Why in the News?

• The Ministry of New and Renewable Energy is preparing a Production Linked Incentive scheme for polysilicon manufacturing, aiming to fill a critical gap in India's solar supply chain where the country relies entirely on imports.

What’s in Today’s Article?

• Solar Manufacturing Value Chain (Background, India’s Position, Importance of Polysilicon, etc.)
• News Summary (PLI for Polysilicon, Need, Impact on DISCOMs, Significance, Challenges, etc.)

The Solar Manufacturing Value Chain

• Solar photovoltaic manufacturing involves a sequence of stages, moving from raw material to the finished panel:
  • Polysilicon: High-purity silicon, the starting point of the chain, produced through a chemical and refining process.
  • Ingots: Polysilicon is melted and formed into solid blocks.
  • Wafers: Ingots are sliced into thin wafers.
  • Solar cells: Wafers are processed into cells that convert sunlight into electricity.
  • Modules or panels: Cells are assembled into finished solar panels.
• The first three stages form the upstream segment, while cells and modules constitute the downstream segment.

India's Position in the Chain

• India has expanded rapidly at the downstream end but remains weak upstream:
  • Solar module manufacturing capacity: More than 213 GW per annum.
  • Solar cell manufacturing capacity: Around 32 GW.
  • Ingot and wafer capacity: Limited, though expected to reach 80 GW by June 2028.
  • Polysilicon capacity: Effectively nil, with complete dependence on imports, primarily from China.
• This imbalance means that even as India builds large module capacity, the foundational raw material continues to come from abroad, leaving the supply chain exposed to external disruption.

Importance of Polysilicon

• It is the starting material for crystalline silicon solar cells, which dominate the global market.
• Complete import dependence creates strategic vulnerability, especially given the concentration of global supply in China.
• Any disruption in polysilicon supply can stall the entire downstream chain, regardless of domestic module capacity.
• High-purity polysilicon is also used in the semiconductor industry, making it relevant to India's chip manufacturing ambitions.
• Because polysilicon production is essentially a chemical and refining process rather than a conventional electronics activity, the government is considering treating it as an independent industry rather than merely a part of the solar value chain.

News Summary: Proposed PLI for Polysilicon

• The Ministry of New and Renewable Energy (MNRE) is working on a dedicated Production Linked Incentive (PLI) scheme for polysilicon manufacturing. The proposed scheme aims to:
  • Promote domestic polysilicon manufacturing, where investments have not materialised despite existing incentives.
  • Support more than 10 GW of manufacturing capacity.
  • Operate separately from the existing PLI scheme for solar PV modules.
• The scheme's size and structure have not yet been disclosed, and its announcement has been delayed.

Need for a Separate Scheme

• The existing Solar PV Module PLI covers the entire value chain, from polysilicon, ingots and wafers to solar cells and modules.
• However, implementation has been uneven:
  • Solar cell and module manufacturing have expanded significantly.
  • Some ingot manufacturing capacity has been established.
  • No commercial polysilicon manufacturing has materialised.
• The government believes polysilicon requires a separate policy because:
  • It is a chemical refining industry rather than conventional manufacturing.
  • It has strategic importance beyond solar, particularly for semiconductors.

Expansion of India's Solar Manufacturing Ecosystem

• Solar cell manufacturing capacity is expected to increase from 32 GW to around 100 GW within a year.
• Ingot and wafer manufacturing capacity is projected to reach at least 80 GW by June 2028.
• An Approved List of Models and Manufacturers (ALMM) has been introduced for ingots and wafers.
• Expanding upstream manufacturing has become essential as India tightens domestic sourcing requirements for solar cells.

Round-the-Clock (RE-RTC) Renewable Energy

• SECI's latest RE-RTC tender discovered a tariff of 5.25/unit. The project provides:
  • 90% assured power availability in every time block.
  • Around 50% daytime solar generation, with the remaining supply met through other renewable sources and energy storage.
• Officials noted that:
  • The tariff is approaching nuclear power tariffs.
  • Developers are confident of supplying electricity at this inflation-resistant price for the next 25 years.

Impact on DISCOMs

• Lower renewable energy prices are helping distribution companies reduce procurement costs. Over the past three years:
  • Average power purchase costs have either declined or remained stable after rising sharply earlier.
  • Combining solar, wind, storage and RE-RTC could reduce average procurement costs from around 5.20/unit to Rs. 4.85/unit.
• Lower electricity costs are expected to:
  • Improve industrial competitiveness.
  • Support data centre growth.
  • Accelerate India's green transition.

Broader Clean Energy Push

• Officials also highlighted the following initiatives:
  • India has crossed 300 GW of non-fossil fuel power capacity and aims to reach 500 GW by 2030.
  • Green ammonia is being supplied to fertiliser plants, while green hydrogen is being supplied to oil refineries to create early demand.
  • Green methanol pilots are underway in shipping, supported by a SECI tender for 5 lakh tonnes to aggregate demand.
• Pilot projects are also underway in:
  • Transport
  • Steel (Direct Reduced Iron plants).
• India is expanding cross-border energy cooperation through:
  • Solar projects with Bhutan.
  • Discussions on a regional South Asian electricity market.

Significance of the Polysilicon Push

• Import substitution: Reduces dependence on China for a critical raw material.
• Supply chain security: Improves resilience against geopolitical and trade disruptions.
• Semiconductor ecosystem: High-purity polysilicon supports India's semiconductor ambitions.
• Higher domestic value addition: Increases manufacturing value retained within India.
• Energy security: Strengthens the foundation of India's renewable energy transition.

Key Challenges

• Capital intensity: Large investments and long gestation periods.
• High energy consumption: Refining polysilicon is energy-intensive and costly.
• Technology dependence: Advanced purification technology is controlled by a limited number of global firms.
• Competition from China: Chinese manufacturers benefit from economies of scale and lower production costs, making domestic competitiveness difficult without sustained policy support.
• Environmental concerns: Manufacturing requires careful management of chemical by-products and emissions.