Incentives and barriers for a solar manufacturing company in India

[Deepa Gupta]

Hi all,

 

I'm doing an assignment on the incentives and barriers for setting up a solar manufacturing company in India. Being a typical student I have left it to the last minute so its due in 3 days. Hence I was wondering if any of you have any pointers or know of good sources of information.

 

I felt the incentives were: the large amount of demand for energy in India (where solar can be implemented through various micro financing mechanisms), the willingness of investors to invest in Indian renewable project/companies, the national action plan focusing on solar helping the solar industry.

 

And the barriers being, that there is no additional tax on carbon intensive industries, or large subsidies on clean technology/industries + there being no market incentives such as carbon trading to make solar more attractive.

 

Are there any key points that I'm missing? And do you know of any good sources where I get information from i.e. papers, or any of you working in the solar industry who can give me first hand experience.

 

Warm regards,

Deepa

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Deepa Gupta

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Indian Youth Climate Network
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[Manu Sharma]

On Mon, Oct 13, 2008 at 10:43 AM, Deepa Gupta <de...@iycn.in> wrote:

I'm doing an assignment on the incentives and barriers for setting up a solar manufacturing company in India.

Hi Deepa,

I think there's need for clarity on the terms you're using here. Particularly "manufacturing" and "incentives".

Are you sure you're referring to manufacturing of solar photovoltaic products and not its adoption? These two are very different things.

India doesn't have any barriers to manufacturing solar PV. We don't make the silicon chips, which is an extremely expensive manufacturing process costing several hundred millions of dollars to set up. There are only a handful of such plants in the world.

But we import the chips from overseas and turn out lots and lots of solar cells and panels. There are several companies involved in it. Last year India's solar PV manufacturing capacity stood at around 170 MW. No small number. 

It's another thing that 95% of that capacity was for exports. Only around 8 MW - was utilised in India. So naturally, there are barriers for adoption of solar power.

Secondly, you need to make a distinction between favourable market conditions and incentives. The latter is a subset of the former. India's energy shortage, investment availability and the NAPCC identifying solar power as a core area are favourable market conditions.

An incentive would be the amount that Indian govt. gives (~Rs.15) per unit of energy generated in a grid-connected solar power plant no larger than 2 MW in addition to the price of energy produced. There may be other incentives, you can read about them in Alexis Ringwald's renewable energy paper published by CSM recently.

Despite these, high upfront cost and non-availability of low-interest long-term finance remain the chief barriers to adoption of solar power in India. Subsidies are not always the answer. Some experts believe that subsidising solar has actually worked against the consumer as manufacturers don't see the need to reduce costs.

If you're interested in exploring what kind of incentives can propel the industry, watch Saved By The Sun, a PBS NOVA documentary that shows how Germany did it.

Thanks,
Manu

[Manu Sharma]

Hi Deepa,

Further to my message below, I'm told that govt has introduced incentives for manufacture of solar grade silicon chips in India as well. I did not know about this. India's manufacturing capacity will go to 4500 MW if the proposals pending with MCIT are cleared.

As I said earlier, we've traditionally made only cells and panels which is relatively not as capital intensive process-- there are a number of small players in this. Manufacturing silicon chips should bring down cost of solar power in India by 2012 or so when these plants start producing which would be in line with market reports that are predicting up to 40% drop in PV prices worldwide after 2010.

Not surprisingly, it's only big players that are bidding for this. According to this news report, Tata BP Solar India Ltd, Moser Baer India Ltd, Reliance Industries Ltd and US-based Signet Solar Inc. have pledged almost Rs.60,000 crore.

Thanks,
Manu