Solar Opportunity

Optimistic outlook for the domestic manufacturing market

India has set an ambitious target of establishing 500 GW of renewable energy capacity by 2030. This amounts to roughly four to five times the present cumulative capacity of renewables in the country. The solar sector is expected to be the largest contributor to this goal, with a target of installing roughly 300 GW of solar capacity by 2030. Despite various policy and regulatory incentives, India continues to be heavily dependent on imports from China for solar cells and mo­dules. In 2021, module imports acco­un­ted for over 65 per cent of the total modu­le demand, as per the Indian Solar Ma­nu­facturers Association.

At present, the installed solar capacity in India is 50 GW. To meet the 2030 target, an average of 30 GW of solar capacity needs to be installed each year until 2030. This provides a great opportunity for the domestic manufacturing market in India to flourish.

Status of domestic manufacturing

As per the Ministry of New and Renewable Energy (MNRE), as of April 2022, India has 4 GW of solar cell production capacity and 10 GW of solar module production capacity. Despite recent policy and regulatory mechanisms, domestic manufacturing capacities have not been able to keep pa­ce with the rising demand for solar po­wer in the country. Till date, India is heavily re­liant on imports, especially from China, for a variety of solar components. In financial year 2021-22, over 78.6 per cent of India’s total solar cells and module imports came from China. In monetary terms, this amounts to roughly $76.62 billion. High de­pendence on imports has also led to poor capacity utilisation of module manufacturing in India. A major reason for this is the price advantage that China possesses, as it offers cheaper imports, rendering Indian components uncompetitive in the market. Manufacturing capacity can only be optimised by increasing the demand for do­m­es­tically manufactured cells and modules. At present, only one-third of the solar modules produced in India utilise India-manufactured cells. India also does not have any capacity to manufacture polysilicon, wafers and ingots, limiting backward integration within the solar value chain.

Yet, some developments have taken place recently, which may be encouraging for the domestic manufacturing sector in India. Renewable energy players, such as Vikram Solar, Tata Solar, Adani Solar and Premier Energies, have expressed their in­tentions to expand their facilities. Clean energy developers such as ReNew Power, Reliance Industries and Azure Power are also planning projects to boost domestic ma­nufacturing. Further, the Indian R­e­ne­wable Energy Development Agency recently released a shortlist of bidders for 10 GW of manufacturing capacity under the government’s production-linked in­centive (PLI) scheme. The supply-side disruptions during the Covid pandemic have also given a fresh impetus to the “Make in India” initiative, as the pandemic has highlighted the importance of self-re­liance in key sectors such as energy. Thus, with the right policy and market environment, the domestic solar manufacturing market in India is expected to expand and become competitive with global markets.

Government initiatives

The Indian government has been vigorously introducing steps to create a positive and enabling environment for solar cell and module manufacturing in the co­untry. Schemes with domestic content requirements include the 12,000 MW Ce­ntral Public Sector Undertaking sche­me, the Pradhan Mantri Kisan Urja Sura­k­sha evam Utthaan Mahabhiyan and the Rooftop Solar. Solar projects under these schemes are mandated to source their solar cells and modules fr­om domestic manufacturers, while com­p­lying with World Trade Organisation rules. Basic customs duties of 40 per cent on solar modules and 25 per cent on solar cells were recently levied. The aim is to provide greater competitiveness and a level playing field to domestic solar manufacturers.

The government is also undertaking a project to build 50 solar parks with a total capacity of 40,000 MW across the country. These parks are designed to provide de­veloped infrastructure to facilitate the installation of solar power projects. Further, the MNRE is implementing the Rooftop Solar Programme Phase II to promote solar energy in the residential sector. The programme is aiming for 4,000 MW of rooftop solar capacity expansion in the residential sector with central financial assis­tan­ce (CFA). For rooftop solar projects up to 3 kW capacity, CFA is provided for up to 40 per cent of the benchmark cost, while 20 per cent CFA is provided for system capacities above 3 kW and up to 10 kW, for individual households. For group housing societies/resident welfare associations, CFA is limited at 20 per cent for rooftop solar plants supplying power to common facilities with a maximum capacity of 500 kW. The MNRE is also initiating tenders for setting up solar PV manufacturing capacities in India, linked with ass­ured offtake in the form of power purchase agreements for solar power plants.

