The renewable energy sector offers immense potential and opportunities, especially to manufacturers

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2015 has been a year of growth for the Indian Solar industry, with a total of 2GW of solar capacity expected to be added

 

India’s 6-lakh crore solar mission is expected to make the country a renewable powerhouse globally with the largest renewable energy base. 2015 has been a year of growth for the Indian Solar industry, with a total of 2GW of solar capacity expected to be added. Although the renewable energy target looked bit ambitious when it was first announced, it seems achievable now with both major domestic and global firms increasingly endorsing these plans, including Softbank, Foxconn and Bharti’s US $20-billion announcements for 20 GW of new solar capacities.

The renewable energy sector offers immense potential and opportunities, especially to manufacturers. Vast potential in this industry powers more jobs, globally more than 7.7 million people are employed either directly or indirectly. In India, the solar PV sector employs 125,000 people (grid-connected and off-grid applications). Solar is also the largest renewable energy employer in the world, accounting for nearly 2.5 million jobs. The Modi Government’s revised solar energy target of 100,000 MW by 2022 has led to a number of Photovoltaic (PV) plant set to be under construction. 

This would mean a portfolio of products, systems, solutions and services along the PV value chain are necessary to enable the generation, transmission and distribution of solar power for grid connected and micro grid applications. The maturing solar manufacturing industry brings about increased competition, with manufacturers re-doubling their efforts to produce less expensive, but efficient products to increase their market share. 

Even with cost-cutting measures, manufacturers cannot afford to compromise on quality. With increased knowledge among solar photovoltaic manufacturers and their demand for quality products, the solar modules manufacturers in particular are beginning to warranty their products for up to 25 years. The solar power components however, vary widely in quality. As the solar industry is still maturing, there has not been any industry-wide alignment of testing methods to ensure manufacturers are using comparable tests that enable buyers to make meaningful comparisons between competing products.

This would mean that buyers end up testing competing products at their expense, due to the lack of a frame of reference to measure vendors’ claims. The massive build-up of capacities in China has adversely impacted the domestic manufacturing industry, with solar PV imports from China climbing to 70% in financial year 2014-15, from 65% in 2013-14. This would lead to a potential loss of jobs and suspension of technology development and R&D initiatives in organizations. With the right policy support and eco-system development, Indian manufacturing has the ability to stay ahead of the technology curve.

The Government has declared a number of measures to support the domestic PV industry. The ‘National Manufacturing Policy’ announced in 2011, merged with the ‘Make in India’ initiative launched in 2014 and a host of incentives were announced specifically for PV module and BOM manufacturers. Exemption from custom and excise duty comprised the bulk of these incentives. 

The exemptions were also extended to equipment purchased for manufacturing certain components. In addition, under the Modified Special Incentive Package Scheme (M-SIPS) announced by the Department of Electronics and Information Technology (DeitY), 20% and 25% subsidy on capital expenditure has been announced for entities establishing cell and module lines in Special Economic Zones (SEZ) and Non-SEZs, respectively. 

 

Reimbursement of excise duty and countervailing duty is also applicable for capital equipment purchased for Non-SEZ units. Further, for high technology units, such as fabrication units (wafer manufacturing facility), reimbursement of central taxes and duties have also been provided. With the World Trade Organization (WTO) ruling against India’s anti-dumping policy of solar products, there is a need to kick start the domestic manufacturing industry by way of promotion of investment in this sector, with access to debt funding and lower cost funds. 

The industry is also in dire need of technology development, with support needed in upgradation of manufacturing facilities to achieve quality/cost competitiveness; investment in R&D through development of solar research centers, R&D labs, training facilities; and provide access to next gen technologies for manufacturers to catch up with their global peers. 

Additional support to the development of manufacturing clusters with fully integrated manufacturing plants and skill building facilities are some of the policy levers that can lead to a robust PV manufacturing industry in India. The Government’s plan to train and create a skilled workforce under the National Skill Development Mission (NSDM) would be a great initiative that could help transform and take the solar sector to greater heights.

-By Mr. Santhosh Kumar, National Sales Manager- Renewable Energy, Lapp India

 

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