Policy Paper on

Published by:
Solar PV Manufacturing in India:
Silicon Ingot &
The Energy and Resources Institute (TERI) Tel: (+91 11) 2468 2100
Darbari Seth Block, Fax: (+91 11) 2468 2144, 2468 2145
IHC Complex, Lodhi Road, Email: [email protected]
New Delhi - 110 003, INDIA Web: www.teriin.org
Wafer PV Cell - PV Module
 Policy Paper
on
Solar PV Manufacturing in India:
Silicon Ingot & Wafer - PV Cell - PV
Module
© The Energy and Resources Institute 2019

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Policy Paper on Solar PV Manufacturing in India: Silicon Ingot & Wafer - PV Cell - PV Module
New Delhi: The Energy and Resources Institute. 27 pp.

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 3

Table of Contents
Preface 7
Acknowledgements 9
Manufacturing of solar PV in India 11
Migration of global solar PV manufacturing 11

Overview of global solar PV industry and its evolution 11

PV manufacturing: Strategies of various leading countries 13

Germany PV manufacturing: boom to bust 13

USA PV manufacturing: debacle due to focus away from Si 14
Japan 15
India 15
Taiwan PV sector growth strategy 15
CHINA PV sector growth 16
Malaysia, Vietnam, Thailand & Singapore PV Sector Growth 20
Decline in prices of module & profitability of Chinese companies 20
Need for Solar PV manufacturing in India 22
High level cost structure of manufacturing & Comparison of India and Chinese costs 24
Indian PV Manufacturing – Comparison with China manufacturing 26
Recommendations 27
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List of Figures
Figure 1: Global cumulative solar PV installations (GW) 10
Figure 2: Migration of solar PV manufacturing over the decades 12
Figure 3: Integrated PV manufacturing cost during the past decade 18
Figure 4: Trend of PV module ASP 19
Figure 5: Trend of R&D Spending of major PV Manufacturing companies 20
Figure 6: Trajectory of Lowest Solar Tariffs in India, 2018 (Source: Mercom) 21
Figure 7: Expected Scenario for Solar Manufacturing in India (Source: Mercom) 22

Policy Paper on Solar PV Manufacturing in India: Silicon Ingot & Wafer - PV Cell - PV Module
 5

List of Tables
Table 1: Growth in world installed solar PV capacity (in GW) 10
Table 2: Top-10 Global Solar PV Manufacturers – The China Dominance 17
Table 3: Trends of ASPs, Gross Profit & Net Profit of Tier-1 Global PV Module companies 19
Table 4: Manufacturing cost break-up 22
Table 5: Comparison of Indian Integrated PV Manufacturing costs with Chinese Tier-1 company 23
Table 6: Comparison of Indian Manufacturing competitiveness with Chinese or SE Asian countries 24
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Policy Paper on Solar PV Manufacturing in India: Silicon Ingot & Wafer - PV Cell - PV Module
Preface
Government of India’s commitment to provide access to energy and electricity to all by
2030 necessitates a multi- pronged approach to look into the generation options on the
supply side, along with demand-side management. As of April 2018, 100 % electrification of
villages has been achieved, as per Ministry of Power. However, around 22 million households
(equivalent to about 130 million people) still need to see the glow in their homes. India
has also declared to achieve 40% of its cumulative electric power installed capacity from
non-fossil fuel sources by 2030 as a part of nationally determined contributions under
Paris agreement in 2017 to contribute to global efforts of limiting rise in atmospheric
temperature to 2 degrees. Solar capacity additions have emerged as one of the most
important component of this strategy, and therefore, a focus on establishing manufacturing
base in the country assumes huge significance.

Looking at current manufacturing base through the lens of requirements to meet targets for solar capacity addition,
there appears to be urgent need to put manufacturing infrastructure in place so as to be able to pursue implementation
of national solar programme without having threat from international fall outs. This is also befitting to the vision of
India to be a global solar leader. This report analyzes issues and brings out a perspective to establish ingot-to-wafer-
to-cells-to-modules in the country in a phased manner with a clear vision of achieving 15,000 MW full value chain
solar modules manufacturing capacity in the country. This vision is coherent with Government of India’s goal to
accelerate domestic industrial production through ‘Make in India’ program. I am sure that the concerned government
departments will find it useful to make realize the national solar dreams.

Ajay Mathur
Director-General, The Energy and Resources Institute (TERI)
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Policy Paper on Solar PV Manufacturing in India: Silicon Ingot & Wafer - PV Cell - PV Module
Acknowledgements
This paper has been produced by The Energy and Resources Institute (TERI) as part of the first year programme of
Energy Transitions Commission (ETC) India.

Insights contained in this paper represent TERI’s analysis based on inputs provided by stakeholders and reports
available in public domain.

We are grateful for the support of ETC India, sponsors and partners, and for the support from multiple stakeholders we
engaged throughout the process and who took part in the meetings and workshops, including Dr. V. S. Gangadhara
Rao, Ananyavijaya Consultancy LLP (AVCL), Bangalore, Mr. Ravi Verma, Member-Governing Council, Solar Power
Developers Association, experts/ policy analysts, solar manufacturers and developers.
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Policy Paper on Solar PV Manufacturing in India: Silicon Ingot & Wafer - PV Cell - PV Module
 11

Manufacturing of solar PV Migration of global solar

in India PV manufacturing
With a national goal of 100,000 MW of solar power
by 2022 and continuing the growth trend beyond to be
Overview of global solar PV
able to achieve 40% of non-fossil fuel power, creation industry and its evolution
of domestic manufacturing base assumes critical
significance. Leveraging the size of domestic market is 80% of the world’s primary energy supply comes from
one of the key strategies adopted world over and China fossil fuels, primarily oil and coal. Alternative energy
has used it to emerge as the global manufacturing hub source are needed as fossil fuel resources are limited
for various articles including solar. Power being the state and their use is associated with a number of negative
subject, procurement by the Government agencies have environmental effects – such as global climate change
always played significant role in developing the market and air pollution. The Inter-governmental Panel on
and establishing procurement strategies, and it is very Climate Change (IPCC) estimates that about 70% of all
much proven in case of solar. greenhouse gas (GHG) emissions world-wide, particularly
carbon dioxide (CO2) emissions, come from energy-
With the launch of National Solar Mission in 2010, a related activities. Avoiding dangerous climate change and
beginning was made by the Government to require staying below a 2 °C warming requires cutting global
bidders to use domestically manufactured solar PV emissions rapidly.
modules in first ever solar bid of 150 MW, except for
Among the various renewable energies, solar photovoltaic
thin film and Concentrator PV technology for which
(PV) has garnered the most excitement in the recent
there was no credible manufacturing base was available
years due to its rapid technological maturation leading
in the country. The stipulation was further strengthened
to the sharp decline in its generation cost. Governments,
in the second bid of 350 MW to require bidders to use
communities, emerging markets, and corporations
only the domestically produced solar cells and modules,
increasingly understand that renewables are sustainable
instead of just modules which can be produced using
and affordable (even without subsidies), and they want
imported solar cells. Indian manufacturing industry met
them included in current and future procurement plans.
these requirements in terms of quantity and quality,
and the projects set up through these bids are reported For about five decades since 1954, solar PV systems have
to be working as per requirements. Later, schemes predominantly been installed off-grid for decentralised
were launched to reserve 50% of the bid capacity for use, and employed extensively in spacecraft and
domestically manufactured solar cells and modules satellites. While the technology is not new, the large-scale
while allowing balance 50% capacity to be set up using installation of solar PV is a relatively recent development
imported modules. Differentiated provision to provide globally, which dates to the late 1990s. Germany was
viability gap funding (VGF) with lower amount for open the first country to provide support for investments in
category was stipulated to provide generated power at renewable energy through the introduction of feed-in
the same pre-fixed tariff from both the categories. tariffs (FIT) in 1990. Since the early 2000s, the world
market for PV has grown exponentially, mainly driven by
However, this was challenged by the US successfully industrialised countries, notably Germany, Japan, Spain
in the World Trade Organization (WTO) who viewed and the United States, as well as China. By 2017, 173
it not as a government procurement (which is outside countries had introduced policies to support investment
the purview of any of international commitments of the in renewable energy through FIT and other support
Government of India) but a commercial transaction. In schemes.
view of this the process of bringing tenders with reserved
capacities for domestic capacities was stopped, but some During 2009-2018, ten-year period, cumulative installed
avenues were created under the category of Government PV capacity has grown at an average rate of 40% per
procurement in the form of special schemes for CPSUs, year. The year 2014 saw the confirmation of a trend
defence sector and roof top solar projects. which has started in 2013: the formerly European
centric solar power market became truly global with
In this background, the moot question is to explore rapid deployments in Asia and America, Africa and Latin
options to support domestic manufacturing of solar America. By the end of 2018, cumulative PV capacity has
modules in a manner which is viable commercially. crossed the level 500 GW, which is sufficient to supply
 12

