COVER STORY: India Eyes Historic Rise Of Solar Cell Manufacturers

EXCLUSIVE: India Eyes Historic Rise Of Solar Cell Manufacturers

So far, 2024 has been a remarkable year for the Indian solar industry. Not only has it met expectations so far in terms of capacity additions, it has also delivered a huge fillip to the rooftop solar sector, thanks to PM Surya Ghar and new momentum in promising schemes like PM-KUSUM, besides record additions in the C&I segment as well. The industry has come of age with a new focus on energy storage projects, and a huge pipeline of projects across categories providing clear visibility for the medium-term future. The icing on the cake has been the strong resurgence of domestic module orders, which crossed 20 GW plus by September this year, with more adding on as we write.

All this positivity had an obvious impact on the numbers as well, leading to the sort of IPO rush that can only happen during boom times. The financial year has already witnessed the public listing of two of the largest solar manufacturing companies into the Indian stock market, both delivering handsome returns to shareholders, past and new. The two, Hyderabad-based Premier Energies and Mumbai-based Waaree Energies are soon to be followed by Vikram Solar and Saatvik Solar. The lineup of ambitious firms seeking an IPO in 2025-26 is much longer again.

But if you thought the IPO dreams were built around cashing out or making more modules, then perish the thought. While those are part of the picture, a big change and recent impetus has been the urgency to get into solar cell manufacturing in India. Solar cell manufacturing considered a relatively ‘capital-intensive’ and more complicated part of the solar supply chain, is no longer an option for many of these firms but an imperative. Driving that is the real possibility of an ALCM (Approved List of Cell Manufacturers) by April 2026, and their own desire to derisk cell sourcing from China, almost the sole supplier of solar cells outside of a smattering of local firms until recently. We have already covered the issues around higher cell prices of domestically produced solar cells earlier at SaurEnergy.

Premier Energies said that 100% of their net proceeds from the IPO are planned for commissioning their proposed 4 GW new TOPCOn-based solar cell plant in Telangana. Waaree Energies, Vikram Solar and Saatvik Solar have also planned to use a good portion of their publicly raised funds for their new solar cell manufacturing plants. Of the around 30 Indian companies (including these firms), that have announced venturing into solar cell manufacturing most have vowed to commission their new plants in the next two years. For what it’s worth, the announcements could potentially take India’s cell manufacturing capacity to over 80 GW by 2026 (See chart).Under the Production-Linked Incentive (PLI) scheme of the Indian government, 13 companies were selected to start solar cell manufacturing in India or work towards deeper backward integration. Many other firms are going on their own, with or without government incentives, as they chase the security and margins from their own cell production.

A key driver has been MNRE’s draft notification in September this year that reiterated its plan to bring an Approved List of Models and Manufacturers (ALMM) for solar cells to boost domestic solar cell production and reduce its dependency on China for solar cell imports. If all goes to plan, after April 1, 2026, only domestic solar cells will be used in India by the local solar module makers. This has prompted several of the larger existing module makers to start their own solar cell manufacturing ventures.

Aditya Singhania, Director at Navitas Solar said that by next year, India’s demand for solar modules will touch to around 80 GW, leading to more demand for domestic solar cells, especially for TOPCOn.

“Currently there are very few solar cell makers in India who are making TOPCon cells. The total capacity of this will be close to 4-5 GW. So, India will need a lot of domestic solar cells for TOPCOn, which opens new avenues for the Indian solar industry. That is why a number of companies have now planned to invest in solar cell manufacturing. Navitas has also planned to start 1.5 GW of solar cell manufacturing,” he told Saur Energy.

While Singhania’s views are aligned with the current trend of investments, a number of aspiring cell makers are hedging their bets by seeking manufacturing options that provide flexibility to shift between TOPCon and HJT cells, for instance.

Odisha, Tamil Nadu new destinations 

While the majority of the solar module companies are concentrated in Gujarat currently, solar cell makers are seeking new opportunities outside Gujarat as well. Driven by state-level incentives and access to key resources including manpower, the shift outside Gujarat should be welcome news in states like Odisha, hitherto seen as laggards in solar as well as more broadly when it comes to industries.

For example-companies like Waaree Energies, Saatvik Solar, Ampin Energy Transition, and Jupiter International have announced starting their solar cell lines in Odisha. At REI 2024, En-icon Solar also said that it was exploring investment either in Odisha or Chattisgarh for its proposed 1.2 GW solar cell plant.

“Odisha offers proximity to ports like Paradip and Dhamra, easing the import of plant machinery, raw materials and export of solar cells & modules. It is also equipped with well-developed transport and industrial infrastructure ensuring seamless operations.  The Odisha government supports industrial investments through incentives such as land at concessional rates, tax exemptions, and capex subsidies, complementing central initiatives like the PLI scheme,” Sourabh Kumar, Associate Vice President (Strategic Investment} at AMPIN Energy Transition told Saur Energy. AMPIN has announced 1.3 GW of integrated solar cell and module manufacturing in Odisha and is a winner of India’s PLI scheme.

