PHOTOVOLTAIC MANUFACTURING OUTLOOK IN INDIA PART 1

India has made substantial progress in domestic solar module manufacturing capacity in recent years. However, stronger impetus is needed in this regard to achieve 300 gigawatts (GW) of solar power generation capacity by 2030.

As of November 2021, India had a cell manufacturing capacity of 4.3GW and a module manufacturing capacity of ~18GW₁. These are, however, just nameplate capacities. Actual production output at any given time is significantly lower as most of Indian solar manufacturing facilities operate at a Capacity Utilisation Factor (CUF) of less than 50%. Moreover, multi-Si module technology, which accounts for the majority (60-70%) of existing domestic module production capacity, is on the verge of becoming obsolete. Local demand for these modules continues to dwindle and is expected to last for another 1-2 years. On the brighter side, new major manufacturers planning to expand or enter the market are seeking to install machinery that can handle cell sizes of up to M12 (210mm x 210mm), in both mono facial and bi-facial configuration.

India needs a sustainable, vertically integrated domestic solar manufacturing ecosystem

There is no existing manufacturing capacity in India for the initial stages of the photovoltaic (PV) value chain, namely from polysilicon to wafer. For these raw materials, Indian solar manufacturers are still dependent on imports, mainly from China. Prolonged dependence on the imports raises the severity of the associated risks. Shortage of raw materials, a power price hike in China and a surge in international freight charges have inflated module prices in 2021 by more than 25% ₂. This highlights the need for a sustainable, vertically integrated domestic solar manufacturing ecosystem.

Without large-scale domestic manufacturing of upstream PV value chain products, the overarching risks of logistics and commodity price fluctuations for imports will persist. The Indian PV industry also faces mid- to long-term challenges of high manufacturing expenses, inadequate Research and Development (R&D) and a shortage of skilled manpower.

Dozens Of Companies Are Vying To Make A Mark In The Indian Solar Sector

To encourage vertically integrated facilities, the Indian Government introduced the Production-Linked Incentive (PLI) scheme for 10GW capacity of integrated manufacturing of “High Efficiency Solar PV Modules” with a financial outlay of Rs 4,500 crore (US$616 million). The PLI tender received a tremendous response (54.8GW of bids, a fourfold over-subscription) from the industry, pushing the government to increase the PLI amount by an additional Rs 19,500 crore (US$2.5 billion) for solar module manufacturing.

The Indian government’s ambitious targets and support for the solar sector have made indigenous PV manufacturing’s prospects even more vibrant. As a result, dozens of companies are vying to make a mark in the Indian solar sector. In coming years, given the high growth potential of the domestic solar market and rising favourability of India as an alternative manufacturing hub (for geopolitical reasons), diverse stakeholders such as solar project developers, government-run organisations, PV ancillary players, etc., will strive to build their stake in the solar manufacturing market.

In addition to the PV manufacturing landscape, this article delves into key aspects such as major government initiatives, ongoing challenges and an overview of the way forward for India.

Global PV Manufacturing Landscape: A Snapshot

Of the total global solar module manufacturing capacity of 358GW, China accounts for about 61%.₃ The dominance of China is visible throughout the entire supply chain of solar manufacturing. It holds the leading market share in manufacturing capacities of materials such as solar cells, wafers, polysilicon etc., which are critical to manufacturing of solar modules. In terms of worldwide production capacity (GW), China accounted for 75.2% of polysilicon, 97.9% of wafers, and 73% of solar cells in 2020.₄

India’s manufacturing capacity share of 5% may make it one of the top five module manufacturers in the world but most of this capacity (about 10GW₅) is either outdated in terms of cell sizes that can be handled (less than 158mm x 158mm) or not used efficiently. Also, the production output of Indian manufacturers is significantly lower than their nameplate capacities. Lower capacity utilisation in Indian production facilities adversely affects the pricing of their modules, presenting a challenge for domestic players to compete with global competitors in quality and pricing terms alike.

Note the positions of Malaysia and Vietnam in the global industry (refer figure 1), these countries have become offshore manufacturing hubs for various Chinese players and are showing continuous growth in the relevant sector over the recent years.

From early 2010s, Chinese suppliers began flooding the market with cheap solar panels and in the process weakened local solar manufacturing industry in most of the relevant countries including India. In response, several countries then introduced policies to limit Chinese dominance and provided protection measures for the local manufacturers. Some of these measures/barriers against the cheap solar imports are Anti-Dumping Duty (ADD) in the U.S. and Safeguard Duty (SGD) in India. As a result, several of the leading Chinese suppliers set up new manufacturing capacities in countries such as Malaysia and Vietnam to mitigate the international trade risks and also facilitated creation of these new solar PV export hubs in Southeast Asia. Leading Chinese suppliers such as Trina, Jinko etc have PV fabrication facilities (fabs) in China and Malaysia/Vietnam.