2.6% of world total electricity consumption. As can be demand aggregation and implementation. In view of
seen in Figure-1 below, the growth projections for solar, this, the solar market is likely to continue growing at a
it can be seen that the present PV market has just begin rate exceeding 150 GW/yr in the near future. The Table
its growth. 1 below presents the cumulative PV in various regions
during the past 10-years.
The leading trio – China, the United States and India –
will comprise 70% of the projected solar capacity, which Cost of solar equipment declined significantly due to
will be added between 2019 and 2027. A continued improvements in technology and economies of scale,
strong decline in PV module Average Sale Prices (ASPs) even more so when production of solar cells and modules
has spurred greater demand in India, the Middle East, started to ramp up in China. In terms of prices, utility-
and North Africa. In addition, International Solar Alliance scale solar has reached price parity in all leading markets.
(ISA) has been launched with an aim to help developing When it comes to self-generation, commercial solar has
solar programmes in the sun-belt countries through reached unsubsidized socket parity in parts of all the top

Solar Energy will grow from 2% of global electricity generation today to >10% d 2030

>10%
Global cumulative solar PV installations

GW Installations

1835.0
2000 % of Electricity Generated

1800
1600
1400
1200

~ 2.6%
1000
800

510.0
414.2
600
319.7
242.6
183.88

400
138.8
100.5
70.5

200
15.8
23.2
40.3
1.2
1.6
2.1
2.6
3.7
5.1
6.7
9.2

0
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2030

Figure 1: Global cumulative solar PV installations (GW)

Table 1: Growth in world installed solar PV capacity (in GW)

Region 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

North 1 1 2 5 8 13 20 30 45 58 74
America

Europe 11 17 31 53 71 81 88 95 98 105 116

Japan 2 3 4 5 7 14 23 34 43 50 54

China 1 3 8 18 29 44 78 131 176

India (FY) 0 1 2 3 3 4 7 13 22 29

Rest of World 2 2 3 3 4 9 19 32 43 48 65

Cumulative 16 23 40 71 101 139 184 243 320 415 512

TOTAL, GW

Source: IEA PVPS Annual Report 2017, AVCL In-house Data

Policy Paper on Solar PV Manufacturing in India: Silicon Ingot & Wafer - PV Cell - PV Module
 13

solar markets that are at grid parity; while incentives such Hence, during this period (2000-2008) of High Demand
as tax credits and net metering have made residential vs Extreme financial caution, the early pioneers of PV
solar PV competitive in many markets. industry, i.e. Germany, USA, Japan & India, chartered
different paths to capture the solar pinnacle over the
As the deployment of renewable energy continues
next 10-years, with unexpectedly disastrous results (in
to expand globally, driven by various inputs, such as
hind-sight). On the other hand, the challenger China
capital allocation and investment, falling capital costs,
and neighbouring SE Asian countries (Taiwan, Singapore,
competitive LCOE and various policy mechanisms, we are
Malaysia, Vietnam) followed a more aggressive and co-
now moving towards a new era for renewable energy.
ordinated approach to succeed.
‘Renewables 2.0’ will have significant, wide-ranging
consequences for all market players, as regulators reduce
their support and power producers seek new revenue
Germany PV manufacturing: boom to
models. The tipping point, where the world shifts from bust
oil and gas to renewables, could be the year 2035. This
is when renewables and electric-based technologies The strategy of high level of automation in manufacturing,
converge, with around 20% of global power needs being with little focus on cost reduction and scale-up led to the
met by solar or wind, and roughly 20% of miles travelled fall of the mighty German solar PV manufacturing.
by cars, trucks, buses and bikes using electricity. • Germany was one of the first European countries
The increased investment in renewables has also to promote renewable energy in 1991 through Grid
enabled equipment manufacturers to achieve increased Feed-In Law, revised later in years 2000, 2004 and
economies of scale. This has brought down the capital 2014. Under these laws & act, Germany’s renewable
cost to build solar PV projects by 68%, between 2010 energy industry boomed, and in short term by 2004,
and 2017. Together with economies of scale, improved the industry growth had reached 100%; and long
production processes have cut the number of defective term growth as high as 40% CAGR, as solar had
cells produced and thus improved yields contributing to become profitable due to the above market feed-in
further cost reductions. tariff investors received for producing excess clean
energy.
PV manufacturing: Strategies of • Q-Cells, a German manufacturer of solar panels, saw
its revenues growing from 17.3 million euros to 299.4
various leading countries million euros in three years 2002-2005. Conergy, a
The breakthrough production of the world’s first German PV manufacturer and EPC firm, saw its sales
silicon photovoltaic (PV) cell occurred in 1954 at Bell increase by 132% in 2004 alone. Similarly scores
Laboratories. Since then, the Solar PV technology has of other companies have grown during the early
been developed and advanced over many decades, 2000 period. The subsidy-fuelled rapid growth of the
through state-regulated monopolies and government German solar industry continued for several years and
initiatives. was further encouraged by a significant transition in
Germany’s energy policy that was passed in 2011.
Since the early 2000s, the solar PV market has grown
exponentially, notably in Germany & EU countries • As Germany’s (and also EU’s) solar industry continued
(through Feed-In-Tariffs) and in the United States to grow, China’s solar market dropped world solar
(through Tax Credits & other incentives). That kicked panel prices by 80% between 2008 and 2013.
off a competition for silicon between the emerging solar This generated a cascading effect of lower panel
panel makers and chip companies. The result: a silicon prices leading to phasing out subsidies. Germany’s
shortage that lasted several years. At one point, the solar industry experienced a surge of insolvencies.
price of silicon skyrocketed from $200 per kg in 2007 to For example, Gehrlicher Solar, a distributer of PV
$500 per kg by the following year 2008. However, many components for solar projects, reported $415 million
of the European and US PV manufacturing companies, in revenues in 2011, but by 2013, they filed for
couldn’t make investments for scaling up of silicon & PV bankruptcy. Both previously mentioned companies,
Manufacturing plants due to the tech bubble of 2000 Q-cells and Conergy also filed for insolvency in 2012
(scaled-up capacities in semi-con sectors were suddenly and 2013, respectively. By 2014 all other companies
found redundant without any takers); the Lehman crisis like Bosch, Schott solar and many others in EU zone
of 2008 only added to the reluctance for any scale-up in have also went out of business. Solar World and the
Solar PV manufacturing. few were left, which went bust recently.
 14

MIGRATION OF SOLAR PV MANFUACTURING

2000-2010 2010-2016
10 GW/yr 50 GW/yr 2017-Beyond
>100 GW/yr
Germany &EU (Poly- EU & USA (Poly)
Module) Japan (Cell-Module) China (Poly-Module)
Japan (Poly-Module) China (Ingot-Module) SE Asain (Ingot-
USA (Si & New Tech) Taiwan (Cell) Module)
India (Modules) India (Modules) Any other ????

MIGRATION OF PV MANFUACTURING EQUIPMENT SOURCES

2017-Beyond
2000-2010 2010-2016
China (Poly-Module)
EU (Poly-Module TF) EU (Poly-cell)
EU (Wafer-cell)
USA (Poly Si & Ingot) China (Cell-Module)
Any other ????

