India’s Solar Sector Buoyant On New Growth Trajectory

FY24-25 is likely to be remembered as a milestone year for India’s solar sector. Not only is capacity addition this year expected to hit a new high, but the year is also likely to see the 25 GW mark breached for the first time, with almost 15 GW added in H1 itself. Significantly, the spike is happening without a corresponding surge in module imports from China, as a raft of new and old domestic suppliers with increased capacities step up to fill the void, after ALMM conditions mandating DCR modules kicked in from April this year.

Hyderabad-based Premier Energies, one of the select few Indian solar cell manufacturers recently created ripples in the stock market after it became the second focused solar cell maker from India after Websol Energy to list at the mainboard exchanges in India. The firm saw its stock price rising over 130% on listing before settling in with a more sedate 115% gains for investors.

With less than 6 GW cell making capacities until as recently as March 2024 versus module capacity of over 50 GW, domestic cell makers today are in the seller’s market of dreams. Of course, the picture is changing at an unprecedented rate since then.

Current players in solar cell manufacturing in India include Premier Energies, Websol Energy, Jupiter International, Adani Solar, ReNew, Tata Solar and Emmvee. Currently, the majority of the solar cells used in the domestic solar module manufacturing are imported from foreign countries like China after paying the government-imposed Basic Customs Duty (BCD). That is expected to change significantly by the end of next year as the full impact of cell manufacturing expansions and the possible inclusion of cells into the ALMM regime are felt.

Cell making is a much more complicated manufacturing process, which explains the focus on module manufacturing until recently. India currently has more than 100 solar module makers. These include 93 solar module makers listed under the government’s Approved List of Models and Manufacturers (ALMM), a hitherto module focused list. That is also why manufacturing the precursor to solar cells , solar wafers is non-existent in India currently, although some initial progress has been on both the wafer front, ingots and polysilicon manufacturing by Adani Solar.

But when it comes to cell making, manufacturers are finally comfortable enough about their ability, and the market viability to make commitments. More importantly, any manufacturer with a module making capacity of 2 GW can no longer count on domestic suppliers to provide cells to remain DCR compliant, with strict traceability norms in place. Plus, the overhang of cells being added to ALMM.

Expanding solar cell market

For example, New Delhi-based module maker Gautam Solar recently announced starting their new vertical of solar cell manufacturing with a capacity of 2 GW with its new plant in Haryana. Gautam Solar is targeting a module making capacity of 4 GW by year end.

India’s solar hub in Gujarat is seeing a flurry of module makers plan cell making as well. From initial plans at Surat-based Rayzon Solar to almost every module manufacturer with a 2 GW plus capacity have announced, or are on the verge of announcing solar cell manufacturing lines.

Emmvee Group currently operates with a 3 GWp capacity for module manufacturing, focusing on TOPCon and Mono PERC modules, along with 2.5 GWp of TOPCon cell manufacturing capacity. The company is now on track to expand our module capacity to 5 GW by November 2024.

“Our 2.5 GWp of TOPCon cell manufacturing facility is the first of its kind in the country. Looking ahead, our roadmap includes a substantial scale-up, targeting 20 GWp for both module and cell capacities. India has immense potential to become a global solar manufacturing hub, and we are witnessing significant investments in upgrading technology, expanding capacity, and strengthening the overall supply chain,” Suhas Donthi, President & CEO of Emmvee Group told Saur Energy.

The most notable is India’s largest module maker, the IPO-bound Waaree Energies, which is expecting to commission its 5.4 GW cell line this year. Waaree, also has plans to start an ingot and wafer manufacturing facility in Odisha post its much awaited IPO. Reliance with its Gigafactories in Jamnagar is also piloting trial runs currently before starting actual manufacturing this year or early next year.

Shravan Gupta, Managing Director (MD) of Cosmic PV told Saur Energy that India’s solar cell capacity is likely to go up to 50GW-60GW by the end of 2025-26 from the existing capacity of around 10GW. While that sounds too optimistic for now, Gupta knows a thing or two about the market, operating out of the solar manufacturing hub of India, Gujarat. Cosmic PV itself has been expanding module capacities furiously from 600 MW to 1.4 GW, with plans underway to expand further to 2.4 GW by 2025-26.

Is it All Golden for India solar makers?

India, like the rest of the world, witnessed one of the lowest prices of solar cells and modules this year with the globally dominant Chinese solar cell and module output testing new floors every month. The announcement by the Indian government in March 2024 to re-impose ALMM, gave a further jolt to the Chinese solar module makers doing solar business in India, as they effectively found themselves shut out from over 90% of the market.

The launch of PM Surya Ghar rooftop scheme this year also raised demand in the residential rooftop solar segment for DCR solar cells and domestic solar modules, backed by an increased subsidy and a massive target of 1 crore households. In another protectionist measure, Union Finance Minister Nirmala Sitharaman announced imposing Customs Duty against the import of solar glass.

