Three golden pillars of technology, policy and finance need to be strengthened
India has set an ambitious target of achieving 175 gigawatts (GW) of RE capacity by 2022. To date, we have installed 44 GW of solar. Closing the gap between the target and installed capacity will mean higher demand for solar panels and modules in the next 2-3 years.
The PV supply chain consists of 5 sub-elements: silicon production from silicate; silicon ingots; solar wafers; solar cells and solar modules. The Indian solar manufacturing story still revolves around the latter two – cells and modules, which are in a nascent stage. As per the recent report by JMK Research & Analytics India’s cumulative solar cell and module manufacturing capacities are about 4 GW and 16 GW respectively. We have zero capacity to develop solar wafers or ingots and still depend on imports for raw materials like wafers, EVA, back sheet, reflective glass, semiconductors etc. This highlights our huge technology dependency and an urgent need to develop and fund domestic R&D in the semiconductor industry. Transitioning to a circular resource model would ensure efficient utilisation of raw materials along with creating ancillary markets to recycle and reuse solar cells and modules, which will, in turn, attract and motivate the private sector. Private players like Borosil Renewables Limited have the potential to lead and innovate in the solar panel glass recycling process to enhance the circular efficiency of the sector.
Policy to practice
Over the past few years the Indian government has introduced various initiatives and schemes to support the domestic manufacturing industry including Make in India, the Safeguard Duty (SGD), the Basic Customs Duty (BCD), the Atmanirbhar Bharat scheme and the recent production-linked incentive (PLI) scheme. The 40% BCD on solar modules and 25% on solar cells starts from 1 April 2022. Although developers have a window from July 2021 (end of SGD) to April 2022 to prepare and secure the required raw materials (non-availability of a domestic raw material supply chain would impact the success and cost of manufacturing).
The Covid-19 pandemic has been an eye-opener for the renewable energy (RE) industry, spotlighting the impact of global supply disruptions on domestic solar capacity additions. India imported approximately Rs 16,000 crore (US$2.16 bn) worth of solar photovoltaic (PV) cells, panels and modules in 2018-19. To enable manufacturing of all power sector equipment in India and also to encourage healthy competition amongst states, the Ministry of Power recently announced it will set up three categories of manufacturing zones in coastal, land-locked and hilly states. Here lies a great opportunity to create manufacturing hubs with availability of clean and affordable electricity; efficient usage of land and water; skilled human resources; and an ancillary equipment industry. However, structured focus would be required to open the ancillary market to smaller businesses, energy entrepreneurs and medium and small-scale enterprises (MSME).
Circular investment for growth
Developing a domestic manufacturing and recycling ecosystem will be crucial to achieving deep decarbonisation and walking a net zero pathway. To achieve this, the Rs 4,500 crore (US$60.6m) PLI scheme ‘National Programme on High Efficiency Solar PV Modules’ focuses on three factors: development of an integrated plant (silicon + wafer + cell + module); performance of modules; and capacity and scale. The higher the efficiency of the module, the higher the PLI. The more integrated the plant, the better the PLI. Another crucial factor is ‘local value addition’ which encourages usage of local raw materials, such as glass and aluminium, but the value chain for it is still missing in India. In addition, more clarity is required to define ‘high efficiency’.
The PLI led to positive ripples in the clean power industry with giants like Reliance Industries Ltd (RIL) and First Solar announcing commitments and plans. RIL plans to invest approximately Rs 750 billion (US$10bn) over three years to build ‘giga-factories’ in Gujarat to manufacture integrated solar photovoltaic (PV) modules, batteries, electrolysers to produce green hydrogen, and fuel cells. These plans, when implemented, will put India on the map as a global solar manufacturing player. To facilitate its push into solar manufacturing, RIL is now looking to buy the Norwegian solar module maker, REC Group. In addition, First Solar plans to invest Rs 5,000 crore (US$67.3m) to set up a solar manufacturing facility in India.
These positive developments will all give a much-needed boost to the domestic manufacturing market. However, much more effort is needed to translate the commitments into action through accelerated R&D in semiconductor manufacturing; technology advancement; and increased private sector participation to assure investors.
By Saloni Sachdeva Michael, Energy and Finance Consultant, IEEFA