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Indian reliance on polycrystalline tech production leaves it trailing China

Polycrystalline PV technology, which is seeing its market share tumble on the global stage, still dominates India’s small solar manufacturing base and is emblematic of the R&D shortfalls in the sector, according to a survey of the state of the industry.

As PV superpower China shifts ever more output towards higher-efficiency monocrystalline silicon solar products, around 87% of India’s fabs were still geared towards polycrystalline products in 2019, according to a report on the challenges facing Indian manufacturers.

The Viability Assessment of New Domestic Solar Module Manufacturing Units report, published by Haryana-based sustainable industry consultant JMK Research and U.S. research body the Institute for Energy Economics and Financial Analysis (IEEFA), has fleshed out how much Indian solar manufacturers trail their Chinese counterparts.

The authors of the study urged the Indian government to widen its domestic manufacturing policy beyond solar cells and modules and to establish supply chain manufacturing of silicon ingots, wafers and cells. With state authorities told to do more to allocate land and speed up factory permitting, the study also emphasized the need for the federal government to drive the same level of solar R&D efforts as have been seen in China.

Political intent

“Clear political intent along with a long-term vision is what is now needed for this sector to take off,” concluded the study, which exposed the latest problems to dog a problematic, painfully drawn-out manufacturing-linked solar tender as it surveyed the reasons India has fallen so far behind the country which supplies 80% of the imported cells and modules it has paid around INR176 billion ($2.4 billion) per year for since 2015.

The manufacturing tender launched by state body the Solar Energy Corporation of India (SECI) in May 2018 is emblematic of the problems the government has faced in attempting to establish a domestic industry to compete with China. Originally envisioned as offering solar developers 10 GW of solar project generation capacity if they agreed to establish ingot, wafer, cell and module production lines with 5 GW of annual manufacturing capacity, the tender suffered numerous deadline extensions and downward revisions of scale which demanded ever smaller fabs in return for the project capacity.

Too costly

Ultimately, Adani Solar agreed to establish 2 GW of module production lines in return for 8 GW of project capacity and Azure Power agreed a ratio of 1 GW production for 4 GW of projects. The IEEFA-JMK Research study stated, however, a six-month delay by SECI in issuing letters of award for the factories saw solar costs fall so much the tendering body has been unable to persuade state electricity distribution companies (discoms) to agree to purchase the power generated by the 12 GW of project capacity at the agreed rate of INR2.92/kWh ($0.04). That is a figure, according to the report, “which the discoms now consider too high, particularly in light of Covid-19 demand disruption over 2020.”

The national body, says the report, has been forced to water down the price by bundling it with two other SECI tenders, signed off for 1.2 GW in February at INR2.50-2.51/kWh and for 2 GW in June, at INR2.36-2.38, for an average of around INR2.66/kWh, by pv magazine‘s calculation. With recent Indian tenders producing tariffs as low as INR1.99, the report continued, “there’s a likely chance of further delay and reluctance from discoms” and “a downward re-pricing is likely.”

The manufacturing tender is just one of the policy initiatives which has failed to help Indian solar producers keep pace with Chinese rivals, along with domestic content requirements on PV projects, successfully challenged by the U.S. at the World Trade Organization; various subsidies; and the imposition of a safeguarding duty to protect Indian industry.

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The report highlights the lack of R&D spending by India’s biggest solar manufacturers. With the Chinese giants investing around 1-3% of their gross annual revenue on improving efficiency – the widespread shift to mono-grade polysilicon and use of larger wafers being a case in point – the result is, according to the study that “India has been a laggard in transitioning towards development of the latest cell technology.” That means Indian “module suppliers prefer the superior imported cells.”

A report which states at its outset that India has to consider its industrial base given the “reformed national priorities following the Covid-19 pandemic and India-China border issues,” similarly does not pull its punches when listing the government-granted advantages Chinese solar manufacturers enjoy. Those include, according to the study, “confiscating land from urban residents and villagers” to award it free of charge to manufacturers, as well as fully integrated solar supply chains backed by public money, cheap finance and supportive industrial strategy.

Dominance

China, noted the report, in addition to housing 71% of the world’s solar panel production in 2019, also had 97% of global wafer output, 79% of cell manufacturing and produced 67% of the world’s polysilicon. The resulting freedom from imported materials offers Chinese producers a huge cost advantage over their Indian peers, who accounted for just 1% of global module production in 2019, according to the study, and who used only 40-45% of their estimated 15 GW of module production lines during the year.

There are crumbs of comfort in the study, which cited a report in Indian business newspaper The Financial Express which stated Indian solar developers had started to look closer to home after Chinese solar manufacturers attempted to capitalize on Covid-related module price rises of up to 20% last year by renegotiating the terms of previously-signed supply contracts.

The IEEFA-JMK Research publication noted the expansion plans of Adani, which plans to add 2-2.5 GW of cell and module production lines this year; Vikram Solar, which in July committed to a INR54billion, 3 GW wafer, cell and module facility in Tamil Nadu; Waaree, which is planning 3 GW more module output; and a 500 MW module fab planned jointly by Azure and Waaree to fulfil those manufacturing-linked-tender requirements. Renewsys intends to add 420 MW of cell and 1 GW of module capacity, according to the report; Jupiter Solar was set to commission 200 MW of new cell capacity by the close of 2020 and even state-owned Coal India Ltd was reportedly ready to get in on the act, with what would be a vast “Rs45,500 crore” ($6.2 billion) wafer fab.

Basic customs duty

In terms of policy, the report noted the 14.9% safeguarding duty applied to cells and modules from China, Thailand and Vietnam will fall to 14.5% from January 29 and expire on July 29. The IEEFA and JMK Research analysts applaud the decision by the finance ministry to replace the safeguarding tariff with a 40% basic customs duty on imported modules and a 25% charge on cells from April 2022 but stress such protectionist moves will be no more than a sticking plaster if the more critical questions of R&D spend and establishing supply chains are not addressed.

In that respect, stated the report, moves by the Ministry of New and Renewable Energy to exempt solar production equipment from the basic customs duty and, with the involvement of the Ministry of Ports, Shipping and Waterways, to allocate land for solar production facilities near ports, should be welcomed as a step in the right direction.

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Source: pv magazine