Solar PV Industry_Global and Indian Scenario

Study on Solar Photovoltaic Industry: ISA-NMCC 2008

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PREFACE

Solar photovoltaic (PV) based electricity generation costs are declining and expected to become economically attractive as technologies improve and the cost of electricity generated by fossil fuels rises. In the years to come, increasing investment capital will probably boost global solar PV capacity 20 to 40 times higher than its current level.

The incentives offered by the Government of India for Solar PV manufacturing as part of the Semiconductor Policy 2007 and deployment towards grid-connected power under the Generation-Based Incentives (GBI) have acted as catalysts for growing interest among investors in this space. Domestic solar PV manufacturing will complement and support the deployment of solar energy. This will make India competitive and a preferred global destination for this industry. Further, generation of power through solar will give India the energy security requirements and another source for energy. This will boost economic growth and industrialization.

This report is the first comprehensive one on the Indian solar PV industry. The analysis is based on a comprehensive review of secondary literature and extensive fieldwork. This has allowed us to make specific recommendations which, if implemented, could contribute to India’s emergence as one of the major solar hubs in the world. Given our domestic demand and the entrepreneurial talent, this would be a natural outcome.

The report has been supported by the National Manufacturing Competitiveness Council (NMCC). We are grateful to NMCC for their generous support, involvement and for the inputs of their members in the study.

The concerted efforts of the ISA solar PV subcommittee on industry research and PricewaterhouseCoopers teams are greatly appreciated. We would also like to acknowledge the support of several individuals and organizations from within and outside the industry for this study. We take this opportunity to thank each one of them for sharing their valuable insights.

Poornima Shenoy Jaswinder Ahuja

President, ISA Chairman, ISA


Table of Contents

Page No Abbreviations 1

Executive summary 4

A1: Mapping the solar PV manufacturing and production supply chain - Global

and India review 11

Background 11

Global scenario 12

Indian scenario 27

A2: Technology status and future trends 39

Introduction 39

Background 39

Development of solar cell technologies 40

Solar cell manufacturing 44

Solar PV technologies – Present trends, challenges, future roadmap 57

A3: Identification of market segments for solar PV in India 73

Prevailing energy and power scenario 73

Solar PV market in india 73

Market segment analysis 78

A4: Assessment of policy support mechanism and benchmarking of global solar

PV industry 96

Germany 96

Japan 109

United States of America 118

Benchmarking of global solar PV industry 134

A5: Policy framework of solar PV in India 141

Introduction 141

National level manufacturing linked incentives 141

Special incentive package scheme (SIPS) 141

SEZ policy 142

Generation based incentives (GBI) 142

Solar PV incentives in different states 143

A6: Economics of solar PV manufacturing in India and need for government

support 146

Investment requirements in solar PV manufacturing 147

Cost structures 148

Profitability of solar PV sector 150

Impact of vertical integration on selling price 153

China –India comparison in solar PV manufacturing 153

Power generation from grid connected solar PV system 155


A7: Recommendations 159

A8: Annexure I: Assumptions 164

A9: End notes 165


List of Tables

Page No

Table 1: Present and future capacity of the 7 major polysilicon players globally 16

Table 2: Capacity of new players projected to come online by 2011 16

Table 3: Present and future capacity of the 9 major multi-crystalline

wafer producers globally 19

Table 4: Present and future capacity of PV cell players 24

Table 5: Large global solar PV module players and their capacities 27

Table 6: Proposed applications for investment in solar PV manufacturing under

the semiconductor policy 30

Table 7: Proposed application for investment in solar PV in Fab City 31

Table 8: Investors: Indian solar PV manufacturing companies 34

Table 9: Current conversion efficiencies and cost of manufacturing for solar PV

technologies 57

Table 10: Target prices set by EU for solar PV 68

Table 11: Trajectory for reduction in energy generation from solar PV and

increase in module efficiencies 68

Table 12: Targets for thin film solar PV from the EU PV vision 69

Table 13: Main efficiency and manufacturing cost targets for 2011 for the USA

multi-year plan 71

Table 14: Cost of generation for different consumer categories and matching

system prices 71

Table 15: NEDO targets for 2010 to 2030 under the PV 2030 roadmap 72

Table 16: Demand projection for grid connected power generation 80

Table 17: Demand projections for solar PV based rural electrification 83

Table 18: Load characteristics and power backup requirements for BTS in India 86

Table 19: Demand projections for telecom backup power 86

Table 20: Addition in retail, office complexes and logistics installations in India

up to 2012 91

Table 21: Prospective area under roof based solar PV in India under the 3 focus

sub-sectors between 2008 and 2012 92

Table 22: Size allocation pattern of industries in Germany 100

Table 23: German feed-in-tariff (€/MWh) 105

Table 24: Future digression rates for feed-in-tariff in Germany 105

Table 25: California - main incentives for solar PV 124

Table 26: Texas - main incentives for solar PV 125

Table 27: New Jersey - main incentives for solar PV 126

Table 28: State wise financial incentive framework in USA 127


Table 29: Key policy highlights of leading countries 137

Table 30: Proposed tariff for solar power plants in Rajasthan 144

Table 31: Investment required for setting up a 100 MWp vertically integrated

poly-crystalline module manufacturing unit (all figures in Rs. crore) 147

Table 32: Cost structure of crystalline silicon value chain (in Rupees per Wp) 148

Table 33: Cost structure of thin film modules (in Rs per Wp) 149

Table 34: Assumptions and profitability parameters for 100 MW poly-crystalline

unit in 2 different scenarios 150

Table 35: Assumptions and profitability parameters for 100 MW thin film unit 152

Table 36: Impact of vertical integration on manufacturer margins

(costs in RS per Wp) 153

Table 37: Assumptions for a grid connected solar PV system 155

Table 38: Cost of generation from a solar based grid connected power project 156


List of Figures

Page No

Figure 1: Links of the solar PV value chain 12

Figure 2: Annual production capacity of polysilicon (in Mt) from 2000 to 2007 13

Figure 3: Break-up of polysilicon capacities company wise globally in 2007 14

Figure 4: Company wise polysilicon production capacity (in Mt) for the major

suppliers between 2005 and 2007 15

Figure 5: Share (%) of major polysilicon producers in 2011 17

Figure 6: Production along the global value chain in 2007 18

Figure 7: Global wafer manufacturing capacity 19

Figure 8: Relative market share of mono and multi-crystalline wafers (MW) in

2006 and 2007 19

Figure 9: Installed multi-crystalline wafer capacity of the 8 largest players

globally 20

Figure 10: Global solar PV production 2005-2007 in MW 22

Figure 11: Global top 10 cell producers and production in 2006/ 2007 23

Figure 12: Global module production capacity 2006 and 2007 (MW) 26

Figure 13: Characteristics of the value chain in India 28

Figure 14: Annual production growth of PV cells and modules in MW 29

Figure 15: India's proposed wafer manufacturing capacity over the few years

in MW 32

Figure 16: Cumulative increase in cell manufacturing capacity over next few

years in India in MW 33

Figure 17: Solar cell types and inputs for steps for module production 42

Figure 18: c-Si production process 46

Figure 19: An overview of the steps required to produce a c-Si based solar PV

system 52

Figure 20: The CIGS manufacturing process and cross-section of a CIGS cell 54

Figure 21: The CdTe manufacturing process and cross-section of a CdTe cell 55

Figure 22: Changing cell efficiencies in c-Si 59

Figure 23: Changing dynamics of solar PV cell production 61

Figure 24: Growth of installed generation capacity in India (in MW) 73

Figure 25: Power deficit status in different regions in FY07 74

Figure 26: Peak power deficit in identified states 74

Figure 27: Short-term trading prices Rs/kWh) across major states 75

Figure 28: Source wise break-up of energy sources and share of renewable

energy sources in India (in MW, data as of 2007) 76

Figure 29: Major segments for solar in India and the main stakeholders 77


Figure 30: End use application of solar PV modules (335 MWp aggregate

capacity; 14,00,000 SPV systems) 78

Figure 31: Status of rural and urban electrification 81

Figure 32: Variation of distance where solar PV becomes viable with decreasing

panel cost 84

Figure 33: DG v/s solar - change in lifecycle cost with hours of backup for

telecom 88

Figure 34: DG v/s solar for telecom backup - levelised cost of power delivery 89

Figure 35: Conventional v/s solar PV for roof top applications 93

Figure 36: Development of solar PV in Germany 98

Figure 37: Highlights of financial assistance in Germany 102

Figure 38: Domestic tariff and its break-up between 1998 and 2007 105

Figure 39: Solar FIT and electricity rates in Germany 106

Figure 40: Annual installed solar PV capacity in Germany 108

Figure 41: FIT mechanism for solar PV success in Germany 109

Figure 42: Highlights of the promotion programmes by METI 111

Figure 43: Development of solar PV industry in Japan 113

Figure 44: Global solar PV cell production (2002-2007) 115

Figure 45: Annual and cumulative capacity addition in the USA market 119

Figure 46: Major incentives at the federal and state level 120

Figure 47: Number of states offering different incentives for solar PV promotion 122

Figure 48: USA market share in thin films 129

Figure 49: Development of the California solar PV market since 2000 132

Figure 50: Illustration of the benchmarking framework 135

Figure 51: Selection of assessment areas of benchmarking parameters 135

Figure 52: Mapping of solar PV industry in Germany 139

Figure 53: Mapping of solar PV industry in Japan 140

Figure 54: Mapping of solar PV industry in USA 140

Figure 55: Cost of production and sales price trajectory for c-Si modules 151

Figure 56: Cost of production and sales price trajectory for thin film modules 152

Figure 57: Trend of cost generation with changing system price 157

Figure 58: Sensitivity of cost of generation to interest rates 158

__________________________________________________________________________ Study on Solar Photovoltaic Industry: ISA-NMCC 2008 1

Abbreviations

A-Si Amorphous Silicon

ATMP Assemble Test Mark and Package

BTS Base Transceiver Station

BHEL Bharat Heavy Electrical Limited

BIPV Building Integrated Photovoltaics

BoS Balance of Systems

CdTe Cadmium Telluride

CER Certified Emission Reduction

CERC Central Electricity Regulatory Commission

CFA Central Financial Assistance

CIS Copper Indium Gallium Diselenide

CREB Clean Renewable Energy Bonds

CSI California Solar Initiative

C-Si Crystalline Silicon

CST Central Service Tax

CUF Capacity Utilisation Factor

CVD Chemical Vapour Deposition

DDG Decentralised Distributed Generation

DNES Department of Non-Conventional Energy Sources

DOE Department of Energy

DPR Detailed Project Report

DTA Domestic Tariff Area

EA 2003 Electricity Act 2003

ECRM Energy Cost Reduction Measures

EEG Erneuerbare Energien-Gesetz

EFG Edge-defined Film-fed Growth

EPES Environmental Protection & Energy Saving

EPIA European Photovoltaic Industry Association (EPIA)

EU European Union

FIT Feed-In Tariff

FY Fiscal Year

GBI Generation Based Incentives

GoI Government of India

GW Gigawatt

HAREDA Haryana Renewable Energy Development Agency

IIT Indian Institute of Technology

IREDA Indian Renewable Energy Development Agency Limited


IRR Internal Rate of Return

ISA India Semiconductor Association

IT Income Tax

ITC Investment Tax Credits

JBIC Japan Bank For International Cooperation

JPEA Japan Photovoltaic Energy Association

JPY Japanese Yen

Kw Kilowatt

kWh kilowatt hour

kWp kilowatt Peak

MACRS Modified Accelerated Cost-Recovery System

MBPV Moser Baer Photo Voltaic

METI Ministry for Economy, Trade and Industry

MIT Massachusetts Institute of Technology

MNES Ministry of Non-conventional Energy Sources

MNRE Ministry of New and Renewable Energy

MOCVD Metal Organic Chemical Vapour Deposition

MoP Ministry of Power

MT Metric Tonne

MU Million Units

MW Megawatt

MWh Megawatt hour

NEDO The New Energy and Industrial Technology Development Organization

NEP National Electricity Policy

NREL National Renewable Energy Laboratory

NTP National Tariff Policy

O&M Operational & Maintenance

PLF Plant Load Factor

PPA Power Purchase Agreement

PSEB Punjab State Electricity Board

PSERC Punjab State Electricity Regulatory Commission

PV Photo Voltaic

PVB Polyvinyl Butyral

R&D Research & Development

RE Renewable Energy

REC Rural Electrification Corporation

REIL Rajasthan Electronics & Instruments Ltd

REN Renewable Energy Network


REPI Renewable Energy Production Incentive

RET Renewable Energy Technology

RPO Renewable Purchase Obligation

RPS Renewable Portfolio Standard

SAI Solar America Initiative

SCS Single Crystal Silicon

SDA State Designated Agency

SERC State Electricity Regulatory Commission

SEZ Special Economic Zone

SGS Solar Grade Silicon

Si Silicon

SIPS Special Incentive Package Scheme

SME Small & Medium Enterprise

SPV Solar Photovoltaic

SREC Solar Renewable Energy Certificates

TFSi Thin Film Silicon

TPV Thermo Photovoltaic

US United States

VAT Value Added Tax

W Watt

WBERC West Bengal Electricity Regulatory Commission

WBREDA West Bengal Renewable Energy Development Agency

WBSEB West Bengal State Electricity Board

Wp Watt Peak

YoY Year on Year

Є Euro

$ US Dollar


Executive Summary

The Renewable Energy (RE) sector around the world, including India, is developing rapidly. Within RE, solar is one of the major growth segments globally with almost 30% of all investments in the sector going into solar. The Indian solar industry, which is in the nascent stage, holds huge potential. But the pace at which it is growing does not compare to global standards. One of the main reasons for this is the lack of adequate investment in solar PV manufacturing and R&D in India. There is an urgent need to facilitate and enhance investment in solar PV manufacturing in India. This would enable the domestic solar PV industry to provide cost-effective and sustainable solutions to the domestic market and compete with the rest of the world. This study has been carried out with the intent to provide the requisite background for investment in this sector.

The study provides a broad overview of the solar PV market globally and in India. It provides the current status and future trends in solar PV manufacturing, technology, R&D, market dynamics, commercial and financial aspects, and government policies and market drivers in leading countries in this space, namely, Germany, Japan and the USA. The study also identifies key market segments where solar PV can be implemented and evaluates the market viability and the size of these market segments. Based on these analyses, a set of recommendations has been made to enhance the growth and competitiveness of the Indian solar PV industry.

Solar PV industry – the global scenario

The solar PV industry is the fastest growing area in the energy sector and is expected to grow four-folds by 2011. In 2007, of the US$ 71 billion invested in new renewable energy capacity globally, 30% was in solar PV. The main factors holding back an even faster rate of growth for this energy source is the high cost of energy production and lack of adequate supply of basic feedstock, particularly polysilicon. The shortage has caused polysilicon prices to go up from an average US$ 20/kg in 2001 to over US$ 50/kg in 2006. On the other hand, the shortage has pushed for higher efficiency in production and the introduction of new solar PV technologies, i.e. thin film technology.

In 2007, there was an increase in the supply of polysilicon globally by 30%. However, access to adequate polysilicon supply remained the main bottleneck for growth of the solar PV industry. The global silicon feedstock capacity servicing the solar PV as well as the semiconductor industry was up from 38,000 tonnes per annum in 2006 to 52,000 tonnes in 2007.

Currently, the polysilicon manufacturing is dominated by 7 major players in the USA, Japan and Germany. However, after seeing the huge demand for solar PV, a large number of new players have entered or are set to foray into this space.

Similarly, the global wafer manufacturing capacity grew at 60% in 2006 (over 2005) and 73% during 2007 (over 2006). The market for solar PV crystalline wafers has been dominated by multi-crystalline, which had a share of almost 54% in 2007. One of the key shifts occurring in wafer manufacturing is the emergence of China and Taiwan as major


players in the near future. Even today, more than 50% of the installed capacity for wafer manufacture is based in these two countries.

Global PV cell production grew by 55% during 2007 (over 2006), with both mono and multi-crystalline losing ground to thin films. The five largest solar PV cell producing countries were Japan, China, Germany, Taiwan, and the United States. Recently, China has emerged as a major player in cell production, displacing Japan as the second largest producer of solar PV cells in 2007.

Concurrently, thin film technology has evolved with a substantial increase in capacity since 2005 (at almost 80% in 2006 and more than 100% in 2007) due to polysilicon shortage. In the thin films market, significant expansion is expected in the future and some of the main players lining up are First Solar and Sharp, both of which hope to have a thin films capacity of 1 GW by 2012.

In recent times, the geographical focus of solar PV manufacturing has shifted towards developing countries, especially China, India, Malaysia and Taiwan. It is expected that by 2011-12, a sizable chunk of the manufacturing base will be developed by leading manufacturers in these countries, with India and China remaining the main strategic choice.

Presently, in India there are around 90 companies into solar PV, which comprise of 9 manufacturers of solar cells and 19 manufacturers of PV modules. Another 60 companies are engaged in the assembly and supply of solar PV systems. During FY07, nearly 45 MW of solar cells and 80 MW of SPV modules were produced in the country, of which over 60 MW of solar PV products were exported.

In 2007, the Government of India announced the Semiconductor Policy that offers a capital subsidy of 20% for manufacturing plants in SEZs and 25% for manufacturing plants outside SEZs. The subsidy is on the condition that the net present value of the investment is at least Rs 1,000 crore. So far, there have been 12 applications for setting up solar PV plants, which cumulatively could bring an investment of about Rs 66,394 crore (approximately US$ 16 billion).

Solar PV is a technology-intensive industry. Over the period, technology interventions have changed the shape of the industry in terms of cost economics and system efficiency. At present, crystalline silicon technology dominates the market. It had an overall share of close to 90% of the 2007 production, followed by 10% by thin films. Besides, new and emerging technologies are still at the research stage. Each technology has its pros and cons on cost and efficiency.

Technology

Crystalline silicon (c-Si) solar cells have a larger surface area and have relatively high conversion efficiency. However, c-Si cells require high inputs during manufacturing (i.e. energy and labour) and are heavily dependent on pure solar grade silicon which has had a limited supply base. In contrast, thin film technology has the advantage over c-Si technology in terms of better cost economics for electricity generation. Lower material (silicon) usage


and lower energy requirements contribute to reduced generation cost. However, the land requirement for this technology is higher than in c-Si technology.

To reduce cost and improve efficiencies in the future, a major thrust on R&D is needed on two key aspects: a) reduction of system cost, and b) improvement of system efficiency. Signs of innovations and improvements in these areas are already visible. Today, silicon usage is down to 10 g/Wp, which till a few years ago was typically 13 g/Wp. There is significant potential for improvement in manufacturing processes in the near future. The European Union (EU) is targeting polysilicon consumption below 5, 3, 2 g/Wp in the short, medium and long term, respectively.

The main areas where cost reduction is expected are in the development of new, lower cost and less energy-intensive techniques for polysilicon production and a reduction in material usage. According to available market research , crystalline silicon modules (c-Si) may touch US$ 1.3-1.7/Wp in EU by 2012.

Module efficiency of c-Si has gone up from 10% in 1990 to typically >13 % today, with the best performers averaging around 17%. Cell efficiency has also been on the rise and poly-crystalline cells now have an efficiency of 18% and mono-crystalline almost 23%. Also, with increasing standardization of manufacturing equipment and improving efficiencies of modules, it is expected that there will be a reduction in production costs in the medium term.

Besides the c-Si and thin film technology, emphasis is being given on R&D for new technologies that can improve system efficiency and maintain low cost production. Researchers are now targeting conversion efficiencies between 30% and 60%, while retaining low cost materials and manufacturing techniques.

With the cost of solar PV falling, it has become a workable alternative for power generation. Solar PV can become a sustainable source of energy considering the current energy security aspects and environmental concerns.

Market segments for solar

Power deficits continue to plague the Indian power sector and impede the country’s economic progress. Today, the country experiences an average energy (electricity) shortage of 9.6% and a peak shortage of about 13.8%. To meet the growing demand and shortages, the generation capacity needs to be doubled in 10 years from the current level of approximately 142,000 MW. In addition, the Government of India in 2007 mandated that electricity utilities purchase power from renewable sources. The target for electricity generation through this route is fixed at 10% by 2010 and 20% by 2020.

The approach has shifted towards alternate power sources with the introduction of state-level Renewable Purchase Obligations (RPOs), increasing demand-supply mismatch and an increase in short-term trading prices. State Electricity Regulatory Commissions (SERCs) have been looking at indigenous and Renewable Energy (RE) sources, such as wind and solar. Presently, solar PV is not an attractive option primarily due to high generation costs. However, in the coming years with increase in fossil fuel prices, rising environmental


concerns and a reduction in the cost of solar PV technology, it is likely to become a major source of energy.

Based on the market size and its attractiveness, four market segments appear to have the maximum potential in the coming years. These are:

• Rural electrification – Decentralised Distributed Generation (DDG)

• Grid interactive solar PV power plants

• Backup Power for Telecom (Base Transceiver Station))

• Roof based solar PV systems

Rural India is home to more than 70% of India’s population and energy is crucial for raising the standard of living in rural India and encouraging employment generation. The Government of India has kept a target of providing electricity for all by 2012 with a minimum consumption of 1 kW per day per household. But even grid connected villages today experience large power outages. Under the ‘Power for All’ programme, the Government of India has targeted electrification of all villages by 2012 in which 18,000 remote villages would be electrified using non-conventional power sources. This would provide an ideal situation for the large-scale introduction of DDG technologies, especially solar PV. An analysis of the DDG-based model shows that solar PV at present solar PV panel costs (i.e. Rs 145/Wp) is a more attractive electrification option for a village than extending the grid by around 12 km or more.

In order to provide an impetus to grid interactive solar power generation, the Ministry of New and Renewable Energy (MNRE) has decided to support grid interactive solar power generation projects. At present, this support in the form of a subsidy is limited to only 50 MW capacity. However, after the announcement of the Generation Based Incentives (GBI) by MNRE, the latter has received Expression of Interest for more than 1000 MW of grid interactive solar PV based power generation projects. MNRE is now targeting a capacity of 500 MW through solar by the end of the 11th Five Year Plan, i.e. 2012.

Telecom towers are another potential segment with considerable market size. As per the guidelines of the Telecom Regulatory Authority of India (TRAI), telecom connectivity has to be maintained at nearly 100% of the times. This means that in case of a power outage there has to be a seamless transition to a backup power supply for all telecom towers. Presently, most BTS’s in India use Diesel Generation (DG) sets as a backup power source. A lifecycle cost assessment between DG-based backup power and solar PV based backup power was undertaken with diesel prices assumed to be Rs 35, 40 & 55 per litre. The analysis highlighted that the lifecycle cost of solar PV is lower for all scenarios (requirements for 4, 6, 8 and 12 hours) of power backup if diesel price is assumed to be Rs 55 per litre and higher for all scenarios when the diesel price is assumed to be Rs 35 and Rs. 40 per litre. Solar PV becomes a viable option for telecom (based on today’s prices) if the retail price of diesel touches or exceeds Rs 45.9 per litre. The telecom sector has the potential to provide a large and viable market for solar PV in the future with retail prices of diesel likely to move up and prices of solar PV panels likely to come down. If solar becomes a viable solution in this sector, it has the potential to cater to a market in excess of 1,000 MW in the next 7-8 years (i.e. till 2015).


In the past few years, due to a huge increase in the demand for power from commercial buildings, the utilities are facing an overall deficit of electricity. In such a scenario, most commercial buildings rely on DG sets, which is an expensive fuel source. Solar PV based applications cannot meet the load requirements as it involves space and cost constraints. But a part of the load can be met with roof based solar PV applications. Roof based solar PV applications are viable options where long hours of backup power is needed. Based on the analysis undertaken under this assignment, solar PV can assist commercial building operators in saving as much as 22% in per unit cost. This segment has the potential of adding up to 1,000 MW of capacity in the coming 5-6 years.

Benchmarking and policy

Based on the above analysis of market segments, solar PV appears to be an attractive alternative source of energy which till now has a limited market in India. The global solar PV market has been growing substantially, especially in developed countries. Led by Germany, Japan and more recently the USA, the growth of solar PV has been remarkable. A consistent PV strategy based on ambitious and long-term targets, a clearly defined implementation policy programme and a mix of financial instruments have led to the growth of the solar PV market in these countries. Simultaneously, the authorities related to power at the federal, regional and local levels have been demonstrating a strong commitment in implementing strategies and programme.

Instead of the stop-and-go approach, the basic requirement for each PV policy framework is its longevity and stability. That will lead to creating secure conditions for target groups (customers and industry) who would then be willing to invest in PV.

The main reason for Germany’s leading position is its existing regulatory framework and incentive mechanism, which sets out an innovative ‘Feed-in Tariff’ (FIT) structure to create a ready-made market for PV manufacturing as well. In addition to tariff support, the Federal Government provides manufacturing incentives to promote production capacity in Germany. For example, the roof top programme in Germany was a mega success after the introduction of the EEG (German renewable energy feed-in law), mandating utilities to purchase all available RE-based power. Also, support to PV R&D has created a thrust within manufacturers to systematically reduce production costs and to offer more efficient products. As a result of a favourable policy structure, Germany produces solar PV component across the value chain, i.e. silicon production (10,000 tonnes, equal to a PV production of approximately 1,000 MW), wafer production (around 1,300 MW), solar cell production (around 1,300-1,400 MW) and production of module with capacity of around 1,000 MW.

In the previous decade, Japan emerged as the dominant player on the global solar PV market, especially the manufacturing companies that have dominated global production. Japan’s solar PV market development has thrown up a number of important lessons for developing countries on how to develop their indigenous solar PV industry. More precisely, Japan’s approach is largely focused on the supply side, especially relying on technology interventions. One area where Japan stands out globally is its expertise in solar PV technology. The development of this expertise has been the result of a strong focus on R&D. Another area of success is the focus among Japanese policy-makers on balancing both demand and supply. On the demand side, Japan targeted the largest possible consumer group,


i.e. the residential sector and provided it the incentives (subsidy, net metering, access to easy finance, etc.) to mandate solar PV application. On the supply side, the government has been working with the solar PV industry to reduce the cost of solar PV power.

