Solar imports could soar to $30 billion annually as India targets 2030

1. In Oct 2024, The Global Trade Research Initiative (GTRI) reports that this ambitious goal could lead to solar equipment imports reaching around $30 billion annually due to significant reliance on Chinese goods.

Key Findings from GTRI Report

1. India has set a target of installing 500 GW of renewable energy capacity by 2030.
2. Solar power is expected to account for over 80% of this capacity.
3. To achieve this target, India needs to increase annual solar installations to 65-70 GW.
4. Solar imports could soar to $30 billion annually.
5. In the fiscal year 2023-24, India imported solar equipment worth $7 billion, with 62.6% of these imports coming from China.
6. India added 15 GW of solar capacity in 2023-24, bringing the total to 90.8 GW by September 2023, a notable increase from 2.8 GW in 2014.
7. The Economic Survey 2023-24 indicated that China’s manufacturing trade surplus has been increasing since 2019.
8. China dominates global solar manufacturing, controlling 97% of polysilicon production and 80% of solar modules.
9. The mismatch between domestic supply and demand in China has prompted Chinese companies to seek additional markets, including India.
10. India’s solar manufacturing sector remains in its infancy, with nearly 90% of solar manufacturing involving the assembly of modules from imported cells.
11. Only 15% of the value addition in solar products is local.
12. In the last fiscal year, India imported $4.4 billion worth of solar modules, inverters, and other key components.
13. There is a critical need for investment in the production of solar cells, starting from silica refining, which includes costly and energy-intensive processes.
14. Strong research and development efforts, along with significant government support, are needed for domestic production of materials like aluminium frames and glass.
15. India has imposed customs duties of 40% on solar modules and 25% on solar cells to reduce dependency on imports.
16. Imports from ASEAN countries are exempt from these duties under the India-ASEAN free trade agreement.

Recommendations from GTRI:

1. Invest in the production of polysilicon and solar cells using domestic materials.
2. Broaden the scope of the Production Linked Incentive (PLI) scheme to support more sectors of the solar supply chain.
3. Collaborate with countries such as the US, EU, and Japan to establish large-scale solar manufacturing facilities.
4. Create training programs to develop a skilled workforce in the solar manufacturing sector.
5. Enhance research and development initiatives for domestic production of key solar components.

Current Status of India’s Solar Sector

1. Energy Consumption: India is the 3rd largest energy-consuming country globally and ranks 5th in solar power capacity.
2. COP26 Commitment: At COP26, India committed to achieving 500 GW of non-fossil fuel-based energy by 2030 as part of the Panchamrit initiative, the largest renewable energy expansion plan in the world.
3. Solar Energy Growth:
   1. Installed solar capacity has surged 30-fold in the last 9 years, reaching 89.4 GW by August 2024.
   2. India’s solar potential is estimated at 748 GWp.
4. Investment:
   1. 100% Foreign Direct Investment (FDI) is permitted for renewable energy projects under the automatic route, in line with The Electricity Act 2003.

Significance of Solar Energy Dominance for India:

1. 1. In sep 2024, REINVEST meet in Gandhinagar attracted USD 386 billion in investment proposals, highlighting the scale of this transition.
   2. The solar sector is projected to generate 3.26 million jobs by 2050. As of 2021-22, over 29,000 people were already employed in the solar sector.
   3. The government's Production Linked Incentive (PLI) scheme for solar manufacturing, with an outlay of ₹24,000 crore, aims to significantly boost manufacturing capacity for fully and partially integrated solar PV modules.
   4. This not only creates jobs but also positions India as a potential global manufacturing hub.
   5. The Pradhan Mantri Kisan Urja Suraksha evam Utthaan Mahabhiyan (PM-KUSUM) scheme aims to add 30.8 GW of solar capacity by 2026.
   6. Initiatives like the Solar Charkha Mission are empowering rural artisans. These programs provide clean energy and boost rural economies, showing solar's potential to bridge the urban-rural divide.
   7. Indian scientists have developed highly stable, low-cost Carbon-based perovskite solar cells with superior thermal and moisture stability.
   8. The establishment of the National Institute of Solar Energy (NISE) as an autonomous R&D institution underscores this commitment.
   1. Solar cells and modules have seen price drops of 65% and 50% respectively in 2022, making solar increasingly competitive with conventional power sources.

Major Issues Related to the Solar Sector in India

1. Land Acquisition Challenges:

   1. Land scarcity is a significant hurdle for large-scale solar projects. Solar power plants occupy at least 5 acres of land per 1 MW output.
   2. The country’s 500 GW renewable energy target by 2030 could require over 1.5 million acres for solar alone, often conflicting with agricultural needs, leading to social tensions and project delays.
   3. For instance, the 5,000 MW Dholera Solar Park in Gujarat faced protests from local farmers, delaying its implementation.
   4. India's complex land ownership laws further complicate land acquisition.

2. Grid Integration and Infrastructure Bottlenecks:

   1. The intermittent nature of solar power poses challenges for grid stability and management.
   2. India’s grid infrastructure, designed primarily for conventional power sources, struggles to accommodate solar variability.
   3. The country’s transmission losses were about 16.4% as of 2021-22, significantly higher than the global average.
   4. Recent grid failures, like the one in Mumbai in October 2020, highlight the system’s vulnerabilities.

