Uncovering the Promises of India’s PLI Program for Solar Modules
The government has allotted ₹139 billion of the ₹195 billion set aside for PLI Tranche II
India’s solar module production incentive program has been hailed as a game-changer for domestic manufacturing. However, factors like the lack of clarity around polysilicon, managing the manufacturing cost gap with Chinese modules, and the lack of advanced technology are often overlooked.
The ambitious 280 GW solar power installations target set for 2030 needs backing from robust domestic manufacturing, which continues to depend on government incentives to compete with its Chinese counterparts.
The government recently announced the winners of the Performance-Linked Incentive (PLI) program Tranche II and allotted ₹139.4 billion (~$1.69 billion) of the ₹195 billion (~$2.36 billion) set aside for PLI Tranche II.
At the recent Mercom India Renewables Summit 2023, Lalit Bohra, Joint Secretary at MNRE, expressed his confidence in the PLI program to help India become self-reliant in solar cells and modules and grow into an export hub in the coming years.
He said, “MNRE plans to help expand the cell side capacity from the current 3-4 GW. The PLI Tranche 1 alone has an 8.7 GW integrated capacity planned. For PLI-II, we have 11 potential players placed in different baskets other than integrated, which also has polysilicon facilities planned. We have 15-16 GW ingot capacity planned in the next 24 months, and we are clear that by the end of 2026, we will have a manufacturing capacity of more than 100 GW.”
Some experts argue that while the PLI program aims to establish the entire solar ecosystem from polysilicon to module manufacturing, it is unclear if India has enough raw material supply and technological expertise to handle polysilicon manufacturing.
Ravinder Tanwar, Chief Operating Officer at Websol Energy System, said, “The PLI program covers polysilicon to wafer capacities; polysilicon is a chemical industry whereas solar cells come under material science. Silica mining, covered under the Mining Ministry, is still to be regulated as there is no policy around it; polysilicon requires high-quality quartz, which needs advanced mining.”
He added, “Companies are expected to develop polysilicon facilities under the program over the next three years, which means we will continue to depend on the international market for wafers. By the time our facilities come up, it will be very difficult to stay competitive with the constantly evolving Chinese market.”
The country does not have polysilicon manufacturing capacity yet, and costs to set up are huge – especially the power costs, which raises questions about the competitiveness of Indian modules vis-à-vis the Chinese ones. China has a domestic solar manufacturing capacity of 190 GW.
Gautam Mohanka, Managing Director at Gautam Solar, said, “The most-undersubscribed category was the fully integrated category (P+W+C+M) at 37% shortfall, which could be due to the high investment required that may have acted as a deterrent in an uncertain market.”
The situation is compounded by insufficient incentives to encourage innovation in research and development to build up a steady domestic polysilicon supply.
Under the PLI program, the modules manufactured must meet minimum efficiency levels to be eligible for incentives.
Indian manufacturers who have been dependent on solar cells imported from China until recently will find it challenging to meet such high-efficiency levels as they try to build new manufacturing capacities from the ground up.
Mohanka said, “PLI is performance-based as there is a minimum threshold of efficiency, temperature coefficient (at maximum power), and local value addition which need to be met. The extent of integration, manufacturing capacity, efficiency, and temperature coefficient of modules will be verified by a team constituted by MNRE/SECI, failing which the PLI amount will not be disbursed.”
Tanwar said, “Under the PLI program, you have been given three years for polysilicon, 1.5 years for cell plus module, and you will receive the PLI for three years. The modules must have a specific efficiency of 21% to 23%. If any of these commitments for duration and efficiency aren’t met, the companies will not receive the incentives for the quarter under the program, making it a very risky investment.”
Avinash Hiranandani, Global CEO and Managing Director at Renewsys, feels India still lacks the process maturity and skilled workforce to achieve the targeted efficiency.
He said, “A lot of Indian manufacturers, after setting up multi-cell manufacturing lines with great difficulty, still manage to achieve only 18.7% to 18.75% efficiency on an average, whereas the cells from China come with 18.9%-19% efficiency. We all set up the lines almost five years back in 2017 and still have to match up with the Chinese efficiencies. It goes to show that it takes a lot of time in India to achieve these efficiencies because of the lack of technology and a skilled workforce. We will see this issue compounded once we start operating TOPCon and HJT lines in India.”
Competing with Chinese Technology
Hiranandani said, “The Chinese companies are operating at the level of 100 GW, whereas under PLI, manufacturers are participating with 4 GW-5 GW; the scale is totally different. It’s a tough ask to get that 10-15% subsidy on capital on PLI. Although we are thankful to the government for such an encouraging initiative, there is a need for a think tank that can ensure this business model is scalable. We need ten companies with at least 10 GW of integrated capacity each.”
The lack of technology and easy access to manufacturing equipment is as much a challenge as bridging the manufacturing cost gap with Chinese modules.
India imposed basic customs duty (BCD) on imported cells and modules, hoping to encourage developers to procure modules domestically.
However, Chinese module prices have dropped by almost 17% since April last year, nearly matching the prices offered by domestic manufacturers even with BCD imposed.
Balachander Krishnan, Chief Operating Officer, Indosol Solar, a special purpose vehicle of Shirdi Sai Electricals, in a recent interview with Mercom, said, “Even with BCD, the Chinese still have a significant hold a significant market share in India, as their prices are comparatively lower (volume of scale) with better quality (comes with experience) because India still doesn’t have to produce the raw materials for manufacturing Ingot-wafers (crucible, hot-zone, diamond wire saw), cell (silver paste, screens, specialty gases, etc.) It takes several years of research to get the requisite quality of silver paste that could be used for a solar cell, and no manufacturer in India is ready to invest in it.”
“There has been no progress in silver paste manufacturing in the country. Indian solar cell manufacturers depend majorly on imports of specialty gases like Silane, ammonia, N20, BCI3, TMAI, and BCI3 used in cell manufacturing,” he added.
A recent analysis by Wood Mackenzie found that companies outside of China, even with multiple opportunities, will struggle to compete with China’s low-cost supply chain and pool of expertise, which it has developed over a decade.
With the suspension of the Approved List of Models and Manufacturers mandate until March 2023, manufacturers setting up capacities even under the PLI will have difficulty finding off-takers.
Krishan suggests that it is vital that the Indian government must consider announcing PLI for solar equipment manufacturers to create a complete manufacturing ecosystem.
Developing Indigenous Technology
In order to cut the dependency on China for technology and solar manufacturing equipment and to match their prices, it is vital that the Indian solar sector invests in R&D extensively.
While addressing a session at Mercom’s recent Renewables Summit, Puneet Gupta, Chief Technology Officer at Adani Solar, emphasized the importance of building a local supply chain and investing in R&D simultaneously while we expand.
He said, “It is important for us not only to manufacture components but also the manufacturing equipment. In its initial days, China was also dependent on Germany and others for machinery until they built their own. The main challenge for us remains polysilicon for now, as we have managed to cut the dependency on BOS components and cells. A polysilicon capacity of less than 10 GW will not make sense in a market like India, for which we need source silicon and electrodes used to manufacture silicon, both of which aren’t available in India.”
A well-placed R&D spending along with effective training for the local workforce to handle this equipment and technology.
Talking about the steps the government is taking in this direction, Bohra said, “MNRE regularly funds various R&D programs to ensure constant technological innovation in the country. The National Centre for Photovoltaic Research and Education (NCPRE) in India conducts extensive research on cell and module technologies. We also ensure regular training is provided to employees so that they are employable by the solar sector, so when we have the 100 GW capacity coming up, we have the workforce ready to operate these types of equipment.”