The government has taken several other steps to promote solar energy. For ins­tan­ce, 100 per cent foreign direct investment has been permitted in the sec­t­or through the automatic route. Regi­s­tra­tion of solar module manufacturers un­der the Approv­ed List of Models and Ma­nu­facturers (ALMM) and the PLI scheme is also a significant step to this end. Moreover, the government has wai­ved interstate transmission system char­ges for interstate solar and wind power sales for projects completed by June 30, 2025. Other initiatives include the declaration of a renewable purchase obligation trajectory until 2022 and the setting up of ultra-me­ga renewable energy parks to provide land and transmission to renewable energy developers on a plug- and -play basis. New transmission lines are also to be laid and new substation capa­city to be created under the Green En­ergy Corridors scheme for the ev­a­cuation of renewable power.

A list of solar panel and inverter manufacturers whose products meet quality standards, and price lists from which householders can select solar panels and in­ver-ters will be published periodically to en­sure that domestic manufacturing meets the required standards. Standards for deployment of solar PV systems and devices have been notified. Standard bidding guidelines for tariff-based competitive bidding for procurement of power from grid-connected solar PV and wind projects have also been laid down. More­over, the government is setting up a project development cell for attracting and facilitating investments. Further, as per the government’s orders, power will be dispatched against letters of credit or adv­an­ce payments to ensure timely payment by destribution licensees to renewable energy generators.

Finally, a greater emphasis is being laid on conducting skill development progra­m­mes to create a pool of skilled manpower for setting up manufacturing hubs as well as to perform the operation and ma­in­tenance of renewable energy projects. The solar manufacturing industry has welcomed these initiatives of the government, which are creating an encouraging domestic manufacturing environment in India.


Even though India has taken several strides in its solar energy journey, there are some key barriers that need attention. The contribution of solar energy in India’s overall power generation has not shown significant growth. In 2019-20, solar po­wer contributed only 3.6 per cent of In­dia’s total power generation of 1,390 BUs. Moreover, out of the total installed capacity of solar power in India, which roughly amounts to 50 GW, over 42 GW comes from ground-mounted solar PV systems alone. This is followed by the rooftop solar segment at 6.68 GW and off-grid solar PV installations at 1.48 GW. The rooftop solar segment is lagging behind and is likely to miss its target of reaching 40 GW this year.

The factors responsible for the slow growth in the rooftop sector include fin­ancing issues and delays, lack of awareness among potential users, un­signed power supply agreements and lack of support from discoms for net metering. In particular, financing options for residential consumers are limited and there are many challenges in rooftop solar up­take. Import duties and certain issues with the ALMM have also limited rooftop solar installations.

The utility-scale solar PV sector is not short of challenges either. These include high transmission and distribution losses, high cost of land and inefficiencies in operation and management. Intermittency of power, instability of the grid, stringent environmental clearances and conflicts with local communities also continue to be pertinent barriers.

India has also not been able to reap the benefits of decentralised renewable energy (DRE) applications on a large scale. DRE projects provide the benefit of reduced transmission losses by allowing the installation of PV technology close to the point of consumption. These projects are also less capital intensive. Tapping this opportunity would be crucial in meeting India’s target for solar energy over the next few years. To this end, the government has recently released a framework to promote DRE livelihoods.

The way forward

India’s solar sector has shown great resilience and growth, despite its challenges. However, to establish a robust domestic solar manufacturing market in India, it is crucial to analyse the shortcomings and take effective action in the form of technological innovations, skill development, finance and a policy framework. As per IRENA, the global value of recoverable materials from solar PV waste could exceed $15 billion. India could also adopt a circular economic model, such that it incorporates solar PV recycling in the supply chain. This is likely to optimise the ma­nufacturing process in the long run. Ov­erall, India seems to be progressing well in terms of meeting its solar energy targets, given the recent developments in the industry and the rising policy support being provided by the government.

By Kasvi Singh



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