Will India be the new hub for solar panel production?
China is currently the world's queen of solar panel production, but we know that the world's industrial dominance changes over time. No empire can aspire to last forever, especially as an industrial and commercial empire. So what will be the evolution in the green technology sector in the future?
The current Indian environment is very congenial for solar panel manufacturing, as we have the expertise and huge domestic demand, something needed in the early stages of development of an industry.
The Indian economy has grown essentially keeping agriculture and services as pillars. At the same time, the manufacturing sector has remained largely absent. Especially, when it comes to high-tech manufacturing such as semiconductors, robotic automation, etc. India, which has grown tremendously in recent decades, now needs the manufacturing sector to become the protagonist of economic growth.
Furthermore, India aims to become carbon neutral by 2070. This requires a mammoth task of electrification and installation of renewable energy sources. Currently, India mainly imports solar panels from China, as domestic panel manufacturers have limited capacity and technologically to improve, as well as having low production capacity upstream, in components.
Currently, Indian production of solar equipment is not cost-competitive when compared with Chinese manufacturers. The Indian government has recognized this shortcoming and has imposed numerous tariff and non-tariff barriers. For example, theBCD (Basic Customer Duty) of 25% and 40% on solar cells and modules respectively and this protectionist step is historically necessary for the development of a domestic industry .
Subsequently, the gap can only be filled if India achieves scale production and develops its raw material supply chain and R&D infrastructure. To achieve such a scale, the Indian government is making an appreciable effort by launching the Production Linked Incentive (PLI) scheme for solar generation, whereby production incentives are obtained on the basis of integration with local supply chains. More contribution is obtained if production is locally integrated.
Tranche 1 of the PLI, equal to 4,500 million euros, was concluded in 2021 with a total capacity of approximately 9 GW, while tranche 2 of the PLI, equal to 19,500 million euros, was recently concluded with a total capacity of about 40 GW. The program favors the production of highly efficient solar panels. The launch of the PLI scheme demonstrates the Indian government's focus on developing the entire supply chain of highly efficient solar modules, including the ancillary supply chain. However, based on the start of the PLI program, it will take up to 3 years to develop and start production of a complete and significantly sized ecosystem. Meanwhile, to be aggressive in solar energy installation targets, India must rely heavily on imported solar modules.
The current Indian regulatory environment is very supportive of solar panel manufacturing domestically as the skills gap has been filled and the demand for solar energy in India and other major economies is very high. However, imports will have to be relied upon for the more technical products such as robotics, manufacturing equipment and technologically advanced raw materials such as silver paste. In this phase India has to choose with whom to develop its capabilities, whether to remain dependent on Chinese supplies or to develop internal industrial capabilities, perhaps in joint ventures with non-Chinese producers, therefore Western, Korean, Japanese or other developing countries .
Once the necessary downstream infrastructure is developed, India Inc. will have the scale and motivation to develop these elements of manufacturing to further reduce the cost of the solar panel. Thanks to this development, India can step up its R&D activities, which could create products in other economic sectors, thereby drastically reducing its overall import dependency.
Obviously this development will threaten China's supremacy in the sector and this challenge will probably mark the end of the second decade of the 21st century.
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The article Will India be the new hub for the production of solar panels? comes from Economic Scenarios .
This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/sara-lindia-il-nuovo-hub-per-la-produzione-dei-pannelli-solari/ on Fri, 07 Jul 2023 08:30:24 +0000.