India is targeting about 450 Gigawatt (GW) of installed renewable energy capacity by 2030 and, of that, a lion’s share – 280 GW (over 60%)–would come from solar. For the next 10 years, around 25 GW of solar energy capacity is needed to be installed every year, to ensure the sun continues to shine over the country’s sunrise sector.
The target also means India needs to manoeuvre global supply chain issues, irrespective of geopolitical realities and mining concerns, impacting the producers of major minerals required in the solar industry.
The Indian solar industry relies heavily on imports of important components such as solar cells, modules and solar inverters. Every year, the industry ends up spending billions on imports. According to the Indian government’s data, in 2019-20, India imported solar wafers, cells, modules and inverters worth $ 2.5 billion.
The government has been trying to ramp up domestic manufacturing through various steps including increasing duty on imports. But, at present, India’s domestic manufacturing capacity is not enough to fulfil the demand for the installation of 25 GW solar power capacity every year.
Currently, India’s annual installed solar photovoltaic (PV) manufacturing capacity is 3 GW for solar PV cells, 10-15 GW for solar PV modules, 5 GW for solar inverters while we have no manufacturing capacity for “polysilicon/wafer/ingots”, another critical component in case of solar power systems.
In 2015, prior to the Paris Agreement, India had announced that it will achieve 175 GW of renewable power by 2022, including 100 GW of solar. It was a huge increase in the target as the earlier solar power target was only 20 GW. At present, India has about 95 GW of installed renewable power and, of that, 40.5 GW comes from solar, which is spread across the country.
The large-scale adoption of renewable power, including a serious push for solar, is crucial for India’s clean energy transition goals.
Though India has seen rapid growth in the solar industry, the road ahead is full of challenges.
Manoj Gupta, who is the vice president of Fortum India, a company involved in renewable energy projects, told Mongabay-India that it is likely that the renewable energy target of 450 GW is achievable but India still has a long way to go.
“To get to the stated targets, it needs to install more than 250 GW of renewable energy capacity in 10 years, or 25-35 GW of renewable energy capacity per year. This is more than twice of what India has been achieving in recent times and is by no means going to be easy.”
He explained that over the last five years, India has added around 34 GW of solar power installed capacity.
“While our domestic manufacturing capacity of 10 GW of modules is sufficient to meet this demand, we imported over 80% local demand for modules across 2015-19,” said Gupta while highlighting that the total value of solar cell and module imports during those five years was around $12.4 billion.
However, the rapid targeted growth, which India’s Prime Minister Narendra Modi has been talking about, would require millions of solar modules and every solar module would need a steady supply chain of all materials required for its manufacturing as well as for batteries.
The domestic manufacturing of solar PV cells/modules is behind due to reasons such as lack of manufacturing chain and skilled workforce and higher cost of production. Data from Ministry of New and Renewable Energy.
Vinay Rustagi, who is the managing director of Bridge to India (BTI), a renewable power consultancy, said that for every megawatt of installed solar power, on average, about 3,000 solar modules are needed.
“A few years ago it was about 4,500 solar modules for every MW of solar power but with an increase in the size of modules and improvement in technology and efficiency the required numbers have come down,” Rustagi told Mongabay-India.
1 MW of installed renewable power capacity needs, on average, 3000 solar modules. A 25 GW capacity needs 75 million solar modules—every year.
This means that India, which is trying to push its domestic manufacturing, may still end up depending largely on imports of solar modules from other countries.
India’s solar power sector is heavily reliant on imports
In March 2021, India’s Ministry of New and Renewable Energy had noted that “India’s solar sector, just like in any other country of the world, is heavily reliant on imports of solar equipment.”
“Government have also noted instances of certain countries dumping solar cells and modules to kill the nascent domestic industry, because of which government had to impose safeguard duties. Covid-19 pandemic brought disruptions in international trade including imports of solar modules and solar cells affecting solar capacity additions in the country. Considering India’s huge solar targets and that electricity is a strategic sector of the economy, India needs to develop domestic solar manufacturing capacities and reduce its dependence on imports to avoid disruption in future,” it had said.
It had emphasised that the focus on achieving self-reliance has taken India toward the decision of “scaling up domestic manufacturing” which would also enable India to “export solar modules.” “This would also provide other countries an alternative avenue for procuring solar modules,” it had said.
The government thus announced a basic custom duty (BCD) of 25% on solar cells and 40% on solar modules from April 1, 2022.
Whether India manufactures those solar modules itself or imports them as a finished product from countries such as China, the supply chains of materials, including many metals, required for building them will be crucial.
A May 2021 report “The Role of Critical Minerals in Clean Energy Transitions” by the International Energy Agency stressed that clean energy technologies including electric vehicles would require a huge amount of minerals. “The shift to a clean energy system is set to drive a huge increase in the requirements for these minerals,” it said.
Depending on the kind of technology used, a solar module typically requires materials such as glass, silicon, copper, silver, aluminium, cadmium, tellurium, indium, gallium and selenium.
What worries many countries pursuing renewable energy is that the supply and refining of many crucial minerals required in the solar and overall renewable energy systems are limited to a few countries.
For instance, the IEA report highlights, South Africa and the Democratic Republic of the Congo account for 70% of global production of platinum and cobalt while China accounts for 60% of global REE production (rare earth elements). Moreover, China has a strong presence in the processing and refining of many minerals operations required for renewable energy systems.
“This creates sources of concern for companies that produce solar panels, wind turbines, electric motors and batteries using imported minerals, as their supply chains can quickly be affected by regulatory changes, trade restrictions or political instability in a small number of countries. The Covid-19 pandemic already demonstrated the ripple effects that disruptions in one part of the supply chain can have on the supply of components and the completion of projects,” the IEA report said.
India needs a long-term policy to ensure stability for the solar sector
For a country like India, which doesn’t produce many of the minerals required for renewable energy systems, it should mean long-term policymaking to ensure that disputes with countries such as China don’t derail its ambitious renewable energy targets.
Rishabh Jain, who works with the Centre for Energy Finance (CEF) of the Council on Energy, Environment and Water (CEEW), a not-for-profit research organisation, emphasised that “estimating the mineral requirement across the renewable energy manufacturing value chain will help the government in taking a strategic decision on which technology and manufacturing step to support.”
“Improvements in the manufacturing process, increase in efficiency and development of new products can significantly reduce the mineral requirement to produce every MW of renewable energy equipment. Recycling should be used as an important tool to recover critical minerals which may be difficult to procure in the international markets,” Jain told Mongabay-India.
While on the issues of batteries required for renewable power systems, BTI’s Rustagi said: “India is yet to finalise a clear storage policy with targets. It is difficult to estimate the storage capacity required to support 450 GW of renewable energy capacity by 2030. Currently, we are not producing batteries or even the minerals required for batteries. We are simply importing the finished products from abroad. The government has recently given a push for manufacturing batteries within India but at the moment we don’t make any.”
Also, the mining activities for these metals, across the world, could end up triggering more social and environmental conflicts as many past experiences show that it leads to problems with local communities and severe pollution.
In fact, a 2019 report by the Institute for Sustainable Futures (ISF) at the Sydney-based University of Technology, had said that if not managed appropriately, there are significant “environmental and social impacts associated with the mining and processing of metals used for renewable energy and technologies” which include “pollution of water and agricultural soils through the release of wastewater and dust, the risk of tailings dam failures and health impacts from workers and surrounding communities.”