India needs solar equipment imports worth $30 bn annually: GTRI

To realise its ambitious goal of installing 500 GW of renewable energy capacity by 2030, India may require solar equipment imports worth around $30 billion annually due to heavy reliance on Chinese goods, the Global Trade Research Initiative (GTRI) has said.

To boost domestic solar manufacturing, the GTRI recommended investing in upstream production, expanding the Production Linked Incentive (PLI) scheme, and developing a skilled workforce. Despite efforts to promote local manufacturing through the PLI scheme, GTRI noted that India remains heavily dependent on imported components.

India's clean energy sector is struggling with the impact of Chinese predatory pricing, which hampers domestic production under the PLI scheme. Expanding the scheme to include early-stage manufacturing and offering subsidies to attract private investment are among the proposed solutions. Additionally, addressing the shortage of skilled workers is crucial to supporting large-scale solar installations and manufacturing efforts.

India added 15 GW of solar capacity in 2023-24, bringing the total to 90.8 GW by September, a significant rise from just 2.8 GW in 2014. However, the GTRI warns that installations need to ramp up to 65-70 GW annually to reach the 2030 target of 500 GW, with solar expected to account for more than 80% of that capacity, pushing up solar import costs to $30 billion annually.

The Economic Survey 2023-24 pointed out that China's growing manufacturing trade surplus since 2019 has driven Chinese companies to expand into overseas markets. In 2023-24, India imported $7 billion worth of solar equipment, with China supplying 62.6% of these imports. China’s dominance in global solar manufacturing, controlling 97% of polysilicon production and 80% of solar modules, makes it tough for other countries to compete. Although India has implemented measures like a 40% duty on solar modules and 25% on solar cells to reduce dependency, imports from Vietnam, Malaysia, and Thailand remain exempt from these tariffs under the India-ASEAN FTA, provided they add at least 35% value to their exported products.

The global shift from fossil fuels to renewable energy heavily relies on solar power, which makes up 50-80% of the renewable energy mix in many countries. The report suggested that India should collaborate with the US, EU, and Japan to establish large-scale solar manufacturing facilities, fostering a more independent and resilient industry.

To build a self-reliant solar manufacturing ecosystem, there must be an emphasis on investments in polysilicon and wafer production, including the importance of producing critical materials locally, such as aluminium frames and glass, which will require substantial research and government support. Additionally, the report stated that there is a need for a reassessment of import duties on solar modules and cells to encourage domestic manufacturing without raising consumer costs.

Currently, 90% of India's solar manufacturing involves assembling imported cells, with only 15% local value addition. Most Indian solar projects rely on ready-to-use modules from abroad due to the nascent stage of domestic manufacturing. In the last fiscal year, India imported $4.4 billion worth of modules, $1.9 billion in solar cells, and $1 billion in key components like inverters and cables. Without significant investment and local production capacity, India risks ongoing reliance on costly imports, jeopardizing its clean energy goals.

Few Indian companies produce solar cells at a commercial scale, adding only 30-40% value by using imported polysilicon or wafers. None manufacture solar cells entirely from scratch, starting with silica sand. The report stressed that to reduce import dependence, India must develop the capacity to produce solar cells from silica refining onward, a costly and energy-intensive process involving advanced technology for polysilicon production.

Solar panel manufacturing consists of six stages, from mining silica sand to assembling the final product. Like many countries, India currently relies on fully assembled module imports rather than building domestic capacity. To address this, the report outlines seven key steps, including investing in upstream solar production, reducing reliance on imported wafers and polysilicon, and expanding local production of critical materials like aluminium frames and glass.