Downside Risks To India’s Solar Ambitions

India’s Solar Power Capacity To Grow To 140 GW By 2031, Says Fitch Solutions

Downside Risks To India’s Solar Ambitions

India’s current operational solar cell production capacity is around 2.5 GW and module capacity is between 9 GW to 10 GW annually, which is not enough to meet the demand for solar, according to Fitch Solutions as developers still prefer imported products. (Illustrative Photo; Photo Credit: Juice Flair/Shutterstock.com)

  • India’s solar power capacity is expected to grow by an annual average of 11% from 59 GW in 2022, to 140 GW in 2031
  • Yet despite government support, Indian domestic PV manufacturing may not be enough to suffice growing demand for solar
  • Fitch Solutions analysts believe developers prefer to buy expensive imported equipment over locally produced goods
  • Indian PV manufacturing industry needs to focus on both quality and quantity to meet the market demand

Fitch Solutions Country Risk & Industry Research estimates India’s solar power capacity to grow to 140 GW in 2031 by an annual average of 11% from 59 GW in 2022, but fears supply and demand mismatch if domestic PV manufacturing doesn’t deliver on quantity and quality. However, that also means India will fail dramatically in meeting its original 100 GW by 2022 target.

The analysts base their forecast on favorable response to recent solar power tenders with the presence of big names as NTPC, Azure Power, Tata Power and ReNew Power among others.

To meet the demand from solar developers, the government is supporting domestic solar PV manufacturing by way of imposing taxes and duties on imported equipment including the Basic Customs Duty (BCD) that’s due to be imposed from April 1, 2022 (see India Imposes Basic Customs Duty On Cells & Modules).

There is also financial support offered in the form of INR 45 billion Production Linked Incentive (PLI) scheme of the federal government whose budget is to be scaled to a total of INR 240 billion which should lead to several GWs of domestic capacity production coming up over the next few years (see Solar PLI Budget Set To Increase).

India has a target to install 175 GW renewable energy capacity by December 31, 2022 and increase it to 450 GW by 2030, to which solar’s contribution is estimated at 100 GW and 280 GW respectively.

However, Fitch Solutions’ analysts believe the local manufacturing industry is not yet ready to cater to the growing demand for solar. Considering imported panels to be better in quality, developers still prefer imported equipment over locally produced goods. In 2021 alone, the country imported more than 80% or 604 million units of solar cells from China, it said.

It remains to be seen whether domestic manufacturers can match this amount imported. According to the Indian Renewable Energy Development Agency (IREDA), India has an operational domestic solar cell manufacturing capacity of around 2.5 GW and between 9 GW to 10 GW for solar modules on annual basis.

“Going forward, as duty taxes grow higher and policies on solar equipment imports grow stricter, domestic manufacturers will need to accelerate their manufacturing quantity and product quality,” opine the analysts. “If domestic manufacturers are unable to meet the quantity and quality required by developers, India risks a supply and demand mismatch.”

About The Author

Anu Bhambhani

Anu Bhambhani is the Senior News Editor of TaiyangNews

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