India’s solar module manufacturing capacity may jump over 60% by 2025: Icra

New Delhi: India’s solar photovoltaic (PV) module manufacturing capacity is likely to increase to over 60 GW by 2025 from the current level of 37 GW, with improved integration back into cell and wafer manufacturing, according to an agency report Icra rating.

This is likely to improve to nearly 100 GW as the capacity awarded under the production-linked incentive (PLI) scheme comes into effect, driven by strong policy support and growing demand from power installations domestic solar, he said.

The policy measures include the notification of an Approved List of Models & Manufacturers (ALMM) that includes only domestic manufacturers, the imposition of customs duty on imported cells and modules, and the PLI scheme. Additionally, the solar power generation capacity is expected to witness significant growth in the next decade due to India’s climate change goals, which will drive the demand for solar PV modules, according to the report.

“While the ALMM order is over until March 2024 and a sharp decline in global module prices will lead to an increase in PV module imports in FY2024, the expected increase in domestic manufacturing capacity with backward integration over the two or three years ahead, along with the resumption of the ALMM order, is expected to reduce import dependency,” said Vikram V, vice president & sector head – corporate ratings, Icra.

He said that apart from module capacity, the OEMs are expected to improve the wafer and cell manufacturing capacity and cell capacity is expected to cross 25 GW by 2025 from the current level of 6 GW. However, the country will still be dependent on polysilicon imports as it will likely take longer to establish those resources, and will involve more capital investment, Vikram said.

The solar PV module supply chain is currently dominated by China, with more than 80% share in manufacturing capacity across polysilicon, wafer, cell, and modules. In comparison, the manufacturing capacity in India is relatively low and is largely limited to the final stage of manufacturing. The PLI scheme is expected to change this, and integrated modular units are expected to emerge in India in the medium term.

The Center has so far awarded incentives to establish a module manufacturing capacity of 48 GW, including 24 GW fully integrated facilities, from polysilicon to module. The outlay is expected to exceed capex to establish these integrated module capabilities 1 trillion. Due to the expected significant increase in manufacturing capacity, it would be critical for domestic solar OEMs to garner a share of global demand through exports.

“The Indian module manufacturers have benefited from the healthy growth in export demand, mainly from the US, over the last 18 months. The exports increased by more than 364% in FY2023 over FY2022 and more than 748% in the first five months of FY2024 over the corresponding period of the previous year. This is due to the healthy demand from the US and restrictions imposed by that country on the sourcing of modules from China,” said Vikram.

While this is positive in the short term, the sustainability of this demand remains to be seen, given that a large-scale increase in module manufacturing capacity is expected in the US, given the significant benefits available under the Reduction Act Inflation, a significant thing. climate legislation announced by the US government, he said.

In recent years, the government has announced several steps to boost the domestic manufacturing ecosystem for solar modules, cells among others in order to also reduce the import dependence on China, which has repeated diplomatic tussles and once again by India since 2020.

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Updated: 06 November 2023, 04:43 PM IST

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