled by a third policy, the production-linked incentive (PLI) scheme. Currently, the government has already committed a total capacity of 48 GW of domestic solar module production capacity, with a proposed outlay of £240 billion. What is impressive is that the polysilicon line is integrated with a 24 GW module line. However, the amount of incentives under PLI is not sufficient to bridge the gap between production costs compared to production costs in China due to lack of scale and ecosystem. This can be addressed by ensuring a stable and cheap energy supply with the common concentration of PLI, BCD and ALMM on integrated lines. This will provide the necessary impetus for the development of the solar energy production sector. While leading Indian manufacturers have outlined plans to set up module manufacturing plants in line with these goals, they are highly dependent on significant support from domestic demand. In India, 8-10 GW of solar capacity has been installed annually over the last 5 years. This rate is quite small to stimulate demand from domestic large-scale production plants. Moreover, to achieve the ambitious 2030 targets that require adding at least 30-40 GW per year, India would need to accelerate project implementation. This can be achieved by streamlining the land acquisition process and strengthening the contract enforcement framework. Moreover, to achieve complete self-sufficiency or ‘Aatmanirbhar’ in solar value chains, India also needs to focus on ancillaries. When this promise translates into actual ground-mounted installations, it will provide adequate domestic demand to encourage integrated solar module production.

As solar technologies are deployed at an increasing rate, a corresponding increase in solar waste is inevitable once they reach the end of their useful life. India needs to proactively address this challenge by prioritizing recycling and reuse measures in solar waste management. While the government is making efforts to manage solar waste, the establishment of integrated module manufacturing plants creates an opportunity to achieve circularity by reusing solar waste or scrap. This will lead to a reduction in production costs while reusing waste as a processed raw material. The Indian solar sector is on the cusp of exponential growth and it is high time that India thinks of a complete value chain rather than fragmentation.

Posted on May 29, 2024 at 1:59 pm EST

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