The USA was one of the early movers in the production and use of solar PV globally. However, in the previous decade the US solar industry was overshadowed first by Japan and now by Europe (particularly Germany). In the USA, the incentive framework for solar PV is fairly complex with incentives being available at the federal as well as the state level. However, till now the growth of the solar PV industry has been largely due to state level incentive programmes - thus development is taking place only in a few states which are proactive in initiating incentives and favourable policies. The overall strategy of these state programmes is to encourage cost reduction through increased manufacturing volume and lowering of transaction costs through the development of local market infrastructure. This, in turn, is resulting in progressively lower levels of public support requirement.

Economics of solar PV manufacturing

Solar PV adoption globally is in its early phase and is expected to grow significantly over the next few decades. Developed economies, like Germany and Japan, have led the manufacturing revolution and the adoption of PV technologies till now. They have fuelled the technological progress and cost reductions. China is slowly gaining ground as a manufacturing centre for solar PV. Given that the technology is young and is in an evolving stage, the government in several countries, like China, Malaysia, Hungary and Mexico, have announced initiatives to attract investments in the manufacturing of PV. Now is the time for the Indian government to frame and implement suitable programmes and policies to attract domestic and global investments in this sector. Besides serving the expanding global PV market, this manufacturing ecosystem will ensure that India has a stake in the development of low cost photovoltaic panels for local consumption. This will ensure the technology achieves grid-parity at the earliest, and thereby reduces dependence on conventional energy sources.

The incentive structure currently offered under the Special Incentive Package Programme of the Semiconductor Policy is a welcome move. It has resulted in investors showing interest to set up large-scale vertically integrated manufacturing facilities. It is crucial to implement the incentive package fast so that India can establish a manufacturing base of a commendable scale. As would be seen in the detailed analysis, the manufacturing base has to be adequately supported by the capital subsidy programme.

Duties on the balance of systems, like inverters, batteries, charge controllers, etc. (which constitute 30-40% of the solar PV system cost), and are used for setting up solar power projects should be reduced. It would lead to a drop in project cost and ensure a lower cost of generation and better returns for the developer.


Recommendations

Based on interactions with various stakeholders, data and information collection and its analysis thereof, the salient recommendations for promoting solar PV industry, both, in manufacturing and its applications, have been made.

The manufacturing base in India comprises of cell and module manufacturing, with the bulk of the value addition taking place outside the country. Additionally, the current scale of manufacturing in India is small in comparison to global standards. Hence, there are two issues to be addressed: scale and integration. Significant and immediate steps would be required from the Government of India to facilitate a bigger and vertically integrated manufacturing base in the country. The availability of capital subsidy would ensure early capital recovery or break even for the investor and allow the investor to commit higher investments into this sector. It is recommended that the incentives as per the Semiconductor Policy should be made available to a larger no. of units engaged in solar PV manufacturing.

Emphasis should be laid on R&D and innovation in solar photo-voltaics as they are one of the key drivers for the development of the solar PV industry. The salient initiatives in this direction include collaborative research amongst government, R&D institutions and industry, enhancing coordination amongst various government departments and institutes undertaking R&D, commercialization of the developed technology and developing a proper framework for technology transfer and collaboration within India and other countries to obtain the best available technology.

On the deployment side, it is recommended that the government extends the GBI scheme to all project developers for unlimited capacity addition in the next 5 years. In addition, the existing period of 10 years for GBI incentives should be extended to 20 years. Besides, the government should allow developers to take benefits of the accelerated depreciation. To accelerate the demand, the government should enact a Renewable Energy Law requiring all utilities to progressively increase their purchase of power (year after year) from the RE segments. Also, within the RE segments, higher allocation should be given to purchasing power from solar sources. This will help in creating sustainable demand for power from renewable sources, which will immensely help the solar manufacturing industry. . Besides the large scale applications, the government should encourage solar PV applications for small & medium scale niche market segments (residential, commercial and telecom). It is recommended that the government agree for ‘net metering’ for all grid connected consumers generating solar power, which will incentivise all consumers to adopt solar PV

The provision of financial assistance at cheaper rates to both, the manufacturers and the developers, will also enhance the competitiveness of this sector and would greatly help in achieving the grid parity through solar PV.

A comprehensive National Policy for Solar Energy in India based on the recommendations made should be formulated to achieve set objectives and goals at the national level and encourage the growth of this sunrise industry in a big way. It is recommended that the growth of the solar PV industry should be implemented under Mission mode.


A1: MAPPING THE SOLAR PV MANUFACTURING AND PRODUCTION SUPPLY CHAIN - GLOBAL AND INDIA REVIEW

Background

1.1 A detailed analysis of the global and Indian solar PV manufacturing and production supply chain has been undertaken in this section. The first step of this task is to identify the various components/links of the solar PV supply chain and map the major players. Subsequently, a review of the stages of the supply chain has been undertaken that includes an analysis of production capacity and future capacity addition across these stages.

1.2 According to Morgan Stanley Research, the solar PV industry is the fastest growing sector in energy and is expected to grow four-folds by 2011. In 2007, an estimated US$ 71 billion was invested in new RE capacity globally, of which 30% was accounted for by solar PV (Source: REN 21 Report).

1.3 The fastest growing energy technology globally is grid-connected solar photovoltaics (PV) with an annual cumulative installed capacity increase of more than 50% in both 2006 and 2007 (Source: REN 21 Report).

1.4 However, high costs of energy production and the lack of adequate supply of basic feedstock, i.e. polysilicon, have been limiting the growth of this industry. Today close to 88-90% of the global PV cell production is crystalline silicon based, making access to adequate solar grade polysilicon the main growth bottleneck.

1.5 Crystalline silicon is popular for solar PV production as it is widely available, well understood and uses a technology similar to the one developed for the electronics (semiconductor) industry. Another factor promoting the use of crystalline silicon technology has been its efficiency that is between 15 and 20% during commercial production.

1.6 Shortage of polysilicon has provided an opportunity for bringing in efficiency in production and introduction of the next generation of solar PV technology, i.e. thin film technologies. Thin film modules are produced by depositing extremely thin layers of photosensitive materials on to a low cost backing (substrates), such as glass, stainless steel or plastic. Due to lower usage of material, thin films have lower production cost as compared to crystalline silicon. On an average, thin films use only 1% of the active material compared to crystalline silicon.

1.7 Over the past few years, production capacity of thin films has increased at a scorching pace (almost 100% year on year growth) due to the shortage of silicon and lower manufacturing costs. It is estimated that thin film production capacity in 2007 climbed to almost 550 MW from around 270 MW. Over time,


the cost of crystalline silicon, due to its supply constraint and high feedstock, is likely to lose market share to thin films.

1.8 The crystalline silicon based solar PV supply chain consists of five major components as highlighted in Figure 1. The first component is the silicon feedstock (polysilicon) which is then converted into either ingots or wafers. From these ingots and wafers, solar PV cells are manufactured. These are subsequently integrated into a module that is a series of cells mounted on a frame. When connected to an external circuit, it produces electricity with exposure to sunlight.

Figure 1: Links of the solar PV value chain

Ingots andwafers

PV Cells PV ModulesPV System Integration

Silicon Feedstock

Source: ISA-NMCC 2008

Global scenario

Global manufacturing supply chain

Link 1 – Silicon feedstock or polysilicon

1.9 Despite global sillicon supply rising by 30% in 2007, access to adequate polysilicon supply remained the main bottleneck for the solar PV industry the world over. The global silicon feedstock capacity servicing the solar PV as well as the semiconductor industry was around 52,000 tonnes per annum towards the end of 2007, up from 38,000 tonnes per annum from 2006. The main drivers of this growth in capacity were the established players, such as Wacker and MEMC, along with a number of new startups.

1.10 The solar PV industry faced no supply crunch of polysilicon till 2000-2001. Till then, there was adequate supply of polysilicon through normal polysilicon production as well as through waste silicon supply from the electronics industry.

1.11 In 2001, the dotcom bubble burst and the consequent downturn in the semiconductor industry caused a glut in polysilicon, which discouraged producers from investing in additional capacity. Although the solar PV industry’s demand for polysilicon was growing, most polysilicon producers did not consider solar PV as a high demand/growth sector due to low oil prices, high cost of solar power delivery and suitability of solar PV only for niche applications or government funded programmes. As a result, the global capacity addition in polysilicon was only 6,800 (Metric Tonne) MT between 2000 and 2005 (from 24,200 MT in 2000 to 31,000 MT in 2005).

1.12 In the past 3-4 years, however, the solar PV industry has experienced substantial growth due to renewed focus on renewable energy in the face of global warming and national energy security issues among nations with sustained high price of oil. In 2006, the solar PV industry consumed about 45-


47% of the total global polysilicon supply for production of solar photovoltaic cells which went up to 54% in 2007. As a result, the solar PV industry for the first time overtook the semiconductor industry in the use of polysilicon.

1.13 This growth in demand and a time lag of almost 2 years for a polysilicon manufacturing unit to come online has resulted in a steady demand supply gap for polysilicon, which has led to an escalation in prices of polysilicon from US$ 9 per kg in 2000 to US$ 75 in early 2006, with spot market prices occasionally reaching US$ 100-200 per kg in 2006.

1.14 Post 2005, realising the future demand and the need for capacity ehancement, leading polysilicon manufacturers announced expansion plans, while a number of new companies also entered this space.

Trends in polysilicon production

1.15 Production of polysilicon has gone up from 24,200 MT in 2000 to 52,000 MT in 2007 due to some rapid expansions by established players as shown in Figure 2.

1.16 Most of this capacity expansion (~ 40%) has come about in the past two years, i.e. 2006 and 2007.

Figure 2: Annual productio capacity of polysilicon (in MT) from 2000 to 2007

24200 25000 26000 26600 27300

31280

38000

52000

0

10000

20000

30000

40000

50000

60000

Pro

duction C

apacity (in

mt to

nnes)

2000 2001 2002 2003 2004 2005 2006 2007

Year

Annual production Capacity (Metric Tonnes)

(Source: Prometheus Institutes Review of the Polysilicon Industry)

1.17 At present, the polysilicon industry is dominated by 7 major suppliers.

1.18 Figure 3 provides the contribution of the major polysilicon suppliers in 2007 globally. Hemlock, Wacker, MEMC and REC were the 4 major players in polysilicon production globally in 2007.


Figure 3: Break-up of polysilicon Capacities Company wise globally in 2007

Capacity of Polysilicon Manufacturers ( Tonnes per Annum)

10500

10000

62506000

5800

3100

1300

9050

Hemlock Wacker REC MEMCTokuyama Mitsubishi Sumitomo Others

Source: REC Annual Report 2007

1.19 Polysilicon production is a capital intensive process and requires high levels of technical knowhow. As a result, the development of the polysilicon production industry has been confined basically to countries like the USA, Germany and Japan. Of the 7 large producers of polysilicon, 3 (REC, Hemlock and MEMC) are based out of the USA, 1 (Wacker) is based in Germany and the rest 3 (Sumitomo, Mitsubishi and Tokuyama) are in Japan.

1.20 With a large number of new players entering the polysilicon space, the coming few years will see the polysilicon industry developing in countries like Norway, China, Spain, and Korea. However, the USA is expected to continue as the top producing country till at least 2010.

1.21 Figure 4 highlights the company-wise polysilicon production capacity in metric tonnes for all the 7 major suppliers between 2005 and 2007. All 7 companies have recognised the shortage of ploysilicon and have ramped up capacity. These producers do not expect the polysilicon market to reach an equilibrium till 2010. Although all players have added to their capacity of 2005, MEMC, Hemlock and Wacker have had the biggest capacity expansion.


Figure 4: Company wise polysilicon production capacity (in MT) for the major suppliers between 2005 and 2007

10500

10000

7700

10000

6600

5500

62506050

5300

6000

4000

3800

5800

5400

5200

3100

28602850

1300900

800

9050

2,190

1130

0

2000

4000

6000

8000

10000

12000

Hemlock Wacker REC MEMC Tokuyama Mitsubishi Sumitomo Others

Name of Main Companies

Company wise break up of Polysilicon Manufacturing Capacity between 2005 and 2007 (in

MT)

2007 2006 2005

Source: Prometheus Institutes Review of the Polysilicon Industry and REC Annual Reports

Future shift

1.22 According to Morgan Stanley Reseacrh, the demand in the polysilicon market is likely to out-strip supply until around 2010, and as a result, prices are not expected to reduce dramatically. However, with increased production capacity in 2008, the polysilicon demand-supply gap is likely to decrease. This, in turn, could help in the easing of polysilicon prices in 2008. At the same time, recycling of polysilicon from scrap and polysilicon dust and broken wafers is further likely to reduce the gap and contribute to easing in prices.

1.23 The major players in the polysilicon market will continue to play a dominant role despite a number of new players entering the market. Based on the data collated on the Big-7 in the polysilicon market, it is estimated that they would add a total of 106,600 MT of polysilicon capacity between 2007 and 2010. Based on data available from 2006, new entrants were likely to add a capacity of approximately 79,050 MT till 2011.


Table 1: Present and future capacity of the 7 major polysilicon players globally

Source: ISA-NMCC 2008 Research, Prometheus Institutes Review of the Polysilicon Industry, annual

reports of market players and company announcements)

1.24 Table 2 highlights details of a few new players who have planned investments in polysilicon. The table below shows that 79,050 MT of polysilicon capacity would come online from new players by 2011.

Table 2: Capacity of new players projected to come online by 2011

S. No Company

Country of

location

Projected target for 2011 (MT)

1 LDK Solar China 15,000

2 M. Setek Japan 13,500

3 DC Chemicals USA 10,000

4 Elkem Norway 10,000

5 Arise Technologies Corporation Canada 10,000

6 Hoku USA 8,000

7 Total China (other than LDK) China 7,300

8 Solar Value Germany 5,300

Market players

Manufacturing base

Technology Present capacity

(MT)

Future roadmap/ capacity targets (year – 2010 unless specifically

mentioned)

Key characteristics of the player

Hemlock

Michigan Siemens

10,500

36,000 MT

Economies of scale and polysilicon expertise

Wacker

Burghausen, Germany

Siemens 10,000

22,000 MT

Diversified in silicones, polymer and chemicals and worldwide distribution network

Montana, USA Siemens

Washington, USA

Siemens REC

Washington, USA

FBR

6,250

19,500 MT

Fully integrated across PV value chain and cost efficient

Texas, USA FBR MEMC

Merano, Italy Siemens 6,000 15,000 MT

Granular polysilicon producer specifically for PV industry

Yamaguchi, Japan

Siemens

Tokuyama Yamaguchi,

Japan VLD

5,800 8,400 MT

VLD technology allows for faster production more appropriate for PV applications

Albama, USA Siemens Mitsubishi Yokkaichi,

Japan Siemens

3,100 3,500 MT No publicly known plans for major expansions

Sumitomo Japan Siemens 1,300 2,700 MT EG polysilicon

Others China, Taiwan

etc N/A 9,050 79,050 MT (2011)

New and emerging markets in China, Japan, USA and India


S. No Company

Country of

location

Projected target for 2011 (MT)

9 Isofoton Spain 2,500

10 French Consortium France 2,000

11 PV Crystalox United Kingdom 1,800

12 Solarworld Germany/USA 1,500

13 Crystal Solar Australia 1,200

14 Joint Solar Silicon GmbH & Co KG

(JSSI). Germany

850

15 JFE Steel Japan 100

Total 79,050

(Source: ISA-NMCC 2008 Rresearch, Prometheus Institutes Review of the Polysilicon Industry, annual

reports and company announcements)

1.25 By 2011, based on the planned investments from the new as well as the established players, it is estimated that around 55% of installed capacity globally would be from the Big 7 (established players in the market today). Figure 5 highlights the projected change in the polysilicon market in terms of marketshare of major polysilicon manufacturers in 2011. A few new entrants, like LDK, could break into the top five players in terms of marketshare by 2011.

Figure 5: Share (%) of major polysilicon producers in 2011

Share of Major Producers of Polysilicon by Capacity in 2011

18.4

11.2

9.7

7.74.35.14.1

6.9

5.1

5.1

7.7

14.7

Hemlock Wacker REC

MEMC Tokuyama DC Chemicals

Hoku M. Setek Elkem

Arise Technologies Corporation LDK Solar Others

Source: ISA-NMCC 2008 Research from Prometheus Institutes Review of the Polysilicon Industry,

annual reports and company announcements

1.26 The estimates for the capacity that is likely to come online have been made based on a number of sources, like company announcements, media reports on specific sectors and companies, and annual reports. However, doubts remain in solar PV circles on whether all the capacity that has been publicly announced


will come online by 2011. These fears are due to concerns over oversupply and the inability to master the engineering and process of polysilicon production.

1.27 For example, based on an analysis by RBC Capital Estimates through its report ‘Investing in Solar’ released in April, 2007, only 105,050 MT (67%) of capacity is likely to come online as against a capacity of 157,130 MT based on all announcements till the beginning of 2007. RBS has also estimated that the incumbent players (i.e. the Big-7) have a very high probability (95%) of meeting their capacity addition targets, whereas new companies (mostly from China and other South East Asian countries) have a low probability (15%) of meeting the capacity addition target.

Link 2 – Silicon wafers/ ingots

1.28 With the shortage of polysilicon, there exists a production deficit at the wafer stage as well. In the solar PV value chain, polysilicon displays the maximum shortage of supply, as can be seen from the following figure. This supply shortage is expected to last till 2010, as described earlier. Although there is surplus today in the rest of the value chain, the production of PV cells and modules is limited significantly by polysilicon supply and, to an extent, by wafering capacity.

Figure 6: Production along the global value chain in 2007

0

500

1000

1500

2000

2500

3000

3500

4000

4500

5000

Pro

du

ctio

n C

ap

acity (in

MW

)

Polysilicon

Capacity

Wafering

Capacity

Cell

Production

Capacity

PV Modules

Capacity

PV Silicon

Cells -

Production

Thin Film -

Production

Production/ capacities along the Global Solar PV value Chain

2006 2007

Source: REC Annual Reports 2006 & 2007

1.29 The global wafer manufacturing capacity grew at 60% in 2006 (over 2005) and 73% during 2007 (over 2006) based on estimates by REC. Figure 7 highlights the change in solar PV wafer production capacity between 2005 and 2007.


Figure 7: Global wafer manufacturing capacity (Source: REC Annual Report 2007)

0

1000

2000

3000

4000

5000

2005 2006 2007

Ca

pa

cit

y i

n M

W

Source – REC Annual Reports 2006 & 2007

1.30 The market for solar PV crystalline wafers is segmented into two broad categories for mono-crystalline and multi-crystalline wafers/ingots. According to 2006 data, multi-crystalline had a share of almost 54% and the rest was mono-crystalline. According to the REC Annual Report 2007, the share of multi-crystalline and mono-crystalline remains almost the same as in 2006, i.e. 54% and 46%, respectively. The relative share in terms of wafer sales for these two types has been shown in Figure 8.

Figure 8: Relative market share of mono and multi-crystalline wafers (MW) in 2006 and 2007

Relative Share of Multi and Mono Crystalline Wafer

Production in 2006 and 2007 ( in MW)

1382

1556

1177

1380

0

200

400

600

800

1000

1200

1400

1600

1800

2006 2007

Multi-Crystalline Mono-Crystalline

Source: REC Annual Reports 2006 & 2007

1.31 Within the multi-crystalline wafer manufacturing industry, a large chunk (78%) of the capacity has been installed by the 9 largest players. The breakup for these players is given in Figure 9.


1.32 REC today is the largest producer of multi-crstalline wafers with a capacity of 468 MW. It is now focussing on mono-crystalline wafers and plans to enhance its capacity from 35 MW in 2007 to 300 MW by 2010. REC is the only integrated company in the whole solar PV chain from polysilicon to modules. It is also the largest manufacturer of wafers with a market share of around 10%.

Figure 9: Installed multi-crystalline wafer capacity of the 8 largest players globally

Multi Crystalline Wafer Capacity

0

100

200

300

400

500

RE

C W

afe

r

PV

Cry

sta

llox

LD

K S

ola

r

De

uts

ch

es

ola

r

Ky

oc

era

Gre

en

En

erg

yT

ec

hn

olo

gy

Ka

wa

sa

ki/J

FE

Ba

od

ing

Yin

gli

ne

w e

ne

rgy

MW

2006 2007


Future shift

1.33 As in polysilicon, producers in other parts of the value chain of the solar PV industry are ramping up capacity to meet the renewed demand.

1.34 Table 3 highlights the current capacities of the 9 major multi-crystalline playes, as well as their plans for adding wafer manufacturing capacity.

Table 3: Present and future capacity of the 9 major multi-crystalline wafer producers globally

Market players

Manufacturing base

Products

Capacity (2007 unless specifically mentioned)

Future roadmap (2010

unless specifically mentioned)

Key characteristics of

the player

Heroya

Glomjford

Multi-crystalline wafer and

mono-crystalline

ingots

REC Wafer

Erfurt, Germany Wafer

35 MW (mono-

crystalline wafer) / 468 MW (multi crystalline

wafer)

2 GW (of which 300 MW → mono-crystalline) 3.6 GW (2012)

Fully integrated across PV value chain, cost efficient

LDK Solar

Xinyu, China

Multi crystalline

wafer

580 MW (March 2008)

1 GW (2008 end)

2 GW (2009 end)

Both virgin and recyclable polysilicon for ingot production

Trina China Multi- Not 1 GW Since 2007, Trina


Market players

Manufacturing base

Products

Capacity (2007 unless specifically mentioned)

Future roadmap (2010

unless specifically mentioned)


the player

Solar crystalline ingots and

wafers, cells and modules

available Solar has been a player in five of the six major steps in the solar industry value chain.

PV Crystalox

Oxfordshire plant, UK

Multi-crystalline ingots and

wafers

300 MW Not available

One of the first to develop multi-crystalline technology on an industrial scale

Deutsche solar

Freiberg, Saxony

Mono- and multi-

crystalline silicon wafers

270 MW 500 MW (2009) A Solar World group company

Baoding Yingli new

energy

Baoding, China Wafer 200 MW 500 MW

Produce SOG silicon from metallic silicon with almost same efficiency

Kyocera

USA

Multi-crystalline

silicon wafers and

ingots

180 MW 500 MW (2011)

Diversified into fine ceramics, semiconductor parts, electronic device group

Kawasaki/JFE

Japan Ingots 170 MW 1000 tonnes

Leading ingot manufacturer

BP Solar Fredrick, USA Polysilicon, wafers and

cells

82 MW in Polysilicon and Wafers

> 200 MW

Wholly owned subsidiary of BP, vertically aligned – from silicon through to the final installation

Source: ISA-NMCC 2008 Research, annual reports of PV companies, company announcement and

news updates

1.35 One of the significant shifts taking place in the manufacture of wafers is the emergence of China and Taiwan as major players. Today, more than 50% of the installed capacity for wafer manufacture is based in these two countries. Players, such as Trina Solar, LDK Solar and Glory Silicon, have already announced plans of installing 1 GW of capacity each by 2010.


Link 3 - Solar PV cells production

1.36 Figure 10 highlights the current production between 2005 and 2007 for solar PV cells, PV crystalline cells and thin films. It is noteworthy that unlike polysilicon and wafer capacity, additions in cell capacity outpaced module manufacturing capacity in 2007.

1.37 Total PV production grew by 55% during 2007 over 2006 with both mono and multi-crystalline losing ground to thin films. Thin films have grown at a substantial rate since 2005 (at almost 80% in 2006 and more than 100% in 2007, albiet on a small base) due to polysilicon shortage which began to have an impact on the industry in 2004.

Figure 10: Global solar PV production 2005-2007 in MW

3436

2217

1663

3036

2021

1555

400

196108

0

500

1000

1500

2000

2500

3000

3500

Pro

du

cti

on

Ca

pac

ity

in

MW

Total Solar PV Production PV Silicon Cells - Production Thin film production

Solar PV Production Global 2005 - 2007

2007 2006 2005

Source – PV Report 2007 and REC Annual Report 2006/2007

1.38 Due to the phenomenal growth of the solar market, for the first time in 2007, more than half of the polysilicon production went into solar PV cells instead of semiconductors.

1.39 According to the Earth Policy Institute, Washington D.C., the five largest solar PV cell producing countries globally were Japan, China, Germany, Taiwan, and the USA. However, the main trend seen in this segment of the value chain (as also in the wafer segment) is the emergence of China as a major player in cell production. China’s capacity has been growing at a phenomenal rate. China trebled its PV cell production in 2006, more than doubled that output in 2007 and emerged as the second largest producer of solar PV cells. Going by the rate at which China is adding capacity, it is poised to displace Japan as the largest producer of solar PV cells in 2008-09.


1.40 Figure 11 highlights the top 10 solar PV cell producers globally. From the figure, it can be seen that a number of players are adding capacity at a phenomenal rate. The major movers in the solar PV cell production are Q-Cell, Suntech and Chinese manufacturers, like Yingli. Q-Cell has moved from the nineth position in 2003 to second in 2007 in terms of capacity, and Suntech has moved to the third position in 2007 from seventh in 2003. Q-Cell, which has the second largest installed capacity of crystalline cells segment, overtook the leader, Sharp, in actual production in 2007. (Source: Yole Development)

Figure 11: Global top 10 cell producers and production in 2006/ 2007

710

420

540

160

516

250

308

60

240

180

240

100

170150

170

60

150

30

140110

0

100

200

300

400

500

600

700

800

Pro

du

cti

on

Ca

pa

cit

y (

in M

W)

Sharp Suntech Q-Cells First Solar Kyocera Motech SolarWorld Sanyo Yingli JA Solar

Name of Cell Producers

Production Capacity (MW) of the Top Ten Solar PV Cell Producers in 2006/ 2007

2007 2006

Source: REC Annual Report 2006/2007

1.41 The order in solar PV cell manufacturing is also changing with time and the with entry of new players. These new players have introduced better production technology and processing plants, scale and volume, which in turn, lead to better economics and lower cost base. They are also able to address the main issue, i.e. cost reduction, through the use and handling of thinner silicon wafers.

1.42 The year 2007 also saw the emergence of new Asian players (specifically Chinese) into the solar PV cell manufacturing market. Players, such as Yingli Solar and JA Solar, broke into the top 10 solar PV cell manufacturers globally.

1.43 With polysilicon production shifting gear, the rest of the supply chain is following suit. Investments in the rest of the production value chain, like PV cell production, might not be as high as polysilicon as over-capacities still exist in other parts of the supply chain. Table 5 highlights the plans of a few of the main players in the solar PV market, including the capacity for particular


technology types being installed. Nine companies announced plans to touch a capacity of 1 GW by 2010.

