Self-sufficiency in Solar manufacturing

  • Category
    Economy
  • Published
    7th Jun, 2019

Issue

Context:

  • India has made significant progress in creating capacity for solar power generation in the last few years but still it relies on China for the solar equipment.
  • India imports 90% of its solar cell and module requirements from China, Malaysia and Taiwan.

About:

Solar Energy:

  • Solar radiation can be converted into both heat and electricity using technologies - solar thermal and solar photovoltaics respectively.
  • Conversion into electricity can be done either directly using photovoltaics (PV) or indirectly using concentrated solar power, or a combination. Concentrated solar power systems use lenses or mirrors and tracking systems to focus a large area of sunlight into a small beam. Photovoltaic cells convert light into an electric current using the photovoltaic effect.
  • Ministry of New and Renewable Energy (MNRE) is the nodal agency of Government of India for implementing solar projects.

Background:

  • India is blessed with plenty of sunlight for most of the year yet it is energy deficient.
  • It should have taken a lead in solar panel manufacture to generate solar energy long ago. Despite the new policy focus on solar plant installation, India is still not a solar panel manufacturer.
  • Just as India has had no overall industrial policy since economic reforms began, there is no real plan in place to ensure solar panel manufacture.
  • The share of all manufacturing in GDP was 16% in 1991; it remained the same in 2017. The solar power potential offers a manufacturing opportunity. The government is a near monopolistic buyer.
  • India is regarded by the global solar industry as one of the most promising markets. Hence the low-cost Chinese importers have boosted their ambitions to develop and supply their own solar technology to India. Imports, mostly from China, accounted for 90% of 2017 sales, up from 86% in 2014.

Analysis

Why India is moving towards self-sufficiency in solar power generation?

  • Provides energy security: In addition to the existing conventional sources of energy, this relatively new source - solar energy will meet the rising energy demand of the huge and continuously rising country’s population. It will help to ensure uninterrupted availability of energy, both electricity and heat.
  • Renewable source of energy: The solar energy is inexhaustible unlike the fossil fuels – coal, petroleum and natural gas that are finite.
  • Addresses climatic change: The solar energy is also a non-polluting source of energy. It does not emit any of the greenhouse gases while producing electricity. Using this energy will help to reduce the global warming effect in our planet.
  • Blessed geographical location: Tropic of Cancer passes through the center of India making half of country lie in sunshine abundant tropical region. India receives peak solar radiation for 300 days, amounting 2300-3,000 hours of sunshine equivalent to above 5,000 trillion kWh.
  • Low running cost: Once the installation of solar panels is done, there is almost zero running cost for the power generation. The little cost incurred is for the maintenance. This makes it affordable for the poor sections of the society.
  • Growth of manufacturing sector: Making of solar panels for converting solar energy and batteries for storing the solar energy will boost the manufacturing sector of the country. This will increase the GDP share of the manufacturing sector. It will provide employment opportunities to our youths and save our foreign exchange reserves.

What are the efforts taken by the government?

