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Photovoltaic manufacturing outlook in India

February 24, 2022
Vibhuti Garg and Jyoti Gulia and Prabhakar Sharma and Akhil Thayillam
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Key Findings

India’s solar module manufacturing capacity of about 18GW is roughly equal to the annual capacity addition of the top individual Chinese PV brands, a comparison that shows the vast scope for Indian companies to match their economies of scale.

For raw materials, India’s manufacturers rely on imports and face associated risks of shortages and price hikes, highlighting the need for a sustainable, vertically integrated domestic solar manufacturing ecosystem.

The government’s Production-Linked Incentive (PLI) scheme for integrated PV manufacturing with initial outlay of Rs4,500 crore (US$616 million), plus the additional allocation of Rs19,500 crore (US$2.5 billion) in Budget 2022, has the potential to produce at least 40GW of solar modules.

Executive Summary

India has made substantial progress in domestic solar module manufacturing capacity in recent years. However, stronger impetus is needed 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 ~18GW. These are, however, just nameplate capacities. Actual production output at any given time is significantly lower as most 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 one to two 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.

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 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%. 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.

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 Rs4,500crore (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 Rs19,500 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 the 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 report delves into key aspects such as major government initiatives, ongoing challenges and an overview of the way forward for India.

Vibhuti Garg

Vibhuti Garg is Director, South Asia, at IEEFA. Vibhuti’s focus is on promoting sustainable development through influencing policy intervention on energy pricing, adoption of new technologies, subsidy reforms, enhancing clean energy access, access to capital and private participation in various areas of the energy sector.

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Jyoti Gulia

Jyoti Gulia is the Founder of JMK Research.

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Prabhakar Sharma

Prabhakar Sharma is a Senior Research Associate at JMK Research with expertise in tracking the renewable energy and battery storage sectors.

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Akhil Thayillam

Akhil Thayillam is a Senior 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.

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