Table 4: Present and future capacity of PV cell players

Market players

Manufacturing base

Technology

Capacity (MW) (2007 unless

specifically mentioned)

Future roadmap

(2012 unless specifically mentioned)


the player

NanoSolar California,

USA CIGS Thin

Films 1 GW

Upscaling on cards – No

details available

Developed a proprietary process technology (nano-particle ink) which makes it possible to produce thinner solar cells faster.

Q-Cell

Sachsen-Anhalt,

Germany

Multi-crystalline

silicon

516

1 GW (of which

500 MW thin Film)

Technology leader and advantages of economies of scale

Sharp

Katsiuiragi, Nara Perfecture

Mono/ multi-

crystalline silicon

710

1 GW (Thin Film)

Japan’s only manufacturer to produce for space applications. Super high efficiency cell for low cost solar concentrator module

Suntech

Wuxi Multi-

crystalline silicon

540 1 GW (2008) Forward integrated

Kyocera

USA Multi-

crystalline silicon

240 Not available

Diversified into Fine ceramics, semiconductor parts, electronic device group

First Solar

Perrysburg Frankfurt Malaysia

Cadmium Telluride

(Thin Films) 308 1,012 MW

Cost advantage over traditional crystalline silicon solar module manufacturers

Motech

Taiwan Multi-

crystalline silicon

240 1 GW

R&D centre to produce next generation solar cell

Solar World

USA Crystalline

silicon 205 1 GW

Group of companies fully integrated across value chain

Sanyo

Japan

Amorphous silicon/ mono-

crystalline silicon hybrid

180 350 MW (2008); 1 GW

Technology leader for HIT cells having efficiency of 22%


Market players

Manufacturing base

Technology

Capacity (MW) (2007 unless

specifically mentioned)

Future roadmap

(2012 unless specifically mentioned)


the player

Yingli

China

Multi-

crystalline

silicon

200 600 MW (2009)

Polysilicon ingots

and wafers, cells

and module

JA Solar

Hebei, China Crystalline

silicon 175

500 MW (2008)

Manufactures high performance solar cells which are then sold to module producers

Mitsubishi Electric

Iida Factory, Nagano

Prefecture

Multi-crystalline

silicon, amorphous silicon thin

film

150 500 MW

Integrated manufacturing and marketing/ sales of solar PV equipment

REC Solar Norway Multi-

crystalline silicon

50 225 MW (2010),

1 GW by 2012

Fully integrated across PV value chain, cost efficient

LDK Solar China Crystalline

silicon 0 1 GW

LDK Solar is mainly a multi-crystalline solar wafer manufacturer trying to integrate across the value chain from polysilicon to modules

Solar World USA Crystalline

silicon 500 MW (2008)

1 GW

Solar World Industries America covers the entire solar energy manufacturing value chain i.e. from raw silicon to complete solar electric systems.

Trina Solar China Wafers,

ingots, cells and modules

150 (Six lines)

1 GW

Trying to undertake backward integration across the value chain from polysilicon to modules

Kaneka Japan Thin Films 55 MW 130 MW (2010)

Early mover in thin films

Source: ISA-NMCC 2008 Research - Estimates based on annual reports of various players


1.44 The thin film market is dominated by four main players who have more than 75% of marketshare. Among these, First Solar is the biggest with almost 50% of the production, followed by United Solar and Kaneka, each with a marketshare of about 10-12% and Mitsubishi Heavy Industries with a share of about 8%.

1.45 In the thin film market, signifcant expansion is expected and some of the main players lining up for this expansion are First Solar and Sharp, both of which hope to have a thin film capacity of 1 GW by 2012, and Moser Baer and Reliance Industries in India. Reliance Industries is targeting an integrated 1 GW facility in India, while Moser Baer is in the process of commissioning a 200 MW thin film module plant that would produce the world's largest non-flexible thin film modules. Moser Baer has also put in a proposal under the Semiconductor Policy of India to set up a new plant with a capacity of 282 MW for thin films. International solar players, such as Signet Solar, and Indian infrastructure development companies, like Lanco Infratech and KSK Energy, are also planning to invest in solar PV manufacturing in India. The details of all of the present and future players have been provided at the end of this chapter.

Link 4 - Solar PV module production

1.46 Global capacity in solar PV module manufacturing increased by more than 50% in 2007 over 2006. Polysilicon shortages marred complete capacity utilization in the supply chain and this was also the case in solar PV module manufacturing.

1.47 Figure 12 highlights the current capacity in 2006 and 2007 for total solar PV modules.

Figure 12: Global module production capacity 2006 and 2007 (MW)

4849

3190

0

1000

2000

3000

4000

5000

6000

2007 2006

Pro

duction C

apacity (in

MW

)


1.48 The solar PV module manufacturing link in the solar PV manufacturing value chain requires the least knowhow vis-a-vis all the other links in the value chain. This is the reason for cost being the basis of competition in this segment. India and China, which have low labor costs, have been able to upscale in this segment.


1.49 Table 5 highlights the main players in the solar PV module manufacturing space, including the installed capacity.

Table 5: Large global solar PV module players and their capacities

Market players Manufacturing base Capacity (MW)

Suntech Wuxi 540

First Solar LLC Perrysburg, Frankfurt 308

SolarFun PRC 240

Mitsubishi Iida Factory, Nagano Prefecture 230

Solon Germany 210

Yingli PRC 200

Solar World Camarillo (USA), Gallivare

(Europe) 185

Kyocera USA 180 (target 500 MW by 2011)

Kaneka Solartech Japan 55

REC Norway 45

Source: ISA-NMCC 2008 Research Estimates based on published reports, including annual reports of

various players

Indian Scenario

India’s energy targets

1.50 India is one of the fastest growing economies globally and energy is one of the basic requirements to maintain this rate of growth and to serve its developmental objectives. To maintain this rate of growth (of around 7-9% per annum), access to cheap, clean and reliable sources of energy has become crucial.

1.51 India has projected its demand for electricity to go up to 210 GW by 2012 and to 800 GW by 2032. To meet this demand, it has laid down a comprehensive plan for adding capacity, in which renewable energy technologies play a crucial role. By 2012, India has targeted 24 GW of capacity through renewable sources of which 0.5 GW would be through solar. By 2017, MNRE expects India’s solar capacity to touch 4 GW.

1.52 The Government of India has kept a target of electrification of all villages by 2009 and ‘Power for all by 2012’ with a minimum energy consumption of 1 unit per day per family. Solar PV based decentralised distributed generation can contribute to this target.


Solar PV manufacturing in India

1.53 India houses a sizeable industrial base for the production of solar cells, PV modules and PV systems which comprises of 9 manufacturers of solar cells and 19 manufacturers of PV modules. Another 60 companies are engaged in the assembly and supply of solar PV systems. An overview of the SPV value chain, main constraints and current scenario are figure given below:

Figure 13: Characteristics of the value chain in India

Source: ISA-NMCC 2008

1.54 During FY07, nearly 45 MW of solar cells and 80 MW of SPV modules were produced in the country. During the same period, over 60 MW capacity of solar PV products were exported. In 2007-08, the MNRE expects the solar PV industry to produce 140 MW for solar cells and 170 to 180 MW of solar PV modules.


1.55 The Indian PV industry has been regularly exporting solar cells, PV modules and PV systems to other countries. India’s capacity for the manufacture of SPV systems has remained less than 200 MW. During the past five years, more than 220 MWp of PV products have been exported. The Indian PV industry imports silicon wafers, solar cells, PV modules, raw materials and components used in the manufacture of solar cells and modules and components used for PV systems.

Figure 14: Annual production growth of PV cells and modules in MW

Annual Production growth of PV Cells and Module in India

9.514

20 22 2532

3745

140

1117 20 23

3645

65

80

175

0

20

40

60

80

100

120

140

160

180

200

1999-2000 2000-2001 2001-2002 2002-2003 2003-2004 2004-2005 2005-2006 2006-2007 2007-2008

(expected)

Production Solar Cell Production Solar PV module

Source: MNRE

The Indian solar PV manufacturing chain

1.56 Currently, all the silicon wafers needed for the manufacture of solar cells in India are imported. However, with the announcement of the Special Incentive Package (SIP) under the GoI’s Semiconductor Policy Guidelines announced in September 2007 for setting up of semiconductor fabrication and other ecosystem units, including solar cells and photovoltaics, MNRE expects the domestic solar PV manufacturing industry to grow substantially.

1.57 The announcement of the Semiconductor Policy in 2007 has spurred investment in the solar PV sector in India. Under this policy, units coming up in this space and with approved applications would be eligible for a capital subsidy of 20% for plants located in SEZs and 25% for plants located outside SEZs on the condition that the net present value of the investment is at least Rs 1,000 crore. (about US$ 250 million)

1.58 It is estimated that in the short term, the import market for solar energy products will continue to increase, while the domestic market share will decline. This decline is mainly due to increasing demand for improved and more cost effective technologies that are not within the cost range of most players in the country.


SPV investors for manufacturing and commissioning of solar power plants

1.59 The solar industry is now dominated by large organised players, either in the public sector or joint ventures with major global players. The major government-owned players in the domestic industry are BHEL, Central Electronics Ltd., BEL and Rajasthan Electronics & Instruments Ltd (REIL). Several international players, such as Moser Baer PV, TATA BP Solar, Signet Solar and SELCO International USA, are also active suppliers in India. The market is dominated by joint ventures and technical collaboration with foreign firms that specialise in RE products. New firms that are setting up or expanding manufacturing units and developing forward linkages to develop solar power plants are Reliance Industries, Moser Baer, Signet Solar, Solar Semiconductors, etc.

1.60 Twelve proposals/applications have been received under the SIP, the details of which have been captured in Table 6. Details on some of the applications were not available. It is estimated that a cumulative investment of about Rs. 66,394 crore under 10 applications/proposals are for solar PV manufacturing. The details of these applications are provided in Table 6.

Table 6: Proposed applications for investment in solar PV manufacturing under the Semiconductor Policy

Name of company

Products Capacity Total

investment (Rs crore)

Subsidy requested (Rs

crore)

Lanco Solar (P) Ltd.

Solar PV (wafer to module) and polysilicon

Not available 12,938 Not available

Solar

Semiconductors

Solar PV – cells and modules


Reliance Industries Ltd

Polysilicon, wafers, cells and modules

(solar photovoltaic) 1 GW 11,631 2,326

Signet Solar Thin film 1 GW 9,672 1,934

Moser Baer PV Technologies

Silicon cells, modules, thin film

concentrators

1.3 GW {580 MW (cells),

540 MW (modules) 282 MW (thin film

concentrators)}

6,000 2,393

Titan Energy Systems

Solar PV cells/modules, polysilicon and

wafers

500 MW (cells, modules and

wafers) 250 MW (polysilicon)

5,880 496

PV Technologies

India Ltd Solar PV Not available 5,880 Not available

KSK Energy Ventures Private

Limited

Integrated solar panel based on thin

film and CulnSe2/CdTe

700 MW 3,211 642


Name of company

Products Capacity Total

investment (Rs crore)

Subsidy requested (Rs

crore)

technology

TF Solar Power Ltd

Silicon thin film

panels


TATA BP Solar Solar PV – cells and

modules Not available 1,692 Not available

Phoenix Solar India

Solar PV Not available 1,200 Not available

Source: PIB release

1.61 Table 6 highlights the names of all the players who have put in their application for setting up manufacturing facilities under the incentives available under the Semiconductor Policy. However, the implementation status of these proposals is not available.

1.62 In particular for solar PV, 10 proposals have been received for setting up manufacturing facilities in ‘Fab City’, which will bring a cumulative investment of about US$ 2.6 billion. Details of these proposals are shown in the following table.

Table 7: Proposed application for investment in solar PV in Fab City

Sl. No.

Name of the company Line of activity

Proposed investment

(in USD Mn)

Proposed employment

1 Solar Semiconductor

(P) Limited

Photovoltaic solar cell fab, PV solar module assembly line, thin film solar and system integration of solar energy

solutions

1,525 8,500

2 Titan Energy Systems

Limited Solar photovoltaic manufacturing unit

700 2,670

3 M/s. XL Telecom &

Energy Limited Solar cells & solar modules 69 186

4 KSK Surya

Photovoltaic Ventures Private Limited

Solar photovoltaic panels 98 1,720

5 Surana Ventures

Limited Solar photo voltaic cell and

modules 13 400

6 Photonne Energy Systerms Limited

Silicon wafers, solar cells and solar PV modules

NA 200

7 Air Liquide India

Holdings (P) Limited Gasses & chemical facilities

unit 27 100

8 Radiant Solar Private

Limited

Photovoltaic module design manufacturing and installation

company with a large R%D centre for solar and other renewable energy sources

37.5 500


Sl. No.

Name of the company Line of activity

Proposed investment

(in USD Mn)

Proposed employment

9 BOC India Limited Centralised industrial gases unit 11.36 10

10 MIC Electronics

Limited

LEDs, LED based display and LED lighting solutions and solar based LED lighting

products

193 1,200

Source: ISA - NMCC 2008

The solar PV chain and capacity in India

1.63 India has had significant capacity in solar cell and module manufacturing, with almost no presence in the upstream sectors, such as polysilicon and wafer.

1.64 Based on the above mentioned applications, India’s solar PV capacity is likely to grow exponentially. This is based on the assumption that the applications are approved and manufacturers begin investment in India. It is estimated that over the next few years, India’s polysilicon production is likely to be 1.9 GW (based only on data obtained from Government of India press releases on the applications made under the Semiconductor Policy).

1.65 India has almost no capacity in wafer manufacture currently but this is likely to increase to 1,500 MW over the next few years with investments from Reliance

Industries and Titan Energy Systems, as shown in the following figure. This

again is based only on the data available from the announcements made under the Semiconductor Policy.

Figure 15: India's proposed wafer manufacturing capacity over the next few years in MW

Source: PTI 2008 release


1.66 Besides the above mentioned source (announcements under the Semiconductor Policy), an addition of approximately 2,600 MW is also being made in thin films by Signet Solar (1000 MW), KSK Energy Ventures (700 MW) and Moser Baer (882 MW, including 282 MW under the Semiconductor Policy).

1.67 India’s cell production is expected to be around 140 MW in 2007-08, which is likely to get a major quantum boost when the facilities planned after the announcement of the Semiconductor Policy start production. Based on the information available from the Government of India on the applications received under the Semiconductor Policy, India’s cell production is likely to jump to a minimum of 2,350 MW (2,210 MW of new capacity expected to become operational over the next few years as a part of the capacity planned under the Semiconductor Policy) which is a conservative estimate as details of a number of applicants were not available.

1.68 Based on data available through public sources, it is estimated that a minimum of 2,170 MW of solar PV module manufacturing would come online if the applications submitted under the Semiconductor Policy materialize. The likely breakup is shown in Figure 16.

Figure 16: Cumulative increase in cell manufacturing capacity over next few years in India in MW

1000

500 580

12010

2210

0

500

1000

1500

2000

2500

Reliance

Industries

Titan Energy

Systems

Moser Baer PV

Technologies

TATA BP Solar CEL Total Cell

Production

Projected Cell Manufacturing Capacity over the next few years (in MW)

Source: PTI 2008 release

1.69 Table 8 provides a list of some of the major players in the solar PV market and their expansion plans.

_______________________________________________________________________________________________________________ Study on Solar Photovoltaic Industry: ISA-NMCC 2008 34

Table 8: Investors: Indian solar PV manufacturing companies

S. No. Name of investor

Focus area in solar

Brief profile (manufacturing)

1 Reliance Industries Limited (RIL)

Manufacturing and development of SPV based power plants

The Reliance Group is India's largest private sector enterprise, with businesses in the energy and materials value chain. The entire group's annual revenues are in excess of US$ 27 billion.

Manufacturing: RIL is also planning to set up a manufacturing plant for the manufacture of polysilicon, solar-grade wafers and SPV modules. The plant is expected to have a cumulative capacity of 1 GW and would require investments to the scale of Rs 116.3 billion over a 10-year period. These investments qualify for the incentives under GoI’s Semiconductor Policy.

2

Moser Baer Photo Voltaic Limited (MBPV)

Manufacturing and development of SPV based power plants

Moser Baer India Ltd. is India’s largest and the world’s third largest manufacturer of removable optical storage devices.

Area of investment in Solar PV: Moser Baer has set up a subsidiary called MBPV for its foray into SPV.

Manufacturing: MBPV has invested US$ 58 million (Rs. 2.6 billion) in an SPV cell and module manufacturing plant in India with a capacity of 80 MW. The company has also signed an MoU with a leading global equipment supplier for the supply of critical equipment for a 565 MW phased expansion of its thin film photovoltaic modules manufacturing capacity that will take its cumulative capacity to above 882 MW by 2010.

3 TATA BP Solar Manufacturing and consultancy services

TATA BP Solar is a joint venture between TATA Power Company and BP Solar. TATA BP Solar has a fully integrated solar manufacturing plant, including cell manufacture, module assembly and Balance of Systems (BOS), all at one site. TATA BP Solar provides customized solar solutions for lighting, water pumping, water heating and backup power. TATA BP Solar has also designed specialized applications for railway signalling systems and offshore platforms.

Manufacturing: TATA BP Solar’s manufacturing facilities are in Bangalore and are the largest of their kind in the country so far. The company plans to add 128 MW to its capacity in early 2008 to augment its capacity to 180 MW and targets a cumulative



Focus area in solar


manufacturing capacity of 300 MW by 2010.

4 Signet Solar Manufacturing

Signet Solar is a company promoted with the aim of designing, developing and manufacturing large area, low cost, thin film silicon SPV modules.

Manufacturing: The company is investing over US$ 2 billion in setting up manufacturing facilities in India. Signet Solar has plans of building three such SPV manufacturing facilities, each having an annual output of 300 MW. The company is in the process of constructing its manufacturing facility in Germany and the construction of the first unit in India is likely to begin in 2008.

5

Maharishi Solar Technology (P) Limited (MSTPL)

Manufacturing

MSTPL, an ISO 9001:2000 certified company, was established in 1999 to harness solar energy for application in residential, commercial, industrial and agricultural areas.

Manufacturing: The company has set up a vertically integrated manufacturing facility to produce multi-crystalline silicon ingots, wafers, cells, modules and systems. The plant capacity is 2.5 MW per annum and is being expanded to 15 MW per annum by 2010.

The company is also foraying into polysilicon. It has set up a 100 m/t R&D project, which the company plans to scale up to 3,000 m/t at a later stage.

6

Webel SL Energy Systems

Manufacturing and consultancy services

Webel is one of the fastest growing manufacturers of SPV cells in Asia and had an installed capacity of 10 MW in March 2007.

Manufacturing: Webel plans to take its manufacturing capacity to 42 MW by March 2008. Webel is looking to achieve a cumulative capacity of 102 MW by 2010. Webel has so far focused only on mono-crystalline cells but is making a transition to multi-crystalline cells. Almost 95% of its income was derived through exports in FY07.

Webel has also entered into a tie-up with a dedicated supply arrangement with a Japanese supplier for silicon. According to the arrangements of the tie-up, the silicon prices will continue to decline progressively over the contract period.

7 BHEL Manufacturing and consultancy

BHEL is the largest engineering and manufacturing enterprise in India in the energy-related/infrastructure sector today. BHEL manufactures over 180 products under 30



Focus area in solar


services major product groups and caters to core sectors of the Indian economy, viz., power generation & transmission, industry, transportation, telecommunication, renewable energy, etc.

Manufacturing: BHEL has made substantial investments in the renewable energy space, especially in solar technologies. It supplies both SPV and solar thermal products. BHEL manufactures high efficiency mono-crystalline solar cells using highly efficient CZ single crystalline technology. BHEL also manufactures a wide range of SPV modules suitable for a variety of applications. BHEL has also undertaken the development of SPV based power plants on turnkey basis across India, which include stand alone and grid connected plants as well as hybrid systems.

8 Central Electronics Limited (CEL)


CEL is one of the largest manufacturers of SPV cells, modules and systems in India. CEL has undertaken in-house development and R&D to convert a laboratory concept into an industrial technology for SPV manufacturing.

Manufacturing: CEL has an integrated production facility to manufacture mono-crystalline silicon solar cells and modules with the state-of-the-art screen-printing technology. The company has supplied over 0.15 million SPV systems in India and abroad, covering both rural and industrial applications. CEL's SPV modules are the only ones from India certified both for design and quality by the European Commission - Joint Research Centre at Ispra, Italy. CEL has now got plans to scale up its production facilities of SPV cells and modules from 2 MWp to 10 MWp and also achieve full production capacity of 12 MWp per annum through better production management.

9 TITAN Energy Systems Ltd (TESL)

Manufacturing

TESL is one of the leading manufacturers and exporters of SPV modules in India. Titan is the only module manufacturer with proven expertise in making modules using various solar cell technologies - crystalline, amorphous-silicon and CIGS. Titan's manufacturing centre in Hyderabad, India, has an installed module manufacturing capacity of 50 MW and is expanding to 200 MW by end of 2008.

Manufacturing: TESL manufactures modules using crystalline, thin film and CIGS



Focus area in solar


based technologies. TESL has over time developed expertise in making crystalline and amorphous SPV modules having power ratings between 2 and 300 Wp. These modules meet certification requirements of IEC. TESL is in an expansion mode and aims for a module production capacity of 500 MW by 2010.

10

Rajasthan Electronics & Instruments Ltd (REIL)


REIL is a joint venture between the Government of India and the Government of Rajasthan and has been conferred the status of a ‘Mini Ratna’. REIL started operations in the SPV sector in 1985 through the development of a SPV module manufacturing facility that has now expanded to cover Balance of Systems for a large number of applications. The company develops products through in-house R&D and has a capacity of 2 MW per year on single shift basis.

11 KSK Energy Ventures Private Limited

Project financing and execution in the energy sector in India

KSK Energy, a premier project development & asset management company, was promoted by K&S Consulting Group Pvt Ltd in 2001 and structured as a holding company for their energy sector initiatives in the country.

KSK Energy Ventures, under the special incentive package scheme for semiconductors, is planning to establish an integrated solar panel plant based on thin film and CulnSe2/CdTe technology with an initial capacity of 50MW. It would be increased to 700 MW over 10 years with a total investment of Rs. 3,211 crore.

12 Velankani Renewable Energy Pvt Ltd

Hospitality, SEZ’s, IT Parks, Electronic Manufacturing

Velankani Information Systems Private Limited (VISPL), incorporated in 1999, is in the business of infrastructure development, and setting up and management of SEZs/technology parks for the manufacturing and technology industry. VREP is part of the Velankani Group’s diversification plans to get into renewable energy equipment manufacturing. They are currently preparing their business plan and proposal for the entire solar PV value chain (polysilicon to modules) to be submitted to GoI to avail benefits under the Semiconductor Policy.

VREP is planning a 5,000-6,000 MT (annual capacity) polysilicon manufacturing facility at the SEZ at Vishakapatnam. This polysilicon would be used for subsequent parts of the value chain to produce 600-700 MWp of mono-crystalline and polycrystalline solar PV



Focus area in solar


modules. The approximate consumption of polysilicon to produce solar panels is around 9 grams per Wp.

13 Solar Semiconductors

Solar cells and modules

Solar Semiconductors initiated operations in 2006 and is in the business of designing, developing, manufacturing and marketing a variety of solar PV products and solutions. Solar Semiconductor’s plant near Hyderabad is in the process of building another manufacturing facility in Fab City, an SEZ near Hyderabad, for its future expansion. The present size of the Solar Semiconductors’ plant is 50 MW per annum. Solar Semiconductor has also put in an application under the Semiconductor Policy for setting up a plant with an investment of Rs 11,821 crore.

14 Lanco Infratech (P) Limited

From polysilicon to solar modules

Lanco Infratech is preparing to set up an end-to-end solar manufacturing facility in Chennai with an investment of around Rs. 12,938 crore. It has already submitted an application under the Semiconductor Policy for capital subsidy. Lanco is planning to invest both in conventional crystalline and the thin film technology. But exact details on the capacity of various end products, like polysilicon, cells and modules, are still not clear. Lanco is planning to set up this facility in Chennai as it foresees huge raw material movements, like modules, for export.

Source: Company websites and press releases

________________________________________________________________________ Study on Solar Photovoltaic Industry: ISA-NMCC 2008 39

A2: TECHNOLOGY STATUS AND FUTURE TRENDS

Introduction

2.1 The time is right for the solar PV industry in India to strengthen its position in manufacturing. Consciousness is growing in the country on the need to shift dependence from fossil fuels to renewable energy sources. The country has several inherent strengths to develop a solar PV manufacturing base. To achieve this, industry players have to introduce better technology to mitigate the high manufacturing costs. This chapter delves into the technological advancements the industry has made around the world, and the future trends.

Background

2.2 A solar cell, or more appropriately a photovoltaic (PV) cell, is a device that converts solar energy into electricity using the photovoltaic effect. Cells assembled on a common platform and connected in a series form a solar module and these modules are commonly used by the end-user to generate electricity from sunlight.

The physics of photo-electric effect

2.3 In a solar cell or a photovoltaic cell, the photons in the sunlight strike the solar panel and are absorbed by semiconductor materials (e.g. silicon). When a photon hits a piece of silicon, one of the following three scenarios happen:

(i) the photons pass straight through

(ii) the photons get reflected off the surface

(iii) the photons get absorbed by the silicon.

2.4 If the photon that gets absorbed by the silicon has energy levels higher than the silicon band gap value, the photons knock off the electrons in the valence band into the conduction band, allowing them to flow through the material to produce electricity.

2.5 This action also creates complementary positive charges called holes which flow in the opposite direction to that of the electrons in a cell. This hole allows the electrons of neighbouring atoms to move into the gap created in its orbit, creating another hole and in this manner the holes move across the lattice but flow in the opposite direction.

2.6 One of the conditions necessary for the photo-electric effect to generate free electrons is that the photons need to have higher energy levels than the band gap of the electrons in the silicon. The makeup of solar radiation reaching the earth (solar frequency spectrum) is composed mostly of photons with


energies greater than the band gap of silicon, which in turn, can be absorbed by the solar cell and produce electricity. However, a significant amount of energy that is the difference between these photons and the silicon band gap is converted into heat (via lattice vibrations called phonons) rather than usable electrical energy.

Energy conversion efficiency of solar cells

2.7 The solar cell's energy conversion efficiency is the percentage of power collected and converted by the cell when it is connected to an electrical circuit. The efficiency is the ratio of the maximum power output at the junction by the input light irradiance and the surface area of the solar cell (Ac in m²) under standard testing conditions.

