According to a Global Trade Research Initiative (GTRI) report, India’s annual import bill of solar equipment could surge to $30 billion annually by 2030.
India has set a target of installing 500 GW of renewable energy by the end of this decade. Now, according to a GTRI report, this may push the nation's solar equipment import (as solar power lies at the center of renewable energy development) bill to $30 billion per year by 2030. Currently, nearly 80% of India's solar equipment is imported; 60% of which comes from China, which controls 97% of polysilicon production and 80% of solar module manufacturing. Countries like Malaysia, Vietnam, and Thailand are also on the list.
The GTRI report mentions that India imported solar equipment worth $7 billion ($3.89 billion coming from China) in 2023-2024, leading to the installation of 15 GW of solar capacity. Experts believe that the country needs to increase its annual installations to 65-70 GW to achieve its target - which seems challenging thanks to the high import cost.
🚨India has launched its National Electricity Plan (Transmission), aiming to achieve 500 GW of renewable energy capacity by 2030 and over 600 GW by 2032. pic.twitter.com/K4Ya8w9NWn
— Indian Infra Report (@Indianinfoguide) October 16, 2024
(Credit: Indian Infra Report)
Well, India's local solar manufacturing is still in its early stages. To reduce its heavy dependency on imported equipment and subsequently cut down on costs, the government needs to implement some strategies extensively. In this article, let's discuss those.
90% of India's domestic solar manufacturing involves assembling solar modules from imported cells with 15 percent local value addition. According to the GTRI report, solar cells worth USD 1.9 billion and other essential parts (like inverters, cables, junction boxes, transformers, and other electrical components) worth USD 1 billion were imported in FY 24. Only a few companies here add 30-40 percent value to the final production.
To solve this issue, India must focus on its local manufacturing from scratch level. As GTRI Founder Ajay Srivastava said in a statement, "To cut down on imports, India needs to produce solar cells starting from silica refining, which involves costly and energy-intensive polysilicon production and requires advanced technology." He added that the country needs to locally produce aluminum frames, glass, and other materials, with strong R&D efforts and government support.
China controls 97 percent of the world's polysilicon supply and dominates over 80 percent of global solar production and exports. According to the GTRI report, it exported 227 GW of solar modules worth USD 39.5 billion and 38 GW of solar cells worth USD 4.2 billion in FY 24.
Countries like the US, the EU, and Japan are now focusing on (besides increasing local production) diversifying their supply chains and establishing a global solar manufacturing ecosystem that is less dependent on China. According to Srivastava, "India should partner with the US, the EU, and Japan to establish large-scale solar manufacturing facilities, fostering an independent and resilient solar industry."
Together, these countries can also create large-scale solar cell manufacturing facilities, producing everything from polysilicon to wafers to modules. This may lead to the development of various advanced technologies, reducing costs with time.
In order to reduce reliance on Chinese imports, India imposed a 40% customs duty on solar modules and 25% on solar cells in April 2022. Due to the India-Asean Free Trade Agreement (FTA), these duties don't apply to imports from Vietnam, Malaysia, and Thailand. Experts suggest the government should maintain a balance in this regard, promoting domestic manufacturing significantly.
On the other hand, government initiatives (aimed at promoting local solar production) should be reformed to “cover early-stage solar manufacturing and provide targeted subsidies to attract private investment”. The list includes the PLI Scheme which supports fully integrated solar PV manufacturing units.
#WATCH | ...By 2030 India's non fossil energy capacity would be increased to 500 GW...50% electricity capacity would be met from renewable energy by 2030 and India will reduce its projected carbon emissions by 1 billion tons from now until 2030: Foreign Secy Harsh V Shringla pic.twitter.com/bzVtnNFNlh
— ANI (@ANI) November 1, 2021
(Credit: ANI)
Moreover, there should be a long-term policy roadmap for the same, consisting of minimum regulations. The government must also focus on establishing a skilled, large workforce.
