India undertakes massive ramp-up in solar components production

Adani Green Energy Ltd had overtaken Hong Kong's GCL New Energy to become the world's top solar developer.
Adani Green Energy Ltd had overtaken Hong Kong's GCL New Energy to become the world's top solar developer.PHOTO: ADANI GROUP/FACEBOOK

BANGALORE - An Indian firm is the world's largest solar company today.

A global ranking in September revealed that Adani Green Energy Ltd (Agel), part of the Adani Group conglomerate, had overtaken Hong Kong's GCL New Energy to become the world's top solar developer.

The five-year-old Adani's sprint to the top was possible thanks to an Indian government contract in January to build 8 gigawatts (GW) of large-scale solar capacity. The world's biggest solar offtake award took Adani's total solar portfolio to 12.3GW - roughly 70 per cent larger than GCL. One gigawatt can power over a million Indian homes.

Based out of Indian Prime Minister's home state of Gujarat, Adani has in many ways mirrored India's own interest and commitment to solar power.

In 2015, Mr Narendra Modi declared India's solar target: 100GW by 2022. That year, Adani set up its first solar project.

At the 2019 UN conference, Mr Modi announced that India would raise its renewable energy capacity to 450GW by 2030, and double the share of non-fossil sources from 21 to 40 per cent by 2030.

Adani Group chairman Gautam Adani, known to be close to the Prime Minister, wrote in a LinkedIn post soon after: "The Adani Group has moved quickly into a position to lead this clean energy transformation."

At the end of August 2020, Indian solar power plants had the capacity to produce only around 37GW every day. India's ambitious solar leap to its target will now be led by a conglomerate that is also the country's biggest private thermal power producer.

The Adani Group has a controversial record of environmental damage through its coal cargo port on India's western coastline. Its massive Carmichael coal mine in Australia and the exporting of coal through railway lines and a sea terminal, climate scientists say, will spur carbon pollution and could seriously harm the environmentally sensitive Great Barrier Reef. 

The company is expanding its clean energy portfolio now, even sitting out India's first-ever auction of coal deposits for commercial mining now ongoing.

"Worldwide, large consumers, power distribution companies and governments are pushing for renewables because of coal's higher price and environmental costs. As a big conglomerate, Adani continues to invest in coal, but seeing the global trend, its ratio of renewables and thermal is shifting," said Mr Vinay Rastogi, founder of the Delhi-based energy analysis firm Bridge to India.

Reflecting the new emphasis of India's Ministry of New and Renewable Energy, Adani announced in January that it wants to indigenise India's entire solar value chain by making solar components.

Agel's new contract includes a commitment to set up manufacturing capacity to make 2GW photovoltaic cells and solar panels by 2022, in addition to the group's 1.3GW cell manufacturing plant in Mundra, Gujarat.

At the moment, India imports 85 per cent of its cell and module requirements mostly from China, but also from Vietnam, Singapore and Taiwan. About 94 per cent of the world's solar components are made in China.

A Bridge to India analysis said Chinese solar manufacturers have a global competitive edge, thanks to strong government support, greater backward integration, larger scale of production and access to in-house technology.

To wrest India away from a crippling dependence on Chinese components, the Indian government imposed a safeguard duty of 25 per cent on imported solar cells and panels for two years from July 2018, and extended it in 2020 at about 15 per cent.

The duties helped a few local companies like Agel increase their market share, but overall, were counterproductive as it made solar projects costlier, experts say. The duties ended up slowing new solar installations.

India's solar energy addition fell to 7.3GW in 2019 from 8.3GW in 2018, according to a report by energy analysis firm Mercom India Research.

"If India wants massive solar capacity addition, the logical direction now is towards massive component manufacturing. There is a thrust now at integrated manufacturing that covers all four steps - silicon ingots, wafers, photovoltaic cells and modules," said Mr Praveer Sinha, managing director of Tata Power, which has been upgrading its solar module technology.

India currently makes enough solar panels to produce 16GW power, and enough cells to produce 2.5GW. There are almost 100 module makers and 15 cell producers, largely for domestic use, but no wafer makers.

Bridge to India's Mr Rastogi said the "highly capital-intensive sector will need large companies with deep pockets" to invest in solar parts.

In a symposium on solar manufacturing earlier this month, Mr Amitesh Kumar Sinha, joint secretary of the Ministry of New and Renewable Energy, said India will need to add at least 30GW of modules, cells, wafers and silicon to meet its solar target.

The ministry has proposed financial incentives like a performance-linked export programme, interest aid and following border hostilities, will continue imposing safeguard duty on Chinese imports.

Mr Sumant Sinha, chairman of ReNew Power which is setting up a 2GW cell and module production plant, said: "The largest driver for local manufacturing is the big domestic market, and if protected from cheap import disruption for just two years, I'm sure the cost differential will also come down soon.

"To realistically add 30GW, we will need US$10-15 billion (S$13.5-20.3 billion) worth of solar modules every year. Wind energy is totally indigenous because the Indian government backed the sector early. For solar to be India's champion sector, domestic manufacturing is the only way for the sector to be viable."