Solar Make-in-India needs a long-term strategy

Policymakers can draw three main classes from the Chinese language expertise.

By Anurag Panda & Abhishek Malhotra

To bolster Make-in-India for the photo voltaic sector, the Centre just lately introduced a production-linked incentive (PLI) scheme for photo voltaic manufacturing with a funds of Rs 4,500 crore over 5 years. Primary customs responsibility of 25% on cells and 40% on panels can even be levied on imported panels beginning April 2022. These measures observe a slew of efforts over the previous decade to determine home photo voltaic panel manufacturing. Nonetheless, a number of points stay, together with a unstable home market and weak industrial innovation capabilities.

Photo voltaic panels are mass-produced, the place low-costs are achieved via economies of scale, excessive capability utilisation components, and optimisation of producing processes. Main Chinese language producers corresponding to Jinko Photo voltaic and Trina Photo voltaic have manufacturing amenities with capacities over 10 GW. Indian producers would require time to attain scale, develop their manufacturing know-how, and turn out to be globally aggressive. To catch up, they should depend upon a big and steady home marketplace for the subsequent few years.

Nonetheless, the Indian solar-panel market has been going through headwinds. Annual photo voltaic PV deployment peaked in 2017, at greater than 9GW, and has stalled since, falling to three GW in 2020, because of the pandemic. Within the short-term, home market dangers will have to be addressed, together with counterparty threat, renegotiation of energy buy agreements, and difficulties with land acquisition. Photo voltaic panel manufacturing is a quickly evolving business. Manufacturing gear can turn out to be outdated in 2-5 years. To make sure that the Indian energy sector advantages from ongoing panel efficiency and value enhancements, a long-term roadmap to succeed in the worldwide technological frontier is critical.

China’s dominance has resulted from a number of public coverage measures. First, the Chinese language authorities offered subsidised manufacturing inputs corresponding to electrical energy and debt, steadily concentrating on its subsidies in the direction of producers who had been in a position to obtain scale and effectivity. Second, the aggressive pricing of photo voltaic panels at razor-thin revenue margins was enabled by gradual vertical integration of the worth chain. Third, producers developed their know-how associated to manufacturing processes via in-house R&D and learning-by-interacting with manufacturing gear suppliers from Germany, Switzerland and the US.

Policymakers can draw three main classes from the Chinese language expertise. First, periodic targets needs to be set for plant capability, capability utilisation issue, module effectivity, value, and R&D investments. Subsidy allocation needs to be made contingent on assembly these targets, creating stress on corporations to repeatedly innovate. Second, incentives for cell and module manufacturing needs to be complemented with measures to develop a producing ecosystem for all the worth chain. This needs to be performed in a phased method, beginning with cell and module manufacturing, and steadily incentivising native manufacturing of wafers, ingots, and polysilicon. Third, manufacturing incentives needs to be complemented with incentives for each industrial R&D and worldwide collaborative R&D, enabling corporations to succeed in the expertise frontier. Traditionally, photo voltaic panel manufacturing has been extremely aggressive. No single agency—and, till just lately, no single nation—has been in a position to seize a excessive market share over an prolonged interval. Whereas its comparatively straightforward to import turnkey manufacturing gear and arrange a producing plant, growing and sustaining a aggressive edge will probably be a gradual and unsure course of requiring monumental long-term public subsidies and entailing critical dangers.

Addressing the dangers requires us to have readability concerning the coverage objectives. If the objective is clear, ample and low-cost electrical energy, photo voltaic panels ought to merely be bought from the place they’re the most cost effective (i.e., China). If the objective is job-creation, deployment of decentralised and rooftop photo voltaic PV installations needs to be prioritised, since downstream jobs account for almost 75% of the employment within the business. If the precedence is strategic localisation of provide chains, manufacturing incentives needs to be made contingent on periodic, time-bound, life like and long-term targets that purpose to make the home business globally aggressive. Moreover, investments needs to be made right into a diversified portfolio of applied sciences corresponding to lithium-ion batteries, electrolysers for inexperienced hydrogen, and vitality effectivity applied sciences as a part of India’s inexperienced industrial technique.

Panda is post-doctoral fellow, and Malhotra is assistant professor, IIT Delhi