Figure 2: Migration of solar PV manufacturing over the decades

• To support the PV manufacturing industry, the EU has

USA PV manufacturing: debacle due to
introduced import restrictions on Chinese PV Cells &
Modules through Minimum Support Price controls. focus away from Si
But despite these import restrictions, European PV • Around 2000, a turning point came as California
Module manufacturing capacity had fallen from suffered a series of blackouts, after energy traders
6.9 GW to 3 GW. So, this “learning” can not to be manipulated the energy market to create a power
ignored by other countries. shortage and inflate electricity pricing, the federal
• There are still handful smaller module manufacturers government created tax credits and other incentives
left. But successful manufacturers need large peers for to promote renewable energy.
sustainability, quality and technological advancement. • The resultant skyrocketing price for silicon represented
In recent years, almost all technological advances a big opportunity for venture capital investors, who
came from Europe, but they still lost the leadership as pumped billions of dollars into new tech companies
they do not put the results on the market in a timely to develop cheaper alternatives for making solar cells.
manner. Silicon Valley became a hub for start-up companies
• European Photovoltaic Industry Association (EPIA) flush with cash. Some of the high-flying Silicon Valley
believes that PV production including wafers, cells start-ups at that time included SoloPower, AVA Solar
and modules is competitively possible in Germany; and Nanosolar, each of whom raised more than $100
and in 2018 called on Europe to set up 5 GW of solar million. The U.S. government also threw a lot of
PV module manufacturing capacity to cater to the support behind solar companies as part of its broader
likely 15 GW of annual demand. Problem in financing effort to boost job growth and promote low-carbon
major new production in Europe is that manufacturers technology. It created programs to give grants for
need direct and indirect support; a level playing field; research and loan guarantees to help solar companies
a policy framework by relaxing state aid laws, more secure loans for building solar panel factories and
accessible financing and land acquisition, low energy solar power plants.
costs and less red tape and the removal of minimum • Focus was shifted from crystalline Silicon to many
import price. Over 35 leading EU solar industrial new technologies for reducing the cost rather than on
players are said to backing the call, including Wacker, scaling up of existing Si based manufacturing facilities.
SMA, Total, Weidmuller, Voestalpine, SolarWatt, ABB Many of these newcomers commonly resorted to the
and Enel. use of new materials to create “thin-film” solar cells.

Policy Paper on Solar PV Manufacturing in India: Silicon Ingot & Wafer - PV Cell - PV Module
 15

• Two things happened which destroyed the dreams

India
of these entrepreneurs and investors : (i) Makers of
silicon in China expanded their production, ended the During the period 2007-2015, India introduced slew
shortage, and significantly lowered the price of silicon of measures to grow the solar PV Manufacturing: (i)
well before many of the thin film solar tech start-ups SIPS capex incentive : Companies under this scheme
figured out how to manufacture their technologies were not benefitted as incentives under these schemes
cheaply. (ii) The 2008 global financial crisis shook
could not be disbursed (ii) Introduced Domestic Content
up the young solar thin-film market. By 2012, dozens
Requirement in JNNSM Phase-1 : Little benefit to industry
of companies had filed for bankruptcy or sold for
due to skewed pattern of allowing Thin Film imports.
pennies. The financial market turmoil made it difficult
Subsequently, WTO objections led to the withdrawal of
for power project developers to borrow money,
the scheme; (iii) Reserving capacities with higher VGF.
leading to a crunch in demand for domestic solar
panels, a price war among solar panel makers, and India introduced revised measures in 2018 : (a) Safeguard
layoffs and factory shutdowns by companies such as Duty on imports of PV Cells and Modules - the resultant
BP Solar — all before the end of 2009. increase in project costs led to slowdown of Indian PV
• Post Lehman-crisis, when the United States and Market coupled with the crash of cell & panel prices -
other countries began implementing legislation to little benefit to the Indian industry; (b) Mandatory BIS
stimulate economic growth, including an extension certification (c) Registration of Cell & Module companies
of a key federal tax for renewable energy, Chinese with MNRE. India has been heavily dependent on Chinese
manufacturers built up giant fleets of factories and imports for implementation of its solar program.
stood ready to offer solar panels at lower prices
than many of their competitors. All this expansion in Taiwan PV sector growth strategy
China led to an oversupply of solar panels by 2011
and prices tumbled 50% in 2011 alone. This led to Initial learning from European turn-key lines provided the
growing resentment towards Chinese companies. basis for gradual capacity expansions. Cell production
• SolarWorld filed a trade complaint, against Chinese has been the raison d’être of the Taiwan manufacturing
solar companies, and won a decision in 2012 to community since 2006 (synergies to Semiconductor
impose tariffs on silicon solar cells from China. expertise). Taiwan cell manufacturing was widely
Despite the trade barriers like Section 201, many considered to be professionally operated, processing-
of the high-profile US PV Manufacturing companies savvy, and quality-output guaranteed. Cells flowed in
like SunEdison, Solyndra, Evergreen, Suniva (unique abundance to overseas markets, both to pure-play module
cell design), Megacell filed for bankruptcy. Sunpower producers globally, but also as essential third-party cell
(Ultra High Efficiency IBC panels) struggling to stay supply to leading integrated Chinese module suppliers.
afloat with losses accumulating in the past 3-quarters For a few years, Taiwan led the way with process-related
of 2018. improvements to multi casting and the quality of the
• First Solar (CdTe) is the only company in the global bricks produced was the envy of every multi c-Si producer
Top-10 Module supplier, competing with improving in China.
Chinese technology as well as dropping prices, more
Taiwanese manufacturers enjoyed a period of relative
because of its locational advantages in Malaysia &
success in 2012 and 2013 on the back of the US & EU
Mexico.
trade disputes with cell shipments hitting record highs,
this changed (i) in 2014, when the US closed a loophole
Japan
allowing Chinese manufacturers to avoid tariffs by using
The Japanese government was already ahead with cells manufactured in third countries; with the primary
success in electronics and semi-conductors, and therefore effect was to stem the tide of dumped solar products
they concentrated their efforts on Ultra High Efficiency in the United States; secondary impact saw Chinese
Cells & Modules catering mainly to the domestic & global solar companies revert in their droves to their domestic
niche roof-top markets. Further, to protect the domestic market, resuming the production of cheaper, home-made
industry, during 2010-2015, formal (quality approvals) solar cells for sale to the U.S. market; (ii) in 2018, China’s
& informal (nationalistic) trade barriers were imposed. 531 impacted Taiwan PV industry by increasing cost
However, by 2018, the niche high efficiency products pressures. These led to a serious consolidation phase,
also could not compete with the Chinese products and which will be difficult to reverse. While many Chinese
the manufacturing declined. solar companies could afford to navigate the U.S. Anti-
 16

Dumping tariffs, higher costs in Taiwan meant the U.S. 2. Certification: Taiwan put in place a remarkably simple
market was prohibitively expensive for all the Taiwan process “local factory auditing pre-requisite”, which
companies. The Challenges faced by the Taiwan PV should enable Taiwan companies to benefit. For
Manufacturing include: projects to qualify for the top-up FIT incentive rate,
modules used must receive local certification which
• Ingot & Wafer production: Today ingot & wafer
requires a factory audit that appears to be confined to
production in Taiwan has no technical advantage
Taiwan only. Preference for Taiwan-companies making
compared to lower-cost channels available within
Taiwan-modules for Taiwan-projects is possibly the
China, despite spending and efforts moving multi
overarching safety net.
wafering to diamond-wire saws and to ‘black-silicon’.
It is argued that there is a strong possibility that this 3. Government is extending financial support by direct
part of the value-chain will disappear entirely by 2020. investment in manufacturing companies.
• Similarly, the cell and module segments have seen 4. Manufacturers rationalising the Technology/
falling utilization rates, beginning with the multi c-Si Operations / Business:
segment.
Technology Changes: A significant portion of multi
• Taiwan industry blames China’s new PV subsidy capacity will be permanently retired until the cell
policy, and the US-China trade war; EU and US anti- landscape is stabilized with competitive technology
dumping, the rise of the Chinese pure-play entrants, (performance and cost), like Mono-PERC. Sino-
and the LONGi-mono effect, for the difficult situation American Silicon, (SAS) is considering exiting the
of its solar business wafer business.
• While companies have four options open to them to Business Revamping: The modus operandi is to move
respond to the new market dynamics – upgrades to quickly from merchant cell producer to flexible power
enable poly black silicon cells; produce quasi-mono-Si plant enabler. Neo Solar, Gintech and Solartech
ingots; turn to mono-Si wafers; or exit the business – completed a merger to form UREC with capacity
none are attractive for Taiwan makers, due to either of 4.5 GW Cells & Modules. They made the full
tighter environmental protection standards, or for transition from p-multi to 100% p-mono PERC; vertical
financial reasons. Taiwanese producers are having integration Ingot-to-downstream solar PV. GET is
financial troubles embracing n-type Heterojunction entering the downstream module manufacturing.
Intrinsic Thin Film (HIT) technology and, consequently,
are not able to remain competitive. Downstream Expansions: Taiwan Solar 2.0 will see
changes whereby modules will become a major focus
Strategy to stay relevant:
in the country, resetting the focus from Wafer & Cell
1. Long-term stable government policy for solar to module revenues. Taiwanese manufacturing costs
deployment in Taiwan: It aims to install 20 GW of are much higher than Chinese cell makers. So, the
solar PV by 2025. This measure will help the domestic strategy of companies going to downstream is seen
PV Manufacturing companies. as a good strategy.

