To promote domestic manufacturing and reduce the dependence on solar imports from various countries, especially China, the Indian government has been proactive in taking a number of policy initiatives. These include the production-linked incentive (PLI) scheme, basic customs duty (BCD), the Approved List of Models and Manufacturers (ALMM) and the domestic content requirement (DCR) scheme. Earlier, the government had also promoted domestic manufacturing with manufacturing-linked tenders and safeguard duties. However, these policies are facing some legacy issues as well as new challenges. The country does not have a significant manufacturing base for polysilicon, ingots and wafers, and is dependent on imports for these. Further, the cost of production is higher, especially due to the lack of an integrated set-up, economies of scale, and the use of modern technology. In addition, challenges such as the high cost of land and electricity, low capacity utilisation of factories, the high cost of financing, and the lack of a skilled workforce deter domestic manufacturing. The slow progress of DCR schemes is another pain point. Senior executives of leading manufacturers share their perspective on key developments, challenges and the policy environment. Excerpts…
What are the most pressing issues confronting the renewable energy manufacturing industry in India?
Bharat Bhut
The biggest challenge in the power sector is policy instability. Often, policies take time to implement, or there is a misalignment between central and state policies. There are numerous regulations and rules across different distribution companies. There is confusion, especially regarding open access regulations in different states, and often the charges are also high.
Gautam Mohanka
The major challenge that the renewable energy sector is facing these days is reducing the dependency on imports and ramping up domestic production. For fast-paced adoption of greener and cleaner modes of energy, the renewable energy manufacturing industry in the country needs to build trust in the market through fast-paced innovation, strong partnerships with domestic and international players, and substantial investment in the domain.
Manufacturers should have a renewed focus on leveraging technology to reduce the cost of solar modules. Also, there should be an advanced outlook with respect to manufacturing PV cells in-house. Further, market surveys have revealed that private investment opportunities in India account for a staggering $700 billion in clean energy, which indicates that there is a need for significant investment in domestic solar manufacturing. To increase the penetration of electric vehicles on Indian roads, domestic manufacturers need to aggressively focus on building robust charging infrastructure and ensure adherence to dynamic battery safety standards, which can be considered as the key challenge in the domain at the time.
How are the global supply chains transforming, and how does it impact manufacturers in the renewable energy space?
Bharat Bhut
Like all stakeholders, we have also faced the impact of global supply chain disruptions. However, it has not impacted us severely, as we receive pre-orders before arranging supply. Overall, capacity utilisation of facilities remains an issue due to these supply chain disruptions.
Sujoy Ghosh
Post Covid-19, and in response to the policy environments in key markets, we are seeing a change in procurement behaviours as sophisticated buyers look for long-term pricing and supply certainty, and full traceability to avoid the risks of buying panels tainted by the use of forced labour in solar supply chains. A combination of these factors has led to growing efforts to establish or restore domestic supply chains. While the US has the Inflation Reduction Act, which seeks to incentivise investments across the solar value chain, Europe too is considering its options as it works to reduce dependencies.
Gaurav Mathur
Trina Solar experienced numerous supply issues. The company overcame this difficulty by reducing its risk by entering into long-term contracts with suppliers. The price of silicon is constantly rising. Additionally, we are witnessing a significant increase in demand from both China and Europe. Therefore, I believe that supply will slightly soften after the Chinese New Year, and that this will continue until 2023. Everything is dependent on the supply chain and the availability of raw materials in this volatile economy.
What has been the impact of the key policy measures to promote local manufacturing in the country? What more needs to be done?
Bharat Bhut
We appreciate the policy steps taken by the Indian government in this space. Due to this policy impetus, we are encouraged to expand our portfolio. Currently, Goldi Solar has a module manufacturing capacity of 2.5 GW. We have two factories, both of which are located near Surat. We want to expand our module manufacturing capacity to 6 GW by 2025. We also plan to set up a cell manufacturing facility. The first phase of this will begin the next financial year. By 2025, we will scale up our cell manufacturing capacity to 5 GW. The majority of the capacity will be used in the domestic market. We will continue to export a portion of our capacity. The US is a key market for export, considering the size of its solar market and the lack of barriers.
Policy impetus has been there from both the central and state governments. The DCR for different solar segments has helped manufacturers increase the utilisation of their facilities. Subsidies for these segments, such as solar pumps and rooftop solar systems, are available throughout the year, which helps manufacturers keep their facilities running.
Another positive is that the government has increased the corpus in the PLI scheme, thus allowing more companies to participate in the tender.
Sujoy Ghosh
India has successfully embarked on a series of strategic policy decisions to create a fully integrated domestic supply chain for solar modules to support its goal of having 500 GW of renewable energy deployed by 2030.
These include a concessional income tax rate for new manufacturing, the imposition of basic customs duty to create a level-playing field against dumping, and production-linked incentives for PV solar manufacturing.
These measures have collectively garnered enough investment interest to establish at least 55 GW of new manufacturing capacities at various stages of the solar supply chain, in direct response to the solar PLI scheme introduced in 2021. From our point of view, it is important for the Indian government to give these policies, and the investments made in response to them, an opportunity to mature by ensuring a stable policy backstop and allowing a minimum five-year runway before making any material changes.
Gaurav Mathur
Trina Solar always abides by the law and has already submitted an ALMM application. The company is awaiting the government’s final approval on the entry in the ALMM. The most recent PLI scheme is a wise step by the government, and it embraces modern technology. It could take three to four years for India to become self-sufficient in obtaining all modules locally. Trina Solar is keen to set up a plant in India. If it makes financial and commercial sense, we will be the first to invest in India.
Trina Solar is expected to produce 60 GW of modules and 50 GW of cells globally by the end of 2022. The company has provided over 100 GW of supplies globally and has provided over 8 GW to India. We have shipped nearly 18.5 GW of capacity in total in the first half of 2022.
India is an important market for us. We have already shipped 8 GW of capacity, demonstrating the company’s dedication to the market. Additionally, we continue to showcase our new products in India to support the solar industry.
We have faith in cutting-edge technologies. In China, Trina Solar has a large research and development facility. We recently exhibited our N-type product at the REI Expo in Greater Noida. As soon as it receives all necessary certifications and meets BIS standards, the company intends to launch this product in India. N-Type technology will have a larger market share by 2024 and monocrystalline and polycrystalline technologies are expected to become obsolete.
Gautam Mohanka
The government has been endeavouring to make Indian renewable energy manufacturers self-reliant, and has introduced several policy changes to boost domestic manufacturing. Recently, the government announced the imposition of BCD on the import of solar modules and cells. This has brought domestic players at par with international players, and is a massive encouragement for them to leverage cutting-edge technologies to escalate manufacturing. However, there is still a slight dependency on imports, as domestic players are attempting to eliminate the demand and supply gap.
In addition, the government’s allocation of an additional Rs 195 billion under the PLI scheme is a major boost, enabling a stead-fast transition towards renewable energy in the country. The initiative is projected to save around Rs 1.37 trillion in imports, thereby further encouraging domestic production and making India self-reliant. While India has been mostly dependent on imports for PV modules, the government allocated a substantial amount to domestic manufacturing for the growth of the solar energy segment in the country. This will also have a positive impact on the overall sustainable economic growth of the country.
