16 May 2016 | BRIDGE TO INDIA
Earlier this month, the Ministry of New and Renewable Energy (MNRE) published an update stating that India’s cell and module manufacturing capacity now stands at 1,212 MW and 5,620 MW respectively (refer). These numbers appear respectable in the context of India’s solar power generation capacity but the average size of a cell and module manufacturing line in India is just 86 MW and 69 MW respectively. In comparison, module production capacity of Trina Solar is expected to surpass 6 GW by the end of this year, higher than all 81 Indian module manufacturers put together.
- The Indian government is committed to support domestic manufacturing and is working on a new policy on this front
- Despite commitments from several leading industry players and an improved demand outlook, Trina Solar and Adani Group are the only parties still considering domestic manufacturing plans in earnest
- It remains to be seen if the planned capacities can become genuinely globally competitive but Scale being a key determinant of competitiveness, outlook is not very promising for Indian manufacturers despite the solar power generation business going through a boom phase.
The Indian government has lost against the US at World Trade Organization (WTO) on defending domestic content requirement for solar projects, but it is not willing to back down. In fact, the government is in the process of filing counter cases against the US to bring it back to the negotiation table (refer). However, we remain firmly of the opinion that imposing anti-dumping duties on imports or providing assured demand for domestic manufacturers is not a sustainable basis for solar manufacturing sector in India. It is worth noting that last May, during Prime Minister Narendra Modi’s visit to China, 3 MoUs were signed for solar manufacturing between Trina Solar, JA Solar, Canadian Solar and Welspun Energy, Essel Solar, Sun Group respectively (refer). Separately, Adani Group had signed an MoU with SunEdison to set up a large integrated solar manufacturing facility in Gujarat. As we had surmised at the time, none of these discussions have led to concrete investments so far (refer). Amongst all these players, Trina Solar and Adani Group are the only parties still considering domestic manufacturing plans in earnest despite the fact that demand outlook for modules in India has improved tremendously over the last year.
What a fundamentally competitive manufacturing sector needs is a thriving ecosystem, access to leading technologies, efficient infrastructure and low cost capital. None of these measures are easy to implement but strong domestic demand and a committed government can make a big difference. Meanwhile, the government is also working on a policy to boost large scale manufacturing for solar in the country (refer).
Our recent CEO survey (refer) findings were largely positive about the potential of domestic manufacturing in India but 60% of the participants don’t expect India to have any fully integrated manufacturing line even by 2022.
Going forward, we expect a handful of serious players, most likely Trina and Adani Group, to make significant investments in the segment partly to exploit the opportunity arising from anti-dumping duties imposed by USA and Europe on Chinese modules. But it will remain to be seen if their facilities can become genuinely globally competitive.