2.8 Most solar cells have efficiencies between 8 and 24% and bear losses due to reflection, heat generation, recombination and resistive electrical loss. The overall efficiency is the product of each of these individual losses.

Thermodynamic efficiency limit

2.9 Solar cells operate as quantum energy conversion devices and therefore cannot convert photons with energy levels below the band gap of the absorber material. This energy is instead converted into heat or reflected. For photons with energy levels above the band gap energy requirements, only a fraction of the energy above the band gap is converted to power. To overcome these losses, solar cells with multiple band gap absorber materials have been designed which are more efficient in converting a higher frequency spectrum using multiple band gaps.

Quantum efficiency

2.10 When the electron-hole pairs travel to the surface of the solar cell and contribute to the current produced by the cell, this pair is said to have been collected. However, some of these carriers do not reach the cell surface but might lose energy and get bound to an atom in the lattice structure leading to the phenomenon of recombination. Thus quantum efficiency refers to the percentage of photons that are converted to electric current against the total photons that generate an electron hole pair.

Development of solar cell technologies

A historical perspective

2.11 The photovoltaic effect was first discovered by the French physicist A. E. Becquerel in 1839 but it was not until 1883 that the first solar cell was built by Charles Fritts. The first solar cell had a coating of gold on the semiconductor selenium and an efficiency of only 1%.


2.12 In 1954, scientists at Bell Laboratories, while experimenting with semiconductors, accidentally stumbled upon the fact that silicon doped with certain impurities was photo-sensitive and lead to the development of the first practical solar cell with an energy conversion efficiency of 6%.

2.13 Initially solar cells found applications in spacecrafts and the US satellite Vanguard 1 was the first one to use solar panels in 1958. Solar cells became popular for these applications as they were a perennial source of energy and had low weight which allowed geostationary communications satellites to be launched. These developments lead to the funding of solar PV research by governments.

2.14 A team lead by Zhores Alferov in the USSR developed the first GaAs hetero-structure solar cells in 1970 but large-scale production of these cells was limited by the lack of a mass production processes till the early 1980s when the Metal Organic Chemical Vapour Deposition (MOCVD, or OMCVD) production equipment was developed. Applied Solar Energy Corporation (ASEC) was the first company to manufacture in large quantities single-junction GaAs solar cells in 1988 (17% efficiency). ASEC accidentally produced the first dual junction cell in 1989, while changing from GaAs on GaAs substrates to GaAs on Germanium (Ge) substrates.

2.15 Triple junction solar cells were developed in 2000 with efficiencies of approximately 24%, which increased to 26% in 2002, 28% in 2005 and till 2007 had reached 30%. In 2007, two companies, Emcore Photovoltaics and Spectrolab, attained commercial efficiency of 38%.

Multi-junction photovoltaic cells Multiple Junction cells are a sub-class of solar PV cells using multiple layers of thin films for higher efficiency. As mentioned earlier, one of the factors limiting the efficiency of solar PV cells is its ability of absorbing radiation only within a certain band gap/spectrum of the electromagnetic radiation or, in other words, absorbs light of a given characteristic color. In case of multiple junction cells, such as triple junction cells, multiple layers of semiconductor material are laid out one on top of the other. Due to the presence of multiple layers with different spectrum absorption characteristics, a larger spectrum of radiation gets absorbed, this, in turn, raises the efficiency of the whole cell.


Evolution of solar cells

2.16 Based on the stage of development and technology, solar cells have been classified into three basic technology types. The basic difference in all three is the stage of development and their positioning vis-à-vis commercial production. The interesting thing is that today concurrent research is being carried out in all three types. At present crystalline silicon dominates the market with an overall share of close to 90% of the 2007 production, followed by a 10% share for thin films. New and emerging technologies are still at the research stage.

2.17 Figure 17 highlights the chain for the assembly of a module under the two main commercially available technologies, i.e. crystalline silicon and thin film.

Figure 17: Solar cell types and inputs for steps for module production

Source: ISA - NMCC 2008

Crystalline silicon based technologies

2.18 Crystalline silicon (c-Si) solar cells basically have a large surface area, are of a high quality and are single junction devices. However, c-Si technologies require high inputs during manufacturing (i.e. energy and labour) which have over the years limited their potential for significant cost reduction.

2.19 The main advantages of c-Si lies in their being tried and tested, having current industry leadership and thus wide scale familiarity in the user groups as well as among producers. At the same time, most applications which have been designed for solar PV use have been designed on the basis of silicon based PV characteristics. c-Si technologies are also ideal for locations with space constraints due to higher efficiency than thin films.

2.20 The major disadvantage of c-Si solar PV technology lies in its heavy reliability on pure solar grade silicon, which has had a limited supply base. As a result, c-Si has not been able to address the demand from the solar PV industry effectively. The main players in this category are BP, Shell, Kyocera, Advent Solar and RWE Schott.

Crystalline silicon

Wafers & ingots

Cells

Modules

Non-silicon feedstock

Thin film process


Thin film based technologies

2.21 Thin film technologies have tried to address two crucial shortcomings of the c-Si based solar PV technologies, i.e. a reduction in the cost of production through lower material usage and energy requirements. Thin films use manufacturing techniques, such as vapour deposition and electroplating, which reduce high temperature processing and thus have lower energy requirements for manufacturing. At the same time, since only a thin film of the semiconductor material is applied on a substrate, the cost of materials (per watt peak) in thin films is almost half of that in c-Si.

2.22 Thin films are evolving and hold much higher promises of cost reduction than c-Si. In 2007, thin films had an approximate market share of 10% but this is expected to increase in the coming few years.

2.23 The main materials that have been used for creating thin film based solar cells are cadmium telluride (CdTe), Copper Indium Gallium Selenide (CIGS), amorphous silicon and micro-amorphous silicon. These materials are applied in a thin film to a supporting substrate, such as glass or ceramics which, in turn, reduces material inputs and associated costs. These technologies hold promises for future cost reduction through higher conversion efficiencies and significantly reduced production costs.

2.24 Thin films are expected to take up 30% of the market share by 2010 and most new manufacturers are looking towards thin film technologies for future investments. According to NREL reports, thin film production would touch 3,700 MW by 2010, with the USA having an installed capacity of 1,300 MW, Japan second with 1,100 MW followed by Europe (800 MW) and Asia (500 MW). However, considering that producers are upscaling capacity in the markets of China, Taiwan and India, thin film capacity in Asia would eventually be much higher.

2.25 Companies that have invested in thin films, like First Solar, produced 200 MW of CdTe based solar cells for the first time in 2007. It catapulted the company into the league of the five largest producers of solar cells in 2007 and the first ever thin film player to reach the top 10 from production of thin film solar PV cells alone. Nano-solar has plans of scaling up commercial production of its CIGS based thin film cells to 430 MW in 2008.

2.26 Thin films as a technology has a number of advantages over the c-Si technologies, like flexibility and light weight, variety of processing methods, high theoretical efficiencies, light weight modules, lower production costs and the ability to produce light under low/diffused light conditions. Their main constraints are lower achieved efficiencies and evolving production practices.


New and emerging technologies

2.27 New and emerging technologies are being designed to overcome shortcomings, such as poor electrical performance of thin films, while maintaining low production costs. Researchers are now targeting conversion efficiencies between 30% and 60%, while retaining similar low cost materials and manufacturing techniques. Some of the measures that are being adopted for achieving these high efficiencies are: a) multi-junction photovoltaic cells; b) modification of incident spectrum (concentration) and c) use of excess thermal generation to enhance voltages or carrier collection.

Solar cell manufacturing

Crystalline silicon based technologies

2.28 Three key elements in a solar cell form the basis of their manufacturing technology. The first is the semiconductor, which absorbs light and converts it into electron-hole pairs. The second is the semiconductor junction, which separates the photo-generated carriers (electrons and holes), and the third is the contacts on the front and back of the cell that allow the current to flow to the external circuit.

2.29 Historically, crystalline silicon (c-Si) has been used as the light-absorbing semiconductor in most solar cells, though it is a relatively poor absorber of light and requires considerable thickness (several hundred microns) of the material. Nevertheless, it has proved convenient because it yields stable solar cells with good efficiencies (11-16%, half to two-thirds of the theoretical maximum) and uses process technology developed from the huge knowledge base of the microelectronics industry.

2.30 Two types of crystalline silicon are used in the industry. The first is mono-crystalline, produced by slicing wafers (up to 150-156 mm diameter and 200-300 microns thick) from a high-purity single crystal boule. The second is multi-crystalline silicon, made by sawing a cast block of silicon first into bars and then wafers. The main trend in crystalline silicon cell manufacture is toward multi-crystalline technology.

2.31 Mono-crystalline silicon: The main technique for producing single-crystal silicon is the Czochralski (CZ) method. High-purity polysilicon is melted in a quartz crucible. A single crystal silicon seed is dipped into this molten mass of polysilicon. As the seed is pulled slowly from the melt, a single crystal ingot is formed. The ingots are then sawed into thin wafers about 200-300 micrometers thick (1 micrometre = 1/1,000,000 metre). The thin wafers are then polished, doped, coated, interconnected and assembled into modules and arrays. The conversion efficiency for commercial single crystal silicon modules ranges between 15% and 20%. Not only are they energy efficient,


but single silicon modules are also highly reliable for outdoor power applications.

2.32 About half of the manufacturing cost comes from wafering, a time-consuming and costly batch process in which ingots are cut into thin wafers with a thickness no less than 200 micrometres. If the wafers are too thin, the entire wafer will break in wafering and subsequent processing. Due to this thickness requirement, a PV cell requires a significant amount of raw silicon. Half of this expensive material is lost as sawdust in wafering.

2.33 Multi-crystalline/polycrystalline silicon: Poly-crystalline solar cells use wafers sliced from ingots cast using silicon melted in a crucible. These ingots are not formed from a single crystal, unlike mono-crystalline silicon which is slowly built up by revolving a seed crystal. The ingots can also be cast in a square shape, instead of the cylinders of poly-crystalline silicon.

2.34 Consisting of small grains of single crystal silicon, multi-crystalline PV cells are less energy efficient than single crystalline silicon PV cells. The grain boundaries in multi-crystalline silicon hinder the flow of electrons and reduce the power output of the cell. The energy conversion efficiency for a commercial module made of multi-crystalline silicon ranges from 10-14%.

2.35 A common approach to produce multi-crystalline silicon PV cells is to slice thin wafers from blocks of cast multi-crystalline silicon. An emerging technology which has seen significant development in multi-crystalline arena is that of string ribbon silicon technology in which silicon is grown directly as thin ribbons or sheets with the approach thickness for making PV cells. Since no sawing is needed, the manufacturing cost is lower. The most commercially developed ribbon growth approach is EFG (edge-defined film-fed growth).

2.36 String ribbon silicon: String ribbon photo voltaic use the same molten silicon, but are produced by slowly drawing a thin strip of crystalline silicon out of molten silicon rather than casting the silicon in a block. These strips of photovoltaic material are then assembled in a panel with metal conductor strips connecting each strip to form a current. String ribbon silicon is less costly than cast polysilicon panels because it eliminates the need to saw wafers off a block of silicon. Some string ribbon technologies also have higher efficiency levels than cast polysilicon.

2.37 Compared to single crystalline silicon, multi-crystalline silicon material is stronger and can be cut into one-third the thickness of single crystal material. It also has slightly lower wafer cost and less strict growth requirements. However, their lower manufacturing cost is offset by the lower cell efficiency.


c-Si manufacturing

2.38 Figure 18 provides an overview of the manufacture of c-Si based solar PV cells. The steps followed under the production process have been described below:

Figure 18: c-Si production process

Source: Tokuyama

Creation of solar grade silicon

2.39 The process of creating a silicon wafer begins with the purification of the starting material, raw silicon dioxide (silica) or quartz. Due to the introduction of impurities in the later stages of wafer preparation, the refinement of Solar Grade Silicon (SGS) from natural silicon dioxide requires the number of impurities to be reduced to less than one part per billion atoms (ppba). This refinement process is a reduction of over eight orders of magnitude and it broadly involves two activities: chemical reduction and purification.

Creation of multi and mono-silicon


2.40 SGS obtained as an end product is chunky and needs to be shaped into a form that can be sliced. The shape can be an ingot, block, ribbon or sheet. The product can also be mono-crystalline (single crystal) or multi-crystalline (polycrystalline) based on the structure of the crystal. In poly-crystalline, the orientation of the polysilicon SGS material is not aligned, whereas in mono-crystalline polysilicon material is realigned so that the crystalline structure is uniform.

2.41 Multi-crystalline polysilicon: As discussed above, multi-crystalline silicon contains a plurality of crystal structures. This characteristic makes them slightly less efficient as a photovoltaic cell. However, in most applications, the lower manufacturing costs of poly-crystalline silicon modules more than offset the lower efficiency and, thus, provide the highest economic returns. Crystalline silicon ingots with a poly-crystalline structure are produced by the Bridgman-Stockbarger crystal growth process, also called the "directional solidification" process.

2.42 In the directional solidification process, a rectangular flat bottom container (also called as ‘mold’) will be filled with polysilicon and subsequently melted under an inert atmosphere. When the polysilicon contents of the mold, called the ‘charge’, have thoroughly melted to a desired state of a molten silicon mass, the bottom of the mould (and thus the charge contained inside) is allowed to cool in a controlled manner. As this cooling occurs, one or more crystals nucleate and grow upward in the charge, thereby pushing impurities out of the expanding crystal microstructure. This slow cooling process of the entire molten silicon mass allows the crystals to grow to a large size.

2.43 Mono-crystalline polysilicon: Once the raw silica material has been refined into SGS, the crystalline structure of the SGS has to be refined into single crystal silicon (SCS). This requires that the orientation of the polysilicon SGS material be realigned so that the crystalline structure is uniform. There are currently two popular methods for converting SGS into SCS, the Czochralski (CZ) Technique, and the Float Zone (FZ) Technique, both of which utilise a ‘crystal-pulling’ device to grow the final crystal. Typically, a dopant is also introduced during this step to modify the electrical characteristics of the silicon material.

2.44 For the Czochralski Technique, a crucible, (made out of heat resistant quartz or graphite), is filled with SGS material and housed in an airtight chamber. Heat is then applied to the crucible through r-f induction and the ambient air is removed from the chamber and replaced with an inert gas (typically argon). During this initial melting phase, a dopant impurity is added to the crucible so that the final ‘pulled’ crystal will have the necessary electrical characteristics. Once the SGS material is melted, a seed crystal, composed of appropriately oriented SGS material, is attached to a removable shaft and inserted into the top of the molten SGS. By slowly turning the seed crystal (at


about 60 rpm) and raising it out of the molten silicon (at about 1 per hour), a large single crystal is grown that exhibits the same crystalline structure as the original seed crystal. The CZ technique is the most efficient, economical, tested and commercially available process.

Wafer slicing

2.45 Ingots of silicon are sliced into wafers prior to cell manufacturing. The wafering process wastes a significant amount of silicon. Wire saws are used to slice the wafers from ingots and blocks. Wafers would be in the range of 200–250 µm thickness. The wires destroy 220-230 µm of silicon as they slice through the block. Wire saw performance is improving, and new techniques are under investigation to reduce waste. Lasers are an option, though there the heat from the laser slicing through the ingot causes the outer silicon to degrade.

2.46 Mounting of ingots: Before the ingot can be sliced into individual wafers, it must first be mounted on a sawing machine in the correct orientation. This step is critical for the sawing process since slicing along an incorrect axis could damage the final wafer.

2.47 Wire sawing: The production of wafers from silicon ingots has been done historically with the use of inner diameter (ID) blade saws in manufacturing. A shift to the use of wire saws as a cutting tool has dramatically increased the productivity of the slicing operations. This is done by reducing both the cutting losses (kerf losses) and the amount of damaged silicon left after cutting. The wire slicing leaves a much smoother surface, with less saw damage to the wafers. This will result in nearly doubling the amount of wafers produced per length of ingot supplied.

Cell processing

2.48 Silicon wafers are processed into solar cells by diffusing a dopant material into the surface of the wafer, applying an anti-reflective coating, and printing on contact strips from which the power produced by the cells is gathered. The cell production process requires high-speed transfer of cells from one process step to another. The automated handling and the increase of cell size has improved productivity per watt by nearly a factor of two. Effective labour utilisation is an important efficiency parameter in manufacturing plants and in optimising costs. Generally, 100 watts of cells produced by a semi-automated system compares to 60 watts of cells produced per labour hour by manual processing.

2.49 Chemical etching: Cutting silicon into wafers leaves the surface covered with cutting slurry and the surface is damaged due to the action of the saw. Wafers are cleaned in a hot solution of sodium hydroxide that removes the surface contamination and the first 10 µm of damaged silicon. The wafers are then


textured in a more dilute solution of sodium hydroxide with isopropanol as a wetting agent.

2.50 Phosphorus diffusion: This is achieved by spraying or spinning a compound containing phosphorus onto the cell surface, followed by heating at high temperature to allow phosphorus dopant atoms to seep into the cell surface by thermal diffusion. Although the diffusion is required over only one surface of the wafer and processing techniques are generally chosen to encourage such a result, phosphorus invariably seeps into both the wafer surfaces to some extent.

2.51 Cleaning etch: The etching process is used immediately after phosphorous diffusion to etch the unwanted material from the wafer. There are two main methods of etching: wet etching and dry etching. Wet etching is done with the use of chemicals. A batch of wafers is dipped into a highly concentrated pool of acid and the exposed areas of the wafer are etched away. Wet etching is good in that it is fairly cheap and capable of processing many wafers quickly.

2.52 Oxidation: Oxidation is done in a furnace with a flow of gas running over the wafers. Oxidation is very similar to diffusion, except that we use oxygen.

2.53 Plasma etch: To break the connection between the phosphorus diffused into front and rear surfaces, an ‘edge junction isolation’ step is required to remove the thin phosphorus layer around the edge of the wafer. This isolation is often achieved by ‘coin stacking’ the wafers so that only their edges are exposed and then placing the stack in a plasma etcher to remove a small section of silicon from the wafer edge, hence breaking the conductive link between front and rear surfaces.

2.54 Anti-reflection coating: An anti-reflection of silicon nitride is deposited using Chemical Vapour Deposition process (CVD). Precursor gases of silane (SiH4) and ammonia (NH3) are fed into a chamber and they break down due to temperature or a plasma enhancement (PECVD).

2.55 Fire paste: Silver paste consisting of a suspension of fine particles of silver and glass fit in an organic medium together with appropriate binders is squeezed through a patterned screening mesh onto the cell surface. After application, the paste is dried at a low temperature and then fired at a higher temperature to drive off the remaining in promoting adhesion to the silicon substrate. Pastes are doped with phosphorus to help prevent the screened contact from penetrating the thin phosphorus skin that it is intended to contact.

2.56 Cell test: The cells are then ready for testing under a solar simulator. Cells are usually graded based on short-circuit current or current at a nominal operating voltage, e.g., 450 mV. Generally, cells are sorted into 5% performance bins. The sorting is required to reduce the amount of mismatch


within the competed module. To a large extent, the output current of the module is determined by that of the worst cell in the module, resulting in large power losses within mismatched modules. Even worse, low output cells can become reverse biased under some modes of module operation and destroy the module by localised over-heating.

2.57 Process yield of 93% has been estimated for conversion of wafers to cells, which is normally offered for a semi-automated set-up by equipment providers.

Module assembly

2.58 Module assembly is the connection of cells into a circuit, the lamination of this circuit behind a piece of tempered glass, then the finishing of this laminate into a module with external electrical connectors. Larger modules have increased the amount of energy delivered per solar module. Larger units have an increased effect on the efficiency of production. Larger modules producing more watts per unit have lowered labour intensive processing, such as module handling and junction box installation. The main processes under this operation have been highlighted below.

2.59 Stringing: Stringing is a process in which solar cells are stringed together in a series to produce electricity. It is an automated production process which interconnects solar cells by soldering flat metal leads, or tabs, to cell contacts. An automated production machine would be used to interconnect solar cells by soldering flat metal leads or tabs to cell contacts. The machine processes solar cells at a throughput of up to 600 cells per hour, resulting in substantial cost savings in high volume production through improved yield and reduced labour.

2.60 Solar cells are unloaded from stacks and edge-aligned with a mechanical aligner. Tab material is fed from reels, coated with flux, cut to length, and provided with a stress-relief bend. Tabs and cells are aligned for soldering. High-intensity lamps in the solder head assembly provide radiant thermal energy to the cell and tabs. Both front and back cell contacts are soldered in a single heating step.

2.61 A variety of solar cell sizes and shapes can be processed. The number of cells per string, the number of strings per module, and the string orientation in the module are software programmable. Each completed string is automatically placed in position for module assembly.

2.62 Circuit assembly: The machine interconnects solar cells by soldering flat metal leads or tabs to cell contacts. Solar cells are unloaded from stacks and edge-aligned with a mechanical aligner. Tab material is fed from reels, coated with flux, cut to length, and provided with a stress-relief bend. Tabs and cells are aligned for soldering. High-intensity lamps in the solder head assembly provide radiant thermal energy to the cell and tabs. Both front and


back cell contacts are soldered in a single heating step. A variety of solar cell sizes and shapes can be processed.

2.63 Laminate assembly & lamination: Laminating machines bonds multiple layers of materials together with thermoplastic or thermosetting films, such as Ethylene Vinyl Acetate (EVA) polymer. The processing chamber of each laminator has temperature, vacuum and atmospheric pressure capabilities, which are independently controlled to provide optimum processing conditions for particular materials and configurations, including laminating glass superstrate, double glass, substrate, or flexible modules.

2.64 Trimming: The process removes excess encapsulant and back sheet material from the edges of photovoltaic modules after lamination.

2.65 Framing: The process dispenses edge sealant and installs frames on module laminates. A hot melt sealant is injected into each frame section to provide a cushion and adhere the sections to the laminate. Frame sections are fastened together with either corner keys or screws, as determined by the frame design. A conveyor system and aligner provide automated laminate loading, alignment and unloading.

2.66 Testing: Photovoltaic module testing systems feature light sources that closely match the solar spectrum, while avoiding the excessive solar cell heating caused by continuous sources.

System integration

2.67 Although the module is a major component of a solar PV system, a number of other components are also required for the system to become operational. These are commonly known as Balance of System and consist of components such as the inverter (or charge controller for DC feed), batteries, civil structures, transformers (for grid connected systems), wiring, etc. The layout of the whole process has been highlighted in figure 19.


Figure 19: An overview of the steps required to produce a c-Si based solar PV system

Silicon Feedstock (Basic Raw Material)

Wafer

Cells

Modules

BoS (Balance of System) – To Equip and Install

Inverter

Battery

Mount Structure

Grid Interconnection Equipment

Installation Process

Inverter

Battery

Mount Structure



Completed Solar PV System

Inverter

Battery

Mount Structure



Inverter

Battery

Mount Structure



Laminator

Source: RBS Capital Markets Research

Thin film technologies

2.68 Thin film modules are created by coating entire sheets of glass or steel (called substrate) with thin layers of semiconductor materials rather than growing, slicing and treating a crystalline ingot. The process of depositing thin layers of different materials on a substrate in very thin layers is a simplified and efficient system from the manufacturing perspective.

2.69 Thin films are manufactured using large area deposition techniques and process technologies which have the potential for high volume, low cost manufacturing. A thin film solar cell manufacturing using a continuous in-line process with a fully integrated supply chain has the ability to produce cost-effective cells required for competing with fossil fuels.

2.70 Thin films require smaller amounts of semiconductor material (1 µm) and lower energy inputs than crystalline silicon, which results in a cost structure roughly half that of wafer-based silicon.


2.71 Use of techniques, such as vapour deposition and electroplating, have also significantly cut down on the high temperature processing and brought the energy pay-back time of thin film modules down to around 1.5 years in central Europe and 1 year in southern Europe.

2.72 Keeping in mind the speed at which the thin film technologies are developing, thin films are expected to touch or stay below the barrier of US$ 1/W by the year 2012. Already companies like First Solar with their upcoming GW sized plants are producing in the US$ 1/W if only variable costs are taken into account.

First Solar – leveraging scale First Solar is a global leader in the manufacture of CdTe based thin film modules. First Solar has been able to leverage economies-of-scale, which in turn, has lead to a drastic drop in manufacturing costs from US$ 2.94/W (6 MW) in 2004 to US$ 1.25/W (90 MW) in 2007. This is expected to go down to US$ 0.70/W due to improvement in productivity, module efficiency and yield by 2012, thus making it potentially price competitive with grid-parity electricity.

(Source: Critical issues for commercialization of thin-film PV technologies; Solid State

Technology; Date: February, 2008)

2.73 There are three major inorganic thin film technologies, amorphous/microcrystalline silicon (TFSi - 13% efficiency), the polycrystalline semiconductors CdTe (16.5% efficiency) and CIGS (an abbreviation of Cu(In,Ga)(S,Se)2 (19.5% efficiency).

2.74 CdTe and CIGS thin film technologies have successfully transitioned from the laboratory to the marketplace. CIGS solar cells and modules have achieved efficiencies of 19.5% and 13%, respectively, and CdTe cells and modules have reached efficiencies of 16.5% and 10.2%, respectively. Yield on the production floor has surpassed 85% and is likely to increase in the future as well (Source: Rommel Noufi and Ken Zweibel, National Renewable

Energy Laboratory).

2.75 The main areas where advances have taken place in thin films is in materials delivery and film growth, control of film properties at the micro and nano levels, understanding of device physics, improved understanding of mechanisms to improve properties of individual layers, intrinsic device stability and prototype module reliability (Source: Rommel Noufi and Ken

Zweibel, National Renewable Energy Laboratory).

2.76 All three thin films types share a number of common features, like the requirement of a small amount of semiconductor material (film thickness is typically 1 µm) and long-term stability under outdoor conditions.


2.77 All three thin film PV modules have broadly similar structures and so the key steps in their production resemble one another. The production of CIGS and CdTe modules has been highlighted in figures 4 and 5 along with the major steps.

Copper Indium Gallium Selenide (CIGS) thin film

2.78 The process for the production of a CIGS solar PV cell and its cross-section has been depicted graphically in Figure 20.

2.79 The process consists of sputtering back and front contact as well as the intrinsic layer, chemical bathing, laser and mechanical scribing and diffusion.

