Key facts
- India's solar manufacturing ambitions have been hampered by factory shutdowns due to component shortages.
- New legislation requiring the use of domestically produced solar cells has led to these shortages.
- Approximately one-third of small and medium solar module makers have ceased operations.
- Investments totaling around $4 billion are at risk.
- Local solar cell manufacturing capacity is significantly lower than demand, creating a 2.6 GW annual gap.
India's ambitious plans to expand its solar power generation capacity have encountered a significant setback, with numerous local solar panel factories shutting down due to a critical shortage of components. This situation stems from new legislation enacted on June 1, which mandates that solar module manufacturers use only domestically produced cells. The intention behind this law was to reduce India's reliance on solar technology imports, particularly from China, which previously supplied over 90% of the cells used by Indian module makers.
However, the domestic cell manufacturing capacity is currently insufficient to meet demand, creating an annual gap of approximately 2.6 GW. This has led to widespread production halts, with close to a third of the country's small and medium-sized solar module makers ceasing operations. These smaller companies constitute 60% of the total industry. One solar panel maker stated that domestic cell unavailability has caused significant hardship, expecting production to fall from 3.2 GW to just 1 GW.
The repercussions of these shutdowns are substantial, putting an estimated $4 billion in investments at risk. This development is likely to impede India's goal of achieving 500 GW of non-hydrocarbon generation capacity by 2030. Solar power currently accounts for 29% of the nation's non-hydrocarbon capacity, with plans to increase it from 162 GW to over 292 GW by the end of the decade. The current module manufacturing capacity stands at 200 GW, but the severely limited solar cell manufacturing capacity of only 27 GW poses a major obstacle to meeting these targets.