Until recently, one of India’s largest
renewable energy developers was focused on building massive solar farms using cheap panels imported from China. But now players in renewable energy sector are planning to make the panels and components by themselves. It is a part of an all-out campaign by India to break China’s lock on the solar supply chain. India which is the world’s third largest carbon emitter after China and the United States, plans to fight climate change with a massive increase in renewable energy.
Now, India wants to create its own domestic
solar industry to avoid becoming more dependent on a key regional rival. “If we continue to just import solar modules from China, then we’re trading one kind of energy dependence on oil from the outside to solar modules which are also coming from the outside”, says Sumant Sinha, ReNew’s Chairman and Chief Executive.
Participation of Global Investors
Inspite of COVID-19 economic crisis, the Indian solar sector has been resilient and continues to be an attractive industry for investors globally. The increased participation of foreign investors in the Indian solar sector resulted in the discovery of the record low tariff of rupees 2.36 per unit in June 2020, even as sectors across the economy are struggling.
According to the recent estimates by the Central Electricity Authority, India will install new solar projects to the tune of 200 GW by the year 2030. Even with reduced solar module prices of rupees 10 per watt and 50 per cent DC overloading, this would translate to a manufacturing opportunity of approximately rupees 3 lakh crores in terms of the current value. The government needs to act urgently to ensure that India taps into this massive opportunity to retain the value created by India’s energy transition for the people of country.
Government Initiatives
Developing a robust manufacturing and value chain ecosystem including poly-silicon, wafer and component production is crucial to ensure the growth of India in becoming self-reliant in solar energy. The Ministry is also focusing on maintaining the quality and reliability of solar products through initiatives like the ALMM. Together these will greatly enhance position of India as a global leader in solar sector.
The Indian government is taking many proactive measures to help the industry grow. MNRE is also been interacting closely with the industry throughout this period of pandemic and is working to bolster the growth of the domestic industry.
Setting up Manufacturing Parks
The government should focus on manufacturing wafer and polysilicon in the country. These are capital, energy and water intensive processes and hence would require fiscal and infrastructure support from the government. Industry experts believe that policy makers should prioritise setting up dedicated solar manufacturing parks as MSME clusters near key ports with a focus on bill of materials manufacturing.
The government along with Solar Panel manufacturers need to start thinking beyond India. An opportunity emerging from the current Covid-19 crisis is that many countries want to diversify their procurement process, and India is emerging as a strong alternative. Also, domestic manufacturers should also start focusing on international markets, especially the member countries of the International Solar Alliance as they will get benefitted from it.
Policy Certainty
Policy Certainty is considered as the most critical but often undervalued tool in this sector. There are many examples in the past when the Indian government propose and initiate reforms which have not achieved their full potential. Industry experts believe that the government set up an ambitious target for different parts of the value chain, say 60 GW of cell and module manufacturing by 2030. Any fiscal tariff or administrative reform must be undertaken and course corrected to achieve the set targets. Different ministries and financial institutions need to work in a coordinated manner and take timely decisions.
Until now, India has artificially limited its ambitions to scale up solar manufacturing. This current crisis has shifted the conversation on manufacturing from the margin to the mainstream and India should leverage this opportunity to become global leader and self-reliant in the sector.
Focus on Latest Technologies
The long term visibility of the import duty structure is needed to encourage both domestic and international investors to set up manufacturing facilities in India. A gradual imposition of basic customs duty up to 20 per cent on both solar cells and modules is recommended. The Indian government should also plough back the revenue collected via import duties into research and development and focus on the manufacturing of the next generation technologies.
The Way Forward
Many stakeholders believe that the lack of trained workforce is another bottleneck in the exponential growth of solar energy sector and other renewable energy sources. To solve this issue, many universities across the country are planning to undertake research and projects which have a component of renewable energy. Recently, the government has launched a scheme of Surya Mitras which is a project to encourage entrepreneurs in the solar energy sector. Given the potential in India’s growth over the next few years, the government is also planning to invest in training the workforce with the latest technologies in the renewable sector.