Figure 20: The CIGS manufacturing process and cross-section of a CIGS cell


Thin Cadmium Telluride Films (CdTe)

2.80 In case of CdTe, the process can be subdivided into three smaller sub-processes deposition, cell definition, assembly and testing. These sub-processes have been depicted graphically in Figure 21

2.81 In the deposition stage, the glass substrate is first prepared, followed by the deposition of the active semiconductor material and finally re-crystallisation.


2.82 This is followed by laser scribing (front and back contact) and cell insulation and isolation (using laser scribing), deposition of inner film layer, metallisation and post heat treatment during the cell definition stage.

2.83 In the last stage, i.e. assembly & testing, besides running tests, the modules are laminated and the electrical assembly completed.

Figure 21: The CdTe manufacturing process and cross-section of a CdTe cell

Prepare Glass Substrate

Laser Scribe Cell Isolation

Deposit Semiconductor

Layers

Re-Crystallisation

Laser Scribe Front Contact

Cell Insulation

Deposit Inner Film Layer

Metalisation

Laser Scribe Back Contact

Glass

CSnO2Cd2SnO4 (0.2 – 0.5 A)

CdS (600 – 2000 A)

CdTe (2.8 µm)

C Paste with Cu or Metals

CdTe CellCross SectionManufacturing

Process

Post Heat Treatment

Module Bussing

Laminate

Electrical Lead Assembly

De

po

sitio

n S

tag

e

Ce

ll Defin

ition

Sta

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As

se

mb

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nd

Te

stin

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tag

e

Prepare Glass Substrate

Laser Scribe Cell Isolation

Deposit Semiconductor

Layers

Re-Crystallisation

Laser Scribe Front Contact

Cell Insulation

Deposit Inner Film Layer

Metalisation

Laser Scribe Back Contact

Glass

CSnO2Cd2SnO4 (0.2 – 0.5 A)

CdS (600 – 2000 A)

CdTe (2.8 µm)


Glass

CSnO2Cd2SnO4 (0.2 – 0.5 A)

CdS (600 – 2000 A)

CdTe (2.8 µm)


CdTe CellCross SectionManufacturing

Process

Post Heat Treatment

Module Bussing

Laminate

Electrical Lead Assembly

De

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sitio

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tag

e

Ce

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ition

Sta

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tag

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Uni-Solar - roll-to-roll solar cell deposition process for a-Si: Uni-Solar has developed and patented a continuous multi-junction, large area deposition production process for producing amorphous silicon thin film solar cells and modules. This process uses vapor deposited a-Si alloy materials that absorb light more efficiently, thereby reducing the cost of the material. Uni-Solar uses a flexible, stainless steel substrate and polymer-based encapsulants that produces light weight and flexible modules. This process also allows for the continuous deposition of layers with varying light absorption properties, one on top of another. To further reduce the manufacturing cost of PV modules, Uni-Solar has developed a continuous roll-to-roll solar cell deposition process which uses a roll of flexible stainless steel — 1/2 mile long and 14 inches wide — to sequentially deposit nine thin film layers of a-Si alloy making a continuous, stacked three-cell structure. Uni-Solar’s plant has a production capacity of 28MW, is fully automated and allows simultaneous processing of six rolls of stainless steel — each 1-1/2 miles long — during deposition. Source: Uni-Solars Website


Main challenges for CdTe and CIGS thin filmsi

2.84 Like all solar PV technologies, CIGS and CdTe also suffer from a number of challenges which must be overcome before they can effectively contribute to making an appreciable impact on the energy mix in the future.

2.85 Science and engineering support: One of the biggest challenges for these two technologies is to enhance the knowledge base so as to increase throughput and yield, enhance reliability and reproducibility which in turn, would lead to cheaper and better performance. Some of the challenges that science and technology have to provide are:

(i) deriving measurable material properties which can accurately predict device and module performance

(ii) understanding of the relationship between film growth and material delivery

(iii) improving industrial processes for higher throughput and yield

2.86 Long-term stability: Although both CIGS and CdTe have shown long-term stability, some degradation has been observed. The main challenge is to have a better understanding of degradation and identify both internal and external degradation initiators.

2.87 Thinner CIGS and CdTe absorbers: For CIGS and CdTe, the availability and price of In and Te is a concern and is likely to become a bigger concern in the future when the production capacity level reaches tens of giga-watts. This concern is mainly due to the presence of competing requirements from other In and Te users, such as flat panel display manufacturers. Reducing thickness of cells would thus improve access to raw material and keep prices in check. Reducing absorber thickness will also mean lower material cost and higher throughput, especially for CIGS.

2.88 Need for high-throughput, low-cost processes for CIGS: At present, CIGS cells are produced by evaporation of the elements in vacuum and by sputtering of the metals, followed by selenisation with H2Se. These two processes have a relatively slow throughput, poor material utilization and require relatively high vacuum. There is a need to develop a lower cost process with higher deposition rates, higher material utilisation and using simpler equipment capable of processing very large substrates. One such example is a process that uses nano components to make printable precursors that are crystallised into CIGS.


Solar PV technologies – present trends, challenges, future roadmap

2.89 Table 9 highlights the current conversion efficiency as well as cost of manufacture for the two main technology types (c-Si and thin films) in commercial production today. It is noteworthy that although the potential for cost reduction is the maximum for crystalline silicon technologies, the target of US$ 1/Wp by 2011 seems to be possible only for thin films.

Table 9 - Current conversion efficiencies and cost of manufacturing for solar PV technologies

S. No

Technology type Current

conversion efficiency (%)

Cost of manufacture (in

US$ per W)

Mono-crystalline 17-23 2.4 1

Crystalline silicon Poly-crystalline 15-18 2.15

Amorphous silicon 6 1.35

Tandem micro-crystalline 8.5 1.35

CdTe 11 1.15 2 Thin films

CIGS 12 1.75

Source: ISA-NMCC 2008 research from publicly available market data

2.90 The following sections of the chapter deal with each of the three technology types of solar PV technology, including the present trends, challenges and future roadmap for cost reduction and efficiency improvement.

Silicon crystalline

2.91 Wafer-based crystalline silicon solar cells have dominated the solar PV industry since the advent of the solar era. Crystalline silicon is widely available, reliable and well understood which has over the years provided a steep learning curve improvement in conversion efficiency and new applications, and system integration and manufacturing.

2.92 In the previous decade, the solar PV industry grew by almost 50% annually. Crystalline silicon has had about 90% of the total volume in that market. The industry has been successful in increasing productivity and efficiency across the value chain.


Progress over the past decade

2.93 Over the past decade, three main routes have been used for cost saving - reduction in material consumption (reduction in wafer thickness), increase in device efficiency and advanced high-throughput manufacturing. Each of these has contributed significantly to enhancing the viability of solar in world energy markets.

2.94 Wafer thickness and wafer area: In c-Si, wafer thickness has decreased from 400 µm in 1990 to 200 µm in 2006, and wafer area has increased from 100 cm2 to 240 cm2 in the same period (Source: A Strategic Research Agenda

for Photovoltaic Solar Energy Technology; European Union). The major area where improvements have taken place is slicing, i.e. the ability to cut the ingots into thinner slices, which has reduced silicon consumption and improved efficiency.

2.95 As mentioned in the chapter on manufacturing and supply chain, the past few years have seen a huge demand supply gap in the availability of polysilicon feedstock. As a result, polysilicon prices have gone up from an average US$ 20/kg in 2001 to over US$ 50/kg in 2006. However, this has also been a harbinger of innovation in wafer production and cell manufacturing. As a result, silicon usage is down to 10 g/Wp from typically 13 g/Wp a few years ago. (Source: A Strategic Research Agenda for Photovoltaic Solar Energy

Technology; European Union). EU planners expect polysilicon consumption to come down to 2 g/Wp in the long-term.

2.96 Efficiency improvements: For CSi, module efficiency has gone up from 10% in 1990 to typically >13 % today (Source: EU Paper on SRA for Solar PV), with the best performers averaging around 17% and above. Cell efficiency has also been on the rise and poly-crystalline cells now have an efficiency of 18% and mono-crystalline almost 23%.

2.97 Economies of scale and size of manufacturing units: There has been an advent of larger manufacturing facilities and new production units in the GWp range are being commissioned. Scale has a huge impact in reducing prices of solar PV. Large plants (close to 0.25 to 1 GW range) with higher automation and improved process control have increased efficiency and reduced costs. Cost reduction has also taken place due to high volume purchase of raw materials.

2.98 Reduction in capital costs for manufacture of solar cells: Capital costs still constitute a substantial component of the cost of production. With manufacturing equipment standardisation and the advent of independent equipment providers, like Applied Materials (AMAT), ULVAC Technologies and Orelikon, it is expected that production cost will reduce from US$ 2.0-2.5/Wp or more in current factories to about US$ 1.5 – 2.0/Wp in the medium-term.


Future projections for c-Si

2.99 To make c-Si technologies viable and attractive in the future, the focus of the solar PV industry is on two aspects -- efficiency improvement and cost reduction.

2.100 The focus of efficiency improvement is through fundamental research and improvement in the intrinsic qualities of c-Si based solar PV cells. Future cost reduction would be on the basis of scale, production process, efficiency improvements like the use of advanced manufacturing practices, process automation, advanced process control and reduction in material usage.

2.101 Efficiency improvements: Laboratories across the world have been establishing new benchmarks in solar PV cell efficiency. A consortium led by the University of Delaware achieved solar cell efficiency of 42.8% using a novel technology through addition of multiple innovations onto a very high-performance crystalline silicon solar cell. Most cells with efficiency in the range of 25% are still produced in expensive clean room facilities with vacuum deposition technologies. Till now, only three high efficiency cell processes have achieved commercial production in non-clean-room manufacturing environments and all use mono-crystalline silicon.

2.102 Future improvements in c-Si based solar cell efficiency will be through the use of materials which have the ability to trap a higher proportion of the incident spectrum and convert that into useful energy. This may require the use of new materials other than silicon. Another area where efficiency improvement can take place is through the development of back contact cells that do not cast a shadow on the cell surface, and hence allow larger trapping of radiation. Another method for cell efficiency improvement that is being experimented with is reducing reflection of solar radiation on the module surface through the development of less reflective encapsulants.

2.103 Cell efficiencies have improved over time and AMAT expects cell efficiencies to go up to 24% by 2020, as shown in the following figure.

Figure 22: Changing cell efficiencies in c-Si

Cell Efficiency Pattern

2422

14

17

0

5

10

15

20

25

30

1999 2000 2010 2020

Eff

icie

ncy in

%

Source: Applied Materials


2.104 Cost reduction: According to EU research (Source: A strategic research agenda for photovoltaic solar energy technology, European Union), c-Si may touch US$ 1.3-1.7/Wp by 2012. One of the main areas where cost reduction would occur is in the development of new, lower cost and less energy-intensive techniques for polysilicon production.

2.105 Polysilicon prices are expected to come down in the future (JP Morgan expects excess capacity by 2010-2011), which in turn, is expected to bring down the prices in the range US$15-30/kg. This will be a key enabler for future PV growth and cost reduction. (Source: A strategic research agenda

for photovoltaic solar energy technology, European Union)

2.106 Waste reduction in polysilicon conversion: At present, cell manufacturers face a loss of polysilicon up to 50% during manufacturing (Source: EU

Paper on PV). Losses of silicon occur while cutting polysilicon ingots into blocks, removal of ingot crusts with high concentration of impurities and wire sawing. A small amount of polysilicon is also lost during the cell production process. Crucial improvements in the manufacturing of polysilicon would be the reduction of this waste during polysilicon crystallisation.

(i) One method is to use silicon in sheet form. At present, six different methods of growing silicon crystals in sheet form are at the pilot stage.

(ii) Another method is to recycle silicon saw dust and rejected silicon during manufacturing and improvements in material handling in the manufacturing process through automation. In the future, there is a high probability that a large part of the polysilicon lost during ingot cutting and wire sawing would be recovered.

2.107 Cost reduction through reduction in material usage: According to Applied Materials (AMAT presentation at IIT Mumbai in June 2007), wafer thickness is likely to reach 180 µm by 2010 and 100 µm by 2020, while kerf losses are likely to come down to 200 and 150 in the same period and cell efficiency (for commercially produced cells) is likely to rise to about 22% by 2010 and 24% by 2020. Thus, the next target for the solar industry is to achieve a module efficiency of over 18% for multi-crystalline silicon and over 20% for mono-crystalline at production scale levels which the industry is targeting by 2010/2011. Another alternative to bring down the consumption of the cost of solar cells is to cast wafers instead of sawing them, saving expensive active material in the process.

2.108 It has been seen in experiments by Photowatt that when there is a drop of wafer thickness from 250 µm to 150 µm (even though yield might decrease from 90 to 80%), there is still an increase of 20% in the number of wafers


produced per kg of polysilicon (Source: ScienceDirect – silicon feedstock for

the multi-crystalline PV industry, 2001). Another method for reducing the material usage is to decrease the kerf losses which is the polysilicon lost due to sawing between two solar PV cells. As kerf losses reduce, more material gets converted into cells. According to data available from AMAT, kerf losses would decrease from 250 to 150 µm between 2000 and 2020, which is a saving of 40%. All these changes have been highlighted in Figure 23:

Figure 23: Changing dynamics of solar PV cell production

Changing Dynamics of Solar PV Cell Production

450

100

500

180

300

150

200

250

30

1.5

3

9

16

40

5

8

0

90

180

270

360

450

1990 2000 2010 2020Years

Th

ickn

ess(µ

m)

-

5.00

10.00

15.00

20.00

25.00

30.00

35.00

40.00

45.00

50.00

Gra

m p

er

Watt

(g

/W)

Wafer thickness (µm) Kerf Loss (µm) Cell weight per Wp (Range Max) Cell weight per Wp (Range Min)

Source: Applied Material presentation at IIT Bombay in 2007

2.109 Improvement in manufacturing processes: There is significant potential for improvement in manufacturing processes in the near future. EU is targeting polysilicon consumption below 5, 3, 2 g/Wp in the short, medium and long term, respectively. One of the biggest impediments to scaling up manufacturing in silicon cell production is that silicon solar cells must be produced one at a time, leading to high inventory costs, low throughput and low levels of automation.

2.110 Module assembly: Module assembly is another material intensive process with the current standard design, using rigid glass-polymer encapsulation in an aluminium frame, representing 30% of the overall module cost. This is being brought down through new, cheaper, more flexible, highly durable materials with improved optical properties that are better suited for high-throughput manufacturing than the materials being currently used.


1366 Technologies MIT professor Ely Sachs has set up 1366 Technologies to develop an improved silicon-based solar cell that can beat coal on cost efficiency. The company is planning to leverage a combination of innovations in silicon cell architecture with manufacturing process improvements to bring about grid parity in poly-crystalline silicon solar cells. 1366 is using cell architecture, which was developed at MIT and which improves surface texture and metallisation, to improve silicon solar cell efficiency from about 15-19%, while lowering costs. Dr Sachs’ company has redesigned the surface of solar cells on a nano scale in order to ensure a higher capture of the solar energy incident on the surface and by reducing the size of the wires to reduce blockage of light.

Thin films

Future focus areas

2.111 Difficulty in undertaking long production runs: The main challenge facing thin films is in up-scaling production capacity. Thin film solar panels are hard to mass produce cost-effectively because of the difficulty of coating large areas of glass and other films. There is a need to devise new and adapt already available deposition processes and equipment for thin film manufacturing which would assist in longer production runs and better coating of larger areas. Some examples are deposition equipment from the flat panel displays industry, equipment for coating glass which can be modified to deposit transparent and metallic contacts on thin films and the use of roll-to-roll coating equipment developed for the packaging industry which can be used for manufacturing flexible modules on foils.

Economies of scale It has been estimated by Dr John Tuttle (Chairman and CEO, Daystar Technologies) in his article, ‘Transforming the solar cell Emerging PV manufacturing technologies and efficiencies’, published in 2006, that scaling up in case of CIGS based thin films would result in savings of 55-80% of the cost per line for a 20 MW batch continuous line. On top of this, manufacturers can also avail discounts in the range of 30-50% below a single unit price for volume purchases.


2.112 Need for mass production of standard equipment and well-defined processes: Another factor that will dominate the cost reduction in thin films would be capital costs. Production equipment makes up as a proportion, almost double of the cost structure in thin films compared to c-Si. Therefore, there is an opportunity for Original Equipment Manufacturers (OEMs) to enter the fray and undertake mass production of standard equipment and well-defined processes to achieve higher throughputs and yields. Two specific areas where standardisation is extremely important are standardisation of substrates and product sizes to make the handling of products easier for vacuum deposition and standardisation of deposition techniques.

2.113 Currently more than 10 deposition processes are being developed worldwide for absorber layers for CIGS thin films. Therefore, one of the most important issues is the standardisation of the absorber-layer deposition in order to allow up scaling and large-scale thin film PV manufacturing, which in turn, will lower the unit cost of module production.

2.114 Another area with huge potential for cost savings is the use of low-cost flexible modules on alternative substrates, such as polymer and metal films, which make full use of roll-to-roll production technologies. For example, the use of polymer/polymer composites and steel replacing glass and aluminium as deposition surfaces would reduce costs and add to the viability of thin films.

Critical R&D and technology issues for thin films A number of critical issues need to be addressed for reducing cost and enhancing production and conversion efficiency of thin film PV technologies. CIGS thin films: The main issues critical for the development of low cost and reliable products are:

1. standardisation of equipment for growth of CIGS absorber films, 2. enhancement of module efficiencies and prevention of moisture

ingress for flexible CIGS modules, and 3. thinner absorber layers (≤1µm).

CdTe thin films: The main issues critical for the development of low cost and reliable products are:

1. standardisation of equipment for deposition of the absorber layer 2. higher module efficiency 3. back contact stability 4. reduced absorber layer thickness (≤1µm), and 5. control of uniformity over large area.

(Source: Critical issues for commercialisation of thin film PV

technologies; Solid State Technology; Date: February, 2008)


New and emerging technologies ii

2.115 New or emerging technologies are at different levels of maturity and can be defined as those technologies for which at least one ‘proof-of-concept’ exists or which have a potential to provide long-term disruptive technology options.

Advanced inorganic thin film technologies

2.116 Advanced inorganic thin films have emerged from thin films but use totally new concepts for deposition technology, substrates and module manufacturing. For example, the spheral CIS approach uses glass beads covered with a thin poly-crystalline compound layer and the interconnection. Another technology in this category is the polysilicon based thin film technology where a poly-crystalline Si layer is produced at higher temperatures than normally used for amorphous silicon. This results in higher deposition and enhances the quality of the active silicon layers. This approach has the potential of achieving efficiencies of around 15% in the next 5 years in the laboratory. The main challenges for this technology lie in developing deposition equipment and suitable ceramic and high temperature glass substrates to use it to its full potential.

Nano materials based solar cells New solar cells made of nano materials are being touted as the next big advancement in the solar PV industry. Nano materials exhibit superior properties, such as high strength and flexibility, and trap more energy than conventional solar PV cells. Nano materials and quantum dot based solar cells use quantum effects to tap and trap the large unexplored infrared region of the solar spectrum. Nano materials use the same thin film light absorbing materials but are overlaid as an extremely thin absorber and have a high surface area to increase internal reflections.

Organic solar cells

2.117 In organic solar cells, the active layer consists of (fully or partially) of organic dyes, or small, volatile organic molecules or polymers suitable for liquid processing. Organic solar cells have the ability to use nano-sized domains which results in a bulk distributed interface and increases the generation and collection of carriers. Organic solar cells have a high potential of low cost manufacturing due to low cost active layer material, substrates, low energy input and easy up-scaling. Organic solar cells can have the active layers printed on them, which would boost production throughput by a factor 10-100 compared to other thin film technologies. These technology options have the potential of achieving a cost of manufacture of module lower than US$ 0.75/Wp.


2.118 Researchers are targeting an efficiency of 15% in the laboratory by 2015 for these cells to have a long-term disruptive potential. The main challenges in the commercial production of organic cells are about developing an improved understanding of their physics, stability and the ability to synthesis novel materials.

Silver solar cells

2.119 Silver solar cells use up to 90% less silicon compared with mono-crystalline cells of equivalent output (19.5% efficiency), which results in lower module costs. Sliver PV cells are micro-machined to less than 70 microns in thickness from mono-crystalline silicon wafers. However, the main constraint in their commercialisation is that the process of manufacture is more expensive.

Silver Deposition Boosts Efficiency Researchers at the University of New South Wales in Australia have devised a way of depositing a thin film of silver (about 10 nanometres thick) onto a solar cell surface and then heating it to 200° Celsius which then breaks the film into tiny 100-nanometre ‘islands’ of silver that boost the cell’s light trapping ability, thereby boosting its efficiency.

Thermo-photovoltaic (TPV) cells

2.120 Thermo-photovoltaic (TPV) cells convert heat into electricity using photovoltaic (PV) cells. The TPV system uses an emitter, whose surface is heated to approximately 1500K, which radiates high energy photons. These photons, after striking the solar PV cell surface, are converted to electricity. Only those photons which have energy levels above the band gap of the PV cell are converted into electricity.

2.121 One of the ways to boost efficiency in this system is by matching emitter radiation spectrum with the PV diode characteristics using 1 or 2 dimensional photonic crystals to modify the emitter spectrum. The EU PV Vision document aims at achieving an efficiency of > 8% and a cost of < 20 US Cents/ kWh by 2020 and < 10 US Cents/ kWh by 2030.

Novel PV technologies

2.122 Novel PV technologies apply to concepts/developments and ideas that have the potential to become disruptive technologies with conversion efficiencies and costs of which are difficult to estimate. Novel PV technologies have a potential of high efficiency. These technologies consist of basically two approaches. One approach is where the properties of the active layer are tailored to meet the properties of the incoming solar radiation. In the second


approach, a material is introduced at the periphery of the cell which modifies the incoming solar spectrum and enhances efficiency.

Novel active layers

2.123 Nanotechnology allows features with reduced dimensionality to be introduced in the active layer: quantum wells, quantum wires and quantum dots. These features allow the cell to:

(a) obtain a more favourable combination of output current and output voltage of the device, or

(b) obtain higher band gap, or

(c) obtain a collection of excited carriers before they thermalise to the bottom of the concerned energy band (e.g. hot carrier cells), which in turn increases the probability of harvesting the full energy of the excited carrier.

2.124 The theoretical limits of the efficiencies of these devices are as high as 50-60% but to invest more in these for the future, prototypes produced in the laboratory have to achieve efficiencies above 25% before 2015.

Tailoring the solar spectrum to boost existing cell technologies

2.125 To tailor the solar spectrum for maximum conversion efficiency, there is a need of stepping up or down conversion layers using nanotechnology. Some options that are being tested are the use of surface plasmons generated through the interaction between photons and metallic nano particles.

2.126 One of the options for early introduction of use of these conversion layers is to ‘bolt-on’ these layers to conventional solar cell technologies (crystalline silicon, thin films), which is expected to result in an improvement of at least 10% (relative) of the performance of existing solar cell technologies.

2.127 However, the largest potential and benefits for these two novel technologies would be obtained by combining modifications to the active layer with modifications to peripheral cell components to get even greater efficiency boosts.

Balance of System (BoS)iii

2.128 Solar PV systems can be divided into two main categories depending on whether they are connected to the electricity grid system or not. As a result of the variation of needs that solar PV systems need to meet, system costs vary considerably and BoS make up anywhere between 30% and 50% of the cost of the system depending upon the application. To make PV competitive in the long run and meet system and delivered energy costs and efficiency target


for high PV penetration between 2020 and 2030, there is a need to improve efficiency, lifetime and reduce cost in BoS components also.

2.129 BoS cost variation is based on application and system size. BoS can also be further subdivided into components that are involved in generation or installation. Installation costs are usually area related costs and currently constitute 30 of the BoS costs. For these components unless some sort of modularity, automation and up-scaling is undertaken, costs are only likely to increase in India and globally due to inflation and increase in global process of commodities. However, a significant scope exists for cost reduction in generation components.

2.130 In the generation component, significant potential exists in the areas of inverters, batteries and other electronic control devices. In case of inverters and batteries, one of the biggest constraints is the equipment lifetime and simultaneous high costs of storage. Therefore, the main focus of research in BoS is on extending the lifetime of BoS components to that of the modules for any given application. One of the targets being followed by National Renewable Energy Laboratory (NREL) and the European Union is to try and increase the BoS component lifetime to 20 years for grid connected systems and for off-grid based systems to 10 years. Among the BoS components, the major focus of research is on extending the lifetime of inverters to 20 years through improved reliability.

2.131 NREL has targeted an inverter selling price of US$ 0.25-0.30/W by 2020 which based on 2006 estimates represents a cost reduction of 50-75% from current levels, whereas historical data shows that inverter costs have been falling at about 5-10% a year since 1999. Based on a study undertaken by Navigant Technologies, this target is unlikely to be achieved just by sales volume increase and learning curve improvements.

2.132 Navigant also found that given the status quo, an inverter lifetime of greater than 15 years also seems difficult as this would entail huge improvement in manufacturing, design and technology. Inverters are a mature technology and a comprehensive EU-supported study of prices and production volumes for PV modules and BOS found that although the learning rate (the rate at which price reduction occurs with doubling of production) in the PV industry is in the 20-25% range, for inverters, the learning rate is significantly lower at approximately 10%.

2.133 The study goes onto highlight the main focus areas for enhancing efficiency, lifetime and reducing cost which have given below:

(a) Manufacturing and testing improvements (i) process improvement (ii) training and quality management (iii) documenting field performance data

(b) Design


(i) alternative topologies (ii) improved thermal management using modelling

(c) Technology (i) focus on advanced switching, capacitors, and components.

Future roadmaps

European Union (EU)iv

2.134 The EU is looking at transiting to a sustainable energy system in the next 30-50 years. The EU has identified solar PV as the key transition technology. EU is targeting solar PV as an established and viable electricity supplier by 2030. The vision document outlining EU’s roadmap for solar PV has estimated that flat plate module efficiencies will be in the 10-25% range and generation costs would have come down to about US$ 0.075-0.18/kWh. EU also expects module efficiencies to increase and reach the 30-50% range beyond 2030. .

2.135 The EU has set targets for module and system target price, silicon consumption in c-Si and wafer thickness for entities operating in EU countries (highlighted in Table 10). From Table 9 it is apparent that EU expects the module price to halve every 10 years and system prices to come down by US$ 1/W every decade. To accomplish these targets, the EU is looking at a host of options for improving efficiency and manufacturing, and reducing material usage.