CHINA PV sector growth

Taiwan c-Si Production (MW)
10,000 China leads the renewable energy field globally in terms
of investments, installed capacity and manufacturing.
8,000 The Chinese government has supported R&D on solar PV
since the 1950s. By the mid-1990s, China’s PV module
6,000 manufacturing capacity was 5 MW, much of this capacity
did not meet modern international standards and actual
4,000 production was only 1.4 MW. The timeline of China’s rise
began in the late 1990s when Germany, overwhelmed
2,000 by the domestic response to a government incentive
program to promote rooftop solar panels, provided
0 the capital, technology and experts to lure China into
2013 2014 2015 2016 2017 2018 2019
making solar panels to meet the German demand. When
Ingot Wafer Cell Module Spain and Italy began their own rapidly expanding solar

Policy Paper on Solar PV Manufacturing in India: Silicon Ingot & Wafer - PV Cell - PV Module
 17

incentives, adding to the demand, the Chinese took it the country, and force the transfer of proprietary
and basically ran with it. technologies from foreign companies to their joint
ventures with China’s state-owned enterprises,
Boosting solar PV manufacturing became part of core
as a condition of operating in the country. The
government strategy since the early 2000s, with belief
Chinese government interpreted WTO provisions,
that those who moved fastest in the transition to a
by maintaining that decisions of companies trading
low carbon economy were likely to gain a significant
technology for accessing the markets are purely
competitive advantage. China’s dominance of nearly all
business decisions.
aspects of solar use and manufacturing—came through
a unique, complex, interdependent set of circumstances. g. Further, with its deep government pockets, growing
The central and provincial governments helped local technical sophistication and a comprehensive plan to
companies through variety of top-down and bottom-up free itself from dependence on foreign companies,
strategies: China has set its aim to become dominant in industries
of the future like solar PV. Under a plan called “Made
A. Central Government (Top-down Policy measures):
in China 2025”, China hopes to become largely self-
a. China having realized the lack of advanced sufficient within seven years including manufacturing
technologies in producing crystalline silicon, and machinery. “Made in China 2025” calls for roughly
therefore found transition to a low carbon economy $300 billion in financial backing: inexpensive loans
erratic and unpredictable. This led to their efforts in from state-owned banks, investment funds to acquire
scouring the world, hiring more solar experts and foreign technologies, and extensive research subsidies.
shopping for machinery and polysilicon supplies to
h. On bank funding, the Government recognized
meet the expected surge of orders for solar panels.
& supported the need for large, semi-automated
b. The heart of solar technology is built on silicon. factories making it easier, cheaper, and a lot less risky
During the 2006-2008, while China exported up to for solar companies to obtain financing. Low cost long
95% of its solar PV modules, it imported 95% of its term debt is provided by the Chinese Development
raw materials for PV, especially high cost Polysilicon. Bank (CDB), which raises most of its money via long-
A sharp fall in the price of purified silicon was driven term bonds. CDB gives borrowers very low interest
by de-licensing of Siemen’s CVD & TCS by EU & USA rates, and, if the borrower cannot pay back the loan,
markets; a breakthrough in China in mastering the there is a provision that it may be back-stopped by
technology & its strategy for domestic production. the Chinese government. In 2010 alone, the bank
c. The central and provincial governments helped local handed out $30 billion in low-cost loans to the top
companies acquire state-of-the-art technologies and five manufacturers in the country.
break into the global market. Technology transfer i. On fiscal measures, it is noted that the People’s Bank
and technology cooperation from industrialized of China (i) tightly controls the yuan to dollar value,
countries occurred particularly through purchasing to manage the prices of exports to the USA; to be
manufacturing equipment, transfer of complementary a little cheaper than those produced in America; (ii)
know-how, foreign direct investment by multinational facilitate raising funds through overseas IPOs –influx
firms and the movement of skilled labour across of foreign capital enabled the Chinese PV industry to
borders, networking, staff exchange schemes, joint expand its production capacity at an unprecedented
ventures, licensing, mergers and acquisitions. rate; armed with tens of billions in loans from the
d. China bought solar companies globally and invited Chinese government & IPOs, Chinese solar companies
others to move to China, where these companies have scaled up by adding in big chunks of GW scale
found cheap skilled labour. Instead of paying taxes, factories for PV manufacturing. This has enabled
they received tax credits. China’s solar producers to grow to GW scale in a
very short period of time, turning the country into
e. China ensured that it will be both buyer and seller, a leading exporter of solar and pushing down prices.
by retaining ownership of customers and suppliers
China’s provincial governments designated solar as
alike. This gave the state a great deal of influence
“strategic industry” which provides more jobs and
over equipment purchases, sales, and technology
manufacturing capacities. The result is that in building
development.
up the world’s largest solar manufacturing industry,
f. Chinese government sought a high degree of local China had helped create a worldwide glut, driving
content in equipment / products produced in higher-cost Western producers into the red.
 18

j. Market Development: A paradox has emerged in the h. Labour support: There are flexible labour laws for
large-scale growth of the Chinese PV industry, with hiring & firing of staff as per the supply-demand.
a strong orientation towards export markets without
i. In addition, there are provisions to provide
complementary policy support for the creation of
technological & research grants.
a domestic market. China then decided to follow
Germany’s lead again, developing its own “feed- C. Bottom-up Measures by Industry (Cost reduction):
in tariff”. The result was a huge surge in domestic
a. Scale: The government consolidated several
demand resulting in China’s domestic market
manufacturers into a few national champions, to
bypassing Germany’s and becoming to be the largest
generate economies of scale (3-5 GW cell and module
in the world just in two years, by 2015.
factories with investments at US$ 500-1000 million
k. Aggressive PV market subsidy structure created a large each) with a view to have scales and focus on learning.
domestic demand, initially by Central Government. The cost advantages that larger manufacturers can
When subsidy payments increased beyond $17 leverage due to the scale of operation allows them
billion, further support – as part of the new 2020 to upgrade factories with higher levels of automation
expansion target, will be provided by local & provincial ensuring more consistent manufacturing quality,
governments. acquire better materials at lower prices as well as
B. Role of Local & Provincial Governments: attract and retain higher qualified staff. The larger
manufacturers have also attracted more attention
a. Free or low-cost loans through local commercial banks from large-scale buyers and investors concerned
are offered. This created a fund-raining and expansion about quality.
boom in the Chinese PV industry, particularly in
b. Mergers: China used low-cost government loans to
provinces such as Jiangsu.
expand solar panel production dramatically. That
b. Sometimes the provincial government reimburses strategy also led many Chinese solar manufacturers
interest payments. to crash and burn. Some blamed it on the pressure
c. Tax rebates - Local tax revenues are calculated from local government to expand too rapidly.
in relation to sales, not profits, and officials are Government now wants survival of the fittest as it
promoted according to how much employment they expects several small-scale wafer makers companies
generate. This incentive structure for decision makers without competitiveness to be eliminated from the PV
reinforces the creation of excess capacity, leading to industry supply chain.
lower prices. c. Improvements in Manufacturing Process: The
d. Received export credits at preferential rates from the prevailing PV technology in China is still based on
Export Import (ExIm) Bank of `China. crystalline silicon solar cells. China PV Industry have
been conservative on new technologies. The PV
e. Cheap land / Land Grants: Many provincial officials manufacturing has undergone incremental changes
provided Chinese entrepreneurs with land at below- on regular basis. The important improvements are (i)
market prices or even for free. Land grants thus increase in tool throughput; (ii) development of new
became larger than what’s needed to build a factory process / tools which can be added seamless to the
and taking benefit of this the Companies build existing lines. The success of these two advancements
apartment buildings on the surplus land; the cash is due to non-disturbance of existing lines; but
flow from such investments were used to pay for R&D integration of few additional tools in the existing lines.
and also to offset factory losses. The processes involved in the manufacture of various
f. Buildings: Local governments in China typically advanced PERC technologies are complimenting in
construct the factory buildings and lease them to the nature requiring few changes in the existing lines.
manufacturers. This saves the capital investment &
d. Indigenous Machinery: The development of
the time to market the product.
indigenous machinery happened initially by
g. Energy & Utility subsidies – Local governments localization of Automation equipment for large
provided low cost hydro power for industries and manufacturing plants. This was followed by Chinese
take the responsibility of treating all wastes at PV manufacturing companies developing their own
common effluent treatment facilities. This reduces technologies and designing own in-house equipment
the operational costs and disruptions for the and fabricate according to particular specifications.
manufacturers. This helped to develop a strong skills’ base in engineers

