India’s solar plans will have to stay their course, despite curbs on imports from China

The Prime Minister’s recent inauguration of ‘Asia’s largest solar power project’ in Rewa, Madhya Pradesh, yet again sends a signal that India remains serious about clean energy. Yet, the country’s solar installed capacity, at about 40 GW today, is short of the goal of achieving 100 GW by 2022. The pace of capacity additions has slowed somewhat after the imposition of safeguard duty on solar cells and modules from China and Vietnam with effect from August 2018. The two-year period for which this duty was imposed ends in a few days. Reports, amidst a policy of atmanirbharta , suggest that this levy may be continued in the form of a regular tariff.

A move to build a self-sufficient solar sector for strategic reasons is unobjectionable. It is notable that China accounted for over 75 per cent of India’s cell and panel imports (totalling over $2 billion) at least before the imposition of safeguard duties, after which Singapore, Thailand and Vietnam seem to have plugged some of the gap. That India’s costs are higher now is apparent from the fact that a ‘manufacturing-linked tender’ awarded by the Solar Energy Corporation of India in January was based on a tariff of ₹2.92/kWh, which is more than contracts awarded sometime ago, based on a tariff of about ₹2.50/kWh. It is not as yet clear to what extent the cells and wafers will be indigenously sourced in such cases. Studies have estimated that domestically produced modules are 33 per cent more expensive than their Chinese counterparts. Apart from scale economies playing a role, the cost of the raw materials is estimated to account for a major share of the cost difference. At present, India is estimated to have a module manufacturing capacity of 9 GW and a cell making capacity of 3 GW. Ironically, the indigenous manufacture of PV modules calls for a reliable supply of electricity. Clearly, India has a long road to traverse if it is to be both cost-effective and self-reliant in this sector. Yet, there can be no getting away from the need to shift to non-hydro renewables, given ecological obligations.

While China leads the world in PVs, making two-thirds of the world’s modules, the EU is trying to make a comeback. The ongoing global stand-off with China will prompt a shift in this direction, as the EU, once a leader in producing PVs, accounts for at least a fifth of PV installations globally for which it is reliant on China. It is a sobering thought that solar power accounts for just 3.6 per cent of India’s electricity generated, and 9.8 per cent of the total installed capacity. India should take a leaf out of China’s policy book (China’s increase is a post 2005 phenomenon) and create the right demand and supply ecosystem. The PM-KUSUM scheme is a notable step in this respect.

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