  • National Solar Mission: It is an initiative of Central government and state government to establish India as a global leader in solar energy. Initially, it set a target of 20GW by 2022 but later this target was revised to 100GW.
  • Indian Renewable Energy Development Agency Limited (IREDA): It is a Mini Ratna Government of India Enterprise under the administrative control of Ministry of New and Renewable Energy (MNRE). IREDA was established as a Non-Banking Financial Institution in 1987 and is engaged in promoting, developing and extending financial assistance for setting up projects relating to new and renewable sources of energy and energy conservation with the motto: “ENERGY FOR EVER”.
  • National Institute Of Solar Energy (NISE): It is an autonomous institution of MNRE. It is the apex National R&D institution in the field Solar Energy. The Government has converted 25 year old Solar Energy Centre (SEC) under MNRE to this autonomous institution in 2013. The institute is involved in demonstration, standardization, interactive research, training and testing solar technologies and systems.
  • Solar park scheme: MNRE along with its affiliate Solar Energy Corporation (SECI) have launched Solar Park scheme to encourage the construction of 50 solar parks that can generate electricity between 500 MW and 1000 MW. The Solar Parks/ Ultra Mega Solar Power Projects will be set up across various states for five years from 2014-15 to 2019-20.
  • Sustainable Rooftop Implementation of Solar Transfiguration of India (SRISTI): It is part of the larger grid-connected Rooftop Solar (RTS) power programme. It aims to bring discoms to the forefront in the implementation of rooftop solar projects by providing them financial support which will be linked to their performance in facilitating the deployment of RTS. The government has set a target to install 40,000 MW of rooftop solar power capacity by 2022.
  • Suryamitra Skill Development Programme: This programme is implemented by NISE. It aims to develop the skills of youth, considering the opportunities for employment in the growing Solar Energy Power project’s installation, operation & maintenance in India and abroad. It is also designed to prepare the candidates to become new entrepreneurs in Solar Energy sector.

How successful are the efforts taken by government?

  • The government has given a new fillip to solar power installation in recent years. The unit costs of solar power have fallen, and solar energy has become increasingly competitive with alternative sources of energy.
  • India expanded its solar generation capacity eight times from 2,650 MW in 2014 to over 20 GW in 2018 and 28.18 GW in 2019.
  • The government had an initial target of 20 GW of solar capacity by 2022, which was achieved four years ahead of schedule. In 2015, the target was raised to 100 GW of solar capacity by 2022.

Why India is importing equipment from China?

  • Core competence: The six largest Chinese manufacturers had core technical competence in semiconductors before they turned to manufacturing solar cells at the turn of the century. When the solar industry in China began to grow, Chinese companies already possessed the know-how. Indian companies had no learning background in semiconductors when the solar industry in India began to grow from 2011.
  • Government Policy: The Chinese government has subsidized land acquisition, raw material, labour and export, among others. None of this is matched by the Indian government. Perhaps even more important is commitment by the government to procure over the long run — without that the investment in building up the design and manufacturing for each of the four stages of production of solar power equipment would come to nought.
  • Capital: The cost of debt in India (11%) is highest in the Asia-Pacific region, while in China it is about 5%.

Way forward:

  • Central and State governments need to support semiconductor production as part of a determined industrial policy to develop this capacity for the future.
  • Strong financial measures are required to finance the solar projects, innovative steps like green bonds, institutional loans and clean energy fund can play a crucial role.
  • Easy availability of credit will help the solar companies to expand their business in solar power.
  • There should be promotion of research and development in renewable energy sector, especially in storage technology.
  • Proper mechanism should be provided to tackle China's dumping of solar equipments like increasing the import duty.

What is domestic content issue?

  • The solar mission mandated that cells and modules for solar PV projects based on crystalline silicon to be manufactured in India. That accounts to over 60% of total system costs. For solar thermal, the mission mandated 30% project to have domestic content.
  • A vigorous controversy emerged between power project developers and solar PV equipment manufacturers. The former prefers to source modules by accessing highly competitive global market to attain flexible pricing, better quality, predictable delivery and use of latest technologies. The latter prefers a controlled environment to force developers to purchase modules from a small, albeit growing, group of module manufacturers in India.
  • US Trade Representative (USTR) has filed a complaint at World Trade Organization challenging India’s domestic content requirements in this Mission, citing discrimination against US exports and that industry in US which has invested hugely will be at loss.
  • US insists that such restrictions are prohibited by WTO. India however claims that it is only an attempt to grow local potential and to ensure self-sustenance and reduce dependence. This case was won by USTR as it violated the free trade principle of WTO.

Learning Aid

Practice Question:

With the ever rising demand for electricity, the new and renewable solar energy can prove to be blessing for our country. Discuss what efforts have been taken by our government in this field, and how far they have been successful.

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