Policy Paper on Solar PV Manufacturing in India: Silicon Ingot & Wafer - PV Cell - PV Module
 19

and operators that are needed to run large factories. particularly to send a signal to public authorities to
For example, LONGi applies a series of innovations to allocate more subsidies. China’s PV industry also
its manufacturing chain every three months to a year recently filed a large number of patents in upstream
so as to strike a balance between lowering production segments, especially silicon production and ingot
cost and improving product efficiency. manufacturing, suggesting a turning point.
e. Indigenous Supply Chain / Eco-System: Mass h. China also issues product standards and specifications
production efforts led to the creation of end-to-end that force foreign software suppliers to develop special
supply chain ecosystem which includes a wide variety versions for China, allowing Chinese equipment
of material vendors; enabling PV manufacturers to
makers to circumvent Western patents and royalty
source good quality local materials at competitive
obligations.
prices.
i. Quality: Today Chinese PV manufacturers advocate
f. Innovation: China historically depended to a large
that the quality of Chinese PV systems is similar to
extent on international technology transfer and
their Western counterparts.
cooperation from high income countries for solar
energy technology. This has changed over time as Through these changes emerged an industry that has
the country stepped up its independent innovation turned solar panels into a commodity produced in
and thereby created what the Chinese government large-scale factories. The main reason why we have low
calls a “PV industry with Chinese characteristics”. prices today is because the fragmented industry has
This was supported by the government by increasing
consolidated around a single tech. That technology is
investments in R&D, covering almost the entire solar
produced by hundreds of firms around the world, so
PV manufacturing chain and establishing national key
they are able to tap into the same economies of scale
laboratories at several leading firms. Today, leading
and R&D investments. While in 2006, there were two
companies like Yingli Solar, Trina Solar, LonGi have
companies from China in the list of top ten cell producers
set up national PV key laboratories with annual R&D
investment of hundreds of million US$. by 2018, all the top ten are Chinese.

g. Patents: A common problem is still the “Valley of If there was ever a situation where the Chinese have put
Death” between product R&D and commercialization. their whole governmental system behind manufacturing,
Chinese solar firms tend to file more patents, it’s got to be solar modules.

Table 2: Top-10 Global Solar PV Manufacturers – The China Dominance

2018 2018 2018

Rank Top Cell Mfg Top Cell Exporters Top Module Suppliers

1 JA Solar, China Tongwei, China (6.5 G W) Jinko, China

2 Tongwei, China Aiko Solar, China JA Solar, China

3 Trina Solar, China Uniex New Energy, China Trina Solar, China

4 Hanwha Q-Cells, China/ Kor/ EU Pingmei New Energy, China LonGi, China

5 Jinko, China United Renewable, Taiwan Canadian Solar, China

6 LonGi, China Hanwha Q-Cells, China/ Kor/ EU

7 Shunfeng (Suntech), China Risen Energy, China

8 Canadian Solar, China GCL-Si, China

9 Aiko Solar, China Talesun, China

10 First Solar. Malaysia/US First Solar, Malaysia/ US

 20

Governments and companies can learn what they need

Malaysia, Vietnam, Thailand & to do to overcome the boom to bust cycle.
Singapore PV Sector Growth
SE Asia (Taiwan, Singapore, Malaysia, Vietnam): OEM Decline in prices of module
manufacturing; capital invested by the Chinese companies;
local governments providing the infrastructure and tax & profitability of Chinese
holidays

Chinese companies are building factories outside China,

companies
particularly in Malaysia and Vietnam, to bypass anti- It is widely believed that module prices will continue to
dumping and anti-subsidy measures of USA and EU. decline due to growing global capacity expansion and
Most of the top 10 module suppliers have company- economies of scale, as well as technology improvements
run operations in Southeast Asia (Malaysia, Thailand and decreasing feed-in tariffs and subsidies. PV
and Vietnam) or have OEM arrangements with China- technology and manufacturing improvements included
financed operations in Vietnam. Chinese companies have PERC, diamond wire saws, with “incremental”
set up manufacturing capacity of about 12 GW for solar improvements to solar cell and solar panel technology.
cells and 14 GW modules in SE Asia. The typical manufacturing cost ($/Wp) of an integrated
While the Chinese players search for manufacturing Ingot & Wafer-Cell-Module facility is shown in Figure-3
locations outside China; at the same time, few of the USA below:
& EU companies were also searching for manufacturing
Figure below shows the module price trends in global
low cost manufacturing locations outside USA & EU, for
market and India market, during the corresponding
their survival against low cost products.
period. Since 2015, the average sale price (ASP) for solar
The governments of these SE Asian countries have panels dove 50 percent to about $0.31 per watt by end
strategically developed industrial policies to attract the of 2018.
investments from China, US & EU companies. Similarly,
The 50% decrease in module price during the period
the companies have developed their own local strategies
2015-2018 is well understood in terms of the following:
like OEM manufacturing (rather than owning the lines)
like those of new production capacities in Vietnam a. poly-silicon price reductions (led by lower power
are associated with Vina Solar, a Vietnam-based OEM consumption; recycling of used modules; higher
manufacturer, which produces both cells and modules. throughputs) from $20 to $10 /kg; consumption
from about 4.5 to 4 gm/Wp
Summary: Nations need to look back by analysing
Germany’s subsidy structure, domestic and international b. wafer processing costs (led by Diamond wire;
competition, and spurring of domestic demand. throughputs) by nearly 40%

INTEGRATED PV SOLAR MANUFACTURING COST

1.4 Poly&Wafer Cell Conv Mod Conv $/Wp

1.2 0.33
1
0.8 0.23
0.24
0.6 0.18
0.4 0.73 0.17 0.16
0.14 0.13
0.12 0.09 0.12
0.2 0.45 0.08
0.12 0.11
0.22 0.21 0.06 0.06
0.19 0.13 0.11 0.1
0
2011 2012 2013 2014 2015 2016 2017 2018

Figure 3: Integrated PV manufacturing cost during the past decade

Policy Paper on Solar PV Manufacturing in India: Silicon Ingot & Wafer - PV Cell - PV Module
 21

Module Price Index (US$/Wp)

0.70 0.62 0.65 0.64 0.63 0.64

0.60 0.61
0.53 0.57
0.50 0.48 0.46 0.45 0.47 0.48 0.45 0.46 0.48 0.45
0.43 0.43
0.40 0.40 0.36 0.38
0.35 0.33 0.32 0.33 0.32
0.33
0.30 0.28 0.23 0.31
0.20 0.22
0.10
0.00
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
15 15 15 15 16 16 16 16 17 17 17 17 18 18 18 18
India $/Wp Europe $/Wp

