India can compete against China in solar module production with right govt policies: IEEFA

• Capacity utilisation rates of solar module domestic production facilities in India running at only 40-45%

• China is out-performing India in a number of areas, in both manufacturing and research and development

New Delhi: Although one of the top 10 solar module producers in the world, India is lagging behind its biggest competitor China, finds a new report by the Institute for Energy Economics and Financial Analysis (IEEFA) and JMK Research. The report, Viability Assessment of New Domestic Solar Module Manufacturing Units, co-written by IEEFA's Vibhuti Garg and JMK's Jyoti Gulia, finds current production capacity in India is only able to meet 35 percent of total annual domestic demand.

"We found capacity utilisation rates of solar module domestic production facilities in India running at only 40-45 percent and estimated operational capacity of only about 7 gigawatts, despite having an installed domestic PV module manufacturing capacity of about 15 gigawatts," said Garg. "Clearly India has the capacity to do much better."

China outperforming India in both manufacturing & research

China is out-performing India in a number of areas, in both manufacturing and research and development. "China utilises between 1-3 percent of gross revenue for solar module R&D every year," said Gulia. "In contrast, India's leading players provide little R&D investment." The report said that in terms of profit margins, Chinese module suppliers are able to absorb larger shares of profit (on average 4.3 percent) from operational revenues compared to Indian suppliers who earn an average profit income of less than 3 percent. 

"This is because Chinese module manufacturers have larger-scale production facilities and a low dependence on imports," said Garg. "China also has completely integrated facilities producing modules, cells and wafers complemented by robust R&D and favourable government support," she added.

In terms of technology adoption trends, China's more advanced mono-Si PV modules were reaching two-thirds of the share of the entire global PV production chain in 2019 by gigawatt volume.

How does India fare in the sector?

"When we compared that to the top 7 Indian domestic module manufacturers in 2019, mono-Si PV modules constituted only 13 percent of PV production, while 87 percent comprised of multi-crystalline (or multi-Si) PV modules," said Gulia. "Keeping abreast of technological innovations in the current energy transition towards renewables must be the highest priority," she added.

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The report noted that many Indian solar module manufacturers have announced plans to expand existing facilities. "There are also a lot of players keen on setting up completely new integrated facilities," said Garg.

"While the ambition is commendable, these players will face stiff competition from leading global players. Chinese firms' aggressive capacity expansion coupled with consistent and ongoing technological advancements are yielding PV cells and modules of superior efficiency while still being cost-effective," Garg added.

Govt policies will play a defining role in boosting manufacturing of solar gear

Gulia remarked the government has a role to play in defining the passage of solar manufacturing going forward. "Central government needs to provide a balanced manufacturing framework nestled in a long term strategy to assist domestic players to compete in the global field," said Gulia.

"While only a short term solution to boost the local market, the imposition of safeguard and basic custom duties designed to increase the price of imported modules will assist domestic manufacturers," she noted. "Any planned initiatives should not be limited to this, however. The focus should also be on helping manufacturers become globally competitive," said Gulia.

'A self-reliant solar sector would cater to domestic demand, open avenues of export'

Garg notes that energy security is a key concern for India and investing locally in the solar module sector is one of the pathways towards achieving that. "A self-reliant solar sector would not only cater to domestic demand but would also open new avenues of exports, especially after the COVID-19 supply chain shock that has forced numerous countries to look elsewhere for alternatives to China's goods," said Garg.

"India could meet those global solar PV needs, with the right government support behind the sector," the report said.

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