Is Indian solar industry evolving as planned?

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India has made considerable progress in solar PV project development, with 186 megawatts (MW) commissioned so far, and of this, 40 MW worth of off-grid projects were commissioned in 2011. The country now plans to build an initial capacity of 1 GW of solar power by 2013—enough to power close to 1 million homes.

However, despite such ambitious plans, the plants of India’s two biggest PV cell manufacturers, Tata BP Solar and Indosolar, are lying shut for want of orders—exposing the state of Indian solar power generation in India.

By Uma Gupta

Thursday, June 14, 2012: The global glut

The reason for this sorry state is attributed to the global glut. Indian manufacturers are unable to compete with the products coming from China and the US. They allege that while the Chinese are selling below cost, the American companies that are using thin film technology are able to grab the orders because they are backed by ultra low interest credit from the US Exim Bank.

In view of the global glut, Shan Solar has decided to put on hold its Rs 7.2 billion project to manufacture polysilicon cells in India. The project was scheduled to come up near Shan Solar’s module making plant in Sri City industrial estate, near Chennai. According to C Suryaprasad, CEO and joint managing director, the company is not likely to reconsider the plan at least until June this year.

Shan Solar has recently commissioned a Rs 800 million module plant, which is capable of producing 30 MW worth of modules. This plant has bagged some orders from Europe, but still is not operating to its full capacity.

The Jawaharlal Nehru National Solar Mission (JNNSM) guidelines stipulate that all grid connected solar PV projects in India coming under the scheme will have to use cells and modules that are made in India.

Clearly, this rule was intended to create a domestic manufacturing hub in India. Unfortunately, Indian suppliers have failed to benefit from it. Instead, low cost Chinese rivals like Suntech and Trina Solar, as well as US firms including First Solar, have grabbed most of the equipment orders for the plants to be built in India.

“It’s a disaster in the making,” says K Subramanya, CEO, Tata BP Solar. “We want solar power to succeed but we need fair competition.”

What’s going wrong

The unsatisfactory status of the Indian solar industry is due to various factors at play, including the scale of manufacturing, infrastructure, costs, the technology used, quality and so on.

The solar PV value chain extends from production of polysilicon to the solar PV system, including wafers, cells, panels, etc.

As of now, it’s mainly the modules and, to a very small extent, cells that are being manufactured in India. Solar wafer manufacturing is yet to witness growth.

“The wafer manufacturing capacity in India is less than 20 MW currently, while the requirement at the end of this decade will be 2000 MW per year. It has not taken off primarily due to the high capital investments—a minimum of US$ 50-75 million for wafer manufacturing and about US$ 20 million for cell manufacturing vis-a-vis about US$ 1-2 million required to put up a module making facility,” informs Rajesh Menon, deputy director general, Confederation of Indian Industry (CII).

The majority of the modules produced in India are also exported as there is less domestic demand. Until 2010, there was no domestic solar market in the country, which compelled cell and module manufacturers to rely primarily on the export market for their production.

Unfortunately, today, when there is a demand with more and more solar PV power plants coming up across the country, the market for domestic manufacturers is marred by stiff competition from key global manufacturers including Shin-Etsu, Sanyo and Sumko from Japan, MEMC from USA, LDK and Renesola from China, and Topsil from Denmark.

There are many other factors affecting the cost of solar cells made in India, putting them at a disadvantage. First, the raw material and components for solar cells still have to be imported—like silicon wafers—which raises the price of solar cells in India.

Currently, India is not strong in the manufacture of silicon as it requires good infrastructure like quality power at low cost (around Rs 2.5/kWh (per unit)). Going forward, though, we may see polysilicon and wafer manufacturing plants coming up in India, with companies like Lanco Solar, Bhaskar Silicon, Carborundum Universal and the Yash Birla Group announcing their planned projects. Lanco plans to set up its facility in Raipur with power coming from its thermal power plant in Chhattisgarh.

Most cell manufacturers in India are using first generation crystalline silicon (cSi) technology, which, as of now, is the most efficient but also the most expensive. This takes the cost of cells made in India to a higher level than if manufactured with thin film technology.

Guidelines for phase 2 of the JNNSM stipulate that the cSi modules have to contain indigenously produced cells. “Project developers, however, are importing and using thin film modules, as these also provide higher energy yields than cSi modules in the arid and semi-arid climate of India,” say SR C Sathyanarayan, head, PV power plants, TUV Rheinland (I).

Also, the JNNSM gives preference to domestic manufacturers only at the central level, and states are not obliged to follow this policy. Project developers are also free to choose products, and obviously, they go for imported products, which are low priced and also generally of good quality.

What needs to be done

Indian manufacturers are lobbying for protection against imports from rivals like First Solar and Suntech. They are seeking a 15 per cent tariff to be imposed on imports of thin film solar panels.

At the same time, the government needs to step up incentives and research funding so that the solar cells made in India can compete aggressively in terms of costs with those manufactured in, say, China.

As tariffs fall significantly in the latest projects on offer and with the trend likely to continue, India has advanced the target date for selling solar power at the same rate as conventional electricity by five years, to 2017. Companies have bid tariffs as low as Rs 7.49 per unit for solar plants.

Encouraging an entire PV ecosystem instead of just solar PV power plants is likely to result in cost reductions. The setting up of polysilicon plants will generate by-products like silane gas, which can be used in the production of solar cells.

Maharishi Solar seems to be the only company in India that has set up a vertically integrated manufacturing facility to produce multi-crystalline silicon ingots, multi-crystalline wafers, multi/mono solar cells, solar PV modules and solar PV systems at Srikalahasti, Andhra Pradesh. Many such plants should come up with government support as the investments are very high.

Thankfully, successive reforms in the power sector and a plethora of policies initiated at the central and state levels to control greenhouse gas emissions and promote renewable energy, have restored investors’ interest in the solar power industry. The Indian solar market can look forward to large scale private investments across the entire PV value chain, especially in the production of polysilicon feedstock, silicon wafers, PV modules and cells, as well as balance of system components. Besides, currently, very few companies like Moser Baer, HHV Solar and Shurjo use thin film technology. More work on thin film technology needs to be carried out in India, as it will bring about price competitiveness. The technology can be researched and developed to increase efficiency as well. Home grown technology would also lower the cost of solar cells made in India.

Electronics Bazaar, South Asia’s No.1 Electronics B2B magazine

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