Figure 4: Trend of PV module ASP

c. Cell processing costs (led by PERC, higher efficiencies; margins could be maintained by increasing the shipment
lower silver costs & consumption; higher throughputs) volumes and the revenues.
by nearly 50%
R&D Expenditure:
d. Module processing costs (led by lower BOM prices;
lower CTM losses) by nearly 30% One of the compelling reasons for the consistent
profitability of the Chinese companies has been the
e. Reduction in capex across the PV Value chain by
high level of investment in R&D. These investments
nearly 30-40%
are complimented by supported by government as well
Table below shows the trends of decreasing ASPs and the as networking with other industries & academia with-
trends of Gross Profit & Net Profit Margins of the global in China. LONGi Green Energy Technology set a new
Top-10 PV manufacturing companies: solar industry R&D expenditure record in 2017, not
only surpassing the two historical leaders, First Solar
It can be seen that while the ASPs declined by 50% and SunPower, but spent more in one year than any
during the 4-year period, the Gross Margins remained PV manufacturer to date. The R&D Investments as % of
within the range of 16%+4%. Similarly, the Net Profit Revenue of LonGi is compared with those First Solar &
remained in the range of 3-5%. This consistency in profit SunPower are compared in the graph below:

Table 3: Trends of ASPs, Gross Profit & Net Profit of Tier-1 Global PV Module companies
2015 2016 2017 2018

ASP, $/Wp 0.63 0.55 0.46 0.32

Blended cost , $/ 0.41 0.416 0.354 0.26

Wp (incl Shipping,
Tariffs, Warranty
costs)

Canadian Solar Shipment, GW 4.7 5.2 6.8 6.4

Revenue, $Bn 3.5 2.9 3.4 3.5

GP % 16.6% 16.2% 18.8% 14.3%

NP % 5.0% 3.3% 2.9% 4.9%

Jinko Solar Shipment, GW 4.5 6.7 9.8 11.7

Revenue, $Bn 2.5 3.1 4.1 3.5

GP % 20.3% 18.1% 11.3% 14.3%

 22

Table 3: Trends of ASPs, Gross Profit & Net Profit of Tier-1 Global PV Module companies
2015 2016 2017 2018

NP % 5.4% 4.6% 5.0% 1.7%

JA Solar Shipment, GW 4.0 5.2 7.6 11.0

Revenue, $Bn 2.1 2.3 3.0

GP % 17.0% 14.6% 12.3%

NP % 4.5% 4.6% 1.5%

LonGi Capacity, 5 7.5 15

Ingot-Wafer, GW

Revenue, $Bn 1.1 1.8 2.42

NP % 9.5% 13% 21%

Annual R&D spending comparison

US$ in Millions
$200
First Solar Sun Power LonGi
$180

$160

$140

$120

$100

$80

$60

$40

$20

$-
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Figure 5: Trend of R&D Spending of major PV Manufacturing companies

country as of December 2018. Indian solar boom is set

Need for Solar PV for a 40-50% growth rate over the next five years, as

manufacturing in India bottlenecks such as integrating solar farms with the grid
are overcome. Grid parity was possible due to the quick
drop in quoted tariffs by the Indian Solar developers, as
India needs energy security and sustainable energy per the chart below.
solutions. Amongst the various energy sources solar
energy has emerged as the preferred option since it is With the record low tariffs, the PV power installations
available across geographies, relatively unlimited vis-à- have succeeded beyond expectations; but, the PV
vis other green sources, freely available and in fact the manufacturing is yet to attain critical mass. The country’s
country is endowed with possibly the highest band installed manufacturing capacity of Cells is about 3.1GW
of average annual solar radiation and well suited for (consisting of 18 companies) and that of the Modules is
decentralized and distributed power requirements. about 11GW (consisting of nearly 175 companies). While
there are only couple of GW scale companies, majority
India’s solar market is on a roll with over 25 GW of large- of the plants are of 50-200MW capacity, having very
scale solar photovoltaic (PV) capacity installed in the

Policy Paper on Solar PV Manufacturing in India: Silicon Ingot & Wafer - PV Cell - PV Module
 23

Trajectory of Solar Tariff in India (Rs/kWh)

14
12.16
12
10
8.36 8.01
8 6.76
5.84
6 4.35
4 3.31
2.44 2.62
2

0
2010 2011 2012 2013 2014 2015 2016 2017 2018
Average Tariff (Rs/kWh)

Figure 6: Trajectory of Lowest Solar Tariffs in India, 2018 (Source: Mercom)

high operating costs. Without credible manufacturing projects are at a greater risk of lower life expectancy.
capacity, import dependence would move from oil to
solar panels. Securing the supply-chain for solar eliminates the risk of
poor quality products getting dumped into India by fly-
To facilitate a comprehensive policy, TERI organized a by-night operators. Further, shortage and glut of products
consultative meeting with the industry representatives leads to wild fluctuation of prices of PV products, resulting
and the following issues were deliberated upon: in project disruptions.

• Government Support: Priorities / Policies / Timelines Market: Indian market is expected to grow 10-20 GW/
/ Financial / Quality / Market access yr, which is a huge support base to develop and sustain
• Why do India need PV Manufacturing: Energy domestic manufacturing.
Security? Forex saving? Employment? Strategic positioning of Domestic Eco-system: At present
• Strategy for Market: India? ISA? Global? more than 80% Indian solar value chain is mostly
dependent on the imports and lacks economy of scale for
• Target Module Market: Grid Parity (lower Tariff) /
the domestic manufacturers. If it continues, the industry
Socket Parity (prosumers – Higher Tariffs)
will end up perpetuating dependence on imports and this
• India specific USP for manufacturing: Basic Materials would not be in the country’s interest as far as concerned
- Eco System – Power - Labour to energy security.
• What extent of Integration: Poly-Ingot & Wafer– Cell India specific Product development: Mono-crystalline
– Module modules with higher wattage are used in premium
• Scale of Manufacturing: Country Road Map? segment of global market, especially in Europe, USA &
Individual plant targets / Roadmap? Japan and Rooftops. The Multi-crystalline technology has
evolved to be the work horse of the industry and is the
• Technology Roadmap: BSF (low tariff)–PERC–HJT– most preferred in the Indian Solar PV market with more
TOPCons (High tariff) – India specific? than 90% market share, presently.
Reliable local Supply Chain: One of the compelling
Foreign Exchange outgo: To meet the projected 10-20
reasons for domestic manufacturing was argued to be the
GW/yr, the recurring annual forex outgo will be US$ 2.5-
quality of modules imported from China. It is generally
5.0 Bn. At this rate, during the next 10 years India may
believed that while China manufacturers export Grade-1
need to forego ~$50+ Billion foreign exchange only for
& Grade-2 PV panels to US, EU & Japan; it is the Grade-3
solar industry.
& Grade-4 which find way into India as low-cost PV
Panels. A recent study of many of the Indian PV projects Employment opportunities in manufacturing sector:
is showing annual degradation much higher as compared Solar photovoltaic (PV) manufacturing in India can
to the expected degradation of 0.6-0.7%. Many of the leverage certain inherent advantages such as low cost of
 24

HR capital in both white- and blue-collar jobs. Every GW/ of this capacity is obsolete, sub-scale and uncompetitive.
yr manufacturing capacity (PV Value chain, supply chain So, the case is to turn India into a solar capital of the
eco system & indirect services like transportation etc) world and earn forex through exports.
will create new skill jobs of the order of 3,000 – 3,500.
At 10-20 GW/yr, solar manufacturing has a potential of
creating nearly 1,00,000 jobs. High level cost structure
Opportunities for Capital Equipment OEM sector: of manufacturing &
Every GW/yr integrated PV manufacturing capacity
needs capital equipment for their process, utilities & Comparison of India and
service requirement. The one-time capital equipment
expenditure to the tune of $200-250 million / GW will Chinese costs
translate to $2.5-5.0 Billion opportunity for the Capital
equipment fabricators. The employment generation in The high level manufacturing costs for each segment of
capital equipment OEM sector is an added benefit over PV Value chain mainly consist of Si cost, BOM costs,
& above those considered above. Utilities, Labour and finance costs. The cost structure of
the Integrated PV Manufacturing for an Indian company
India domestic PV manufacturing industry met just 15 are estimated based on the capital costs, operating
percent of the country’s annual requirement, according costs information obtained from technology / turnkey
to government estimates. Out of India’s annual demand solution / BOM suppliers, for a new project in India.
of 10GW PV equipment, nearly 85% is imported, despite Information related to SGA and other expenses are based
having installed manufacturing capacity of nearly 11GW on the industrial practices followed in India. Table below
of PV Modules and about 3GW of PV Cell capacity. The shows cost estimates of the manufacturing, highlighting
major reason for lower capacity utilization is that, most polysilicon cost as the main component:

