Taking on China in solar manufacturing

Made-in-India solar panels might not be the most competitive, but what might work in the country's favour is the strategic shift in the priorities of companies post Covid

China’s dominance in the solar sector was underlined once again when BloombergNEF published the latest manufacturing update for the sector. Chinese companies managed to secure an even larger share of the global solar business in 2019 (see box: Solar equipment landscape).

Looking in turn at the different parts of the solar value chain, the share of Chinese firms in polysilicon production increased to 66 per cent. The top three wafer manufacturers are companies from China (Longi Green, GCL Poly and Zhonghuan), and they increased their market shares. Almost 80 per cent of the world’s solar cells came from Chinese companies, as did 72 per cent of modules — and they are rapidly adding capacity.

JinkoSolar is the largest module ma­nufacturer in the world. On June 1, 2020, it started operations at the first phase of a massive 11 billion yuan ($1.6 billion) factory in China that will eventually do­uble its manufacturing capacity, according to a Bloomberg News report. The en­tire plant is designed to produce 16 gigawatts of panels a year, when it is finished.

There is excess capacity along the solar supply chain, but manufacturers continue to expand in order to keep pace with technological improvements, whether it is the shift to more efficient monocrystalline panels (from multicrystalline ones), or to bifacial modules, which generate power from both sides.

India wants to expand its solar manufacturing base, and is trying to work on a three-pronged package for local producers:

• Protection from cheap imports. The imposition of a customs duty on im­ports of solar modules is imminent. Solar cell imports would likely be covered in the next round.
• Cost-competitive power round-the-clock to be made available in planned solar manufacturing hubs. The Make-in-India initiative is hamstrung by the high cost of power in India, and this is a way to get around that.
• Financial incentives, with options on the table ranging from access to cheaper money at one end, to viability gap funding at the other.

The scale and maturity of the solar manufacturing sector in China gives it an edge over any new player on costs. Made-in-India solar panels may not be the most competitive. What may work in India’s favor, however, is the strategic shift in the priorities of companies and countries post Covid-19: comparative costs have ceased to be the only criterion for deciding on equipment supply.

 

As Srinivas Phatak, chief financial offi­cer of Hi­n­dus­tan Unilever, said in a post on moneycontrol.com, there is a case for a shift from a “just-in” supply chain to “just-in-case” multiple-source supply chains to build resilience and continuity. Such a shift could make space for Indian panels not only in India, but also in the global market.

There are, however, concerns about the competitiveness of the global export market. The quantum of support that China extends to its exporters has be­come an issue. 
 

“The Chinese system is especially influential due to its size ($39 billion in official export credits in 2018 — larger than the next three export credit agencies combined), opacity and flexibility (China is not a party to any international rules on the provision of export credits), and its coordinated who­le-of-government approach, “US Exim President and Chairman, Kimberley Reed, said in the annual Export Credit Competitiveness Report filed by her bank to the US Congress in June 2019.

  

India’s push could be led by government-owned companies like Bharat He­avy Electricals, which invited international players last month to leverage its “facilities and capabilities” — 16 manufacturing locations, a substantial land bank, and 34,000 employees — to set up base in India.

Adani Group plans to set up a 2 gigawatts solar cell and module manufacturing capacity by 2022, as part of a contract where it has also committed to set up 8 gigawatts of solar generation capacity.

The author is the editor, Global Policy, for BloombergNEF 

vgombar@bloomberg.net