New Delhi, Feb 6
India’s solar cell manufacturing is expected to jump five-fold, from 10 GW at the end of fiscal 2024 to between 50 and 55 GW by fiscal 2027. This significant growth is driven by the government’s push to reduce reliance on imported solar cells and modules.
A recent report by Crisil Ratings estimates that this expansion will require an investment of around Rs 28,000-30,000 crore, which will likely be financed through a mix of debt and equity at a ratio of 70:30. The study, which looked at four major domestic cell manufacturers (covering 54% of the country’s capacity as of March 31, 2024), underscores the impact of the ‘Make in India’ initiative and new government policies.
In recent years, India’s module manufacturing capacity has grown rapidly from 7 GW in March 2020 to 60 GW in March 2024. This growth has helped lower module imports from 45% to 25% of total consumption. However, solar cells, which are a key component in module production, are still largely imported around 80% come from China.
To boost local production and reduce this dependency, the government has introduced measures such as mandating the use of domestically approved cell manufacturers for projects receiving government support, along with schemes like the Production-Linked Incentive (PLI) program and domestic content requirements. These initiatives are expected to drive further investments in local solar cell manufacturing.
According to Crisil Ratings Director Ankit Hakhu, these policies have already led to announcements of new cell capacity projects totaling 45-50 GW, which will help raise India’s overall capacity to about 55 GW over the next two fiscal years.
An increase in domestic solar cell production is expected to improve self-reliance and boost local integration in the solar supply chain. For example, when cells are made in India, up to 70-80% of a solar module’s cost can be kept within the country, compared to only 40-50% with imported cells. As a result, the share of domestic module capacity supported by locally made cells is projected to rise from less than 15% in fiscal 2024 to over 50%.
However, the report notes that currently, locally manufactured cells are about 80-90% more expensive than imported ones due to higher production costs and smaller production scales. While government support like the PLI scheme may help offset some of these costs, solar project developers could still see an increase in project expenses.
The report concludes by emphasizing the need for continued policy support, such as non-tariff measures like the Approved List of Cell Manufacturers (ALCM) and Approved List of Module Manufacturers (ALMM), to sustain demand for domestically produced cells and modules. Additionally, potential changes in US trade policies and disruptions in wafer supplies from China will be important factors to monitor.
This ambitious boost in solar cell capacity is a key step for India to enhance its renewable energy self-sufficiency and support its broader energy goals.
