Page 131 - CW E-Magazine (6-5-2025)

Point of View

Fiscal and policy support key to building integrated

photovoltaics industry in India

The chemical industry has an indispensable role in the
deployment of new energy technologies, in particular solar
and wind. Depending on the specifics of the technologies,
the material inputs vary, but it is no exaggeration to say the
chemical industry underpins the renewable energy sector, in
general, and solar, in particular.

Steady rise in global installed base
Photovoltaic (PV) cells – that convert incident solar
energy into electricity that can be consumed immediately,
stored in batteries, or piped into electricity grids – have seen
spectacular growth in the last decade, and continue to do
so. This has been driven by technological developments that
have raised their efficiency, as also massive investments in
manufacturing infrastructure – well ahead of demand. The latter has had the predictable consequence of lowering prices, and while this is not
good news for the PV cell or module producers, user industries have greatly benefitted.
According to estimates by the International Energy Agency (IEA), a Paris-based thinktank, global cumulative PV capacity grew to 1.6-TW
(Terawatts) [1-TW = 1,000 Gigawatts (GW)] in 2023, up from 1.2-TW in 2022, with 446-GW of capacity commissioned in the year. China, which
has spearheaded solar energy deployment and integrated module manufacturing at a scale unmatched by any other country, alone installed
235-GW (~60% of global installations) – almost equivalent to the total installed base in Europe, the world’s second largest market, taking its
cumulative installed base to 665-GW.

India’s growth in PV capacity has not been steady largely due to issues related to administrative procedures, grid access and financing. But in
recent years, the growth has been largely on an upward trajectory. In 2023, India had a slightly slower year (compared to the previous) with 16-GW
of new capacity added, taking its installed base to close to 170-GW. This puts India at fourth place after (China, EU, USA) and just ahead of Japan.
A big chunk (65%) of the installed PV base is in utility scale projects.
Tackling China’s dominance
PV markets have been severely oversupplied for several years now, and stocks at producers at the end of 2022 reached a volume above that of
the installed base in Europe and US combined. This situation worsened further in 2023, and by the end of the year unsold stocks were estimated at
150-GW, resulting in massive price drops along the value chain. According to S&P Global Commodity Insights (S&P), a consultancy, solar module
prices fell 54% between 2022 and 2024 and could go down even further. Very soon, prices could be a 1/1,000 the level in 1977 – greatly expanding
th
affordability for consumers.
In 2023, China produced approximately 91% of the world’s polysilicon for solar PV modules, while India had zilch. As of 2024, China produced
97% of the world’s ingots and wafers, 80% of the cells, and 80% of the modules. The IEA estimates module manufacturing costs in China are
10% lower than in India, 20% lower than in the US, and 35% lower than in Europe. Large variations in energy, labour, investment and overhead
costs explain these differences.

For Indian producers (and others outside of China) looking to invest in integrated PV cell/module making this dominance has severely challenged
project viability, and restricted manufacturing to just panel assembly.

Policy and fiscal support
Governments – keen to build integrated PV manufacturing to ramp up energy security – have responded to industry pleas with fiscal and policy
support. In India, a Production Linked Incentive (PLI) Scheme is available for industry participants and provides fiscal incentives in the early years
of operations, as also capital subsidies. The two phases of the PLI scheme had allocations of Rs. 4,500-crore and Rs. 19,500-crore, respectively, to
enable 39.6-GW of manufacturing capacity across 11 companies.

Mandates also require government and government-assisted projects – which represent about 70% of India’s module demand – to
source India-made modules. India also has imposed a 40% Basic Customs Duty (BCD) on imported solar modules and a 25% BCD on

Chemical Weekly May 6, 2025 131

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