Viability Assessment of New Domestic Solar Module Manufacturing Units
Report by IEEFA and JMK Research
India is one of the top 10 solar module producers in the world with an installed domestic photovoltaic (PV) module manufacturing capacity of about 15 gigawatts (GW). However, India is lagging behind its biggest competitor China, in not just module manufacturing capacity but also in production of other raw materials such as wafers, cells and poly silicon. In addition, the capacity utilisation of domestic production facilities is only 40-45% and estimated operational capacity is only about 7GW. Current production capacity is only able to meet 35% of the total annual domestic demand. Even though domestic suppliers contribute only 30-35% share of all utility-scale solar installations, the situation is reversed in the commercial and industrial (C&I) and distributed segment of the market where domestic suppliers cater to nearly 60% of the market
On the export-import front in India, Chinese suppliers account for 80% of the imported modules market with the rest of the imports coming from Thailand, Malaysia, Vietnam. Since 2015, India has on average imported solar cells and modules worth Rs176bn (US$2.6bn) annually. Simultaneously, 80% of India’s market share of exports is to the U.S. The exports of each of the top 4 players – Vikram Solar, Waaree, Adani Solar and Tata – constitute 25-30% of their total trade volume. On the other hand, Chinese manufacturers, trade 66% of their production volume on average in the overseas market.
Indian Players’ Share of Exports in 2019 Module Shipments
Source: JMK Research
This report covers two distinct sets of policy framework and different industry incentive programmes prevailing in India and China. In India, in order to boost domestic manufacturing, several avenues were created under the Domestic Content Requirement (DCR) category, manufacturing linked tenders, incentives though Modified Special Incentive Package Scheme (M-SIPS), imposition of safeguard duties etc. to name a few. Whereas, the Chinese government offers cheap credit, free land, cheap loans, research funds, tax rebates, and sometimes even cash to support its manufacturing sector.
In terms of profit margins, the Chinese module suppliers are able to absorb larger shares of profit (average 4.3%) of the operational revenues compared to that of Indian suppliers (excluding Adani), who earn an average profit income of less than 3%. This is because the Chinese module manufacturers have larger-scale production facilities, low dependence on imports, completely integrated facilities of modules, cells and wafers. This is also complemented by robust research & development (R&D) and favourable government support.
Profit Comparison Between Indian and Chinese Companies
The report also analyses various components of PV module manufacturing cost, in which the Bill of Materials (BOM) has the highest share with more than 4/5ths of the total expenditure. BOM of solar modules include the cell, glass, ribbon, silicon, aluminium frame, etc, with the cell contributing the highest share in terms of component cost. For Indian manufacturers, the BOM is about 9% higher than the BOM for their Chinese counterparts for non-DCR modules (modules where imported cells are used) and about 20% higher for DCR modules. If India’s capacity utilisation could be increased to 100%, then the per watt-peak (Wp) cost can be reduced by 7-8%.
Comparison of BOM Cost for India vs China
Source: Industry Interviews, JMK Research.
Note: BOM cost for a module capacity 330 Wp, 72 cell module of 4.7 Wp.
In terms of technology adoption trends, the more advanced mono-Si PV modules had almost a two-thirds share of the entire global PV production by 2019 in terms of GW volume. Whereas in India, considering the top 7 domestic module manufacturers in 2019, mono-Si PV modules constituted only 13% of PV production, while 87% comprised of multi-crystalline (or multi-Si) PV modules. According to JMK Research, in 2020, in India, the share of mono PERC modules is expected to increase to 25-30% of all utility-scale solar installations.
Breakup by Technology for Indian Module Suppliers in 2019
From having a virtually monopolistic presence in Chinese module exports prior to 2018, demand for M2 cell-based modules has been declining at a fast pace every quarter since 2019. Conversely, in the Indian market, the domestic manufacturers have only been catering to the M2 cell-based module market.
Furthermore, about 1-3% of the gross revenue has been utilised for R&D by the Chinese players every year. In India on other hand, there is not much investment in R&D, even by the leading players. Even the government has not promoted schemes or given grants to set up facilities to promote technological innovation, a key aspect of the solar sector. However, in a recent development, the Indian government gave the nod for the introduction of a Production-Linked Incentive (PLI) scheme in 10 key sectors, including the solar PV manufacturing sector, for which Rs45bn (US$603m) is allocated for investment by the Ministry of New and Renewable Energy (MNRE) in high efficiency solar PV modules.
R&D Expenditure of Leading Chinese Companies
Source: PV Tech, Company Annual Reports, JMK Research
With reformed national priorities following the COVID-19 pandemic and India-China border issues, the solar PV industry presents an opportunity for the nation to boost its self-reliance, albeit at a cost to downstream electricity users in the form of higher resulting tariffs. Henceforth, to assess the viability of new module PV manufacturing facilities in India, this report analysis and compares in detail various critical parameters, that are imperative to aid this segment.
 For leading domestic manufacturers only, Source: JMK Research.
Click to download the full report