With Right Govt Support, India Could Compete with China in Solar Module Production

The report finds that in terms of profit margins, Chinese module suppliers are able to absorb larger shares of profit (on average 4.3%) from operational revenues compared to Indian suppliers who earn an average profit income of less than 3%.

January 06, 2021. By Manu Tayal

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India can compete with China in solar module production with the right government support, finds a new report by the Institute for Energy Economics and Financial Analysis (IEEFA) and JMK Research.

The report ‘Viability Assessment of New Domestic Solar Module Manufacturing Units’, finds current production capacity in India is only able to meet 35 per cent of total annual domestic demand.

IEEFA’s Vibhuti Garg and co-author of the report, said that “we found capacity utilisation rates of solar module domestic production facilities in India running at only 40-45 per cent and estimated operational capacity of only about 7 GW, despite having an installed domestic PV module manufacturing capacity of about 15 GW. Clearly India has the capacity to do much better.”

China is out-performing India in a number of areas, in both manufacturing and research and development.

JMK Research’s Jyoti Gulia and co-author of the report said that “China utilises between 1-3 per cent of gross revenue for solar module R&D every year. In contrast, India’s leading players provide little R&D investment.”

The report finds that in terms of profit margins, Chinese module suppliers are able to absorb larger shares of profit (on average 4.3%) from operational revenues compared to Indian suppliers who earn an average profit income of less than 3%. 

“This is because Chinese module manufacturers have larger-scale production facilities and a low dependence on imports,” says Garg.

“China also has completely integrated facilities producing modules, cells and wafers complemented by robust R&D and favourable government support.”

In terms of technology adoption trends, China’s more advanced mono-Si PV modules were reaching two-thirds of the share of the entire global PV production chain in 2019 by GW volume. 

The report noted that many Indian solar module manufacturers have announced plans to expand existing facilities.

“While the ambition is commendable, these players will face stiff competition from leading global players. Chinese firms’ aggressive capacity expansion coupled with consistent and ongoing technological advancements are yielding PV cells and modules of superior efficiency while still being cost-effective,” said Garg.

Gulia notes the government has a role to play in defining the passage of solar manufacturing going forward.

“Central government needs to provide a balanced manufacturing framework nestled in a long term strategy to assist domestic players to compete in the global field,” says Gulia.

“While only a short term solution to boost the local market, the imposition of safeguard and basic custom duties designed to increase the price of imported modules will assist domestic manufacturers. 

“Any planned initiatives should not be limited to this, however. The focus should also be on helping manufacturers become globally competitive.” 

“A self-reliant solar sector would not only cater to domestic demand but would also open new avenues of exports, especially after the COVID-19 supply chain shock that has forced numerous countries to look elsewhere for alternatives to China’s goods,” says Garg. “India could meet those global solar PV needs, with the right government support behind the sector.”

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