According to Bloomberg, JA Solar plans to start construction on a 500-megawatt solar cell manufacturing facility in the south Indian state of Andhra Pradesh in partnership with Essel Infraprojects. The cell-manufacturing facility will likely be followed by a 500-megawatt module plant later next year. While doubts remain on the progress of these manufacturing plans, the move is a noteworthy signal of the increasing viability of setting up Indian solar manufacturing for leading international PV suppliers.
According to GTM Research’s estimates, cell-manufacturing capacity in India currently stands at close to 0.9 gigawatts, with module-manufacturing capacity at 2.1 gigawatts. This is despite India expecting to become an annual 3.3-gigawatt-demand market in 2016, with a cumulative 100-gigawatt ambition for 2022 put forth by the Indian government (though, by some estimates, actual installation numbers by around then might not exceed a cumulative 31 gigawatts).
With the significant expected demand, a domestic content requirement of at least 5 gigawatts under the National Solar Mission, and the Indian market’s reliance predominantly on cell and module imports from China, the case for sizable Indian solar manufacturing is very strong.
JA Solar’s move toward construction shows an increasing willingness on the part of leading international suppliers to act upon this opportunity.
The Indian market has had local players in PV manufacturing for decades, but their market shares have languished given their small scale and non-viable cost structures, as well as highly competitive Chinese supply. Nonetheless, international players have preferred to supply the market from outside, given the shakiness of Indian demand tied to the unreliability of Indian government policy-supported demand.
With JA Solar now signaling its move ahead on local manufacturing, following on the heels of a similar large-scale announcement by Trina in June, there is an indication that international suppliers now view Indian demand to be reliable enough to make substantial local investments. A big part of the decision to set up Indian manufacturing is driven by the need to diversify beyond Chinese and Taiwanese manufacturing to avoid anti-dumping duties and become more competitive in Europe and the U.S. Nonetheless, given the numerous alternative locations available for new manufacturing, JA's decision on India shows that the size and reliability of local demand is a big draw.
Importantly, JA Solar’s move indicates that the Indian manufacturing ecosystem has what it takes to support solar manufacturing -- despite the challenges of doing business in India, with its high taxes and sometimes sketchy logistics capabilities.
However, decisions on local manufacturing made by international solar majors suggest that the country’s manufacturing incentives and input costs are competitive relative to its peers. Along with having adequate human capital suited to solar manufacturing, India could emerge as a much more favorable location than has been recognized thus far.
We will analyze these and other related factors in an upcoming report on global solar manufacturing attractiveness to be published next month -- stay tuned.
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Mohit Anand is a senior solar analyst with GTM Research.