As Solar Exports See Striking Surge, Indian PV Manufacturers Face New Challenges

China  continues its global domination when it comes to the solar supply chain. The leader brought online a whopping capacity of 87.41 GW of new solar power in 2022. As per an IEA report, it  contributed to nearly 90% of solar PV modules manufacturing capacity in 2022. The report further states that this Chinese supply chain domination will continue until 2030. It is the undisputed leader in the solar industry with major economies relying on it for imports. Underlining this, major Chinese solar firms have rung up record profits for 2022, feeding a further capacity expansion to the extent that now, the fear is for oversupply.

India is no exception and it also meets a large part of its requirements from its Asian neighbour.  The country imported $3 billion worth of solar panels in 2021-22, 92% of which came from China. That figure dropped to under 60% in 2022-23, due to tariffs and other measures taken by the government.

Even though India is still dependent on solar imports to make up for shortages in its supply chain, the exports narrate a more optimistic story, for it has begun to cement its reputation as an exporter in the PV industry. Especially for solar modules. The numbers are a testimony to this. A report by ICRA has hinted that the country’s solar cell and module exports by domestic OEMs was INR 8840 cr in FY22-23 as opposed to INR 1819 cr in FY22. This is a 364 percent surge in India’s solar exports!

The notable rise in exports can be attributed to a number of reasons…

What Catalysed the Domestic Industry

The notable increase in solar exports from India has been catalysed by a string of policy measures aimed at giving an impetus to the domestic solar industry in India, and such initiatives are bearing fruit. The domestic manufacturers, which, up until now were mostly looking west for imports, are gradually changing the narrative, becoming self-sufficient, by constantly ramping up manufacturing capacities. In fact, if trends and projections are anything to go by, reports unanimously agree that India could be self-sufficient by 2026, crossing over 100 GW.

To begin with, the imposition of Basic Customs Duty (BCD) has played a key role in discouraging imports and instead encouraging domestic players to take the indigenous route.

And then, of course, the PLI Scheme (Production Linked Incentive) has been instrumental in furthering domestic capacities. Tranche II of PLI scheme seeks to grant 15.4 GW of manufacturing projects from  polysilicon to module manufacturing capacity. It aims to achieve this by the development of local polysilicon development.

Another initiative intent on augmenting domestic capacities, of course is ALMM. The Ministry of New & Renewable Energy (MNRE) has come up with a number of reforms in its ALMM mechanism for Solar Photovoltaic Modules. The reforms are primarily aimed at reducing cost to solar PV manufactures, time between application to enlistment as well as compliance burden and increasing ease of doing business in the whole ALMM process, an increase in ALMM enlistment validity from 2 years to 4 years. As on May 2023, the ALMM list consists of 91 no of module manufacturing facilities (all domestic) with their aggregate solar PV module manufacturing capacity of 22,389 MW per year- a number that looks promising. ALMM has also nudged domestic manufacturers towards producing higher efficiency equipment, by raising the bar on minimum levels.

Gyanesh Chaudhary, Chairman & MD, Vikram Solar, one of India’s largest solar module manufacturers, which also has manufacturing units in the US, having recognised the potential that the country offers, opines “The imposition of a high customs duty of 40% on imported solar modules, particularly from China, redirected demand to domestically manufactured solar panels, leading to a notable increase in exports. Additionally, the government-mandated Approved List of Models and Manufacturers (ALMM) policy instilled confidence in overseas buyers, resulting in more export orders for Indian solar modules.”

The PLI Scheme, in addition to aiding with domestic capacities, has also helped vertical integration of the Indian value chain in India. Though India has made clear its ambitious goals, the supply chain constraints cannot be looked away from. The country lacks in local polysilicon, wafers and even cell development,

The bidding trajectory that envisions 50 GW renewables every year over  the following five years (5) years, will further accelerate capacities, creating demand and paving the path for RE players to participate on a greater level domestically. The idea of domestic content requirement (DCR) for major government solar schemes is another step that sets sights on accelerating the domestic PV industry.

The result? The numbers speak for themselves. There has been an 82% downturn in imports in the period of H1of 2022 to H2 of 2022.

The Headwinds

Though the numbers are looking up, reflecting a slide in imports, increase in exports, the challenges persist with regards to supply chain bottlenecks in the country.

To begin with, there continue to be gaps between supply and demand, as a result of which projects are constantly delayed with contentions over tariffs and PPAs. As mentioned before, the Indian PV supply chain lacks in local polysilicon manufacture, ingots, wafers. China is a formidable force in polysilicon and shows no signs of stopping anytime soon. However, the rate at which the Indian PV industry is recording growth and manufacturers filling in gaps, thanks to the favourable government initiatives, there is immense hope.

US: A Favoured Destination for Indian PV Exports

Indian PV manufacturers are realising the potential in western markets and tapping into them. The USA, in particular, has emerged as the top spot that Indian manufacturers are eyeing for exports.

The numbers are too strong to not take note of. In H122, the exports to the USA stood at $18.86 million. In H123 (barring June 2023), they are at $US 772 million.

Several factors have helped script India’s success story in the USA.

For one, introducing the Inflation Reduction Act in the country has created massive demands as players are raising ambitions with tax credits in place.

The massive ambitions, though have rung in substantial exports from India to  USA, could also prove to be detrimental for India’s export figures as the IRA promises immense support to and encourages domestic manufacturing, which, given that it has, 20 GW of announced solar cell manufacturing facilities in the US, could wipe out the need for dependence on any country.

