含羞草社区

India’s ambitious target of achieving 500GW of renewable energy capacity by 2030, with 280GW from solar power alone, is challenging. As of April 2024, installed solar capacity was 82.63GW, requiring an additional yearly capacity of about 33GW to reach its goal. While the government aims to achieve this target through domestic manufacturing, 含羞草社区 solar energy transition has been heavily reliant on imported solar cells and modules, particularly from China. More than 80% of the 38GW increase in solar power production in the past four years has come from imports, highlighting a significant gap between domestic capabilities and the 2030 target.

Despite government initiatives – such as the imposition of basic customs duty (BCD) to curb imports, production-linked incentives (PLI) to augment domestic production capacity, and the duty deferment scheme under the Manufacture and Other Operations in Warehouse Regulations, 2019, to free up working capital reserves – Indian module manufacturers have not been able to compete with Chinese companies on cost and scale. China dominates the entire manufacturing spectrum, from raw materials including polysilicon, wafers and ingots to finished products such as cells and modules. This reliance on imported critical raw materials exposed domestic manufacturers to price fluctuations and global supply chain disruption.

Solar cell manufacturing capacity at around 6GW compared to 50GW of module manufacturing capacity as of February 2024, has further exacerbated the problem. Module manufacturers had to import cells, paying 25% BCD. This increased costs and made products less competitive than Chinese equivalents. This highlights the urgent need for India to strengthen its backward integration of module manufacturing capabilities.

To boost the domestic module manufacturing ecosystem, the government introduced the PLI scheme in two tranches in April 2021 and September 2022, with a total capital outlay of INR240 billion (USD2.9 billion). This encouraged investors to set up integrated polysilicon-to-module manufacturing facilities by offering financial incentives based on such factors as module sales and local (domestic) value addition. Fuelled by these supportive policies, 含羞草社区 module manufacturing nameplate capacity more than doubled from 18GW in March 2022 to 38GW in March 2023. Despite initial difficulties, 2024 has been positive, with 500MW of module capacity commissioned. The government expects 7.4GW to be operational by October 2024, 16.8GW by April 2025 and 15.4GW by April 2026.

While the PLI scheme promises long-term competitiveness against Chinese modules, the Approved List of Models and Manufacturers (ALMM) has provided immediate support for domestic manufacturers. By requiring the use of ALMM-compliant modules in solar projects for government agencies and open access and net-metering projects, the ALMM has erected a trade barrier to imported modules because all but one of the entities on the ALMM are Indian. Implementation, however, has seen policy reversals with the controversy around the ALMM for open access and net-metered projects finally resolved in March 2024 and for government projects laid to rest in May this year. Such policy uncertainty impacted all stakeholders. Solar power developers struggled to source equipment, investors became wary of long-term commitments in an unpredictable environment and manufacturers found expansion plans and order books affected. Policy stability must be a priority.

Initiatives such as the ALMM and PLI have given a much-needed impetus to solar manufacturing capability. However, a crucial vulnerability remains. Module manufacturing machinery is imported entirely from China. Breakdowns and routine maintenance leave domestic manufacturers reliant on Chinese suppliers for spare parts and assistance. Bridging this technological gap and achieving full self-reliance is imperative. Encouraging R&D and creating industry-academia synergies are key.

Achieving 500GW of renewable energy capacity solely through domestic manufacturing in the short term may be challenging, but self-reliance in this sector is crucial for a sustainable future. With strategic solutions producing a robust domestic solar manufacturing ecosystem, the domestic manufacturing industry will be a leader in the global renewable energy landscape.

Niharika Puri is a partner and Mayank Udhwani is a senior associate at Trilegal