November 10, 2017
There are immense opportunities in India’s solar sector owing to rising investments
The cost of solar power generation and equipment has dropped amid rising capacity
The rapid growth provides vast scope for solar manufacturing and innovation in India
Fully integrated large-scale manufacturing needed to bring down domestic costs
Situated in the tropics and with most parts of the country having around 300 sunny days in a year, the potential for solar energy in India is enormous. That is why the government has revised its target for solar energy capacity from 20 GW (Gigawatts) by 2022 to 100 GW. Rapid progress has been made in the addition of solar capacities and, till July 2017, solar projects of 12.5 GW capacity were commissioned in the country, according to the Ministry of New and Renewable Energy (MNRE).
The International Energy Agency (IEA) has said in its recent report that India’s renewable energy capacity will more than double in the next five years. It pointed out that China, India and the US will account for two-thirds of global renewable expansion by 2022 and that total solar PV capacity by then would exceed the combined total power capacities of India and Japan today. Solar tariffs breached INR2.50 (~US$0.038)/kWh for the first time during the second quarter of 2017, making solar cheaper than coal-fired electricity.
The rapid pace of expansion will lead to myriad opportunities for domestic manufacturers of solar components. According to an appraisal note of the National Solar Mission presented to the Parliament on July 31, 2017, currently India has installed PV (photovoltaic) manufacturing capacity of round 3 GW for PV Cells and around 7 GW for PV modules. However, the actual production is 1 GW and 3 GW, respectively. In India, solar power plants installed in the year 2016-17 had capacity of about 5.5 GW with the target for 2017-18 set at around 10 GW. This points to a growing room for expanded production as the installed manufacturing capacity of solar PV cells and modules is not capable of catering to the annual demand of the country.
IEA has pointed to a fundamental issue – Indian manufacturers’ costs are higher than China’s. It says that while the conversion cost for wafer to cell is US$0.06 per watt in China, it is as high as US$0.16-US$0.18 per watt in India. The cost from cell to module is 12 US cents per watt in China, compared to 13-14 US cents per watt in India. The result is that the Indian solar industry is largely dependent on Chinese imports. Most Indian manufacturers import Chinese cells and assemble them into modules. During 2016-17 industry estimates put India’s imports of solar modules and cells at US$3.2 billion, with the lion’s share – more than four-fifths – coming from China. Resultantly, an anti-dumping petition filed by solar component manufacturers against imports from China, Taiwan and Malaysia is currently being investigated by the Directorate General of Anti-Dumping.
A fine line has to be followed between supporting domestic manufacturers of solar energy components and ensuring that costs of solar tariffs remain as low as possible. The cost of Chinese modules has further dropped in the recent past and producers in India will have to be competitive.
The Parliamentary Standing Committee on Energy has said that it is a necessity for India to support its domestic solar manufacturing sector, as over-reliance on a single country puts the Indian solar sector at a risk of supply-chain disruption. The Committee recommended that the MNRE should formulate a dedicated programme to establish India as a Solar Manufacturing Hub so as to provide policy support to the complete value chain.
Towards this end, the Government is planning to enhance the solar capacity addition scheme by central public sector undertakings to 7.5 GW from 1 GW. This allows for installation of the entire solar capacity by domestically manufactured solar PV cells and modules. Moreover, if the Government becomes the owner of a solar project, beyond developing it, it is free to choose equipment from domestic manufacturers, without falling foul of WTO rules. MNRE has also said that it is working to encourage the development of a world-class, fully vertically integrated, state-of-the-art solar PV manufacturing facility in India. It seeks to address the challenges of technology obsolescence as well as that of fragmented and small-scale operation currently faced by the Domestic Solar PV Manufacturing Industry.
The vision is to build a world-class manufacturing industry that is not only globally competitive, but also an important component of the overall energy security for the country. Needless to say, these initiatives will complement the International Solar Alliance’s efforts to reduce the cost of financing and technology, so that more than US$1 trillion of investments can be mobilised by 2030. This will be incorporated in the deployment of solar energy and related future technologies. adapted to the needs of the countries lying fully or partially between the Tropics.