In a recent development, think tank Global Trade Research Initiative (GTRI) in a report has revealed how China's dominance over the global solar industry affects local manufacturing in India, the United States (US), the European Union (EU) and other countries. All three regions still rely heavily on Chinese inputs.
The EU imports most materials directly from China, while the US, which bans Chinese supplies, imports from Vietnam, Thailand, and Malaysia. India sources inputs from China, Vietnam, Thailand, and Malaysia. However, even non-Chinese suppliers like Vietnam, Thailand, and Malaysia depend on Chinese materials like polysilicon and wafers to make solar cells and panels.
“As a result, solar equipment worldwide, whether made locally or imported, relies on Chinese inputs. Dependence on China will increase as countries add new solar capacities to meet green energy goals. Collaboration between the US, EU, India, and Japan is needed to build large-scale solar manufacturing from scratch to reduce global reliance on China,” the report added.
Talking about India, the report prepared by Ajay Srivastava, Founder, Global Trade Research Initiative (GTRI) stated that India installed 15 GW of solar capacity in FY 2024, raising the total to 90.8 GW by September 2024, compared to just 2.8 GW in 2014. However, to meet its 2030 goal of 500 GW in renewable energy, India needs to add 65-70 GW each year.
The report revealed, “This target, especially compared to the US's plan to add 32 GW in 2024, seems ambitious, particularly given India's reliance on imports, which could push solar import costs to US$ 30 billion annually.” Notably, in FY 2024, India imported USD 7 billion worth of solar equipment, with China supplying 62.6 per cent. China controls 97 per cent of global polysilicon production and 80 per cent of solar module manufacturing, making it difficult for India or any country to compete due to lower prices from China.
While initiatives like the Production Linked Incentive (PLI) Scheme aim to boost local manufacturing, impact is limited as rely on the large-scale use of imported inputs. The think tank suggested that developing a self-reliant solar manufacturing industry in India will require significant investment to create an integrated supply chain, especially in areas like polysilicon and wafer production. Without this, India may continue to face high import costs and struggle to meet its renewable energy goals.
India's Struggle To Continue
The report also added that India will struggle to achieve the 500 GW renewable energy target by 2030. To meet the government’s target of installing 500 GW of renewable energy by 2030, India needs to significantly ramp up installations, with over 80 per cent of this target expected to come from solar power, it added.
According to the report, “India would need to increase its solar capacity from 90.8 GW to 400 GW by 2030, requiring an additional 310 GW. This means adding 65-70 GW of solar power annually, a challenging goal considering India added only 15 GW in FY 2024. To put this into perspective, the US aims to install 32 GW in 2024, making India's target seem highly ambitious.”
Given India’s limited local manufacturing and heavy reliance on imports, reaching this capacity could drive the country’s annual solar import bill from the current USD 7 billion to around USD 30 billion, with most imports coming from China, it stated. The underdeveloped local solar industry is not limited to India. The US, EU and most other countries rely on importing directly or indirectly from China.
Notably, India's solar manufacturing industry is in its early stages, with most projects relying on imported ready-to-use modules. In FY 2024, solar module imports reached USD 4.4 billion. Additionally, the local production primarily focused on the final two stages of assembly.
Currently, 90 per cent of solar manufacturing in India involves assembling solar modules from imported cells, with only 15per cent local value addition. This reliance on imports is evident in the FY 2024 figures, which show solar cell imports valued at US$1.9 billion. Furthermore, only a handful of Indian companies produce commercial-scale solar cells using imported polysilicon or wafers, adding 30 to 40 per cent of local value, while none manufacture solar cells from scratch using silica sands.
To cut down on imports, India needs to produce solar cells starting from silica refining, which involves costly and energy-intensive polysilicon production and requires advanced technology. Cheap imports disrupt local pricing. India must also locally produce aluminium frames, glass, and other materials, which will require strong R&D efforts and government support, it suggested.
