India's Solar Cell Capacity Set for Fivefold Increase to 55 GW by 2026-27

New Delhi, Feb 6 (NationPress) India's solar cell manufacturing capacity is projected to reach 50-55 GW by the fiscal year 2027, marking a significant fivefold rise from 10 GW at the conclusion of fiscal 2024. This growth is fueled by the government's strategic push to minimize imports of cells and modules, as detailed in a recent report by Crisil Ratings.

The expansion is anticipated to incur a capital expenditure (capex) ranging from Rs 28,000-30,000 crore, which will likely be financed through a 70:30 debt-equity structure. Strong balance sheets and healthy cash flow will bolster credit quality.

This estimate stems from a Crisil Ratings analysis of four domestic cell manufacturers, which together represented 54 percent of total cell manufacturing capacity as of March 31, 2024.

The 'Make in India' initiative, supported by policy measures aimed at curtailing imports of cells and modules, is expected to promote backward integration strategies among module manufacturers, thereby enhancing domestic cell production capacity, according to the report.

By March 2024, India's module-making capacity had surged to 60 GW from 7 GW in March 2020. This expansion has resulted in a decrease in module imports, which are expected to account for 25 percent of total consumption this fiscal year, down from 45 percent previously. However, the import of cells—a critical component for module production—remains high, predominantly sourced from China, at around 80 percent.

The report cautions that with domestic cell supply remaining insufficient, there may be an increase in import dependency due to expected renewable capacity growth.

Crisil Ratings Director Ankit Hakhu stated: "To enhance domestic demand and cell production capabilities, the government has mandated the utilization of cells exclusively from its approved list of cell manufacturers (ALCM) for open access and net metering projects, as well as projects receiving government funding assistance. Other initiatives, including the Production-Linked Incentive (PLI) scheme and domestic content requirements, are also expected to invigorate local production. Collectively, these factors have led to announcements for cell capacity expansions of 45-50 GW, bringing India's total cell production capacity to approximately 55 GW within the next two fiscal years."

The increase in cell capacity is expected to enhance self-sufficiency and integration at the cell level. For instance, in a domestically produced cell, 70-80 percent of the module cost can potentially be captured within India, compared to only 40-50 percent for imported cells. Furthermore, the proportion of domestic module capacity supported by domestic cell production is forecasted to rise to more than 50 percent, up from less than 15 percent in fiscal 2024.

The report also notes that at current price levels, domestically produced cells are expected to be 80-90 percent more expensive than imported cells due to higher wafer-to-cell conversion costs, stemming from initially lower economies of scale in India and competitive pricing from China. As a result, while anticipated benefits from the PLI and other government initiatives may allow manufacturers to partially offset these elevated costs, solar project developers could still encounter increased project expenses.

"Thus, ongoing policy support through non-tariff barriers like ALCM and ALMM is essential to sustain demand for locally manufactured cells and modules. Moreover, potential changes in US trade policies following recent regime shifts and disruptions in wafer supplies, which are primarily imported from China, warrant close monitoring," the report concluded.