A new joint report by the Institute for Energy Economics and Financial Analysis (IEEFA) and JMK Research and Analytics predicts that India will achieve self-sufficiency in solar photovoltaic (PV) module production in the next three years, as 110 gigawatts (GW) of capacity are expected to be added. This development positions India as the second-largest PV manufacturing country globally, trailing only China.
According to the report, India has witnessed a significant increase in its cumulative module manufacturing nameplate capacity, soaring from 18GW in March 2022 to an impressive 38GW by March 2023, more than doubling its capacity in just one year.
Jyoti Gulia, the founder of JMK and co-author of the report, attributed India’s progress in PV manufacturing to the supportive policy environment established by the Indian government. Gulia emphasized the potential impact of the Production Linked Incentive (PLI) scheme, stating that it could serve as a crucial catalyst for the substantial expansion of India’s PV manufacturing capacity in the years ahead.
Gujarat leading State
According to Jyoti Gulia, Gujarat is the frontrunner among Indian states in terms of upcoming PV manufacturing installations. With approximately 57% of the total upcoming PV manufacturing capacity, Gujarat is an attractive choice for manufacturers due to factors such as lower industrial electricity costs and convenient access to ports for streamlined imports and exports of PV materials.
Vibhuti Garg, Director of South Asia at IEEFA and co-author of the report, emphasized that once India achieves self-sufficiency in the next two to three years, the focus should shift towards establishing a strong presence in the global PV module market by competing on both quality and scale. Garg acknowledged the presence of minor obstacles that hinder the growth of the PV manufacturing industry, and emphasized the importance of policy stability to maintain investor confidence and sustain the aggressive market momentum.
Reliance on China
The report highlights a concerning trend wherein China remains the predominant source (approximately 95%) of raw materials for PV manufacturing, indicating a sustained reliance on Chinese suppliers. Furthermore, there is a notable shortage of skilled manpower, particularly in the manufacturing of upstream components, as emphasized by Ms. Gulia. These factors pose challenges to the industry’s growth and self-sufficiency goals.
When comparing China’s success in the PV manufacturing sector to India, it becomes evident that China has achieved economies of scale due to its vast manufacturing capacity. Additionally, the Chinese government has provided various incentives such as access to cheap credit, free land, low-interest loans, research funding, tax rebates, and even direct financial support to bolster its manufacturing industry. These favorable conditions have allowed Chinese manufacturers to capture larger portions of profit from their operational revenues. With the advantage of integrated facilities and robust government support, Chinese manufacturers consistently invest significantly in research and development, enabling them to maintain a competitive edge globally. This explanation by Ms. Gulia emphasizes how China’s approach differs from India’s, contributing to China’s leadership in the PV manufacturing sector.
Holistic development
As per the report, a key recommendation is for the government to expand the scope of the Production Linked Incentive (PLI) scheme to encompass additional upstream components, PV equipment machinery, and ancillary components. This broader inclusion aims to foster a comprehensive development of the PV manufacturing ecosystem, promoting a more holistic and integrated approach in the industry.
Furthermore, in its long-term expansion strategy, India should strive to develop a sufficient PV capacity to meet domestic demand and establish a strong global presence, positioning itself as a viable competitor to Chinese PV products. However, India’s primary PV export markets, namely the U.S. and Europe, are also bolstering their own PV manufacturing capabilities, potentially achieving self-sufficiency in the future. Consequently, there is an increased need to explore alternative export markets for Indian tier-1 manufacturers, as emphasized in the report.
