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Business Economy

Solar module making capacity to soar 400 per cent on demand, policy, efficiency: Crisil

New Delhi, Jan 19 (UNI) India’s solar module manufacturing capacity is set to jump by almost 400 per cent by fiscal 2025, compared with fiscal 2021, with 30-35 GW of fresh module capacity set to be commissioned following strong demand, favourable policies, likely improvement in energy efficiency, and price competitiveness, it was reported on Wednesday.
A CRISIL Ratings study of the capex plans of the top 11 domestic module manufacturers, which account for 80 per cent of the current effective solar module installed capacity of 8 GW and some new entrants, indicates as much. “We estimate Rs 50,000 crore of investments across the value chain for capacity building in India through fiscal 2025. Module and cell manufacturing capacity is estimated to increase by 30-35 GW each,” says Aditya Jhaver, Director, CRISIL Ratings.
As on 31 March, 2021, India had 3 GW of solar cell capacity (mostly used for captive production of solar modules) and 8 GW of effective solar module capacity. The solar module manufacturing value chain starts with polysilicon and/or ingots, which are converted into wafers. These wafers are used to produce solar cells, which are then assembled to manufacture solar modules. The study shows there is no manufacturing capacity for polysilicon and wafers yet. Even this 8 GW capacity remains underutilised, at 20 per cent, because of higher cost of domestic modules compared with Chinese ones, which are 15-25 per cent (4-61 cents/watt) cheaper because of subsidies and scale efficiencies. As a result, nearly 80 per cent of India’s current annual solar module demand is catered to by Chinese module manufactures.
However, now, the government’s policy intervention, the imposition of 40 per cent custom duty on imported modules and the Production-Linked Incentive (PLI) scheme2 benefits will not only eliminate the existing price gap, but may even make domestic module competitive by 2-3 cents/watt at current prices, according to Ankit Hakhu, Director, CRISIL Ratings. This alongwith growing demand due to continuing government thrust on renewables and private sector focus on the environmental norms is expected to push up India’s solar capacity implementation to 14 GW per annum between fiscals 2022 and 2024, and further beyond that given aggressive renewable energy plans.
A portion of the capex is also moving towards newer technologies such as mono perc/bifacial modules, where efficiencies are higher and comparable with imports. That, along with healthy demand and favourable government policies, is expected to drive operating margins for integrated solar module manufacturers (manufacturing both cells and modules) to 12-13 per cent. It will also result in a payback period of 4.5-5 years, assuming ~50 per cent utilisation levels. However, the capex will increase leverage, given 70 per cent of outlay is likely to be funded by debt but with low complexity in implementation, a faster payback period and robust investor appetite, credit profiles for domestic solar module manufacturers are expected to be stable.
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