High And Rising Imports
In FY 2024, India imported USD 7 billion worth of solar components. This included USD 4.4 billion in ready-to-use solar modules, USD 1.9 billion in solar cells, and USD 1 billion for other essential parts like inverters, and cables, junction boxes, transformers, and other electrical components needed for solar installations.
China is India's largest supplier, providing USD 3.89 billion worth of solar cells and modules, which account for 62.6 per cent of total imports. Vietnam is the second-largest supplier at USD 1.02 billion (16.5 per cent), followed by Malaysia at USD 549.8 million (8.9 per cent), and Thailand, which supplied USD 248.8 million worth of solar cells (4 per cent).
To reduce dependency on Chinese imports, India imposed a 40 per cent customs duty on solar modules and a 25 per cent duty on solar cells. However, imports from Vietnam, Malaysia, and Thailand are exempt from these tariffs under the India-ASEAN Free Trade Agreement, provided they add at least 35 per cent value to the imported inputs used in their export products.
Talking about government efforts to promote local manufacturing, the GTRI report mentioned it has implemented the Approved List of Models and Manufacturers (ALMM) which requires government-backed projects to use BIS-standard solar PV modules, favoring local manufacturers. The Production Linked Incentive (PLI) Scheme, worth Rs. 24,000 crore, supports solar production, targeting fully integrated solar PV manufacturing units.
Also, programs like CPSU Scheme Phase-II and PM-KUSUM mandate domestically sourced solar cells and modules for subsidies. The Public Procurement Order requires locally manufactured solar PV modules and inverters for government projects. Additionally, a 40 per cent customs duty on solar modules and 25 per cent on solar cells was imposed in April 2022, alongside increased auctions and rooftop solar support programs to drive sector growth.
China's Iron Grip
The global shift from fossil fuels to renewable energy, led by the US, EU, Japan, and India, hinges heavily on solar power, which makes up 50-80 per cent of the renewable energy mix in most countries. Yet, this transition comes with a critical obstacle— dependence on China. Most local manufacturing adds about 15 per cent value locally on imported inputs.
Producing solar panels involves six stages, from mining silica sand to assembling the final panel. For a US$ 100 solar panel, the cost increases with each stage: USD 20 for mining silica, USD 30 for metallurgical-grade silicon, USD 50 for polysilicon, USD 60 for wafers, USD 85 for solar cells, and USD 100 for the assembled panel. Most countries import fully assembled solar modules, preferring this route over building domestic capacity.
While the EU imports finished solar modules, countries like the USA and India are attempting to develop local manufacturing capacity by raising import tariffs, imposing restrictions, and offering incentives for domestic production. Despite these efforts, their solar industries remain shallow, adding only 10-15% value to imported components like solar cells, which primarily come from China and Vietnam.
According to the report, only a handful of companies in the US or India can produce solar panels from earlier stages, such as polysilicon or wafers, where value addition is higher, at around 30-50%. No country except China has the capability to make solar cells from the first silica ore processing stage.
While Western countries focused on talking about on net-zero goals and renewable energy transitions, China, through strategic planning and investments since the 1990s, has built an unrivalled solar industry. China now dominates over 80 per cent of global solar production and exports, controlling 97 per cent of the world’s polysilicon supply. In 2023, China exported 227 GW of solar modules worth US$ 39.5 billion and 38 GW of solar cells worth USD 4.2 billion.
With strong government support, advanced technology, and a fully integrated supply chain, China’s dominance makes it extremely difficult for other nations to compete. It added, “China's aggressive production and export targets are leading to oversupply and price drops, making manufacturing outside of China almost uncompetitive. China in 2024 so far produced 1.45 million metric tons of polysilicon—enough to produce 700 GW of solar modules.”
Meanwhile, global installations are expected to reach just 592 GW. This surplus has driven prices down 40 to 50 per cent, with solar modules selling at US$ 0.096 per watt, putting additional pressure on manufacturing efforts in countries like the USA and India.
