New Delhi, India – India’s solar cell manufacturing capacity is projected to grow five-fold, reaching 50-55 GW by fiscal 2027 from 10 GW at the end of fiscal 2024, according to a report by Crisil Ratings. This significant expansion is driven by the government’s push to reduce imports of photovoltaic (PV) cells and modules.
Major Investments and Expansion Plans
The planned expansion will require an estimated capital expenditure (capex) of INR 28,000-30,000 crore financed through a 70:30 debt-equity mix. Crisil Ratings analyzed four leading domestic cell manufacturers which collectively accounted for 54% of India’s total cell manufacturing capacity as of March 31, 2024.
The government’s ‘Make in India’ initiative, along with policies aimed at reducing dependency on imported cells and modules, is expected to drive backward integration among module manufacturers. This will result in a substantial increase in domestic cell manufacturing capacity.
Current Market Scenario and Growth Trends
India’s solar module manufacturing capacity surged from 7 GW in March 2020 to 60 GW by March 2024. Consequently, module imports fell to 25% of total consumption in fiscal 2024 from 45% in the previous fiscal year. However, the reliance on imported cells remains high at 80%, with China being the primary supplier.
With an anticipated addition of 60-65 GW of solar capacity by 2027 Crisil Ratings warns that limited domestic cell supply could lead to continued dependence on imports.
Government Policies Driving Growth
Ankit Hakhu, Director at Crisil Ratings, highlighted the government’s efforts to boost domestic demand and manufacturing. The Approved List of Cell Manufacturers (ALCM) will be mandatory for open access and net metering projects starting June 1, 2024. Additionally, the Production-Linked Incentive (PLI) scheme and domestic content requirements will further stimulate local manufacturing.
These measures have led to announcements of 45-50 GW in cell capacity expansions potentially increasing India’s total capacity to ~55 GW over the next two fiscal years. This development will enable India to capture 70-80% of module costs domestically, compared to only 40-50% without locally manufactured cells.
Economic Impact and Challenges
Ankush Tyagi, Associate Director at Crisil Ratings noted that despite significant capex investments the annual capex intensity will remain stable at 1.3-1.5 times over the next three years, supported by expanding module capacity and strong operating margins. The expected payback period for these investments is estimated at 4-5 years.
However, domestically manufactured cells are currently 80-90% more expensive than imported ones due to higher conversion costs and China’s competitive pricing. While government incentives like PLI may offset some costs, solar project developers may still experience increased expenses.
Future Outlook
To ensure the continued growth of domestic solar manufacturing, sustained policy support through measures such as ALCM and the Approved List of Models and Manufacturers (ALMM) remains crucial. At present, only domestic manufacturers are registered under ALMM, making them eligible for government and government-assisted projects, as well as open access and net-metering projects.
These ongoing policy initiatives will be vital in strengthening India’s solar manufacturing ecosystem, reducing import dependency, and supporting the country’s renewable energy transition.
