"Solar imports could soar to $30 bn as India targets 2030 renewable goals'
- India’s ambitious goal of installing 500 GW of renewable energy capacity by 2030 may drive the country’s annual solar equipment imports to around $30 billion due to heavy reliance on Chinese goods, Global Trade Research Initiative (GTRI) has said
Highlights:
- India’s ambitious goal to install 500 GW of renewable energy capacity by 2030, with solar power expected to constitute over 80% of this, could lead to an annual solar equipment import bill of around $30 billion, largely due to its heavy reliance on Chinese imports.
- The Global Trade Research Initiative (GTRI) has raised concerns over the country's ability to meet this target without developing a robust domestic solar manufacturing ecosystem.
Heavy Reliance on Chinese Imports:
- China dominates the global solar market, controlling 97% of polysilicon production and 80% of solar modules. In 2023-24, India imported $7 billion worth of solar equipment, with China accounting for 62.6%.
- This dependence poses a significant challenge to India’s renewable energy goals, as it risks exposing the country to supply chain vulnerabilities and volatile pricing.
India's Growing Solar Capacity:
- India has made significant progress in solar installations, adding 15 GW of capacity in 2023-24, bringing the total to 90.8 GW by September 2024. However, to meet its 500 GW renewable energy target by 2030, India will need to install 65-70 GW annually. Achieving this goal will require addressing the import-heavy nature of its current solar manufacturing ecosystem.
Challenges in Domestic Manufacturing:
- India’s solar manufacturing sector remains in its infancy, with 90% of production focused on assembling modules from imported solar cells, and only 15% local value addition. Domestic production is limited, with only a handful of companies manufacturing solar cells on a commercial scale, and none producing cells from scratch using indigenous materials.
- The GTRI report highlights key areas where India lacks capabilities, including:
- Polysilicon production (an energy-intensive process)
- Wafer production (critical for solar cell manufacturing)
- Key components such as aluminium frames and glass
- Without a substantial shift in local manufacturing, India’s dependency on imports could jeopardize both its clean energy transition and its efforts to reduce trade deficits in this sector.
The Impact of Chinese Predatory Pricing:
- Chinese manufacturers are able to offer predatory pricing due to their scale and industrial capacity, which has undermined India’s domestic manufacturing initiatives, particularly under the Production Linked Incentive (PLI) scheme.
- India has invested over $4.5 billion in the PLI scheme to support solar manufacturing, but Chinese dominance continues to pose a challenge to building a self-reliant industry.
Government Measures to Reduce Dependency:
- To mitigate its reliance on Chinese imports, India has imposed 40% customs duties on solar modules and 25% on solar cells. However, imports from ASEAN countries like Vietnam, Malaysia, and Thailand remain exempt under the India-ASEAN Free Trade Agreement, creating another supply-side challenge.
Recommendations for Boosting Domestic Manufacturing:
- The GTRI report outlines several key steps India must take to reduce its dependency on imports and boost domestic production:
- Investment in upstream solar production: India needs to focus on developing capabilities in polysilicon production, wafer production, and other upstream solar manufacturing processes.
- Expansion of the PLI scheme: Enhancing the scope of the PLI scheme could incentivize more domestic production.
- Collaborations with global partners: Working with countries like the US, the EU, and Japan to establish large-scale solar manufacturing facilities in India.
- Developing a skilled workforce: India will need to train a workforce adept in handling advanced solar manufacturing technologies.
Prelims Takeaways:
- Global Trade Research Initiative (GTRI)
- Economic Survey 2023-24
- Production Linked Incentive (PLI) scheme.