Several solar module makers, Saur Energy spoke too, attributed FY25 as a “golden year”, “transformative period” and a “the best year ever” for the Indian solar makers. This is amply borne out from the financial results, with most showing extraordinary to healthy growth rates over FY23, with an even better rise in profitability.

“These measures have reduced dependency on imports and encouraged domestic production. Additionally, the reduction in Chinese solar cell prices has allowed Indian manufacturers to procure raw materials at competitive rates, further boosting their competitiveness. Therefore, FY25 can be considered a golden period for Indian solar module manufacturers, as these factors collectively enhance their market position and profitability, “Vineet Mittal, Co-founder and Director of Navitas Solar told Saur Energy.

A close analysis by Saur Energy indicated that a basket of listed solar manufacturing firms grew by 120% in value in the last one year. The confidence of the investors and the industry emanates from the strong underlying growth and policy support.

Expansion mode

With an ambitious target of 500 GW of non-fossil fuel energy by 2030 and an annual tendering trajectory of 50 GW by the government backed by protectionist measures, the Indian solar module makers are now expanding. However, it is important to emphasise that while current talk, and focus remains on 2030 targets, in the longer run, those numbers will probably pale in comparison to what is actually needed by, say, 2050.

2030 is a key part of the transition journey to 2050, and that is why talk of impending overcapacity is dismissed by many right now. Interestingly, is it an argument even the Chinese, with a 1.2 TW manufacturing capacity in place at a time global consumption is expected to be around 600 GW in 2024, give.

Most of the solar module makers we spoke to projected India’s likely cumulative solar module manufacturing capacity at 100 GW by the end of FY25 and around 150 GW by the end of FY26. However, notwithstanding the good times, challenges remain that can trip up the strong run being enjoyed by module makers.

Some module makers emphasised on the need to innovate and bring in new technologies to be able to cater to the higher domestic demand and ambitions of the government.

“Given India’s ambitious renewable energy targets and the increasing number of tenders, Indian solar module manufacturers need to focus on scaling up production capacity, investing in advanced technologies, and ensuring high-quality standards to meet the rising demand. At Rayzon Solar, we believe that by adopting innovative manufacturing processes and enhancing efficiency, the domestic supply can indeed be sufficient to fulfill the country’s renewable energy needs. Additionally, support from government policies and initiatives to promote local manufacturing will play a crucial role in strengthening the domestic solar module market and achieving energy independence,” Chirag Nakrani, Founder and MD of Rayzon Solar told Saur Energy.

Chinese Checkers- A Game That Can Still Change

Even with higher cell manufacturing, India remains dependent on Chinese imports for solar wafers, where China’s global stranglehold is even higher at over 90% of global capacity. This month in September, after months of sliding or stagnant prices,  some of the largest Silicon Wafer producers in China like Longi and Tongwei increased their wafer prices. Several solar makers in India are now anticipating a minor rise in the solar cell and module prices in India as they pass on the extra costs to customers. Although some opine that these minor hikes could be mitigated with better management and through some other arrangements.

“Rising wafer prices in China will likely influence the cost of solar cells and modules, potentially leading to an increase in domestic prices. Wafers account for approximately 50-60% of the total solar cell production cost, so any fluctuation in wafer prices inevitably trickles down to the module level. We do anticipate a moderate price correction in the short term, potentially 5-10% increase in solar module prices,” Tanmoy Duari, CEO, AXITEC Energy India told Saur Energy.

Duari said that he does not expect a drastic price hike in the immediate future. He added that several factors can mitigate the impact like-inventory management, diversification of supply chains, economies of scale, technological advancements and government support.

Gautam Mohanka, Director at Gautam Solar told Saur Energy, “The prices of solar cells and modules are highly influenced by the price of silicon wafers. China is the world’s largest exporter of silicon wafers and due to industry consolidation in China, the prices of solar wafers are expected to increase. Hence, in the short term, it is looking likely that the domestic prices of solar cells and modules will increase.”

“Since wafers are a vital part of solar cell manufacturing, any rise in their prices would necessarily translate into increased production costs for cells and modules. Therefore, we would likely see a readjustment to the higher domestically-oriented price if this was followed. But how much this increase may be and will vary based on a number of factors, like supply chain efficiencies as well as Indian manufacturers taking some hit in costs,” Vineet Mittal, Director of Navitas Solar said.

Keep in mind that integrated Chinese manufacturers like LONGi and Tongwei are well aware that most markets like the US, India and even Europe will find the transition to manufacturing cells and modules a lot easier than wafers. That might strengthen the case for them to seek higher margins on these, to make the most of the situation.

