Will new solar power rules boost production?

Subject: Economy

Section: External Sector

Context:

To incentivise India’s solar module manufacturing industry, the Ministry of New and Renewable Energy (MNRE) has brought into effect from April 1 an executive order, The Approved Models and Manufacturers of Solar Photovoltaic Modules (Requirements for Compulsory Registration) Order, 2019.

What is the context of the executive order?

The executive order, issued by the MNRE in 2019, mandates solar module manufacturers to undergo facility inspections by the National Institute of Solar Energy to be listed as ‘approved’ producers, distinguishing them from mere importers or assemblers.
This measure addresses concerns within India’s solar industry, which, despite its claims of self-sufficiency, relies heavily on importing cheaper, quality solar modules from China due to local production of cells and modules not meeting demand.
India aims to significantly increase its solar installation by 2030 but faces challenges in producing the necessary raw materials like ingots and wafers, resulting in dependence on imported cells.

Why is India reliant on imports?

India’s reliance on imports, especially from China, is due to efforts to reduce dependency on a country that controls about 80% of the global supply, amidst strained diplomatic relations.
India’s ambitious goal to source nearly 500 GW of its electricity from non-fossil fuels by 2030, with at least 280 GW from solar power, necessitates adding about 40 GW of solar capacity annually until 2030.
The past five years have seen a maximum addition of 13 GW annually, partly attributed to COVID-19 disruptions, highlighting the gap between domestic production capabilities and the solar panels and cells needed to meet these targets.

If the list is voluntary why pay to be on it?

Being listed as an approved manufacturer is voluntary but crucial for eligibility in government solar energy tenders, such as the PM Surya Ghar Muft Bijli Yojana, which subsidizes rooftop solar installations with an estimated ₹75,000 crore subsidy for about one crore households.
Only domestic manufacturers on the Approved Models and Manufacturers (AMM) list can participate in this and the PM KUSUM scheme, which supports solar pump sets and rural electrification.
Additionally, the ₹24,000 crore Production Linked Incentive Scheme aims to boost domestic solar panel and component production, requiring manufacturers to be verified as local producers.
So far, 14 major companies have qualified for incentives to produce solar modules totalling 48 GW, though these restrictions only apply to new projects, with facilities commissioned before March 2024 allowed to use imported modules.

Is India’s manufacturing capacity adequate?

Last year, India benefited from reduced global orders to China, exporting nearly $1 billion worth of solar modules in six months due to concerns over forced labour in Xinjiang. However, potential U.S. policy changes could reintroduce uncertainty for Indian exports.
Despite these exports, around half of India’s solar modules are imported from China, with the demand-supply gap expected to continue.
The Indian government anticipates a rise in domestic manufacturing capacity starting this year, with 82 manufacturers now certified on the AMM list by the MNRE.
Nonetheless, the absence of a similar list for solar cell manufacturers indicates India’s ongoing struggle to achieve substantial self-reliance in solar component production.

PM Surya Ghar Muft Bijli Yojana:

The scheme Surya Ghar Muft Bijli Yojana, with an investment of over Rs. 75,000 crores, aims to light up 1 crore households by providing up to 300 units of free electricity every month.
The scheme aims to incentivise the adoption of solar energy among residential consumers, promoting sustainability and reducing reliance on conventional energy sources.
It is a grid connected rooftop solar PV system, where the DC power generated from a solar panel converted to AC power using a power conditioning unit/Inverter and is fed to the grid.
All stakeholders will be integrated into a National Online Portal.
In order to popularize this scheme at the grassroots, Urban Local Bodies and Panchayats shall be incentivised to promote rooftop solar systems in their jurisdictions.
The scheme will lead to more income, lesser power bills and employment generation for people.
Under the scheme, subsidies will be given directly to people’s bank accounts.
The government has appointed eight central public sector undertakings (CPSUs) to implement the scheme across all states and union territories of the country.
These include NTPC, NHPC, EESL, PowerGrid, Grid-India, THDC, SJVN and NEEPCO.
These CPSUs will be responsible for the installation of rooftop solar in one crore households.
Under rooftop installation, solar photovoltaic (PV) panels are fixed atop a building, home, or a residential property

Source: TH