Sustainable Manufacturing is Needed to Realize Sustainable Energy Vision

India’s renewable energy push is a commendable shift that promises to bring socio-economic change and drive progress. Government support has been the primary force behind this growth and scaling from 10 MW of solar capacity in 2010 to 13 GW in 2017. Besides utility scale installations, Government support has spurred a growth trend within rooftop solar sector, showing a 72 MW per year to 227 MW per year growth since 2013. Presently, India has near about 1,660 MW of installed capacity in rooftop solar sector. And expected 90% year-over-year growth expectancy within the solar sector, promised to increase rooftop solar installed capacity.

Although, solarisation within the country is growing, our green energy future is still not in our control. Government initiatives like Make in India, Power for All, Surya Mitra, and even the 100 GW target by 2022 revolves around immediate solarisation and socio-economic growth of the country. However, as our present solar growth depends on importing solar modules, the core purpose behind green energy shift still remains unrealized.

Continuous Solar Module Imports and Its Effect

India has imported approximately 161.5 million solar panels in FY 2014–15 amounting to almost $821mn, which is a 15.45% ($ mn) growth over last year’s expenditure of $711.12 mn. In FY 15-16, the expenditure jumped to $2.3 bn and within FY16-17, India spent $3.2 billion in solar equipment imports, which is about 35 times its solar equipment export. Records show that within April-July FY 17-18, Indian solar module import expense has already reached $1.5bn, estimated to surpass past year records. Chinese modules being 8-10% cheaper than the domestically manufactured modules are the reason behind such unwavering focus on importing solar modules.

However, increase in solar module imports has also led to drastic fall in tariff. India has seen solar tariff fall from Rs 12.76-10 per kWh in 2010-11 to INR 2.44/per unit in 2017 (near about 90 per cent fall). Decreasing solar tariff is making solar projects financially unviable, by shrinking down the ROI generation. This is scaring off investors and putting Indian solar growth on an unstable ground.

Increase in imports has also reduced demand for domestic manufacturers (8 out of 10 module suppliers within India are Chinese), which has made existing capacity utilization an unfair challenge, and capacity enhancement moot.

These practices are increasing forex outflow, allowing foreign (Chinese) suppliers more than 80% of the domestic industry, blocking the road to job creation, and pushing out India from the highly lucrative solar export market. All this is leading India to practically import the solar dream, making it costly to realize a fraction of the idea, while the primary purpose remains frozen.

Manufacturing Scenario and Its Importance

Solar energy source is free indeed, but the components used to harvest the energy (solar panels) are not. Therefore, it is easy to understand that allowing solar manufacturing industry to centralize in foreign countries, will lead India to spend money for energy just like importing fossil fuels.

Countries like- China and the US have understood this and have aggressively expanded their domestic manufacturing capacity, thus controlling the price and improving the quality of panels. With better products and cheaper price, China and the US have claimed large portions of the global market through exports, becoming leaders in the solar industry. Although, Indian Government has introduced Make in India, Power for All, and brought DCR quota projects to help increase demand for domestic manufacturers; delays in awarding projects, lack of investment in domestic manufacturing, lack of R&D have allowed limited growth in capacity enhancement and utilization.

Limited involvement in domestic capacity enhancement and utilization, will only result in limited or disproportionate growth of Indian industrial structure. Which is far away from making Indian solar industry global competitive.

The Right Decision for Growth

If the country focuses on reducing imports and utilizing domestic capacities, it will help India save up to $42 billion in equipment imports by 2030 in solar industry only. Besides concentrating on domestic manufacturing will urge in R&D development, thus helping India improve module quality and control product prices, winning a considerable position in the export market.

Expanding domestic manufacturing capacity and utilizing it can become the advantage for India, that dominant solar countries are already enjoying. It will help India develop an industrial eco-system controlling solar component supply chain, bringing in industrial growth, creating jobs, and ultimately, introduce socio-economic growth.