India’s solar module manufacturing ambitions

Last week, the Finance Ministry called for a meeting to discuss the financing issues plaguing domestic solar module manufacturers.

A couple of days ago, the Union Ministry of Commerce decided to initiate an anti-dumping duty investigation into imports of aluminium frames for solar panels from China.

So, we thought it a good time to talk about India’s solar module manufacturing ambitions and the many hiccups involved. That’s today's Finshots for you.

Solar manufacturing is quite fascinating.

It starts with polysilicon. This is the root material that forms the base of all solar modules. It is melted and cast into metal blocks called ingots. When you thinly slice an ingot, you get wafers. The wafer is then cleaned to form a solar cell. And finally, multiple cells are put together to form solar modules. This finally goes into the panels that convert sunlight into energy and help light up our homes.

And no prizes for guessing who dominates this entire supply chain — it’s China. It has an 80% market share across stages.

But India has big dreams too. We want to go toe to toe with China and capture at least one part of this supply chain. We want to become a mega solar module maker. And the thing is, we seem to be making good progress. We doubled the manufacturing capacity in FY23. And our solar cell and module exports also rose a whopping 364% compared to the previous fiscal year.

If things go right, we could become the second-largest solar module maker in the world by 2026. Sure, we’ll still be a long way behind China, but we’ll overtake Japan and that’s something.

So, how are we achieving this, you ask?

Well, a part of the success can be attributed to China dropping an axe on its own foot.

Last year, research by Breakthrough Institute revealed something shocking. It suggested that China was employing slave labour in its renewable energy supply chains. Factories in Xinjiang were forcing minority communities of the Uyghurs and Kazakhs to make polysilicon.

And since this region is the source of nearly half of the world’s solar-grade polysilicon, countries jumped into action. Everyone wants renewable energy but not at the cost of human rights. For instance, the US began slapping import duties on Chinese solar modules and imposed bans too. Companies want as little to do as possible with China and maybe that’s why we also had news last week that US-based First Solar will invest millions of dollars into producing and exporting solar panels from India.

This Chinese problem is giving India a chance to step up the solar game.

Now this was an unexpected gain. But we’ve got expected gains coming from the government’s consistent efforts to back domestic manufacturers too.

To begin with, in 2021 we launched the Production Linked Incentive (PLI) scheme. These were monetary incentives given to companies who showed incremental sales each year. And it encouraged companies to cover the entire production cycle — starting from making polysilicon cells, wafers, modules and panels. And as per Credit Suisse, we set aside ₹24,000 crores to get this moving.

But then, the government did something else too. You see, Chinese manufacturers supplied 85% of India’s panel demand. India needed to find a way to cut back on these imports. So the government launched something called the Approved List of Models and Manufacturers or ALMM*. Simply put, this is an official list where a manufacturer had to be registered if they wanted to participate in government projects to expand solar power across the country.

It was a way to discourage imports and offer a stamp of quality on Indian solar-related manufacturing. Something that everyone could trust.

And the government even imposed a 40% import tax on solar panels to prevent dumping from China and other parts of Asia.

So yeah, there’s a lot happening.

But as with most things, we do have to talk about the hurdles too.

For starters, if India truly wants to become a solar module manufacturing mammoth, we probably need to control every aspect of the supply chain. And that’s hard.

Take the base material polysilicon. If we want to produce it in India, it’s going to cost twice as much. Which means we’re inevitably going to have to rely on importing it. When it comes to manufacturing cells, we still don’t have enough capacity because everyone has directly jumped on the final module manufacturing bandwagon. Again, we have to import what we need. Now with the tariffs and duties in place on such imports, it becomes expensive. And we lose out on pricing power.

There’s also the money issue that we introduced at the start of the story. Apparently, manufacturers need over ₹50,000 crores in the next 3-4 years to set up all their production capacity. But banks and other institutions have been slow to lend, especially to smaller players.

So yeah, while we definitely seem to be making big strides in solar manufacturing, it’s still going to be an uphill battle. And we’ll keep our fingers crossed.

Until then…

* The government has hit pause on ALMM till March 2024 for now.

Don't forget to share this article on WhatsApp, LinkedIn and Twitter.

Nearly 83% of Indian millennials don't have term life insurance!!!

The reason?

Well, some think it's too expensive. Others haven't even heard of it. And the rest fear spam calls and the misselling of insurance products.

But a term policy is crucial for nearly every Indian household. When you buy a term insurance product, you pay a small fee every year to protect your downside.

And in the event of your passing, the insurance company pays out a large sum of money to your family or your loved ones. In fact, if you're young, you can get a policy with 1 Cr+ cover at a nominal premium of just 10k a year.

But who can you trust with buying a term plan?

Well, Shamsher - the gentleman who left the above review- spoke to Ditto.

Ditto offered him:

You too can talk to Ditto's advisors now, by clicking the link here

Be a part of our ever growing community. Join us on Twitter