Another major factor that has pushed the US into choosing India for imports over China is the restrictions that the US has imposed on imports from China, whose reputation has suffered with the exploitation of the Uyghur Forced Labor. The USA’s UFLPA’s import control provisions have put serious curbs on permitting imports from China, especially polysilicon and solar panels.  Thus, the USA is now looking towards India to help with its requirements.

Bharat Bhut, Founder, Goldi Solar, believes that technological strides made by the Indian PV industry have compelled Westerners to turn their attention to the country, “Indian manufacturers have made significant advancements in their solar panel technology, from conventional polyfiber busbar modules to half-cut high-efficiency panels featuring multi-busbar technology. These advanced panels are always in demand within the European and US export markets.”

Furthermore, Indian firms have substantially increased their manufacturing capacity to a gigawatt scale. This expansion has prompted them to adopt exports as a strategic approach.

In the USA market, a duty is levied against China for importing solar panels. In contrast, India can export solar products to US with nil or minimal duty against China, providing it some price protection. Additionally, many countries, the US includes, are aiming to reduce dependence on China and diversify supply chain, especially following COVID 19.

Concludes Gyanesh, “Indian manufacturers capitalized on this opportunity, supplying solar modules at competitive prices to the USA, leading to a substantial increase in exports. Additionally, India’s solar module industry garnered interest from European markets, with ongoing dialogues indicating the potential to surpass Chinese module suppliers in Europe, opening new avenues for Indian exports.” Vikram Solar has also announced plans to manufacture in the US now.

Gyanesh also credits the EPCG for the surge in solar exports, “The Export Promotion Capital Goods (EPCG) scheme further incentivized manufacturers to focus on exports. By setting up new production lines with imported machinery and exporting a certain share, companies could claim duty benefits and prioritize export markets.”

Meanwhile, Indian solar manufacturers continue recognising the opportunity and potential in the USA market. Saatvik has plans for a 1.5 GW factory in the USA. Technologies such as TopCon available here are manufactured in India. Recently, Vikram Solar also picked Colorado for its 2 GW solar panel factory. Indian inroads into the US solar market have certainly helped its reputation in the region.

Following USA, Indian manufacturers are also exporting proactively to Europe, which, much like USA, is curbing imports from China and witnessing a solar capacity boom. Africa is another favoured destination for exports for Indian manufacturers.

Swelling Domestic & Export Ambitions

 On the back of favourable policies, domestic players are ramping up production and units. Vikram Solar, which has supplied solar PV modules to customers in 32 countries and shipped over 600 MW capacity solar modules across the world, has current export portfolio (executed + under commissioning) at close to 1 GW. The firm has  nearly doubled exports in FY 22-23 compared to the previous financial year. Vikram Solar aims to expand its production capacity from 3.5 GW to an impressive 7.9 GW in the next few years. As part of this expansion plan, the company has setup a new facility in Tamil Nadu with 1.3 GW capacity for solar PV module manufacturing and working to integrate solar cell manufacturing capacity.

Goldi Solar, which also majorly exports to the USA, at the same time, has expanded its capacity to 2.5 GW, with plans to further increase it to 4 GW within this year. As part of its business strategy, the firm aims to export a significant quantity of solar panels to overseas markets, it informs. Bharat further sheds light on this, “In terms of domestic production, our capacity has witnessed substantial growth compared to the previous year, reaching 2.5 GW, and we are on track to achieve 4 GW by September 2023., The domestic market has shown significant demand, particularly within the utility-scale segment. The implementation of the Basic Customs Duty (BCD) has led many utility power developers to adjust their procurement plans and resources from domestic manufacturers. The utility-scale sector has been a major driving force behind our capacity expansion to multiple gigawatts.”

Navitas Solar has also been able to successfully expand domestic capacities. Tells Vineet Mittal, the firm’s Founder & Director, “Our production capacity was 200 MW p.a. and in 2022 we have expanded to 500 MW p.a. In this current manufacturing capacity of 500 MW p.a., we can manufacture modules up to 10 Bus Bars from 5 to 600 watts per panel. But, in the new manufacturing line, we can manufacture modules up to 20 Bus Bars which can generate power up to 720 watts per panel in Mono PERC Half Cut as well as TOPCon technologies,” further affirming Bharat’s views on the advancements being made by Indian PV manufacturers.

Others Like Adani Solar and Waaree Energies enjoy tier 1 status on measures like the Bloomberg rankings of solar manufacturers, helping them export to these markets.

Conclusion: While the numbers look extremely good when compared to 2021-22, one has to warn that the first signs of a slowdown in exports are already here. From reports of an inventory glut in Europe to price drops by Chinese makers, Indian exporters will not find it easy to sustain the growth rates of last year. It is an unfortunate reality that economics usually trumps everything in these markets, and to that extent, price drop below the 18 cents per watt level will not help the cause of the Indian manufacturers at all. Being dependent on Chinese suppliers for key inputs , be it cells or wafers, it is obvious they need the help of tariffs or special preference to overcome the Chinese threats. The only hope is that a much more stronger domestic supply chain in the next two years will enable more efficiencies, helping Indian players become world players in their own right.

Beyond 2025, of course, is the threat of counter actions in both the US and Europe, as they seek to provide some cover to their their newly minted manufacturers. One way out is for top Indian manufacturers to set up at least module making operations in these markets, as these can be set up much more quickly, as we already see.