2.136 Table 11 highlights the trajectory that the EU is targeting between 2007 and 2030, and beyond.

Table 10 - Target prices set by EU for solar PV

Source: SRA forecast – European Union

Table 11 - Trajectory for reduction in energy generation from solar PV and increase in module efficiencies

Parameters 1980 2007 2015 2030 Very long term

Electricity generation costs ($/W) >3 0.45 0.22 0.09 0.04

Flat plate module efficiencies (%) Upto 8% Upto 15%

Upto 20%

Upto 25%

Upto 40%

Typical system payback time (years) >10 2 1 0.5 0.25


Year Module target price (US$/W)

System target price (US$/W)

Silicon consumption g/W)

Wafer thickness (µm)

2010 2 3 5 <150

2020 < 1 2 3 <120

2030 < 0.5 1 2 <100


2.137 The EU has identified a set of tasks which would help in achieving these targets for each technology type. For example, in the areas of c-Si technology, the EU has formulated the following measures:

(a) Short term:

(i) limiting consumption of silicon to 5g/W and wafer thickness to < 150 µm

(ii) improved crystal growth, (iii) development of reusable crucibles which introduce only small

amounts of impurities into the silicon (iv) low kerf loss sawing (v) metal pastes suited for thinner wafers (vi) low-cost encapsulants and new frames and supporting structures (vii) improved recycling techniques and low impact manufacturing

techniques (viii) defect characterisation and control in silicon (ix) new feedstock technologies (x) advanced wafering technologies

(b) Medium term:

(i) limiting consumption of silicon to 3 g/W and wafer thickness to < 120 µm

(ii) new Si feedstock and low defect (high electronic quality) silicon wafers

(iii) improved and new/novel wafering technologies (iv) improved encapsulants, and conductive adhesives or other solder

free solutions for module interconnection and new materials for metal contacts

(c) Long term

(i) limiting consumption of silicon to 2g/W and wafer thickness to < 100 µm

2.138 Similarly, measures for the short, medium and long term have been devised for all thin film technologies in the areas of manufacturing, technology and basic research which have been captured in Table 12.

Table 12 - Targets for thin film solar PV from the EU PV Vision

S. No

Broad parameters

2012 2020 2030

1 Industry manufacturing aspects

� low cost packaging solutions/reliability

Module costs and efficiencies � cost < 0.95 €/Wp

for 100 MW, ή >10% (Glass)

� demonstration of next generation equipment with lower material use

� higher throughput and higher efficiency

� simplified production processes

Module costs and efficiencies � cost < 0.4 €/Wp at

500 MW, ή 15% (rigid)

� cost < 0.3 €/Wp at


S. No

Broad parameters

2012 2020 2030

� cost < 0.75 €/Wp for 50 MW, ή > 9% (flexible)

� ultra-low cost packaging solutions

Module costs and efficiencies � cost < 0.65 €/Wp for

200 MW, ή 12% (rigid)

� cost < 0.5 €/Wp for 10 MW, ή > 11% (flexible

500 MW, ή 13% (flexible)

2 Applied/ advanced technology aspects

� large area plasma processes for amorphous and microcrystalline Si

� plasma process control

� advanced embedding materials

� alternative techniques for absorber deposition

� demonstration of modules with ή > 12%.

� development of new deposition reactor concepts

� introduction of fully optimised light trapping schemes on large area

� modules with ή > 15%

� design of ultra-high throughput lines/reactors

� process simplification

� full integration of production line

3 Basic research � understanding of electronic properties of layers and interfaces in devices

� understanding of light trapping

� demonstrate stable cells with ή > 15%

� new techniques for very high rate deposition

� incorporation of quantum dots or spectrum-converting effects in thin film Si

� combination of thin film Si with other absorbers/PV technology

demonstrate stable cells with ή > 17%

� identification and introduction of higher performance as well as new materials

� testing of new concepts

� identification of best ideas/possibilities



United States of Americav

2.139 The United States of America targets to achieve grid parity by 2015 through solar PV for all market segments and be competitive with fossil fuels by 2020. The US Department of Energy (DOE) has laid down a comprehensive multi-year plan 2007-2011, under which it has set targets for technology improvements as well as cost reductions. Some of the main highlights of those targets are given in Table 13 below:

Table 13 - Main efficiency and manufacturing cost targets for 2011 for the USA multi-year plan

Technology Module efficiency (%) Direct manufacturing cost

(US $/Wp)

c-Si module 16 1.6

CdTe module 10 0.9

CIGS module 12 1.4

a-Si module 8 1.15

Inverter 95 N/A

Concentrator 25 3

Source: US DOE

2.140 Besides, the US DOE targets to achieve cost of energy generation for different consumer categories as listed in the table below:

Table 14 - Cost of generation for different consumer categories and matching system prices

Consumer categories

Current USA market prices

(c/ kWh)

Target for PV for 2011 (c/

kWh)

Target for PV for 2020 (c/

kWh)

Required system price in

2020 ($/Wp)

Residential 25 – 32 13- 18 8 - 10 2.25 – 3.00

Commercial 18 -22 9- 12 6 - 8 2.00 – 2.75

Utility 15 – 22 10 – 15 5 - 7 1.5 – 2.25

Source: US DOE

Japanvi

2.141 Japan initiated R&D in photovoltaic based power generation under the Sunshine Project in 1974. This project, along with a number of other PV based initiatives, developed under R&D projects and policies support achieved its primary goal of creating the initial market for PV systems. It transformed Japan into a global leader in both PV production and installed capacity.

2.142 In 2003, an investigative committee with members from academia, industry and government circles was established to study and formulate a “PV Roadmap towards 2030 (PV2030)”. Projecting PV as an established energy-supply technology, the committee devised a set of tasks to achieve the position in 2030 with the aim of shifting from existing “seeds-driven R&D” to “market-driven R&D”.


2.143 The aim of the PV Roadmap is to make PV competitive with other energy resources by 2030 and shifting PV system applications from the conventional grid-connected systems to new system configurations that do not overload the grid.

2.144 The specific aims of the PV 2030 Roadmap are:

(a) Cost of PV based power should be equivalent to the electricity costs for residential use (approximately 23 Yen/kWh) by 2010

(b) Cost of PV based power should be equivalent to that for business use (approximately 14 Yen/kWh) by 2020, and

(c) Cost of PV based power should be equivalent to that for industrial use (approximately 7 Yen/kWh) by 2030.

2.145 To achieve a reduction in the PV module cost, there is a need to improve cell efficiency. This can be achieved by bringing about technological innovations in the manufacturing process and reducing cost of Balance of System (BoS) as well as BoS’s durability and life.

2.146 Table 15 highlights the main technological aims and objectives of the NEDO PV 2030 Roadmap.

Table 15 - NEDO targets for 2010 to 2030 under the PV 2030 Roadmap

S. No Parameter 2010 2020 2030

1 Production cost of PV

module (in Yen/W) 100 75 <50

2 Durability of PV module 30 years

3 Silicon based feedstock

consumption 1 g/W

4 Inverter cost (Yen/Wh) 10

5 Crystalline silicon solar cell

conversion efficiency 20 25 25

6 Crystalline silicon solar

module conversion efficiency

16 19 22

7 Thin film Si cell 15 18 20

8 III – V solar cell 40 45 50

9 Dye sensitized solar cell 10 15 18

Source: NEDO PV Roadmap 2030


A3: IDENTIFICATION OF MARKET SEGMENTS FOR SOLAR PV IN INDIA

Introduction

3.1 The demand for power in the country and consequently, the demand-supply gap, is growing over the years. Solar PV has the potential to be deployed in a few key segments like grid connected power generation, decentralised distributed generation, backup power for telecom towers and roof based solar PV. However, there are certain barriers limiting the application of the solar PV in these segments. Besides technological advancements, the industry has to develop a focused agenda to gain entry into these segments.

Prevailing energy and power scenario

3.2 Rapid economic development has provided an impetus to the country’s power generation sector, which has been witnessing consistent growth since the 90s. It has grown from just over 81,171 MW in 1995 to 140,301 MW in 2007. India is the sixth largest country in power generation but continues to face electricity shortages. The country lags behind the rest of the world in terms of energy usage with a per capita consumption of 632 units in India, as against the world average of 2,516 units.

Figure 24: Growth of installed generation capacity in India (in MW)

Growth of Installed Generation Capacity (in MW)

1362 2695 4653 902716664

28448

42584

63634

81171

107877118426

124287

140301

105046

0

20000

40000

60000

80000

100000

120000

140000

160000

FY47 FY50 FY61 FY66 FY74 FY80 FY84 FY90 FY95 FY02 FY03 FY04 FY06 FY07

Insta

lle

d C

ap

aic

ty i

n M

W

Source: CEA

3.3 Power deficits continue to plague the country. Today, India experiences an average energy (electricity) shortage of 9.6%, and a peak shortage of about 13.8%, as shown in the figure below:


Figure 25: Power deficit status in different regions in FY07

Source: CEA

3.4 To meet the growing demand and shortage, the generation capacity needs to be doubled in 10 years from the current 142,000 MW (approximately). The country needs to deliver a sustained growth of 8-9% through 2031-32 and meet the energy needs of its citizens. The Integrated Energy Policy has assessed that India needs, at the very least, to increase its primary energy supply by 3-4 times and its electricity generation capacity by about 6 times to 800 GW by 2031-2032.

3.5 The graph below presents the demand supply gap in terms of peak deficit for the identified states in FY’06, FY’07 and FY’08 (till Feb’08).

Figure 26: Peak power deficit in identified states

Peak Deficit (%)

-12.3

-9.3

-20.3

-13.2

-22.2

-21.7

-23.1

-5.1

-6.6

-1.7

-11.5

-3.0

-13.8

-13.1

-26.9

-14.6

-30.2

-20.8

-15.4

-7.1

-2.1

-2.7

-2.4

-15.8

-2.7

-15.4

-16.0

-26.2

-10.6

-11.0

-16.3

-7.1

-15.9

-2.9

-27.4

-26.4

-35

-30

-25

-20

-15

-10

-5

0

India

Hary

ana

Punja

b

Raja

sth

an

Guja

rat

Madhya

Pra

desh

Mahara

shtr

a

Andhra

Pra

desh

Karn

ata

ka

Kera

la

Tam

ilN

adu

West B

engal

FY 06 FY 07 Apr-Feb 2008

Source: ISA-NMCC 2008 Research

Peak Deficit Across Regions in FY07 (MW, %)

-4,872

-8,990

-1,826

-433 -311

-10,000

-8,000

-6,000

-4,000

-2,000

0

North West South East North-East

MW

-30%

-25%

-20%

-15%

-10%

-5%

0%


3.6 Though India as a whole is a power deficit country, some states have surplus power at certain times. Additionally, there are seasonal and day-time variations. This has led to creation of a power trading market between the power surplus and power deficit states. Hence, power trading has seen significant growth in the past 3-4 years. Typically, about 2% of total installed capacity is traded in India. This figure is on the rise and during the first 2 quarters of FY’08, more than 12,000 MUs were traded. The price for short-term power sale varies depending upon the season and time of the day, place of sale and other factors. It is for all time more than the long-term power purchase.

3.7 Average short-term sale price shown below has varied between Rs 3 per unit from January-March 2006 to Rs 5 per unit from April–June 2007. This is because the entities buying short-term power are in deficit and need power to avoid unscheduled interchange charges and meet the states’ obligation towards citizens. Prices touch the peak in the summer months. In 2007, the states of Rajasthan, Tamil Nadu, Kerala and Maharashtra paid between Rs 7 per unit and Rs 8.5 per unit for power. The following figure shows the trading price pattern in various states:

Figure 27: Short-term trading prices Rs/kWh) across major states


3.8 To meet the increasing demand, there is a need to enhance energy security through indigenous sources of energy and promote the development of clean energy sources. The Government of India is focussing on the development of renewable energy (RE) sources. This focus has resulted in cost reduction and scale in RE sectors, such as small hydro and wind. RE projects have also helped bridge the demand supply gap (increasing due to economic growth and rural electrification) and promote the development of the RE industry, especially wind, small hydro and solar.


3.9 The Government of India in 2007 released a draft model of RE law by mandating electricity utilities to purchase power from renewable sources. The target for electricity generation via this route is fixed at 10% by 2010 and 20% by 2020. Thus far, 13 SERCs have notified RPO targets for their respective states and the remaining states are lined up to fix their purchase obligation. These measures will boost the RE market in the country.

3.10 In view of the introduction of state-level RPO’s, increasing demand (due to economic growth and rural electrification) and increase in short-term trading prices, SERCs have called for the use of indigenous energy sources, such as RE, especially wind and solar.

3.11 Currently, as of March 2007, India has RE capacity of 11,275 MW, which is around 7% of the total installed capacity. It has been growing at a CAGR (2003-07) of 18%. The figure below presents the break-up of installed energy capacity of different segments as on January 2008. By and large, the RE sector is dominated by wind, with a share of around 71% or 7,845 MW of the total renewable capacity.

Figure 28: Source wise break-up of energy sources and share of renewable energy sources in India (in MW, data as of 2007)

4120, 3%

11275,

8%

13299,

9%

32870,

22%

1202, 1%

12687,

9%

72809,

48%

Coal Gas Diesel Nuclear Hydro Captive RE

3, 0%

7845,

71%

55, 0%606, 5% 2046,

18%

720, 6%

Wind WTE Biomass SHP Solar Cogen


3.12 Presently, solar PV is not a vibrant technology, primarily due to its cost economics but it has the potential of becoming the future source of energy. This is possible due to technological advancement, incentives for investment, supportive legislative framework of various SERCs, private sector investment and rising prices of fossil fuels. All of the above factors can play a crucial role in scaling up the solar PV as a leading RE source.


3.13 India has, in the past three decades, been implementing a large RE programme and solar, including solar PV, is a focus area. As a part of the RE programme in India, the Ministry of New and Renewable Energy (MNRE) launched a country-wide Solar Photovoltaic Programme two decades ago.

3.14 Under this programme, almost 11 lakh solar PV based systems have been installed, including 5.85 lakh solar lanterns, 3.64 lakh solar home lighting systems, 69,500 street lighting systems, 7,068 solar water pumps and 4.75 MWp of stand alone and grid interactive solar PV power plants.

3.15 The MNRE’s country-wide solar programme has two major focus areas:

(i) Remote village electrification through DDG using RETs, especially solar based applications, and

(ii) Promotion of solar technologies in urban, industrial and commercial applications

3.16 On the demand side, solar energy (thermal and PV) has found application in four main market segments, which have been highlighted in Figure 29.

Figure 29: Major segments for solar in India and the main stakeholders



Solar PV market in India

3.17 Till 2007-08, India has been seen primarily as a hub for low cost manufacturing and production of solar PV cells and modules. As a result, a large part of the 45 MW aggregate capacity of solar cells and 80 MW aggregate capacity of SPV modules produced in the country during FY07 was exported (a cumulative 60 MW of solar PV modules have been exported till 2007).

3.18 During the past five years (2002-2007), India produced 335 MWp and exported 225 MWp capacity of PV products.

3.19 Figure 30 highlights the category wise use of solar PV capacity in India in the past 5 years.

Figure 30: End use application of solar PV modules (335 MWp aggregate capacity; 14,00,000 SPV systems)

Category Wise Usage of Solar PV Modules

225

39

22

16.511 8.5 7.5 5.5

Exports Others Telecom

Home Lighting Systems Solar Pumps Solar PV Power Plants

Solar Lanterns Street Lights

Source: MNRE

3.20 Based on discussions with MNRE officials, it has been estimated that MNRE is targeting a capacity of 500 MW by the end of the 11th Five Year Plan, i.e. 2012. By 2017, MNRE expects India’s solar capacity to touch 4 GW.

Market segment analysis

3.21 As a part of the study of the solar PV market in India, a detailed demand and lifecycle analysis is undertaken for four of the main market segments considered most viable for solar PV in India.


3.22 The first component of this task is the identification of potential market segments, i.e. market segments where solar PV is either commercially viable or can become viable in the near future (the time scale for future is till 2013-14). The following potential market segments have been identified:

(i) Grid interactive solar PV power plants (ii) Rural electrification – Decentralised Distributed Generation

(DDG) (iii) Backup power for telecom (Base Transceiver Station) (iv) Roof Based Solar PV (v) Building Integrated PV systems (BIPV) (vi) Bill board application (vii) Residential backup application (viii) Solar water pumps (ix) Solar home lighting systems

3.23 Subsequently, a preliminary analysis of each of the above mentioned

segments has been undertaken to estimate the market size and its attractiveness in the coming five years. The following four segments were shortlisted for a detailed economic and financial analysis:

(i) Grid interactive solar PV power plants (ii) Rural electrification – Decentralised Distributed Generation

(DDG) (iii) Backup power for telecom (Base Transceiver Station) (iv) Roof based solar PV systems

3.24 The analysis in the following sections is based on data gathered and collated

from various market and government sources. Suitable assumptions (based on experience on the field and dialogue with appropriate sector experts) have also been highlighted.

Basic assumptions

3.25 In order to undertake an analysis across the segments, certain basic assumptions were made regarding the cost and design of solar PV and the incumbent systems. These basic assumptions have been documented in Annexure I. At the same time, looking at the possibility of a future cost reduction in solar PV and Balance of System (BoS) components, a cost reduction path for the purpose of analysing market segment viability in the future has been developed. This has also been detailed in Annexure I.


Power generation (grid connected) through solar PV

Market size

3.26 To achieve a reduction in the cost of the grid connected solar systems and the cost of solar power generation in the country, MNRE has been supporting grid interactive solar power generation projects. At present, this support in the form of a subsidy is limited to only 50 MW capacity. This scheme has been covered extensively in the ‘Policy and Benchmarking’ chapter.

3.27 Grid interactive solar PV based power capacity in India is negligible today. Till 31st March 2008, only 2 MW of grid interactive solar PV based power capacity had been developed. However, after the announcement of the Generation Based Incentives (GBI) by MNRE, the latter has received Expressions of Interest (EoI) for more than 1,000 MW of such projects. The main players who have expressed an interest in this segment are project developers, like RIL, Moser Baer, etc.

3.28 MNRE is targeting a capacity of 500 MW in solar by the end of the 11th Five Year Plan, i.e. 2012, but MNRE officials expect the country to surpass the target for the 11th Five Year Plan.

3.29 It is estimated that almost 50% of this addition would come from solar PV based grid interactive generation as most potential players till now have announced plans for using solar PV technology for power generation. This makes the cumulative power production potential at 250 MW, which using

conservative assumptions should be rolled out as highlighted in Table 16.

Table 16: Demand projection for grid connected power generation

Demand projection for grid connected solar PV power generation Numbers Units

MNRE target for installed capacity of solar energy installations by end of 11th Plan

500 MW

Grid based solar PV capacity to be developed by 2012 (assumed @ 50%)

250 MW

Grid based solar PV capacity developed in 2009 25 MW




Source: ISA NMCC 2008 Research


Solar based distributed generation for rural electrification

Market size

3.30 Rural India is home to more than 70% of its population, with a majority of the people living under the poverty line. All governments since Independence have focused on improving the quality of life of the rural poor by providing them basic inputs, such as water and energy. These inputs are of critical importance if India as a nation is to improve the quality of life and bring about prosperity among the rural poor.

3.31 Rural India still remains deprived of these crucial services, especially when it comes to the supply of electricity for consumptive and productive purposes. Based on the figures available from the Census of India, 2001, only 44% of households in India have access to grid based electricity. The state of rural electrification in India and in some of the big states in India is highlighted in the figure below.

Figure 31: Status of rural and urban electrification –national level data and data for some key states (% of rural households electrified) including per capita energy (kWh/household) consumption across states


3.32 Although the Government of India has kept a target of providing electricity for all by 2012 with a minimum consumption of 1 kWh per day per household, rural India is still experiencing large power outages, including villages that have access to grid.

3.33 The Government of India as a part of the programme, ‘Electricity for All by 2012’, has targeted the electrification of 80,000 unelectified villages out of which 18,000 are remote villages. These would have to be electrified using


non-conventional power sources. Besides the coverage of the un-electrified villages, households and hamlets that have not been provided power connections in electrified villages need to be included.

3.34 The power deficit in India and the need to enhance access and per capita consumption at the lowest lifecycle cost provides an ideal situation for the large-scale introduction of DDG technologies, like solar, wind, biomass and small hydro.

3.35 Most of the above mentioned technologies are site specific and are not found abundantly across the country. Small hydro is concentrated in the north, north-east and coastal parts of the country, and wind along the coasts. Biomass gasifiers have had major issues in sustainable gathering and usage of biomass. Thus, a technology like solar, which is not site and market dependent and has one of the largest potential globally, offers Indian policy-makers an exellent opportuniuty for DDG.

3.36 Solar PV installations can be located within short distances of the load centres and avoid the development of long transmission and distribution networks and save large aggregate transmission & distribution losses. Solar PV based energy generation provides savings in carbon emissions and allows local communities to meet their own energy needs locally. Added to this, India has among the highest solar irradiance in the world, and, thus, solar based DDG provides an attractive alternative for rural electrification.

3.37 Although the relative economics of solar PV is important in normal electrification scenarios, solar PV becomes extremely viable and atttractive in cases where physical barriers and obstacles exist in the extention of the grid, like swampy land, mountain ranges, rivers or protected forests.

3.38 Solar PV plants would also have applications in the future when demand outstrips the capacity of the transmission and distribution networks. These plants can then be installed near large load centres and isolated from the grid.

3.39 Putting an estimate on the number of villages that would have to be electrified using solar PV requires a detailed analysis and is beyond the scope of this study. However, taking a conservative estimate, it has been assumed that 25% or 4,500 villages out of the 1,8000 classified as remote do not have any other option but solar PV based DDG. Based on this assumption, an analysis was undertaken to arrive at the levelised cost of generation for solar PV. For some villages where both grid connected and solar PV have potential, a relative comparison was undertaken to understand the viability of solar PV there.


Detailed analysis

3.40 It is assumed that a remote village in rural Rajasthan would be used as an example for carrying out the analysis. This village is assumed to have 50 households, each of which rely on solar PV based DDG for electrification.

3.41 An estimation was made on the total connected load using the following assumptions and load calculations given below:

(a) Total number of households – 50 with a minimum daily load of 1 kW (GoI target).

(b) Industrial load of 3 kW (2 chakis and 1 small cottage industry) and commercial load of 1.5 kW (1 dhaba/office etc and 2 shops)

(c) Other commercial and institutional load.

Table 17: Demand projections for solar PV based rural electrification


3.42 The aim of the segment analysis is to simulate a demand model for a remote village in India and undertake an analysis of the levelised cost of generation from solar PV and the viability of using solar PV based DDG based on that model.

3.43 For this model, the demand profile of a village in remote Rajasthan has been created. A comparison has been made on the cost to the government for electrifying the village through the grid or through solar PV based DDG. The model has been prepared using the cost structure prevailing in the solar PV industry today as well as the cost of power delivered for a specimen village in a specific state, i.e. Rajasthan village, i.e Jaisalmer.

3.44 The demand model has been used as an input for calculating the levelised cost of energy delivery to the village over a 20-year period. The levelised tariff was calculated by varying these two independent variables, i.e. distance from the grid and the cost per watt of the solar panel.

3.45 For analysing the competitiveness of these two options, the two independent variables, namely distance from the grid and the cost per watt of the solar panel, have been varied. For example, the levelised cost of energy delivery

Demand projections for rural electrification Numbers Units

Number of remote villages 18,000 Villages

Percentage (assumed) likely to be electrified through Solar PV 25% Percentage

Number of remote villages to be electrified through solar PV` 4,500 Villages

Total load per village 66.8 kW

Total MW of solar PV power required (for 4500 villages) 300 MW


from the grid was calculated by varying the distance by which the grid needs to be extended (to reach the village) from 1 km to 14 km. Similarly, for solar PV, the panel cost has been reduced from Rs. 145/W to Rs. 60/W (reflecting improving efficiencies and reducing costs of modules). The results of the analysis has been depicted in the form of a graph which portrays the viability of solar PV based DDG versus the grid.

3.46 As can be seen from the graph (figure 32), the panel cost (plotted on the X axis) was taken as an input for plotting the levelised cost of energy delivery (on one Y axis). Subsequently, the levelised cost of energy for solar PV has been used as an input and based on this levelised cost of energy delivery, the corresponding distance from the grid is calculated.

Figure 32: Variation of distance where solar PV becomes viable with decreasing panel cost

Variation of Panel Cost with distance from grid and levelised cost of power delivery

32.26

31.09

29.38

27.69

26.03

24.40

23.26

22.11

20.97

19.82

12.18

11.57

10.70

9.73

9.00

8.20

7.60

7.01

6.43

5.84

15.00

17.00

19.00

21.00

23.00

25.00

27.00

29.00

31.00

33.00

35.00

60.00 70.00 80.00 90.00 100.00 110.00 120.00 130.00 140.00 145.00

Cost of Panel (Rs/W)

Levelised C

ost of P

ow

er

Delivery

(R

s/W

)

5.00

6.00

7.00

8.00

9.00

10.00

11.00

12.00

13.00

14.00

15.00

Dis

tan

ce f

rom

Gri

d (

Km

)Levelised Cost of Delivery of Power (Rs/kWh) Distance from main grid (Km)


3.47 Based on present solar PV panel costs (i.e. Rs. 145/W based on primary

survey of select solar PV firms), solar PV was found to be more attractive as an electrification option for a village at a distance of 12.20 km or more from the nearest substation (grid would need to be extended by 12.20 km to reach the village). However, if the cost of a solar PV panel comes down to Rs. 60/W, the viability of a solar based DDG would increase. In this case, a village that is even 5.8 km from the nearest substation would be served more economically by a standalone solar PV system.


Backup power generation for Telecom (BTS)

3.48 The Indian telecom industry is growing at 45% per annum, which is the highest in the world. It has the third largest mobile network in the world after China and the USA.

3.49 With disposable incomes rising even in semi-urban and rural areas, telecom

services and networks are expanding to cover a larger section of the population.

3.50 As a result, today all major telecom operators are in a network expansion

mode to cover the rural and semi-urban market. Added to it, due to frequency constraints, telecom operators have to put up more towers to cover a particular area. This is spurring the expansion of the tower business.

