Customer Logins

Obtain the data you need to make the most informed decisions by accessing our extensive portfolio of information, analytics, and expertise. Sign in to the product or service center of your choice.

Customer Logins

India boosts subsidies for domestic solar module makers in annual budget

01 February 2022 Max Tingyao Lin

India intends to quintuple the size of a subsidy scheme for domestic solar photovoltaic (PV) module makers, pushing forward with the country's Atmanirbhar Bharat (Self-reliant India) strategy for decarbonizing its economy.

To help counter climate change, the world's third largest GHG emitter is aiming to have 500 GW of renewable energy capacity installed by 2030—including at least 280 GW of solar—before reaching net-zero emissions by 2070.

"This [decarbonization] strategy opens up huge employment opportunities and will take the country on a sustainable development path," Indian Finance Minister Nirmala Sitharaman told the country's parliament in the annual budget speech 1 February.

In the budget for April 2022 to March 2023, New Delhi would allocate an additional Rs 19,500 crore ($2.61 billion) to the Production Linked Incentive (PLI) program to promote domestic PV module manufacturing, Sitharaman said.

The PLI, which started with Rs 4,500 crore ($600 million) in the last annual budget, offers subsidies to selected module plants based on their sales, product quality, and local content.

IHS Markit estimates 80%-90% of India's solar components are imported, with China the main supplier. Government figures show India currently has annual production capacity of just 2.5 GW for PV cells and 9-10 GW for modules.

But the initial PLI budget will help drive the expansion of India-based manufacturers, according to the National Investment Promotion & Facilitation Agency (NIPFA), and India's capacity of integrated module plants that can convert wafer-ingots to modules is expected to reach 10 GW by the end of March 2023.

The government agency expects India's annual module manufacturing capacity to expand by 30-35 GW between 2021 and 2025, in part driven by strong demand and policy incentives.

New Delhi is hoping to generate employment opportunities and attract foreign investment as a result of expanding the PV manufacturing sector, said Amit Manohar, an investment specialist at the NIPFA.

"After a decade of innovation and cost reductions, the solar energy sector has evolved to a major source of energy, and it could potentially serve 30% or more of India's electricity demand by 2030," Manohar said.

Atmanirbhar Bharat strategy

Since 2020, Indian Prime Minister Narendra Modi has been promoting the Atmanirbhar Bharat strategy in several sectors—including renewables—to boost domestic manufacturing capacity in a post-COVID recovery.

In the budget for April 2021 to March 2022, New Delhi injected Rs 1,000 crore ($133 million) into Solar Energy Corporation of India and Rs 1,500 crore ($200 million) into the Indian Renewable Energy Development Agency. The entities are responsible for running various central government-sponsored incentive programs.

Since April 2021, only companies on an all-Indian, approved list of module makers have been allowed to bid into solar tenders sponsored by the central government.

Also, the government plans to impose a 40% basic customs duty on imported solar modules and 25% on cells from this April.

Kashish Shah, an analyst at the Institute for Energy Economics and Financial Analysis, suggested the policy initiatives' effects are likely to be compounded by supply chain issues in the global PV industry.

"Module manufacturing in India has never been more viable," Shah said last December.

With the strong policy signals, some major Indian businesses have announced large renewable investment programs that place a strong focus on solar energy.

Having set a target of building 100 GW of solar capacity by 2030, Reliance Industries last year said it will launch an integrated PV panel plant in Jamnagar after acquiring REC Group for $771 million. The plant is expected to have an initial capacity of 4 GW per annum before eventually ramping up to 10 GW.

In January, Reliance, India's largest publicly traded company by market capitalization, announced renewable investment initiatives totaling Rs 595,500 crore ($80 billion), and a substantial proportion of the money will be used to develop manufacturing facilities for PV modules, electrolyzers, batteries, fuel cells, as well as hydrogen and low-carbon energy projects in Gujarat over the next 10-15 years.

Rival conglomerate Adani Group plans to invest $50 billion to $70 billion in decarbonization projects in the next decade, including $20 billion in renewable energy generation. It aims to have a solar manufacturing capacity of 2 GW per annum by the end of March 2023.

While the government's policies are prompting more investment in domestic manufacturing, IHS Markit Renewable Analyst Ankita Chauhan warned of short-term disruptions to solar installations in the country.

"Current domestic manufacturing is not sufficient to meet the domestic demand, and it may take another three to five years to build it up," said Chauhan, adding that the policies favoring Indian manufacturers will push up overall costs, and restrict vendor choices for procurement and project timelines.

Show me the money

In the latest annual budget, the Indian government also said it will improve recycling, promote agroforestry, adopt a battery swapping policy for electric vehicles wherever charging networks are not viable, and replace 5%-7% of the coal used in thermal power plants with biomass pellets, among other decarbonization measures.

Sitharaman said India will issue sovereign green bonds in the coming fiscal year to fund "green infrastructure" in the public sector, without elaborating.

Official data showed India had 150.5 GW of renewable capacity installed in November when large hydropower projects were taken into account. This means annual capacity additions of 40-50 GW will be required to meet the government's 500 GW target by 2030.

"On a very conservative capital funding calculation … the investment required for achieving the target is approximately $210 billion," said Manohar, adding that both public and private stakeholders need to contribute.

In a note published last month, IHS Markit analysts estimated India will need more than $28 billion in annual investment to reach the 2030 goal, compared with average spending of $7 billion in the past five years.

"Project developers are tapping international capital markets to access low-cost financing, but the government needs to improve regulatory transparency, introduce a uniform green taxonomy, and provide targeted interventions to improve access to low-cost international capital," the note said.

Aside from putting money into low-carbon generation capacity, researchers at the Lawrence Berkeley National Laboratory in the US said Indian stakeholders will need to invest $40 billion in 63 GW of battery storage to ensure grid stability.

Still, they believe renewable expansion will be the cheapest overall option in meeting India's rising electricity demand.

"Dramatic cost reductions over the last decade for wind, solar, and battery storage technologies position India to leapfrog to a more flexible, robust, and sustainable power system … for delivering affordable and reliable power to serve demand that will nearly double by 2030," they said in a study published last December.

Posted 01 February 2022 by Max Tingyao Lin, Principal Journalist, Climate and Sustainability


Follow Us

May 11

RT @SPGlobal: Essential Intelligence from S&P Global helps you dive below the surface. Because a better, more prosperous world is yours for…

{"items" : [ {"name":"share","enabled":true,"desc":"<strong>Share</strong>","mobdesc":"Share","options":[ {"name":"facebook","url":"","enabled":true},{"name":"twitter","url":"","enabled":true},{"name":"linkedin","url":"","enabled":true},{"name":"email","url":"?subject=India boosts subsidies for domestic solar module makers in annual budget | IHS Markit &","enabled":true},{"name":"whatsapp","url":"","enabled":true}]}, {"name":"rtt","enabled":true,"mobdesc":"Top"} ]}
Filter Sort