The recently introduced Approved List of Models and Manufacturers was launched to promote local manufacturing of solar cells in India as the country continues to depend on significant imports of these vital building blocks in the solar space. While an intervention in the right direction to ensure future security of supply chains, there have been concerns regarding its impact on solar growth in India, at least in the short-term, considering the limited domestic solar cell manufacturing capacity. Against this backdrop, Akshat Nagpal, Associate Director, Business Development, Cleantech Solar shares his perspective on the impact of ALMM List-II on the solar power growth in the country.
Given India’s limited capacity for solar PV cell manufacturing, adapting to the ALMM List-II presents several challenges, the most significant of which is the need to develop enhanced manufacturing capacity for solar cells, which are currently predominantly sourced from China. China operates a vertical integration model, where a single manufacturing hub within a Special Economic Zone (SEZ) produces ingots, wafers, solar cells, solar panels, solar glass, junction boxes, and aluminium frames, thereby optimising supply chain costs, taxes, and timelines, while benefiting from economies of scale. In contrast to ALMM List-I, which focused primarily on solar modules – essentially the assembly of a few components – shifting solar cell manufacturing to India will require substantial engineering and R&D, as it is the most complex aspect of solar module production, making it a costly endeavour. This shift is likely to result in an increase in the price of solar cells and, consequently, solar modules, potentially raising costs by up to $0.10/Wp. Even a modest increase of $0.01/Wp would lead to a rise in the cost of delivered power under SECI or similar PPAs by Rs 0.07/kWh.
As of December 2023, India has a total solar PV cell manufacturing capacity of approximately 6 GW, and around 60 GW of solar module manufacturing capacity. Closing this gap and catching up with solar module production could take up to three years and require billions of dollars in investment, still resulting in solar tariffs exceeding Rs 3/kWh. With a current backlog of around 30 GW of power sale agreements awaiting signing for firm and dispatchable renewable energy, along with solar plus BESS bids where solar is the primary energy source, an increase of approximately Rs 0.45–0.50/kWh would undermine India’s goal of achieving 500 GW of operational non-fossil fuel energy.
While ALMM List-II may pose a challenge and lead to higher prices and longer timelines in the short term, in the long run, as solar cell manufacturing scales up in India, it will contribute to the country’s self-sufficiency in meeting its power needs. Additionally, it will reduce India’s foreign exchange outflows for renewable energy projects and stimulate employment generation, not only for blue-collar workers but also for higher-wage professionals.
Going forward, the total forecasted demand for solar modules in India is expected to require around 30 GW of solar cells annually, while India currently has a minimal 6 GW solar PV cell manufacturing capacity. To meet this demand, we need to increase manufacturing capacity by 30-40 GW. Further, a timeline of 2-3 years is needed to build and optimise production processes, ensuring efficient operations and the production of high-quality solar PV cells. The required investment would be 3-4 times that of solar modules in terms of the same GW capacity.