DCR & other challenges

Several government solar schemes like PM Surya Ghar and PM KUSUM have now increased the demand of domestic solar cells which comply with the government Domestic Content Requirement (DCR). “Currently there are only a handful of players in India who are into the production of DCR solar cells. Several solar module manufacturing companies in India are now facing the issue of availability of DCR cells, leading to delayed supplies. These DCR cells are also 4-5 times more expensive than imported Chinese non-DCR cells,” Shravan Gupta, MD of Cosmic PV Power, told Saur Energy.

Indian solar project developers said that although the demand for DCR solar cells opened new opportunities for local solar cell makers but the timely supply has been a matter of concern. That is not really surprising considering the challenge of scaling up production manifold with limited trained manpower, and a manufacturing process that is much more challenging to master and stabilise.

Naresh Mansukhani, CEO, Juniper Green, a renewable project developer told Saur Energy that even as DCR requirements are helping incubate a strong domestic manufacturing base, “However, it presents a mixed picture for developers. One significant challenge is limited supply and capacity constraints. Despite recent growth, India’s manufacturing base for high-quality solar cells and modules is still developing, and there is a gap between supply and demand. Developers often face delays in procurement, and the available modules may not always match the required specifications or efficiency standards for large-scale projects.”

Add to that the price sensitivity of Indian markets, where discoms are still not out of the woods when it comes to financial strength, and the government might find itself stepping in if the difference between domestic and global prices becomes too high. Currently, the going view seems to be that a difference of between 25-35% is acceptable in the interest of building a strong domestic capacity. The government is likely to take a much closer look at higher gaps that exist currently, post 2026.

Optimism dominates

A huge renewable target in hand and strong pipeline of tenders have given new hope for the Indian renewable players in the country. India’s biggest and key Central Public Sector Enterprises (CPSEs) like NTPC, SJVN, NLC India and others have their own mega plans for renewable projects, ensuring a strong pipeline of upcoming projects. For example NTPC aims to add 60 GW of renewable capacities by 2032. Coal India Limited, which is engaged in coal mining has also decided to add around 5 GW of renewable energy by 2030.

Talking about the tendering trajectory in India and its linkage to the direct demand of solar modules, Shravan Gupta from Cosmic PV said, “In the initial six months of FY25, we have seen 35 GW of clean energy bids getting allocated. This could lead to a total of 50 Gw to 60 Gw of solar modules. The domestic solar module market is unable to cater to this demand now. This has led to overbooking of orders for most of the solar module makers. This is good news for our industry and motivates us to expand.” Add to that the clear shift towards RTC and FDRE linked tenders, which entails even higher capacity creation to meet objectives, and manufacturers can’t be blamed for being optimistic.

What Else Needs To Be Done By Govt While the solar module manufacturers we spoke to talked in detail about the benefits from ALMM, BCD and other interventions of the government, the industry suggested several ways to boost the growth of the Indian solar industry. Some of them included- Incentives for R&D: A number of solar module manufacturers talked about the need of infusing government money in boosting the research and development (R&D) in solar module technology to make the Indian manufacturing ecosystem more robust. Some suggested linking academia with the industries. This makes sense as Chinese firms lead in innovation as well today, including manufacturing excellence. For sustained strength, Indian industry needs to come up with its own innovations to ensure it does not stay dependent. Extending PLI Scheme for smaller players: Companies like Gautam Solar and Cosmic PV Power batted for extending the benefits of PLI scheme for medium sized players too and not confining it only for few players. “Many companies are unable to access PLI benefits despite meeting the technical standards, because of the high financial thresholds, which act as a significant barrier,” Gautam Solar said. This tilt towards really large manufacturers is a fact, and can only be corrected if the government sees specific need for incentives in some segments like thin film solar perhaps, or other specialised needs. Otherwise, with the focus on scale and global competitiveness, we don’t see the govt changing stance here. Stable Policies: Some module makers demanded stable govt policies for long lasting effects. They said that consistent policies can lead to creation of a predictable business environment. This has been a long held grouse against the government , which has found it convenient to regularly tweak policies and conditions up untill now. Keeping in mind that the industry has definitely moved to another level today, we believe a stable policy environment is not just a possibility, but will be provided. Tax breaks/subsidies: By implementing targeted incentives such as tax breaks, subsidies for technology upgrades, and streamlined regulatory processes, the government can accelerate growth and innovation in the sector, Rayzon Solar said. Even state specific incentives are needed to ensure a wider spread of solar manufacturing, said some experts. Extending ALMM for ancillary: A crucial area that also requires attention is the Approved List of Models and Manufacturers (ALMM) policy, particularly for ancillary components. “Expanding the ALMM to include ancillaries like cells, glasses junction box and other essential components. Such measures would not only strengthen the domestic industry but also contribute to India’s renewable energy goals and its position as a global leader in clean technology, a solar module maker said. In effect spreading ALMM to the BOS for solar plants. However, that seems unlikely, save for possible action on solar inverters in the future post 2027 perhaps, considering the Chinese dominance in inverters as well. However, India is a long way from any sort of strong counter there yet.