Expected scenario for solar manufacturing in India

80000

60000

40000

20000

0
2015 2016 2017 2018 2019 2020 2021 2022
Expected demand Expected supply-Domestic Gap

Figure 7: Expected Scenario for Solar Manufacturing in India (Source: Mercom)

Table 4: Manufacturing cost break-up

Sr No Cost Item I & W US$c/ Cell US$c/Wp Module US$c/ Total
Wp Wp US$c/Wp
1 Raw Materials (BOM) 6.1 4.3 9.9 20.3 72%
2 Labour & Staff 0.3 0.7 0.5 1.4 5%
3 Power & Utilities 0.6 1.1 0.1 1.7 6%
4 Manufacturing Over Heads 0.8 0.6 0.3 1.7 6%
5 Depreciation Costs 1.7 1.1 0.2 3.0 11%
Total Direct Cost, $c /Wp 9.3 7.8 11.0 28.1 100%

Policy Paper on Solar PV Manufacturing in India: Silicon Ingot & Wafer - PV Cell - PV Module
 25

A GW scale integrated manufacturing consisting of Ingot- Mfg OH are obtained. These ratios are used to estimate
wafer-Cell-Module requires the Electrical Power of 60 the corresponding costs in $/Wp. These values are found
MVA (300 million units/year), water supply of 2 MLD to be in-line with the actual industrial costs in China. The
and related facilities. comparison of both the costs is presented in the Table-5
below:
The cost structure of the Integrated PV manufacturing,
consisting of Ingot-Wafer-Cell-Module for a Tier-1 Chinese In summary, it is clear that it would be necessary for
company are obtained from their published balance Indian companies to maintain comparable & sustainable
sheet. From the cost of revenue details, the contribution 10% Net Profit, to have an ASP which will be nearly 40-
ratios of RM, Labour, Power & Utilities, Depreciation & 50% higher than the Chinese ASP.

Table 5: Comparison of Indian Integrated PV Manufacturing costs with Chinese Tier-1 company
CHINA, Tier-1 INDIA

2016 2017

Capacity

Wafers, GW 7.5 15

Modules, GW 4.5 EoS Medium

Scale

RMB Mn RMB Mn $ Cent/ Wp $ Cent/ Wp

Revenue 11,531 16,362 27 38

Cost of Revenue (8,361) (11,082) (18) (28)

Raw Materials (5,633) (8,324) 51% (13.7) (20.3) 53%

Direct Labour (448) (571) 3% (0.9) (1.4) 4%

Depreciation (375) (546) 3% (0.9) (3.0) 8%

Power & Utilities (554) (668) 4% (1.1) (1.7) 4%

Mfg OH (1,351) (973) 6% (1.6) (1.7) 4%

Gross Profit 3,169 5,280 9 10

GP% 27% 32% 32% 26%

Sales Exp (incl freight (468) (664) 4% (1.1) (1.1) 3%

etc)

Admn Exp (incl R&D, (441) (664) 4% (1.1) (1.5) 4%

Salary)

Financial Exp (102) (198) 1% (0.3) (1.9) 5%

Other Income/ (390) 242 -1% 0.4

expenses

Profit from Ops 1,768 3,996 7 6

Other profits 24 22

Income tax (242) (468) 3% (0.8) (1.7) 4%

Net Profit 1,551 3,549 22% 5.8 3.9 10%

13% 22% 100% 22% 100%

 26

Indian PV Manufacturing
– Comparison with China
manufacturing

Table 6: Comparison of Indian Manufacturing competitiveness with Chinese or SE Asian countries

Parameters India Chinese, Other Asian & Countries
Capital Cost Land & Buildings Full costs to be absorbed by Local govt. provides land &
the project. ready -to-occupy buildings on
lease basis or at subsidized
rates
Utilities & Infrastructure Self-financed by the project Local govt provides power,
for all external woks (road, utilities & waste disposal
power, pipelines) facilities at plant boundary
Plant & Machinery Fully imported from China / Designed & Fabricated locally
Europe at higher costs by Manufacturing companies;
tax set-offs are available
Technology Imported with continuous In-house and hence cost
dependence on OEM effective
Economies of scale Medium scale plants of 0.5-1 3-5GW scale; with huge
GW capacity; advantage of scale for project
savings
Project Finance 10-13% interest loans, 0-5% per annum interest
comparatively shorter loan loans with long tenures
durations by government along with
grants.
Hence, the total project cost for Indian companies is higher around 15-25% than other
countries.
Operational Cost Raw Material (RM) Cost High as majority are Low as majority sourced
imported; the local RM are locally; Manufactured with
costly due to ADD local know-how and eco-
system
Supplier Options Lesser Higher with regular
improvements
Inventory Cost High due to higher lead times Low (JIT); many times across
for supply / sales the fence
Bargaining Power Low due to low volumes High due to high volumes
Yield Losses & recoveries Higher due to manual / semi- Lower due to high
auto / lack of know-how automation / precision
manufacturing; own R&D for
improvements
Utilities Higher prices (due to cross- Subsidized
subsidization requirements
Manpower Higher manpower due to Low manpower due to
semi-automation; Lower higher automation; higher
productivity productivity
R&D No co-ordinated Academia- Govt supported large scale
Research Labs- Industry R&D R&D centres in all Tier-1
companies

Policy Paper on Solar PV Manufacturing in India: Silicon Ingot & Wafer - PV Cell - PV Module
 27

Table 6: Comparison of Indian Manufacturing competitiveness with Chinese or SE Asian countries

Parameters India Chinese, Other Asian & Countries
Quality Standards Meets international standards Meets international standards
– has been exporting to
European markets; Semi-
automation is a concern
Financing Costs Interest Cost – Term Loans Around 11-14% 0-5 %
Interest rates -Working Higher interest rates of 12- Lower interest rates of 2-4%;
Capital 14%
Working Capital Not easily available; Easily available; easier terms
Depreciation Faster depreciation (5-7 Normal depreciation
years) due to equipment (10-years) due to equipment
obsolesce improvements internal to
companies
Income Tax No Tax rebates or holidays Local governments extend
tax rebates & tax holidays
SGA / Marketing & Logistics Mandatory Product Not available in India; Available from local / global
Performance Insurance big disadvantage; higher insurance companies
warranty costs
Logistics High transportation costs Well established and low
for raw material and finished transportation costs; available
products at short distances
Exim Benefits None Available with buyer’s credit
finance mechanism

It is evident that India is competitive in terms of cost of The PV manufacturing value chain starting from mining
labour and Quality Standards but is at a disadvantage of Quartz Silica to PV Module manufacturing has
in terms of high cost of capital, higher power tariff been reviewed for competitiveness in (i) security; (ii)
and absence of facilitating ecosystem. The global PV technology & (iii) cost.
production capacity stood at >100 GW whereas in India Quartz Silica (SiO2): High grade quartz silica (containing
it was mere 3 GW cumulative with insufficient demand about 99.8% SiO2) suitable for semi-conductor grade
for domestic products. These capacities deter the Indian Silicon manufacturing is available in natural hillocks
companies in terms of economies of scale. located in AP, Karnataka, Orissa regions. Presently, the
quartz is mined in small scale and processed (size &
Based on the development potential, it is expected that colour separation) manually. The quartz is exported to
during the next 10-years, the Indian solar energy industry Japan, Korea and other countries.
requirement will be growing at a healthy annual rate
of 30-40% or more. This growth rate throws up many Metallurgical Grade Silicon (MG-Si): The quartz (SiO2)
is converted to silicon (Si) by carbothermic Reduction
challenges. Co-ordinated efforts backed up by a strategic
process in submerged (electric) Arc Furnaces with graphite
policy support can help in the development of the
electrodes at 2000 0C, using charcoal as reducing agent.
domestic supply chain system. With support, the Indian
For production of 1kg of MG Silicon, 2.6 kg of Quartz
solar manufacturing industry has the potential to become Silica is used along with. The power requirement is about
a global scale industry in a short time. 11-13 kWh/kg of Metal Grade (MG) Silicon. The cost
of power is nearly 50-60% of the manufacturing cost of