An analysis of Odisha’s Industrial Resolution and State Renewable Energy Policy reveals that Odisha offers several incentives and support that can help solar firms to invest in the state to reduce their manufacturing and operations-related costs.

For example-Odisha offers upto 30% of capital investment subsidy, a 100% exemption of stamp duty, it also reimburses the power tariff at Rs 2 per unit, and it also exempts electricity duty for 10 years. Interestingly, it also gives employment subsidies like reimbursement against ESI contributions or PF contributions per month for the recruitment of the local workforce.

Ports and ease of doing business 

However, Odisha is not alone. Offering serious competition is Tamil Nadu, where companies like Tata Power, First Solar, Vikram Solar and others have planned to invest. Tamil Nadu also offers capital subsidy, electricity tax exemption, subsidy in interests and training. It also allowed a 50% exemption in stamp duty. Besides Gujarat, Odisha and Tamil Nadu, some other states like Andhra Pradesh, Maharashtra and Uttar Pradesh have also witnessed new investments from solar cell makers. However, the majority of these destinations are coastal states due to the obvious ease of sourcing raw materials like Wafers.

A senior official from a solar company who has plans to start solar cell manufacturing in Odisha told Saur Energy, “We plan to invest in Odisha because of its location and pro-solar policies. We have our head office in North India. If we invest in Odisha, this can help us to supply the produced cells and modules from the region to South India, reducing our transportation costs. Moreover, the proximity to ports can allow us to easily export or import our items, especially from the nearby Southeast Asian countries.”

Challenges beyond CAPEX 

Notwithstanding the glaring challenge of higher capital expenditure, several conspicuous hurdles can confront the new players. Several threats ranging from changing geopolitical relations, tariff barriers, fluctuating prices of raw materials and others expose new threats to the new emerging industry.

“Solar cell manufacturing is a complex trade unlike solar module manufacturing, which is more of an assembly business. Solar cell manufacturing involves processing with several hazardous chemicals that can pose health hazards. It also involved the use of water. So the whole process of setting up and operating these units require more approvals,” a senior official from a Gujarat-based solar module maker told Saur Energy, requesting anonymity. The firm has also planned solar cell manufacturing in Gujarat soon.

The production of solar cells, wafers and ingots involves the use of hazardous items like Cadmium, Lead, Arsenic and Selenium. They need scientific disposal to avert any hazards. Even the production of Silicon wafers, which need purification, cutting and polishing also involves a good amount of water. As per the documents filed by Waaree Energies, Premier Energies, Saatvik and Vikram Solar with SEBI, these firms required multiple approvals ranging from 17-20. These approvals range from nod from the State and Central Pollution Control Board, Ministry of Environment, Forest and Climate Change among others.

State laws also have demarcated the production of solar modules and solar cells differently. The Tamil Nadu Pollution Control Board considered the solar module trade under the ‘white category” and does not require environmental approvals but solar cell manufacturing is categorized under the ‘red category’ which requires special permissions.

Solar cell manufacturing is associated with several additional compliances.

Geopolitical vulnerabilities 

The latest report from the Institute of Energy Economics and Financial Analysis (IEEFA) said that in Fiscal Year (FY) 2024, India imported a record US$6.2 billion worth of PV cells and modules from

China-based manufacturers. This is a figure expected to drop by 2026 with the higher cell and module production, to be replaced by the lower-priced solar wafer imports.

This dependency on China for wafers, ingots, polysilicon and key solar cell manufacturing machinery will continue to make the Indian solar cell industry heavily reliant on the world’s solar manufacturing superpower. Any adverse effect on the trade ties with the country will adversely affect the revenue prospects and viability of these projects. While a recent thaw has been welcomed by industry, especially the promise of faster visa processing, it has come after some serious delays for solar manufacturers.

For example, Premier Energies in its RHP told its investors that in fiscal year 2022, the firm reported losses mainly due to the delay in the stabilisation and process setup of its cell line. The firm attributed this to the unavailability of specialized engineers from China. These engineers were key in installing and process stabslisation activities at the plant. It was mainly triggered due to visa and travel restrictions between the two countries.

Surender Pal Singh, Chairman of Premier Energies in an interview with Saur Energy said that solar cell manufacturing is a “processing-based trade” and requires around 4-5 times higher capital investment compared to a solar module plant.

“The trade is not simple and involves multiple complex challenges. It takes more time to establish a solar cell line compared to solar module lines. On the other hand, it also takes time to standardize and stabilize the solar cell lines to achieve the required cell efficiency. It took 5-6 months to stabilize the solar cell lines,” Singh told Saur Energy. While the current solar cell manufacturing capacity in India is close to 8 GW, Singh said that it is likely to touch 24 GW by the end of December 2025. Premier Energies has also planned to launch its new 4 GW TOPCOn cell line by December 2025.

