India imported 75 per cent of its installed solar photovoltaic (PV) module capacity in the last five years fuelling its negative net trade balance. During 2017-2021, the share of solar PVs in the country’s trade deficit stood at 4 per cent, the International Energy Agency (IEA) said on Thursday.

The IEA in a report on the solar PV supply chain said the EU, the US, and Indian solar PV trade deficit reached over $20 billion last year.

“At the same time, India’s imports also reached a record-breaking $4 billion as installation levels rebounded in 2021-2022 and project developers rushed to stockpile modules before higher import duties came into force in April 2022,” it pointed out.

Combining polysilicon, wafers, cells, and modules, the total value of PV-related trade rose 70 per cent y-o-y to $40 billion in 2021.

India’s trade deficit

In 2017-2021, the global PV module export market was dominated by China, with its share in India and Brazil exceeding 90 per cent.

“In countries with negative net trade balance, massive PV component imports (mainly modules and cells) further increased their deficit. Shares of PV in trade deficits over 2017-2021 were 1 per cent for the US, 2 per cent for France and as much as 4 per cent for India,” IEA report said.

In the last five years, the EU has imported 84 per cent of its installed solar PV modules, the US 77 per cent, and India 75 per cent. Moreover, modules produced in these areas depend on 60-80 per cent of imported PV cells, it added.

Cost competitiveness

The IEA report noted that at present, cost competitiveness of existing solar PV manufacturing is a key challenge to diversifying supply chains. China is the most cost-competitive location to manufacture all components of the solar PV supply chain.

Costs in China are 10 per cent lower than in India, 20 per cent lower than in the US, and 35 per cent lower than in Europe. Large variations in energy, labour, investment, and overhead costs explain these differences.

Still, in the absence of financial incentives and manufacturing support, the bankability of manufacturing projects outside of panel assembly remains limited outside of China and a few countries in Southeast Asia, the report said.

Although 38 countries have module assembly facilities, China was still responsible for about 70 per cent of production in 2021, up from 50 per cent in 2010.

“Other countries with high module assembly capacity, such as the US (4 per cent), Germany (1 per cent) and India (1 per cent), produce mainly for their domestic markets, although they often lack the adequate manufacturing capacity for PV cells and wafers (except for thin-film technology, wherein facilities include the entire supply chain),” it added.

China’s dominance

The report pointed out that global solar PV manufacturing capacity has increasingly moved from Europe, Japan, and the US to China over the last decade.

“China has invested over $50 billion in new PV supply capacity – ten times more than Europe − and created more than 3,00,000 manufacturing jobs across the solar PV value chain since 2011. Today, China’s share in all the manufacturing stages of solar panels (such as polysilicon, ingots, wafers, cells and modules) exceeds 80 per cent,” the report said.

This is more than double China’s share of global PV demand. In addition, the country is home to the world’s 10 top suppliers of solar PV manufacturing equipment.

The world will almost completely rely on China for the supply of key building blocks for solar panel production through 2025. Based on manufacturing capacity under construction, China’s share of global polysilicon, ingot, and wafer production will soon reach almost 95 per cent.

“Today, China’s Xinjiang province accounts for 40 per cent of global polysilicon manufacturing. Moreover, one out of every seven panels produced worldwide is manufactured by a single facility. This level of concentration in any global supply chain would represent a considerable vulnerability; solar PV is no exception,” IEA warned.