Recommendations MG Silicon. Hence, countries like China, Norway, Brazil

have allocated small hydro power plants of 20-50 MW
capacity to each of these SME scale Silicon manufacturing
Government may consider prioritising the PV plants. These plants operate seasonally utilizing the low
Manufacturing value chain – as a strategic industry cost hydro power projects. The MG Silicon of >99% (2N)
(energy security; Forex savings & Employment reasons). is used as pre-cursor for Solar & Semi-conductor industry.
 28

India produces Ferro grade silicon (75% Si) for Steel & • Technology upgradation: The Hydrochlorination-
Aluminium industry. However, in the absence of low cost Siemens CVD is the most preferred route with more
power, it is suggested not to manufacture MG Silicon for than 95% market share. Attempts were made by
Solar applications. various global majors to introduce Fluidized Bed
Reactor (FBR) technology to achieve lower costs.
Polysilicon (MG-Si): MG-Si of 2N is purified to 6-11N
However, the GCL (20,000 tons/yr plant); Samsung
purity using Hydrochlorination & Siemens CVD process.
(20,000 tons/yr plant); REC (9,000 tons/yr plant) –
The economies of scale are ~20,000 tons/year. At a
none of them are able to manufacture the product
consumption rate of 4gm/Wp, this translates to nearly
due to quality & operational issues.
8GW/yr of PV manufacturing.
• High Entry Barriers: Apart from technology barriers,
The availability of state-of-the-art technology consisting
the high capex & high opex will be critical barriers for
of low power utilisation (<40 kWh/kg); high quality 6-9N
any new entrant.
is now available from USA & China only. The cost of
power will be 20-35% of the manufacturing cost. Further, In view of the above, it is suggested that Government
the price of Polysilicon is now in the single digits (<$9/ may adopt Phased Manufacturing Programme (PMP),
kg). In the absence of low cost & un-interrupted power, under Make in India plan, with the overarching objective
it will be difficult to manufacture competitively. The of establishing 15GW full value chain Silicon Ingot to
following points are critical in any decision for Polysilicon solar modules local manufacturing facility at competitive
manufacturing: prices in the country by 2024. Phase wise programme is
• Demand – Supply : The increase in demand due as proposed below:
to Solar PV market, nearly 40% CAGR in the past (i) First Stage: Solar Cells & Modules – About 15 GW
10-years, has resulted in supply increase by about capacity could be targeted over a period of 2-3
20% CAGR (from about 50,000 Tons /year in 2009 years for manufacturing of cells and modules with
to about 300,000 tons in 2017). This lower growth full value addition in India. For this, expression of
of Polysilicon is due to the increase in efficiency interests could be invited for approval aiming supply
of the solar cell technologies & reduction in silicon to commence in 2021 with the following provisions:
wastages throughout the manufacturing value chain
(more power out for less polysilicon). Hence, there • Scale: Investors will be keen to install GW scale plants.
is no shortage of Polysilicon anticipated in the next Minimum capacity could be 1 GW for eligibility for
few years. Further, China & other countries have more participation.
than 200,000 tons of additional idle capacity, due to
• Technology: Though investors would be encouraged
the high cost of manufacturing. In case of any short
to go for best in class technologies like PERC+/HJT/
supply, if the price-increase, these plants will come
TOPCON, yet the investors could pick up usual
on-stream at a very short notice. Hence, any decision
polysilicon based solar cells and modules and thin
based on shortage of supplies will not be viable.
film technologies with different efficiency and cost
• Strategy to become Self Reliant: China is a net structure. It is suggested that to go for ‘Rs per Wp’
importer of Polysilicon. Nearly 50% of its requirement criterion to decide priority amongst the applicant
of 2017 was imported from OCI (South Korea), developers.
Wacker (Germany) & other Japanese & USA markets.
India can also source its Polysilicon requirements • Manufacturing Hubs: In order to provide a scale
from a divergent market base. Hence, there is no to manufacturing expeditiously, creation of solar
threat of supply shortages in case of hostilities with manufacturing hubs could be considered, something
neighbouring countries. on the lines of Solar Parks, with participation of
States and pre-approved provisions for land use and
• Quality: Even after 10-years of manufacturing availability of infrastructural facilities. Each hub can
experience in Polysilicon at global scale capacities be designed to accommodate 4-5 GW of Solar PV
and access to global R&D, China is still not able to
manufacturing along with all the ancillary industries.
manufacture Polysilicon of higher quality (>7N) which
Various requirements for each of the manufacturing
is required for CZ Mono wafer (ultra-High Efficiency
hubs include the following:
PERC & N-type cells) manufacturing. This high quality
polysilicon is manufactured only by 4-5 companies ◊ Land: 200 – 500 acres (developed land to
located in South Korea, Germany, USA, Japan, who be provided on lease basis to the selected
guard the technology very closely. manufacturers)

Policy Paper on Solar PV Manufacturing in India: Silicon Ingot & Wafer - PV Cell - PV Module
 29

◊ Power: 250-400 MVA (220 KV or 440KV to About 15GW manufacturing being in-place, the domestic
meet stable power requirement) PV Value chain can be expanded to integrate INGOT-
WAFER & BOM ECO SYSTEM. Bids may be repeated
◊ Water: 5 - 10 MLD
every year for the next 5 years to get competitive industry
◊ Waste Water Treatment (CETP): 2-7 MLD structure and lower prices.
with adequate recycling facilities
• Scale: Investors will be keen to install >5 GW scale
◊ Solid Waste Handling: 1000 Tons/year facility plants for manufacturing of Ingot-Wafer & BOM
(with 10-20 year design capacity) Materials, which are of economies of scale for these
◊ Duties & Taxes: Allowing duty free imports of components. Minimum capacity 5 GW.
all plant, machinery and spares. • Various financial and fiscal incentives mentioned
◊ Environmental Clearances: Waiver on during First Stage are suggested to continue.
environmental clearance with necessary • Assuming duty free imports of all plant, machinery
safeguards for waste disposal is suggested and spare, it is felt that the implications of higher
under EIA notification which could be cost of financing in India would be required to be
facilitated by the Central Government. compensated through capital grant to make the
• Production linked Incentive: It has been estimated product cost competitive. In line with provisions
based on inputs from various stakeholders that there of MSIPS, it is recommended to provide upto 20%
could be a price differential of about Rs. 20 lakh per of the project cost on reimbursable basis to the
MWp for domestically manufactured solar cells and manufacturers. Two trenches of equal amount could
modules due to higher financial and infrastructural be considered for disbursement of capital grant; first
costs. The companies who will be entering into on the receipt of the machinery at the project site,
manufacturing under this scheme could be provided and the second on commissioning of the facility.
production linked incentive to the tune of this amount. In addition, making available power at a tariff of
about Rs. 2.00 per kWh would be necessary to keep
• Financing: Green Manufacturing Fund could be operational costs competitive and having no necessity
created to support production linked incentives to consider providing recurring production linked
through funds collected i) through realization of incentives.
safeguard duty, and ii) by levying a cess of Rs. 20
lakhs per MWp on imported solar modules. (iii) Third Stage: With 10-20 GW manufacturing in-
place, the domestic PV Value chain can be expanded
(ii) Second Stage: This stage is for integrating cells and
to the Plant & Machinery equipment fabrication
modules manufacturing capacity in the country with
domestically.
Silicon Ingot to wafer with an aim to be able to
have critical mass of full value chain manufacturing It is, however, needless to emphasize the need to develop
capability so as to allow national solar programme comprehensive R&D programme by the Government
continue even in the circumstances of unforeseen around manufacturing plants with defined targets and
international fall outs. It is suggested to have overlap goals for enhancing competitiveness of the industry.
of second phase starting with second year of first
phase.