Favourable business environments, in terms of local government support and availability of skilled workforce, are among the key factors that led to the selection of Malaysia and Vietnam as preferred PV manufacturing destinations outside of China. Another factor is the countries’ strategic location in the middle of Asia, enabling manufacturers to have their supply networks closer to the source of demand. Following suit, non-Chinese players such as First Solar, Hanwha Q cells etc have also set up manufacturing facilities in Southeast Asia.

Of the 10 leading solar module suppliers, nine are Chinese. Most of the leading Chinese manufacturers maintain a Capacity Utilisation Factor (CUF) of more than 50%.6 Huge production scale coupled with their high CUF allow them to produce high-quality modules and simultaneously maintain competitive pricing. Anticipating an increase in demand globally in the post-pandemic era, many Chinese manufacturers plan to expand capacity at each level of their solar PV value chain, from polysilicon to modules.

In CY2020, JA solar announced module capacity expansion of 33GW, while Trina, Jinko and Longi have announced phased expansions of 29GW, 19GW and 15GW respectively₈ up to CY2024. By the end of CY2021, JA Solar managed to reach 11GW of its 33GW target, while Trina and Jinko achieved 13GW and 14GW of their expansion targets. However, some analysts say achieving these targets in a timely manner would be difficult in a post-pandemic economy, owing to short-term constraints such as supply chain disruption and shortage of raw materials such as polysilicon.

The Chinese solar PV industry is also driving technology advancement. First, in early 2010s, Chinese players acted as the dominant force to bring back crystalline silicon (c-Si), specifically polycrystalline silicon (poly-Si) technology in the global market as it was losing ground to other technologies. In just a few years since the resurgence of c-Si, global PV technology demand began to shift from poly-Si to monocrystalline silicon (mono-Si) modules, chiefly driven again by the Chinese industry. Under mono-Si type, passivated emitter and rear contact (PERC) technology has become the workhorse globally. Coming technologies such as Hetero-Junction (HJT) and Tunnel Oxide Passivated Contacts (TOPCon) are already on the horizon. The unrelenting strides in technological innovation and massive scale of PV adoption across the globe have been largely promoted by Chinese players capitalising on extensive R&D, economies of scale and large government incentives.

Import-Export Trends

Undoubtedly, China has become one of the main drivers for solar PV development globally. The industry relies heavily on exports. In CY2020, from total PV production of 124.6GW in China, exports constituted 78.8GW.₉ The leading Chinese solar export markets are depicted below.

Europe is the biggest export market for Chinese modules, with Netherlands, Spain and Germany among top 10. India, with a share of 6%, is in the top five.

Considering solar PV international trade data vis-à-vis India (April to November 2021), Chinese suppliers account for 90% of India’s solar imports.₁₁ The share of Chinese suppliers in net import of solar cells and finished panels is 91.1% and 89.9% respectively. The remainder comes from countries including Hong Kong, Malaysia and Singapore.

The bulk of India’s PV exports (76%) is shipped to the U.S. This market accounts for 71% and 77% of solar cell and finished panel exports respectively. Other countries in India’s export manifest are South Africa, Afghanistan, UAE, Turkey, Canada etc.

Observing the solar import statistics for India in the past six fiscal years, imports were the least in FY2021 owing to covid-induced disruptions, though imports (refer figure 7 later) were declining since FY2019. Safeguard Duty (SGD), applicable on imported solar modules from countries such as China, Malaysia and Taiwan from July 2018, is the key factor behind the downward curve between FY2019 and FY2021.

                                                                                …To be continued

Jyoti Gulia is the Founder of JMK Research. Jyoti has about 15 years of rich experience in the Indian renewable sector. Her core expertise includes policy and regulatory advocacy, assessing market trends, and advising companies on their business strategy.

Prabhakar Sharma is a Senior Research Associate at JMK Research with expertise in tracking renewable energy and battery storage sector. He has previously worked with Amplus Solar.

Akhil Thayillam is a Research Associate at JMK Research. Akhil is a renewable sector enthusiast with experience in tracking new sector trends as well as policy and regulatory
developments.

Energy Economist Vibhuti Garg has advised private and public sector clients on commercial and market entry strategies, investment diligence on power projects and the impact of power sector performance on state finances. She also works on international energy governance, energy transition, energy access, reallocation of fossil fuel subsidy expenditure to clean energy, energy pricing and tariff reforms.