3.51 India currently has close to 150,000 towers (Base Transceiver Station or

BTS) by the end of 2007-08, of which 80% are in urban areas and the rest in semi-urban and rural areas. It is expected that by 2012, this ratio would be 60% in urban and 40% in the semi-urban and rural areas, and over 300,000 towers would have been installed. The Indian telecom industry is likely to install another 2 lakh towers in the next decade with a more indepth coverage of rural areas.

3.52 According to guidelines laid down by the Telecom Regulatory Authority of

India (TRAI), telecom connectivity or access to the network has to be maintained at all times. This means that in case of a power outage, there has to be a seamless transition to a backup power supply for all BTSes.

3.53 Most BTSes in India use DG sets for backup power. However, DG sets have

certain disadvantages, like high cost of fuel (diesel), fuel transportation and storage, fuel pilferage and fuel adulteration. Diesel is not a clean fuel and has associated carbon emissions, which for any image-consious corporate can become an issue in the long run.

3.54 The use of DG sets is common in semi-urban and rural areas with long and

frequent power outages and old and unreliable distrbution networks. Also, the high cost of delivery of fuels, like diesel, due to bad infrastructure and stringent service obligations provide an opportunity for solar PV based power back up for BTS.

3.55 A number of companies are exploring options, such as wind and solar PV,

for backup power for BTS keeping in mind the above mentioned constraints with DG. Solar PV is particularly attractive as it can be used as a common solution set across the country (due to India’s high irradiance levels) and has minimal operation and maintenance requirements. Solar PV also has another advantage - solar equipment in India is usually provided with accelerated


depreciation and for profit-making, cash surplus telecom providers, this is an added advantage.

3.56 Although the complete backup of a BTS cannot be met by solar PV, a large

part can be substituted with a hybrid of solar PV based system and a DG set. Although the capital cost of this option is high, the hybrid more than makes up for this in terms of savings on lifecycle costs and smoother operations.

3.57 A typical BTS would be made of two power consuming components, i.e. the

base station and microwave transport equipment load, and airconditioning load. As the airconditioning load is seasonal, it was assumed that only the base station and microwave transport equipment load would be simulated for solar PV backup power, which is 3.0 kW as mentioned in the table below. However in the semi-urban and rural areas it has been seen that tower sharing is taking place and multiple BTSes are located on the same tower sharing the same passive infrastructure. Thus for the benefit of this analysis, it has been assumed that back up power solutions woul be available simulated for a BTS tower with 3 BTSes having a combined load of 9 kW. The load requirements used for calculation of the load characteristics and power backup requirements for BTSes in India is given in the following table

Table 18 - Load characteristics and power backup requirements for BTS in India

Power requirements in BTS Number Unit

Base station load 2.3 kW

Microwave transport 0.7 kW

Total load 3.0 kW

Number of BTS on 1 tower 3 No.s

Total Load 9 kW

Source: ISA NMCC 2008 Research 3.58 Based on these load and power requirements, demand projections for telecom

backup power have been provided in Table 19. Table 19 - Demand projections for telecom backup power

FY 2008 2009 2010 2011 2012 2013 2014 2015

Total towers in India 19,3419 248,551 286,459 307,869 320,483 333,454 344,885 355,754

Additions 63,419 55,132 37,908 21,410 12,614 12,971 11,431 10,869


Detailed analysis

3.59 The aim of this segment analysis is to examine the viability of solar PV as a backup power solution for telecom Base Transceiver Station (BTS) in semi-urban and rural areas which now use diesel based generators for backup power.


3.60 A model of BTS with backup energy requirements being supplied through a DG or a solar PV is simulated. Today, the biggest constraint in the use of a DG is the high fuel cost of diesel and diesel theft in rural areas.

3.61 It has been assumed that only the load related to the electronic equipment of the BTS would be used for simulation and not the airconditioning load. As pointed out above, this model has been prepared using the cost structure prevailing in the solar PV industry today as well as the cost of power delivered for a DG set as obtained from a set of DG players.

3.62 The solar PV system was designed based on the number of hours of backup it would need to provide. The cost and efficiencies of a 15 kVA DG set were used for the substitute analysis. The method of comparison is the Life Cycle Cost Analysis (LCCA) of both the options. The cost and consumption of DG has also been taken into condsideration for 30 days (on an average) when solar PV would not be functional (assumption: number of sunny days in India

– 330).

3.63 The LCCA was simulated for backup requirements for 4, 6, 8 and 12 hours at a stretch and the LCCA of both solar PV and DG plotted. The analysis has been presented in Figure 33.

3.64 From the graph given below, it can be seen that the LCCA for solar PV

ishigher for all scenarios of power backup required if diesel is priced at Rs 35 and Rs 40 per litre and lower if diesel is priced at Rs 55/ litre which is the cost the government pays for supplying diesel.


Figure 33: DG v/s solar - change in lifecycle cost with hours of backup for telecom

Life Cycle Cost Analysis (LCCA) Solar PV vs DG (Diesel)

8.62

5.82

4.42

1

10.04

6.85

5.25

7.70

5.29

4.08

3.03

3.67

6.92

4.77

3.69

2.612.88

0

2

4

6

8

10

12

12 8 6 4

Number of hours of Back Up

LC

CA

Pre

se

nt

Va

lue

(R

s M

n)

Present Value (Rs Mn) Solar Present Value (Rs Mn) DG (Rs 55/ Litre)

Present Value (Rs Mn) DG (Rs 35/ Litre) Present Value (Rs Mn) DG (Rs 40/ Litre)


3.65 A plot in Figure 34 of the levelized cost of generation for solar PV and DG has also been drawn. This graph shows that solar PV has a lower levelized cost as compared to DG when diesel is priced at Rs 55/litre but has a high levelised cost of generation if diesel is priced at Rs 40/35 per litre..

3.66 Solar PV becomes a viable option for telecom (based on today’s prices) if the

retail price of diesel touches or exceeds Rs 45.9 per litre. The telecom sector has the potential to provide a large and viable market for solar PV in the future with retail prices of diesel likely to move up and prices of solar PV panels likely to come down.


Figure 34: DG v/s solar for telecom backup - levelised cost of power delivery

Levelised Cost of Generation (Rs/kWh)

25.83 26.1826.53 27.23

32.89

31.4630.7930.08

20.7321.44

22.14

23.54

25.88

24.4823.78

23.07

10

20

30

40

12 8 6 4Number of Hours

Le

ve

lis

ed

Co

st

of

Ge

ne

rati

on

(R

s/k

Wh

)

Levelised Cost of Generation (Rs) Solar Levelised Cost of Generation (Rs) DG (Rs 55/ Litre)

Levelised Cost of Generation (Rs) DG (Rs 35/ Litre) Levelised Cost of Generation (Rs) DG (Rs 40/ Litre)


3.67 If solar becomes a viable solution in this sector, it has the potential to cater to a market in excess of 1,000 MW in the next 7-8 years (i.e. till 2015).

Roof based solar PV applications

3.68 Currently in the country the main potential for roof based solar PV lies in the commercial sector, namely in retail, office complexes and logistics installations. Within these sub-sectors, most applications would be on roof integrated solar PV installations.

3.69 The Solar Buildings Programme was initiatied in 1995 in India. As part of this programme, the provisions for incorporating solar PV elements in the building design have been prepared and MNRE has sanctioned a number of roof based BIPV projects as a part of its demonstration programme.

3.70 Although a number of demonstration projects have been launched but roof top based building applications were not considered viable in India till recently. This was due to the high cost of solar PV and low cost of backup power fuels, such as diesel. In the past few years, there has been a huge increase in demand in urban areas due to the large-scale proliferation of commercial buildings and their need for power (to run airconditioning applications). Coupled with this, there is an overall power deficit. These


factors have forced electricity utilities to either not provide electricity connections or resort to frequent power cuts.

3.71 In such a scenario, most commercial buildings rely on DG sets that come with their own set of problems. DG set generated power has become expensive in the past two years due to the high cost of diesel. DG sets also add to the already high pollution levels in urban areas.

Energy Conservation Building Code (ECBC) BEE has also developed a Draft Energy Conservation Building Code (ECBC). ECBC is to be applicable on new commercial buildings having connected load of 500 KW or 600 KVA and above and to old buildings having a connected load / energy consumption beyond a prescribed limit (still to be released). According to the ECBC, each of the buildings coming under the designated consumer categories are to be audited and economically viable energy efficient measures implemented. To implement the recommendations of the ECBC, India has been divided into 5 zones and each state in the country has been positioned in one of these zones. Based on the zones, each state is to designate targets for energy savings in buildings and implement energy efficiency measures at the local level. One of the proposals being considered under the ECBC is for commercial buildings to obtain a certain proportion of energy through solar (PV and thermal). Delhi has already introduced a provision wherein for commercial buildings, more than 50% of the roof area should be dedicated to solar water heaters.

3.72 Although solar PV based appplications cannot meet all the load requirements of commercial complexes, a part of the load can be met using roof based solar PV applications.

3.73 As an analysis of the potential for roof based solar PV in commercial establishments at a national level has not been taken up before, a new methodology had to be devised to make an assessment of the market potential and its viability.

3.74 To estimate the demand for roof based solar PV, an estimation has been made of the future commercial space (retail, office complexes and logistics installations) being developed in the country. This data has been obtained from secondary sources (Duestche Equity Research Paper and RREEF Research) and based on this input, assumptions made to identify the area on which solar PV can be implemented.


3.75 The cumulative area additions between 2006 and 2010 has been obtained from RREEF Research (RREEF Alternative Investments is the global alternative investment management business of Deutsche Bank’s Asset Management division) which came to 580 million square feet for offices, 130 million square feet for retail and 125 million square feet for logistics. For calculating figures for 2011 and 2012, a growth rate of 20% and 10% has been taken for office space in these years and for retail and logistics, a growth rate of 15% and 10% was assumed in these years. Based on the above assumptions and calculations, an area addition table has been generated (Table 20).

Table 20 – Addition in retail, office complexes and logistics installations in India upto 2012

Estimated development pipe line (million square feet)

2008 2009 2010 2011 2012

Office 112 157 204 245 270

Retail 45 63 76 87 96

Logistics 28 34 40 46 51

Source : Deutsche Bank’s Asset Management division

3.76 Certain assumptions were made to calculate the area on which solar PV can be implemented under all the above three heads. For retail and logistic areas being developed (primarily malls), it has been estimated that 25% of the total area would be available for roof based solar PV and of this, only 40% would be used for solar PV implemenation (PwC estimates). This assumption has been made on the basis that commercial complexes (malls) would have 4 stories and the total area of the mall would be spread across these four stories. Therefore the actual area of the roof would be only 25% of the total area of the mall.

3.77 For office space being developed, it has been estimated that 10% of the total area would be available (roof area) for roof based solar PV and of this 60% would be used for solar PV implementation (PwC estimates). Commercial complexes (office buildings) have been assumed to be 10 stories high and therefore have only 10% of the total area is available as roof area.

3.78 Based on information obtained through a primary survey from one of the solar PV equipment providers, it was assumed that for an area of 10 square meters a 1 kWp capacity solar PV system can be installed.

3.79 Table 21 highlights the prospective area used for roof based solar PV implementation. Based on the calculations shown below, the potential for roof based solar PV for future commercial space increases from 130 MW in 2008 to 286 MW in 2012.


Table 21 - Prospective area under roof based solar PV in India under the 3 focus sub-sectors between 2008 and 2012

Prospective area under roof based solar PV

Years 2008 2009 2010 2011 2012

Office (@6%) mn sq feet

7 9 12 15 16

Retail (@10%) mn sq feet

5 6 8 9 10

Logistics (@10%)

mn sq feet 3 3 4 5 5

Total (million square feet)

14 19 24 28 31

Total (square meters)

1,303,563

1,773,049

2,215,250

2,604,471

2,864,918

Roof based Solar PV Potential

(MW) 130 177 222 260 286

ISA-NMCC 2008 analysis based on Duestche Bank Report Data

Detailed analysis

3.80 The aim of this segment analysis is to examine the viability of solar PV as a source of clean power in large commercial buildings and as replacement for grid and diesel based backup power.

3.81 A model of a commericial complex in New Delhi was simulated using tariffs for grid as well as the cost of supplying backup power through a DG set.

3.82 The basic assumption made for the simulation is that the power generated would replace the conventional source(s) of power supplying electricity to the building. It has been assumed that a roof based system on a given day would function for 5.5 hours (average). The energy generated from this roof based system would displace a part of the energy being imported from the grid or being bought from local DG based energy suppliers in times of power outage.

3.83 Tariff for grid is the tariff charged by the utilities in Delhi for commercial buildings (Rs 4.92/kWh) and for diesel it is assumed as Rs 15.33/ kWh assuming a specific energy generation ratio (Units generated per liter of diesel consumption) of 3. The cost per unit includes fixed cost and variable cost.

3.84 For analyzing the viability of solar vis-à-vis the conventional sources of energy, the levelised cost of energy generation from solar for various panel costs (varying between Rs. 145/W and Rs. 60/W) and a 5.5 hours of generation has been calculated. This set of values of levelised cost of generation has been plotted against the panel cost on the graph.


3.85 At the same time, a scenario has been taken where of the 5.5 hours in which solar energy would be available, it would replace diesel based generator power for 1.5 hours and grid based power for 4 hours. Taking this scenario, the levelised cost of generation has been plotted for conventional power sources. The cost of grid based electricity has been assumed constant and the cost of diesel has been varied. Based on this variation (from Rs 32/litre), a spread of values of levelised cost of generation has been plotted.

3.86 The results of the both plots/analysis can be seen in Figure 35. The two curves show solar PV based generation to be even viable at present costs, i.e. solar PV at panel cost Rs 145/W, and, becoming more economical in the future when panel costs come down and diesel price increases. At the existing panel cost, the levelised cost of generation is Rs 7.78vii/ kWh, whereas the levelised cost of generation from conventional sources, with DG cost at Rs 40/litres is working out to Rs 10.1/ kWh.

Figure 35: Conventional v/s solar PV for roof top applications

Conventional VS Solar BIPV

4.084.45

4.825.19

5.56

6.036.5

6.997.47

7.78

11.4611.18

10.9110.6410.3710.1

9.829.55

9.289.01

3

4

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60 70 80 90 100 110 120 130 140 145

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Levelised Cost of Pow er Generated from Solar (Rs/kWh)

Levelised Cost of Pow er Generated from Grid/ Diesel (for 1.5 hours of back up) (Rs/kWh)



Conclusion

Rural electrification

3.87 The Government of India has kept a target of providing electricity for all by 2012 with a minimum consumption of 1 kW per day per household. As a part of this programme, the government has targeted electrification of 18,000 remote villages through non-conventional power sources.

3.88 Power deficiency in India and the need to enhance access of power to all at the lowest lifecycle cost provide an ideal situation for the large-scale introduction of DDG technologies, like solar, wind, biomass and small hydro.

3.89 Solar PV installations for rural electrification provide policy-makers the following advantages:

(i) located within short distances of the load centres

(ii) avoid the development of long transmission and distribution networks and also save large AT&C losses

(iii) savings in carbon emissions

(iv) allow local communities to meet their own energy needs locally

(v) highest solar irradiance in the world makes solar based DDG an attractive alternative

3.90 Although the relative economics of solar PV might not provide an ideal match for all villages just as yet, solar PV is ideal for villages separated from the grid by physical barriers.

3.91 Taking a conservative estimate of 25% or 4,500 villages out of the 18,000 villages classified as remote being electrified by solar means a demand of about 300 MW in the coming next 4-5 years.

Telecom

3.92 Most BTSs in India use DG sets for backup power that suffers from disadvantages, like high cost of fuel (diesel), fuel transportation and storage, fuel pilferage, pollution and fuel adulteration. This use is more frequent in semi-urban and rural areas with long and frequent power outages and old and unreliable distribution networks.


3.93 The use of solar PV for backup power applications in telecom provides operators the advantage of a lower lifecycle cost compared to a DG set. Based on estimates, the total potential of this market would be around 500 MW in the next 7-8 years (i.e. till 2015).

3.94 The telecom sector has the potential to provide a large and viable market for solar PV in the future with retail prices of diesel likely to move up and prices of solar PV panels likely to come down.

Roof based Building Integrated Solar PV

3.95 This segment provides an alternative for reducing the cost of power procured by commercial buildings and at the same time reducing the burden on local city grid.

3.96 Based on the analysis undertaken, solar PV can assist commercial building operators in saving as much as 22% per unit cost. This segment has the potential of adding upto 1,000 MW of capacity in the coming 5-6 years.


A4: ASSESSMENT OF POLICY SUPPORT MECHANISM AND BENCHMARKING OF GLOBAL SOLAR PV INDUSTRY

4.1 Favourable government policies have provided a big thrust to solar PV manufacturing and its deployment in countries like Germany, Japan and the USA. In this chapter, it is seen how the world leaders in solar PV industry have benefited immensely from the regulatory framework and incentive mechanisms developed by their respective governments.

4.2 The subsequent section provides a synthesised overview of the leading countries, i.e. Germany, Japan and the USA. The first section assesses the policy framework and support mechanism of each country. The second section dwells on the benchmarking framework which sets out to compare the respective PV policy framework with regards to the overall effectiveness, efficiency and achievement of the respective countries.

4.3 The process of benchmarking adopted as a part of this report was undertaken with the intention of identifying the global leaders in solar PV (policy, incentives, market development and industry growth) and mapping the process as well as the mechanisms used by these countries to promote solar. The learning from this chapter will provide a direction on initiatives to be taken by the Indian policy-makers and other stakeholders to make the Indian solar PV industry more competitive globally and responsive towards the needs of the Indian market.

Germany

Introduction and current status

4.4 Today, Germany is the world’s leading market for PV energy, housing almost 55% of the installed PV capacity worldwide and generating €3.8 billion through sales of PV equipment. The main reason for Germany’s leading position is its existing regulatory framework and incentive mechanism. This framework has facilitated the design of an innovative ‘Feed-in Tariff’ (FIT) structure, which in turn has created a ready-made market for solar PV manufacturing. In addition to tariff support, the Federal Government provides certain manufacturing incentives to promote production capacity within Germany.

4.5 Currently, solar PV accounts for a noteworthy share in the renewable energy portfolio in Germany. The estimated share of solar PV is 4% of the total renewable power generated, which itself is 14% of the total electricity consumption of Germany. Of the total generation of solar power in Germany, 91% is contributed by grid connected, whereas the remaining 9% is through off-grid systems.


4.6 Although solar PV is the most expensive mode of electricity generation and fails to compete not only with conventional sources of energy but also other renewable energy technologies, the Federal Government of Germany perceives it as a major source of energy for the future and has provided it the highest level of support.

Development of policy/regulatory framework

4.7 In 1991, the Electricity Feed-in Act was introduced with the key objective of mandating operators to accept RET based electricity fed into the grid and ensure preferential tariff for all RETs, including solar PV. This Act entailed a cap of 5% on RE purchase for local utilities.

4.8 However, this regulation had an asymmetric impact because at that time only the clusters of wind turbines were in a position to benefit most from this Act. Most of these turbines were located in Northern Germany, which again encouraged the development of the RE market in one part of Germany.

4.9 To facilitate investment in RE in other parts of Germany, the Federal Government launched a revised programme with an improved incentive scheme named ‘100,000 Rooftop - HTDP’ in 1997, which brought in a better financial support scheme for encouraging solar PV in the country.

4.10 In 2000, the Renewable Energy Act (Erneuerbare Energien-Gesetz, EEG) replaced the Electricity FIT. Under the new EEG, the cap on the share of electricity from RES was abolished and a new feed in tariff was introduced fixed for 20 years. The EEG pioneered an innovative tariff structure which recommended new installations to receive relatively low tariffs than previous years’ tariff. For example, the RE plant commissioned in 2008 would get a lower tariff rate than a plant commissioned in 2007.

4.11 The objective behind giving a lower feed in tariff every successive year was to create an environment where manufacturers systematically reduce production costs and offer more efficient products every year. The rate of digression was based on the technology progress ratios.

4.12 In the recent past, the RE Act 2000-EEG was amended in 2004. It has been the most important support instrument in the RE sector in Germany. This Act mandates utilities to purchase power from RE sources and ensures the investment security by guaranteed purchase at the specified FIT applied for next 20 years. In order to maintain the cost-price ratio (cost to be paid to developer and price to be charged from consumers), the grid operator may pass the excess cost on to the consumer.

4.13 The following figure shows the phased development approach of solar PV market in Germany:


Figure 36: Development of solar PV in Germany

Source: ISA- NMCC 2008 Research

National support programme: current policy framework

4.14 In Germany, the Federal Ministry for the Environment, Nature, Conservation and Nuclear Safety (BMU) is responsible for the promotion of the solar PV programme. Presently, the Federal Government is actively implementing the support programmes across the value chain, i.e. promoting R&D programmes, designing and developing favourable policies for manufacturing and promoting the use of solar PV for domestic and industrial applications.

4.15 In addition to the federal programmes, state-level public funds are allocated according to a region’s level of economic development. The PV support programmes receive differing levels of incentives in different regions. For example, East Germany is given comprehensive support to bridge its gap between other more developed regions of Europe. It gets support to maintain and expand its economic competitiveness and employment prospects. This has made East Germany an attractive destination for solar PV manufacturing in Germany.

Incentives for R&D programme

4.16 The government is implementing the fifth energy research programme called ‘Innovation and New Energy Technologies’ for R&D support to various RE


technologies. As of now, this programme is valid till 2008, but can be extended if required.

4.17 A large part of the funding is committed to R&D in the solar PV sector. Following are the key research agenda/themes that various institutes are undertaking:

(i) R&D on silicon feedstock and wafer technology – Focus is especially on the production of polysilicon, reduced material consumption and the development of new cell and module concepts.

(ii) Advancement of thin film technologies – This programme emphasises on the transfer of concepts and processes into an industrial environment, optimisation of processes considering reduction of cost and investigation of degradation processes aiming for long-term stable structures.

(iii) R&D on alternative concepts, which are both suitable for power applications and feasible for industrial production.

(iv) Cost-cutting issues, like enhancement of the lifetime of all system components, avoiding materials that are harmful to the environment, a reduction in energy usage in production and recycling.

4.18 Additionally, there are other sources for the support for R&D in solar PV. The Federal Ministry of Education and Research (BMBF) is currently supporting R&D work through ‘Energy 2020+’ for the support of RE related networks.

Incentives for manufacturing

4.19 Germany has an ‘Industry Investment Incentive Scheme’ for the manufacturing industry, which is common for all industrial sectors, including solar PV equipment manufacturing, i.e. production of polysilicon, manufacturing of solar wafer/cells and panels/modules. This investment incentive framework is in accordance with guidelines set down by the European Union (EU). It has been further classified into certain geographical areas eligible for incentives by the German Federal Government.

4.20 These incentives are in the form of cash subsidy on direct investment cost and incentives towards direct and indirect taxes. Irrespective of the origin of the investor’s country, the range of capital subsidy lies between 10% and 15% largely depending on the size of the industry and the investing company and the nature of the industry.


4.21 Within Germany, the eastern region has some of the highest incentive levels as this region is economically less developed than regions in western Germany. In addition to investment incentives, labour related incentives and R&D incentives are available throughout the country.

4.22 Incentives in the solar PV manufacturing sector – The main instrument to lower direct investment cost is in the form of direct investment grants. Additionally, East Germany offers investment allowances. The availability and volume of investment grants and allowances varies from project to project. Broadly, these investment incentives are categorised as:

(i) Investment grant – Investment grants are available in capital subsidy form and targets at lowering direct investment.

(ii) Investment allowance -- Only available in East Germany, these are targeted at lowering operational costs so as to make it more attractive to invest here.

Investment grants

4.23 Investment grants are cash subsidies or refunds, which have to be applied for before the actual investment project starts.

4.24 In East Germany, the incentive volumes are the highest as they offer subsidies of up to 30% for large companies, 40% for medium-sized, and 50% for small companies. In West Germany, the incentives are relatively low. Large companies can receive subsidy up to 15%, medium-sized companies 25%, and small companies 35%.

(i) Eligible incentive volume depends on the number of unemployed manpower employed by the proposed investment. Investment grants can be calculated from either capital expenditure, including tangible and intangible assets, or labour costs. Tangible assets are fully eligible except land, vehicles and used assets. Intangible goods can account up to 50% of the eligible project cost.

4.25 Germany has laid down certain criteria to define the size of a company:

Table 22: Size allocation pattern of industries in Germany

Enterprise category Headcount Annual revenue Annual balance sheet

Large sized >250 >= € 50 million >= € 43 million

Medium sized <250 and >50 <= € 50 million <= € 43 million

Small sized <50 <= € 10 million <= € 10 million



4.26 To benefit from the investment grants scheme, the investment project must create long-term employment that has to be retained for at least five years after the grant has been released.

Investment allowance

4.27 This incentive scheme is available only for projects in East Germany, including Berlin. Usually, it is a tax-free cash payment but can also be allotted in the form of a tax credit. The investment allowance can be combined with the investment grant but must not exceed the maximum allowed incentive level of the region.

4.28 Large companies can receive assistance of up to 12.5% of their purchase or production costs for new depreciable equipment and for new buildings purchased or erected through the end of 2009. Small and medium sized companies can receive up to 25% of the cost incurred for the purchase of new depreciable equipment. Under the investment allowance, land, intangibles, vehicles or used assets cannot be subsidised.

4.29 As the investment allowance is a tool to support East Germany in its development, all equipment financed through the investment allowance must remain in East Germany for at least five years after the investment project has been completed.

Investment incentive package – loans and guarantees

4.30 In addition to investment allowances and grants, Germany promotes solar PV industry through low interest loans and guarantees. The following figure summarises the investment incentive package designed for loans and guarantees:


Figure 37: Highlights of financial assistance in Germany


4.31 At the national level, the German Bank for Reconstruction (KfW) fosters investments in this industry through a variety of loan programmes that are especially tailored for start-ups and Small and Medium Enterprises (SMEs). Application is made at the investor’s primary banking institution in Germany.