Investments for solar cell manufacturing plants

As per industry insights, the cost of starting a new solar cell plant lies around Rs 1,000 crore per GW. On the other hand, the investment needed for starting a solar module manufacturing plant for 1 GW lies around Rs150 crore-Rs 200 crore including working capital and marketing.

However, with the mega announcements and the pending PLI committed capacities in hand, India’s solar cell capacity is likely to touch around 60-70 GW realistically by the end of 2027 or can go even beyond that.

DV Manjunatha, MD of Emmvee, another solar cell maker based in Karnataka told Saur Energy that the industry suffers from several challenges beyond CAPEX. “Beyond CAPEX, the requirement of skilled manpower having expertise in solar cell technology is also paramount. Besides this, changing solar cell technology is another challenge that has made the solar cell business challenging.” Emmvee is one of the early adopters of TOPCOn solar cells in India with a capacity of 2.5 GWp.

“Solar cell lines take longer timelines when it comes to actually start producing cells for despatch. It is ideally 24 months or more. So anyone who is setting up the plant now will find it tough to make solar cells before April 1, 2026, the date fixed for the introduction of ALMM alike scheme for solar cells in India,” a leading solar module maker from Gujarat told Saur Energy.

“Government is putting pressure on every manufacturer, encouraging every manufacturer to set up a cell line.  Once we have sufficient capacity, ALCM will be in place”, said Chetan Shah, Chairman and MD of Solex Energy to investors in the latest investors call. 

NASDAQ-listed developer ReNew which has just started its trial solar cell production, in its investors’ presentation said that while the imposition of ALCM can eliminate the current solar cell imports it will also lead to a significant shortfall in cell capacity. It projected the demand to hit 20-30 GW when ALCM comes into action.

An August 2024 report from SBI Caps said that the cell level, production was only around 4 GW (in FY24), as against consumption of 21 GW. “Even if cell capacities get scaled up, given standard usability factors of

55-60% (ratio of actual production to nameplate capacity), there is likely to remain a shortfall in cell manufacturing domestically in the years to come,” the report said.

The China factor

Even as relations mend at a slow pace with China, any disruption in the supply chain can adversely affect the whole sector, leading to delays, reduced profitability and others. China remains key to India’s solar ambitions, with almost all machinery for manufacturing and skills training needing China’s hand.

For example-China recently has issued its revised catalog of technologies which barred the export of certain items outside China. While currently, this list does not bar solar items that can affect solar cell production in India, any such change including these items can hamper the spirits and prospects of the local industry in India. The outlook here seems to be improving, however, as the Chinese government seems to have realized it is better to stay ahead on the innovation and technology cycle than try to protect technologies that might be closer to their expiry date than many realize.

Similarly, the imposition of any tariff barrier either by India or China can lead to fluctuation of the raw material, leading to higher input costs for the Indian solar cell makers. For example, the United States (US) increased the duties on imported Chinese solar cells from 25% to 50%. Any such tariff barriers on cells, wafers, and ingots can interfere with the plans of the Indian solar cell makers. This comes at a time when some solar cell makers are now demanding ALMM kind of support for wafer and ingot production in India too.

Indian cell makers also expose themselves to short-term price movements by a practice of avoiding long-term contracts with Chinese solar equipment or raw material suppliers. By placing orders based on give orders orders they receive from their clients, they remain exposed to price movements leading to excessive provisioning at a time of shortage as is the case now, where the gap between Indian DCR-compliant modules and Chinese modules has crossed 100%.

Conclusion

There is little doubt that despite hiccups, the Indian solar manufacturing sector, especially the larger, better capitalized and efficiently run firms has a great medium-term outlook for the next 2-3 years. The protectionist moves by the government like ALCM (if it is done by 2026 as indicated) are set to support the shift to cell making, in some ways making it essential, if one considers the DCR mandate for large solar projects.

As a recent report by bodies like IEEFA has also indicated,  the government can consider giving incentives for the production of solar cells, wafers and ingots beyond PLI aid to a few. A recent report from ICRA, however, said that the incoming of ALMM for solar cells can also lead to an increase in the solar tariffs in the country.

Or more simply, the cost will have to be borne by Indian consumers eventually. While India has been lucky in that the rise in domestic module costs here has been more than offset by a crash in cell and wafer costs in China, it is when the tide turns in China that Indian manufacturers will need to step up.

They probably have a window of anything between 6  months to 12 months to focus on bringing in better efficiencies and driving down costs, so that they can genuinely compete with China at some stage at the global stage. Otherwise, with module capacity set to rise to 150 GW plus by 2026 end, even today’s high margins may not be enough to keep the business sustainable. If India does get its cell manufacturing right, then the transition to further integration into wafers, and eventually polysilicon as well will be much easier as capital becomes available. Only then would the country be able to claim a real sense of energy security on the solar module side.