Emerging economies expect to benefit by developing their manufacturing capabilities in high value-added sectors, especially in technologically advanced sectors. Governments often use industrial policy to stimulate a transition from low to high value-added manufacturing, especially in sectors in which the country may have a latent comparative advantage. The solar sector is one such sector that has been identified by the Indian government. A number of policies have been introduced to support the development of a solar industry in India with the goal of installing 100 GW of solar power by the year 2022. The policies cover the spectrum of industrial activity, from early stage manufacturing to generation, with a target of 5GW of annual manufacturing capacity by 2022.
This scenario raises several key policy questions: Which parts of the supply-chain are feasible for manufacture in India? Are the policies in place adequate to induce the realization of its latent comparative advantage? What specific policies need to be implemented to enable this transition, if any?
Focusing on the key components of the crystalline silicon photovoltaic (c-Si PV) supply chain (polysilicon, wafers, cells, modules), this study specifically asks the following targeted questions: First, what is competitiveness of India's domestic manufacturing across the supply chain? Second, what are the barriers and enablers to developing a domestic industry? And, third, what is the cost of industrial policy support?
These three questions are answered with a mixed methods approach. First, we study trade data to identify revealed comparative advantage. Second, we analyze the results of face-to-face interviews with 27 senior industry practitioners, policy makers, and academics to obtain insights on the barriers and enablers of the domestic industry in India, along with related issues. Third, stochastic cost accounting and financial models were developed and used to estimate the cost and returns of setting up new manufacturing plants in India in different components of the c-Si PV supply chain.The study of trade data revealed no comparative advantage in any of the components of the value-chain. Our interviews revealed that respondents felt that this was due to the early stage of the industry in India and that, as the industry matures, comparative advantages will surface. Interestingly, there was limited interest by manufacturers and developers in new policies or incentives from the Indian government. This again contrasted with some of our cost analyses, which found upstream manufacturing in certain key areas of potential growth; production of polysilicon, wafers and cells are not currently viable in India but modules could potentially be viable if barriers to input cost such as duties in imports and logistical costs are reduced.
Table of Contents
Overview and Background
Solar PV Industry in India
Barriers and Enablers: Stakeholder Analysis
Potential Viability of the Solar PV Manufacturing in India
Recommendations and Conclusions
Industrial Policy Theoretical Models
Solar vs Coal Cost Benefit Analysis