MUMBAI: The recent government move to extend the approved lists of models and manufacturers (ALMMs) to solar cells from June 2026 will accelerate the development of domestic solar cell manufacturing, leading to the domestic capacity more than quadrupling to 43-47 gw by June 2026 from 10 gw in March 2024, but provided timely execution.
Average annual demand is expected to be 40-45 gw between fiscals 2027 and 2030, Crisil said in a report Wednesday which listed timely solar cell capacity commissioning as crucial for achieving these targets. While the capacity will more than triple, on the flip side, high prices can push up the capital cost for solar developers and, in turn, tariffs, which makes it all the more important for timely commissioning of projects.
“High prices of domestically manufactured cells can be a bane for the industry because they would tend to impact the tariff levels bid at solar power project auctions,” the report said.
According to Sehul Bhatt, a director with the agency, while solar cells supply should be enough based on current market announcements, there can be a transient shortfall till manufacturing ramps up. Also, the prices of domestically made solar cells today are 1.5-2x more than alternatives from China even after basic customs duty. Such high prices can drive up the capital cost of solar power projects by Rs 50-100 lakh/mw and require tariff increase of 40-50 paise per unit.
The ALMM cell mandate can also pose challenges for companies that don’t develop domestic cell manufacturing capability as they will not be in compliance and can thus face module-supply challenges.
According to Surbhi Kaushal, an associate director of the agency, of the 62 gw of installed capacity as of December 2024 owned by 79 entities, only 13 have an integrated cell manufacturing base. The rest will have to decide between expanding capacity or competing for domestic cell supplies.
Although 12 non-integrated players have announced plans to install 32 gw capacity by 2029, the relatively higher capital cost of manufacturing compared with module assembly lines, and falling prices of the solar value chain could slow things down.
The industry has seen announcements of over 55 gw through the production linked incentive (PLI) scheme and beyond. This augurs well because data show cell-to-module integrated plants enjoy 2-6 percentage points higher margins compared with an only-module unit.
Overall, the non-tariff barrier will protect domestic manufacturers that are vulnerable to global supply shocks and even aid exports as the US, a key market, continues to manufacture modules at 30-35 per cent higher prices owing to lack of upstream components.