3. Financing and Investment Hurdles:

   1. Securing consistent financing for solar projects remains challenging despite recent investment proposals.
   2. Outstanding dues of electricity distribution companies dropped by one-third to ₹93,000 crore by May 2023 following the implementation of the Late Payment Surcharge (LPS) Rules in June 2022, but significant liquidity pressures remain, increasing investor risk perception.
   3. While green bonds and specialized financial instruments are emerging, scaling up these funding mechanisms to meet the sector's needs is crucial.

4. Technological Dependence and Manufacturing Gaps:

   1. India’s solar sector heavily relies on imported technology, particularly from China.
   2. Despite recent policy pushes, including increased import duties and the PLI scheme, domestic manufacturing capacity remains limited.
   3. The lack of a robust domestic supply chain for critical components like wafers and ingots increases vulnerability to global supply disruptions.
   4. From July 2020 to November 2021, the polysilicon price in global markets increased from USD 6.8/Kg to USD 43/Kg (about a sixfold increase).

5. Storage and Round-the-Clock Power:

   1. The lack of cost-effective energy storage solutions hinders solar power's full potential in India.
   2. Current battery storage capacity is merely 20 MWh, against a projected requirement of 74 gigawatts by 2032.
   3. The high cost of battery storage makes round-the-clock solar power economically viable for many applications.

6. Environmental and Social Impacts:

   1. While solar energy is clean, its large-scale deployment can lead to environmental concerns, such as habitat destruction and biodiversity loss.
   2. The Bhadla Solar Park in Rajasthan, one of the world's largest at 2,245 MW, has raised concerns about its impact on local flora and fauna.
   3. Additionally, managing end-of-life solar panels is a significant challenge, with India expected to generate 34,600 tonnes of solar panel waste by 2030 but lacking a comprehensive recycling policy.

Steps India Can Take to Enhance the Viability and Efficiency of Solar Energy

1. Streamlined Land Acquisition and Innovative Land Use Policies:

   1. Implement a centralized land bank system for solar projects, identifying and pre-clearing suitable non-agricultural lands.
   2. Introduce a national policy on agrivoltaics, incentivizing dual use of land for agriculture and solar generation.
   3. Simplify land leasing regulations for solar projects, allowing longer lease periods of up to 40 years.
   4. Encourage the use of brownfield sites, such as closed landfills and abandoned mines, for solar installations.

2. Grid Modernization and Smart Integration Technologies:

   1. Invest heavily in smart grid technologies and energy management systems to handle solar variability.
   2. Upgrade transmission infrastructure, focusing on high-capacity interstate transmission lines dedicated to renewable energy.
   3. Incentivize the deployment of distributed energy resources (DERs) and microgrids to reduce transmission losses and improve grid resilience.

3. Innovative Financing Mechanisms and Risk Mitigation Tools:

   1. Establish a dedicated Green Bank for renewable energy projects, offering low-interest loans and credit enhancement tools.
   2. Implement a national payment security mechanism to address the risk of delayed payments from DISCOMs.

4. Domestic Manufacturing through Technology Transfer and R&D:

   1. Implement a phased manufacturing program for the entire solar value chain, from polysilicon to modules.
   2. Establish joint ventures with global technology leaders for knowledge transfer and capacity building.
   3. The recent success of IIT Bombay in developing 4T-silicon-perovskite tandem solar cells with over 26% efficiency demonstrates the potential for indigenous innovation, which could be scaled up with targeted support.

5. Comprehensive Energy Storage Policy and Infrastructure:

   1. Develop a national energy storage mission with clear targets and incentives for various storage technologies.
   2. Promote pumped hydro storage in suitable geographical locations as a cost-effective large-scale storage solution.

6. Skill Development and Workforce Training Programs:

   1. Establish a network of solar skill development centers across the country, focusing on rural areas where large solar projects are typically located.
   2. Integrate solar technology courses into ITI and polytechnic curricula to create a pipeline of skilled technicians.
   3. The Suryamitra Skill Development Programme could be expanded to include advanced technologies and soft skills training.

7. Water-Efficient Cleaning Technologies and Practices:

   1. Mandate the use of robotic dry-cleaning systems for large-scale solar installations in water-stressed areas.
   2. Invest in research and development of hydrophobic coatings for solar panels to reduce dust accumulation.
   3. Implement rainwater harvesting systems at solar parks for cleaning purposes.
   4. Promote the use of treated wastewater for panel cleaning in areas near urban centers.

Accelerating Rooftop Solar Adoption:

1. Revamp the rooftop solar ecosystem by implementing a unified, nationwide net metering policy with consistent regulations across states.
2. Introduce innovative financing models like solar leasing and on-bill financing to reduce upfront costs for consumers.
3. The Pradhanmantri Suryoday Yojana seeks to outfit 10 million households with rooftop solar panels.
4. Simplifying the approval and installation process through a single-window clearance system and standardized equipment ratings is necessary.

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