India to become the second-largest solar PV manufacturer

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India will have 110 gigawatts (GW) of solar photovoltaic (PV) module capacity in the next three years  — becoming the second-largest PV manufacturing country after China.

India’s cumulative module manufacturing nameplate capacity more than doubled from 18GW in March 2022 to 38GW in March 2023, according to a joint report from the Institute for Energy Economics and Financial Analysis (IEEFA) and JMK Research & Analytics.

Read the report: India’s Photovoltaic Manufacturing Capacity Set to Surge

“The favourable policy environment created by the Indian government is helping the PV manufacturing industry to grow rapidly, which is evident in the frequent announcements of expansions or new investments in the sector,” says the report’s co-author Vibhuti Garg, Director, South Asia, IEEFA.

The production-linked incentive (PLI) scheme is one of the catalysts spurring the growth of the PV manufacturing ecosystem in India.

“Besides the augmentation of infrastructure in all stages of PV manufacturing, from polysilicon to modules, it will lead to the development of a market for PV ancillary components, such as glass, ethylene vinyl acetate (EVA) and backsheets,” says the report’s co-author Jyoti Gulia, Founder, JMK Research.

The results of both tranches of the PLI scheme show that there will be an increase of 51.6GW of module capacity and at least 27.4GW of integrated “polysilicon-to-module” capacity in India in the next three to four years.

While the PLI scheme is a supply-side measure, the government has also taken steps to increase the demand for locally made solar PV modules. The introduction of domestic content requirement (DCR) for solar power in several government schemes, such as the Pradhan Mantri Kisan Urja Suraksha Evam Utthaan Mahabhiyan (PM-KUSUM) Scheme and the Central Public Sector Undertaking (CPSU) Scheme are assisting in creating demand for India-made solar PV modules.

The introduction of the Approved List of Module Manufacturers (ALMM) in 2019 was one of the key steps taken by the government to boost demand for domestic solar PV modules. Even after applying higher basic customs duty (BCD) on imported modules, the cost differential compared to domestic modules is negligible.

“ALMM acts as an absolute trade barrier protecting the interests of domestic manufacturers. Over the past year, ALMM has been the most important driver for the development of domestic PV manufacturing,” says the report’s co-author Prabhakar Sharma, Consultant, JMK Research.

The latest ALMM list, updated on 27 February 2023 by the Ministry of New and Renewable Energy, includes 70+ domestic manufacturers with an enlisted capacity of 22,389 megawatts (MW).

The report also identifies some hurdles holding back the domestic PV manufacturing industry from realising its full growth potential. Chief among them is over-reliance on Chinese imports for upstream components of PV modules, such as polysilicon, ingots/wafers and more.

“With the Chinese government mulling restrictions on the outflow of the critical technology used in the manufacture of these upstream components, it is imperative for countries targeting integrated PV manufacturing at scale to identify alternate sources of supply for these raw materials,” says the report’s co-author Nagoor Shaik, Senior Research Associate, JMK Research.

The report recommends that the government augments the PLI scheme to also include more upstream components, PV equipment machinery and ancillary components for a more holistic development of the PV manufacturing ecosystem.

Recent deferment of ALMM will provide relief to project developers. This decision may lead to a short-term setback for domestic manufacturers and could delay domestic manufacturers’ expansion plans, especially non-participants of PLI.