4.32 The bank’s two most important loan and capital programmes are:

(i) Entrepreneur loan

– Available to companies of all sizes (if the company is mainly privately owned and has a turnover less than €500 million)

– Maximum loan amount is €10 million

– Available to finance property, buildings, machines, facilities, equipment and construction projects

– Financing share is 100% of the eligible expenses


– Interest rates below market conditions, fixed for 10 years with a redemption-free grace period of up to 3 years

– May be combined with other KfW-programmes and additional public funding

(ii) Entrepreneur capital

– Is offered mainly to start-ups and young companies as a subordinated loan

– Maximum loan amount is €500,000

– Financing is available for property and buildings as well as fixtures, fittings, and tools for facilities

– Subordinate capital may not exceed 40% of company assets

– A loan with a 15-year term has a fixed interest rate for the first 10 years

– Capital is available in full for 7 years before repayment begins

– For small and young companies, interest rates are subsidized out of the ERP special fund

– For start-ups, loans can be combined with other types of public funding

Other loan programmes of state development banks

4.33 At the state level in Germany, most development banks have their own loan programmes based on the KfW entrepreneur loan programme, with lowered interest rates @ 5-6%, which are 2-4% below market rates.

4.34 Additionally, many of the state development banks offer reduced interest rates, depending on criteria, such as location, company size or technological focus. They are targeted especially at SMEs investing in a particular state.

4.35 The maximum credit amount varies from €750,000 to €10 million. Financing is generally available for property, buildings, machines, plants, and equipment.

4.36 Application is made through the investor’s primary banking institution in Germany to the respective state development bank. Reduced interest loans can usually be combined with other public funding.


Incentives for solar PV applications

4.37 The Government has executed the ‘National Rooftops Solar Electricity Programme - Solarstrom Erzeugen - Solar Power Generation’ that provides soft loans for grid connected PV systems.

4.38 At present, solar electricity is guaranteed by the largest financial support per kilowatt hour (kWh) among all Renewable Energy Technologies (RETs) in Germany.

4.39 Planning procedures for smaller-scale PV installations (≤5 kWp) are fairly straightforward; for larger-scale projects (above 500 kWp), the procedures only differ considerably if the system is installed on the ground (rather than on the roof top).

Financial support mechanism for solar PV application

4.40 The EEG introduced FIT specifying an attractive fixed price set by the Federal Government for electricity generation from solar based applications. The tariff is guaranteed for a period of 20 years from the end of the year in which an installation is commissioned. This incentive scheme focuses on generation rather than only installation as it follows a performance based incentive mechanism.

(i) Broadly, to achieve its RE goal and to encourage the development and adoption of RE technologies, Germany offers a feed-in tariff of 54.5 € cents/kWh for solar PV for 20 years, reducing 5% per year. Moreover, there is no effective cap on this programme. This rate, if compared to the average domestic prices offered since 1998, is very attractive. Domestic electricity tariffs have been fluctuating between 17 € cents/kWh and 21 € cents/kWh between 1998 and 2007. FITs for solar PV are much more attractive and are making solar PV systems viable for most consumers.


Figure 38: Domestic tariff and its break-up between 1998 and 2007

Average domestic power prices

0

5

10

15

20

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

€ct/kW

h

production Transmission and Distribution Community taxes CHP levy Renewable Lavy Electricity Taxes VAT


4.41 At the same time, it is obligatory for a utility/grid operator to connect PV installation to the grid and purchase electricity through renewable sources in priority to conventional electricity.

4.42 The applicable tariff depends upon the capacity and the location of the PV installation, as may be seen in the table below:-

Table 23: German feed-in-tariff (€/MWh)

Price of energy (€/MWh) for FY 2008 Type/capacity

≤ 30kWp >30 kWp & ≤100 kWp > 100 kWp

Roof top installation 467.5 444.8 439.90

Facades 542 494.8 489.9

Ground mounted installation 354.9 354.9 354.9


4.43 The tariff is subject to an annual digression of 5% for new roof tops and façade installations and 6.5% for new ground mounted installations.

4.44 To date, Germany has achieved more than the targeted installed capacity, hence a few amendments to the EEG have been made in the annual tariff digression rate as of 2009. The following table illustrates future digression rates:

Table 24: Future digression rates for feed-in-tariff in Germany

2008 2009 2010 2011

Roof top < 100 kWp 5% 8% 8% 9%

Roof top > 100 kWp 5% 10% 10% 9%

Ground mounted 6.5% 10% 10% 9%

No more bonus for façade integrated systems


4.45 As pointed out above, Germany has achieved a lot more than what it had


targeted. Going by the cost projections for 2020, it is estimated that the feed in tariff of ground mounted solar PV systems would equal grid electricity rates by 2012 (assuming an escalation of 3% YoY) and the feed-in tariff of the solar roof top systems with a capacity of less than 3 kW would equal grid electricity rates by 2017. The large built-up capacity along with falling costs of solar PV due to large-scale manufacturing and efficiency enhancements aided by a conducive policy environment have meant that solar PV systems would be highly competitive in the future in Germany.

Figure 39: Solar FIT and electricity rates in Germany

Solar FIT and Electricity Rates in Germany

25

15

31

55

35

45

19

28

40

19 22

25

0

10

20

30

40

50

60

2005 2010 2015 2020

€c

t/k

Wh

<3kWh Solar Feed in Tariff (-5% a) Ground Mounted Electiricy Rates (+3% a)


Other incentive regime

4.46 Other support mechanisms include cheaper interest rate on loan, investment cost subsidies and tax relief to end users of solar PV.

(i) For investment over € 50,000, various loan schemes are available such as ERP (Environmental Result Programme), Environmental Protection & Energy Saving (EPES) Programme and the kfW Environmental Protection Programme. These schemes are accessible at low interest rates of 5.5-6.0% p.a., corresponding to 50-70% of the total investment.

Implication of solar PV policy framework

Industry status

4.47 The German PV industry has experienced strong growth in manufacturing. Despite the fact that the production cost is higher than developing countries


like China and Malaysia, the range of companies dealing with PV is expanding along the entire value chain in Germany. The capacity of thin film production facilities is expected to grow significantly in the near future, taking advantage of the current global silicon supply shortage.

4.48 Wafer production capacity: The total production of wafer in Germany was 415 MW in 2007. At present, although there are 6 companies manufacturing wafers, 90% of the total production comes from 3 companies. The main supplier of silicon wafers is Deutsche Solar AG in Freiberg with a production capacity of approximately 250 MW of mono and multi-crystalline wafers. Besides Deutsche Solar, there are two other wafer manufacturers: PV Silicon at Erfurt and ASI at Arnstadt, which together produced 125 MW in 2007.

4.49 A substantial production capacity of around 1300 MW is also expected to be installed by the end of 2008.

4.50 Solar cell production: cell production in Germany has shown steady growth. Starting from 58 MW in 2002, it reached 700 MW in 2007 and is expected to touch 500-600 MW by the end of 2008. Currently, 9 companies are engaged in solar cell production.

4.51 Production of solar modules: Growth pattern of the solar modules is largely similar to that of cell production. After assembling 40 MW in 2002, the output of modules reached 680 MW in 2007. Because of the ongoing strong demand for modules, many manufacturers are aiming for further production extensions.

4.52 Thin film technologies: In addition to the c-Si activity, there is an increasing number of companies investing in thin film production lines. In 2007, the cumulative production was around 92 MW, comprising of CIS and CdTe. This is a remarkable increase in thin film production when compared to the previous years, which was only 10 MW. In the coming years, further growth is expected in thin films based production. During the year 2008, Germany expects more than 250 MW of thin film production capacity.

4.53 The German PV industry is not only a fast growing industry, but it has also offered innovative products along the whole value chain. There are 44 companies engaged in solar PV manufacturing. Moreover, there are around 10,000 companies engaged in solar PV business, employing 40,000 workers and achieving a turnover of €3.8 billion annually.

Market development

4.54 In past one decade, Germany has significantly accelerated the installation of grid-connected PV systems. Till the end of 2007, the country had achieved a cumulative capacity of 3,848 MW. In addition, there is a stable and steadily


growing request for standalone systems.

4.55 The following figure shows annual growth of solar PV sector in Germany:

Figure 40: Annual installed solar PV capacity in Germany

3 3 3 3 4 7 12 10 1240

78 80

150

600

850 850

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Annual Installed Power Capacity ( in MWp)

1000 Roof Top Programme

100,000 Roof Top Programme

Feed-in Law

New Feed-in Law

3 3 3 3 4 7 12 10 1240

78 80

150

600

850 850

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Annual Installed Power Capacity ( in MWp)

1000 Roof Top Programme

100,000 Roof Top Programme

Feed-in Law

New Feed-in Law


Lessons learnt from Germany

4.56 Germany's grand success in RE industry, especially in solar PV, is due to the favourable policy and regulatory framework adopted by Germany’s lawmakers in response to the country’s rising environmental consciousness.

4.57 Germany has used a balanced strategy to promote solar PV by incentivising manufacturing as well as its applications.

4.58 Germany’s flagship programme for the promotion of solar has been the FIT mechanism. FIT has seen huge success and is generally regarded as the best example of policy intervention and solely credited for the development of solar PV in Germany.

4.59 FIT has accomplished the target for which it was introduced, i.e. to stimulate initial demand and make PV technology economically viable for consumers. FIT’s success lies in the fact that it provides investment guarantees, including access to the grid and a preferential tariff which covers the excess costs associated with solar electricity production. Also, it guarantees a fixed tariff for 20 years. Thus, the tariff structure is one of the key success factors that


have turned Germany’s solar PV industry into the world’s most successful business model in solar PV.

4.60 The demand created by FIT has been effectively leveraged for developing a domestic manufacturing base and providing more focus on R&D. This, in turn, has resulted in a reduction of cost through economies of scale and technology intervention.

4.61 The following figure illustrates Germany’s market entry strategy which can be replicated by any other country:

Figure 41: FIT mechanism for solar PV success in Germany


Japan

Introduction

4.62 Japan is the one of the largest economies in the world, the third largest oil consumer and the second largest net importer of oil in the world. Over the past 2 decades, Japan has also emerged as a global leader in the development of environment friendly technologies, especially RE technologies, such as solar PV.

4.63 Japan is a world leader in the production, export and application of PV cells, modules and systems. Till 2006, Japan was the largest producer of solar PV cells and modules, and was among the top three in polysilicon and thin films production. It lost its top position in solar cell and module production in 2007 to China. But it is the second largest solar PV cell producer and third largest solar PV user globally. This position has been achieved through a combination of market development initiatives in tandem with the expansion of an industrial base for the manufacturing of solar PV technologies.


4.64 To stimulate market demand, Japan used a series of national programmes (1994-2006) which created demand for solar PV. Japan also invested in production and R&D, which coupled with scale (due to a pull in the market), led to a drastic reduction in the cost of solar PV and a substantial increase in installed capacity (31 MW in 1994 to 1,900 MW in 2007).

Development of policy and regulatory framework

4.65 No other country (besides Germany and Spain on the market side) has promoted solar PV in the same manner as Japan. Through a combination of research programmes (‘New Sunshine Project’ started in 1993) and incentive programmes (‘Residential PV System Dissemination Programme’ launched in 1997 and its predecessor ‘Residential PV System Monitoring Programme’ launched in 1994), Japan has been able to build a large and vibrant domestic market.

4.66 Simultaneously, Japan’s focus on mass production has contributed to cost reduction in the PV system (from 2,000,000 Yen per kW in 1994 to 67,000 Yen per kW in 2007) and huge capacity addition, making Japan one of the largest manufacturers of solar PV components.

4.67 The Japanese Ministry for Economy, Trade, and Industry (METI) has played a crucial role in the development of the solar PV industry. Solar PV received a major thrust after the first oil crisis in the 1970s when METI was mandated to develop new energy options and policies to reduce Japan’s dependence on import of oil.

4.68 Japan launched the ‘Sunshine Project’ in 1974 to encourage new and non-conventional energy sources. Solar PV was not included as part of this project but was made a part of the subsequent ‘Moonshine Project’. In 1993, METI launched the ‘New Sunshine Project’ which merged the R&D programme for environmental technologies with the old ‘Moonshine Project’.

4.69 In 2001, the ‘Advanced PV Generation Programme’ was launched and the targets for the solar PV industry were revised and expanded to cover scenarios up to 2030. Under this scenario planning, METI estimated that RE sources would account for 10% of Japan’s total energy needs by 2030 and of this 80% would come from solar PV. NEDO (New Energy and Industrial Technology Development Organisation) then set a target of 4.8 GW and 100 GW of installed capacity by 2010 and 2030, respectively.

4.70 Japan’s focus on RE led to the adoption of the ‘New Energy Law’ in 2007. This law lays down the responsibilities of all the major players, like the government, local authorities, energy consumers, energy suppliers and manufacturers of energy equipment in the promotion of renewable energy.


4.71 Other laws, such as the ‘Special Measures Law’ (focusing on use of new and renewable energy by utilities), and the ‘RE Portfolio Standard (RPS) Law’, which obligates energy suppliers to use a certain amount of electricity generated from new and RE sources, have also provided a much needed boost to the RE market in Japan.

4.72 The following figure illustrates some of the promotional programmes implemented by METI:

Figure 42: Highlights of the promotion programmes by METI


National support programme


4.73 The Government of Japan is presently promoting R&D for solar PV through two projects, which are being executed under the ‘4-Year Plan for Photovoltaic Power Generation Technology Research and Development (FY2006 - FY2009)’:

(i) R&D for next generation PV systems and

(ii) Development of PV systems technology for mass deployment, phase II


4.74 R&D for next generation PV systems: This project aims at developing incumbent and future solar PV technologies with the target of achieving a cost of 14 JPY/kWh by 2020 and 7 JPY/kWh in 2030. Technological development of 5 types of solar cells is being conducted with the aim of obtaining higher conversion efficiency, cost reduction and improvement in durability. Parallel to this focus area, fundamental research sub-projects for the development of ultra-high efficiency solar cells using quantum dot nanostructure and other technologies is also being funded under this project.

4.75 Development of PV systems technology for mass deployment, phase II: This programme aims at developing technological infrastructure for supporting extensive utilisation and mass deployment of PV systems. Under this project, research studies are being undertaken to develop technologies to improve performance and reliability of PV cell/module.

Incentives for solar PV application

4.76 For solar PV applications, two major programmes are currently being undertaken in Japan:

(i) Project for promoting local introduction of new energy: with the aim of accelerating the introduction of new and renewable energy in local areas through support to projects (valid for PV systems with 10 kW of output capacity) and awareness generation.

(ii) Project for supporting new energy operators: aims to support private institutions installing new and renewable energy with a subsidy of one-third of the installation cost and guarantee of 90% of the debt for systems having a minimum 50 kW capacity.

Residential PV system dissemination programme

4.77 The National Energy Framework in Japan recognises solar PV as an environment friendly energy supply source and has for sustainable growth advocated its promotion through the use of market based mechanisms rather than government hand holding. To stimulate the industry and make it more market driven, the policy-makers of Japan focussed on the residential market for demand creation, which in turn, would stimulate supply as well as cost reduction.

4.78 Under this overall framework, the ‘Monitoring programme for residential PV systems’ was launched and implemented between 1994 and 1996. Under this programme, the government provided a subsidy of up to 50% of the installation cost of the systems. This resulted in a four-fold increase in the number of consumers and a reduction in the cost of the systems.


4.79 After the success of the first programme, the ‘Programme for the development of the infrastructure for the introduction of residential PV systems’ was launched in 1997. Though the budget for the programme was increased, the per unit (system) subsidy decreased due to a reduction in the cost of the systems.

4.80 The following figure highlights the impact of the residential PV systems programme on the advancement of this technology as well as the changes in the prices of these systems. The biggest challenge facing Japan in solar PV today is the slackening demand after the removal of the subsidies in 2006. The removal of subsidies has had a significant impact on installations and is the major factor in the slowdown in the Japanese solar PV installation market. From the trends in figure below, it can be seen that the number of household installations increased with the subsidy, and after 2005 installations have fallen due to subsidy withdrawal.

Figure 43: development of Solar PV industry in Japan Source: JPEA


Secondary factors

4.81 To aid and promote this programme, 136 local governments also initiated their own subsidy programmes and a number of financial institutions offered low cost finance. For example, Sumitomo Trust & Banking Co. Ltd. offered loans at 1-2% below the market rate for solar installations in Sekisui and Kubota. What made these mortgages more attractive was that these did not apply to only the cost of the solar PV system but the entire mortgage for the house. In other cases, banks such as Ogaki Kyouritsu Bank, offered loans without any collateral for solar PV retrofits making these installations more attractive.

Renewable Portfolio Standard (RPS) Law

4.82 The DIET (Japanese Parliament) in 2002 passed the RE Portfolio Standard (RPS) Law, also known as the Law Concerning the Use of New Energy by Electric Utilities, to promote the adoption and use of new energy sources. This law was subsequently implemented in 2003 and electricity utilities have since then been given annual targets for each for the six RE technologies covered under this law.

Reintroduction of subsidies

Japan had phased out its subsidies in 2006, with the aim of making the solar PV market self-sufficient. However, the domestic solar power demand has fallen substantially after the subsidies were withdrawn in March 2006, which in turn, impacted Japan’s solar equipment manufacturers’ ability to invest in research and expand abroad as well as in Japan. The METI is planning to reintroduce subsidies on solar power equipment in 2009 to help generate demand until technological innovation brings down prices. METI has estimated that a 3 kW solar PV system costs 2.3 million yen (US$ 21,330) to install of which in 2006 the government provided a subsidy of 60,000 yen making these systems more attractive. Reduction in subsidy has impacted installations and provided a setback to Japan’s goals of integrating solar PV as the biggest contributor of solar PV by 2030. The Japanese Prime Minister had also targeted a long-term goal of cutting greenhouse gas emissions by 60-80% from current levels by 2050. To achieve this goal, the government is targeting the installation of solar PV systems in more than 70% of newly built houses by 2020.

Implication of solar PV industrial development

Industry status

4.83 The production of solar cells has grown substantially in recent years and Japanese companies have been at the forefront of addressing this demand. Today, Japanese manufacturers are among the top 5 global manufacturers


and are responsible for a large proportion of globally installed production capacity. The figure below highlights the changing production capacity across the globe between 2002 and 2007. It can be seen from the figure that Japan had been the largest producer of solar PV cells for the past 4 years but lost its position to China in 2007.

Figure 44: Global solar PV cell production (2002-2007)

0

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800

1000

1200

2001 2002 2003 2004 2005 2006 2007

Ca

pa

cit

y in

MW

Japan Europe China Taiwan US


4.84 Japan's Sharp, Sanyo Electric, Kyocera and Mitsubishi Electric are the dominant players in the market.

4.85 Due to its technical know-how, Japan has been at the forefront of polysilicon production along with countries, like the USA and Germany. Of the 7 large producers of polysilicon, 3 (Sumitomo, Mitsubishi and Tokuyama) are based out of Japan and have a combined market share of close to 13%.

4.86 In crystalline ingot manufacturing, Kawasaki/JFE with a current capacity of 170 MW is one of the biggest global players and in solar PV cell production. Japan's Sharp, Sanyo Electric, Kyocera and Mitsubishi Electric are among the top 10 producers globally.

4.87 Japan and the USA have a focus on thin films rather than c-Si, with Japan being the second largest producer of thin films globally.

4.88 Kaneka and Mitsubishi Heavy Industries were the third and fourth largest thin film producers in 2007 with a cumulative production of almost 80 MW.

4.89 Thin films are expected to take up 30% of the market share by 2010 and most manufacturers are making investments in thin film technologies. According to NREL, thin film production is likely to touch 3,700 MW by 2010, out of


which the USA with a capacity of 1,300 MW and Japan with a capacity of 1,100 MW would be the largest players.

4.90 Besides support from the government in manufacturing and design of market development programmes, the factor that has contributed to Japan’s emergence as one of the largest players is a well-established supply chain for solar PV products as well as Balance of System Components.

Technology development

4.91 Japan initiated R&D in PV based power generation under the ‘Sunshine Project’ in 1974. Thirty-five years on, Japan is now among the global leaders in both PV production and installed capacity. To complement the ‘Sunshine Project’ launched in 1974, Japan also launched short-term R&D projects using the seeds-driven approach and the focus of these R&D efforts was revised every 4-5 years.

4.92 Taking a lead from EU and the USA, which had established PV R&D roadmaps and to counter the threat posed by emerging Asian countries like India and China, Japan in 2004 decided to develop a long-term R&D strategy and roadmap with the aim of securing and maintaining global competitiveness through technological advancement.

4.93 An investigative committee was formed to study and formulate the ‘PV Roadmap toward 2030 (PV2030)’. The aim of the roadmap is to shift from the existing ‘seeds-driven R&D’ to ‘market-driven R&D’ and make PV competitive with other energy resources by 2030.

4.94 The main targets for the Japanese PV industry as kept by the vision document are:

(i) Achieving costs of 23Y/W by 2010, 14 Y/W by 2020 and 7 Y/W by 2030.

(ii) For 2010 target, Japan is looking at high deployment of bulk silicon and thin film silicon cells, i.e. using scale to bring down the cost.

(iii) For 2020 target, Japan is looking at the design and deployment of very thin multi junction cells and next generation cells using new designs and materials, like dye sensitised cells.

4.95 To meet these targets, the Japanese Government plans to move future PV R&D efforts from national government directed R&D to full-scale PV system market creation R&D based on collaboration among academic, business and governmental circles. Under this approach, the Japanese


Government will focus on high risk R&D required for technology development and the establishment of infrastructure. The responsibility for actual R&D for practical applications will be with the industry.

4.96 To attain the goals set for 2030, the Japanese industry and research institutions shall have to bring about drastic improvements in solar cell performance, manufacturing processes and system integration.

Lessons from Japan solar PV industry

4.97 In the past decade, Japan has emerged as the dominant player on the global solar PV market. Its manufacturing companies have dominated global production and its market development programmes have thrown up a number of important lessons for developing countries on how to develop their indigenous solar PV industries. Based on the mapping of the Japanese solar PV industry, the following main lessons need to be highlighted:

(i) Japan has been very consistent in designing and developing a programme for sustainable use of energy. For Japan, its future sustainable energy adoption strategy is focussed heavily on solar PV.

(ii) Japan’s solar PV sector development was the responsibility of METI, which in turn, designed and implemented all programmes with the assistance of NEDO. Therefore, there was one central ministry responsible for the development of industries. METI was given the resources, responsibility as well as the powers to implement the programme, which included complete control over Japan’s solar PV manufacturers (and also included control over management and disclosures in some cases).

(iii) Japan has over the years successfully established future targets and goals for the solar PV industry and has been successful in achieving these targets/goals. METI and Japan are now looking to the future and have extended its PV vision till 2030 with ambitious targets/goals that have been documented earlier.

(iv) One area where Japan stands out globally is its expertise in solar PV technology and its applications. The development of this expertise has been the result of a very strong R&D focus in METI’s programmes as well as within the Japanese solar PV industry.

(v) Another area of success is the focus among Japanese policy-makers on balancing demand and supply. On the demand side, Japan targeted the largest possible consumer group, i.e. the


residential sector, and provided it the incentives (subsidy, net metering, access to easy finance, etc) to purchase and install solar PV systems. On the supply side, METI worked with the solar PV industry to reduce costs. This approach is in contrast with the USA and Germany, which are predominantly demand focussed. Japan also focused on the global market for export of solar PV systems and thus, developed an export strategy for the same.

United States of America

Introduction

4.98 The United States of America was one of the early movers in the production and use of solar PV globally. However in the previous decade, the USA solar industry has been overshadowed, first by Japan and now by Europe (particularly Germany). The industry is already facing a much larger challenge in the form of competition from China and Taiwan.

4.99 The USA market has huge potential for solar as over 70% of the electricity being generated in the country is from fossil fuels. The contribution of RE and solar PV to the overall energy mix of the country in the past 5 years has improved but only marginally. The contribution of solar PV has been growing slowly but steadily (up at 0.84% in 2007 from 0.65% in 2003); it is still a miniscule contribution. The state of RE contribution is also the same with RE contribution being just 6.3% in 2003, which in turn, has not shown any change in 2007 when it stood at 6.75%.

The USA solar PV market

4.100 Although the USA market is the fourth largest market globally, the solar PV market development there is confined to only a few states. States such as California, New Jersey, Colorado and Arizona have been proactive and have taken the lead in developing solar PV markets in their states using incentives and favourable policies. The rest of the USA is still to catch up with these states due to limited Federal Government support for solar and slow progress in implementing incentive programmes in laggard states.

4.101 Incidentally, California has towered over all the other states like a Goliath in the USA. In 2006, California was the third largest generator of solar energy globally after Germany and Japan. It had installed within its state boundaries 62% of the cumulative capacity of the United States. This share comes down in 2007 to 57% after the development of some large-scale projects in Colorado and Nevada.


Market development

4.102 The figure below highlights the annual and cumulative capacity addition in the USA market from 2003 to 2007. As is evident from the figure, the PV market has had a high growth rate over the past 8 years, with a compounded annual growth rate of over 50%. While the USA still lags significantly behind Europe (Germany has nearly 3850 MW installed), it is still a high growth market. This, in turn, could take a higher growth trajectory if the US Federal Government decides to focus on solar.

Figure 45: Annual and cumulative capacity addition in the USA market (2003-2007)

196

138

6688

108

1022 20

30

58

0

50

100

150

200

250

2003 2004 2005 2006 2007

Ca

pa

cit

y i

n M

W

Cumulative Capacity Capacity addition


Development of policy and regulatory framework

4.103 In the USA, the incentive framework for solar PV is fairly complex with incentives being available at the federal as well as the state level. The growth till now (in the solar PV industry) has been due to state-level incentive programmes. More than 30 states have a set of incentives comprising a reduction in corporate and sales tax, flexible loans, higher feed-in tariffs etc.

4.104 The overall strategy of such state programmes is to encourage PV system cost reductions through an increase in manufacturing volume and lowering of transaction costs through the development of local market infrastructure. This is expected to result in progressively lower level of public support requirement.

4.105 A wide range of incentives are available for different constituents of the solar PV industry, i.e. R&D related incentives towards technology improvement, production incentives for solar PV component manufacturing and generation linked incentives for solar PV deployment, but these vary from state to state.


4.106 While federal incentives are common across all the states, the volume and availability of state-level incentives varies from state to state. The following table briefly illustrates the incentive structure:

Figure 46: Major incentives at the federal and state level


National/federal programmes


4.107 Though there are no committed programmes undertaken by the Federal Government, different states have a number of programmes towards the promotion of R&D work in solar PV.

Incentives for manufacturing

4.108 Incentives for manufacturing at the state-level are similar to the incentive structure for manufacturing programmes at the federal level.

Incentives for solar PV application

4.109 The Federal RE Production Incentive (REPI) programme provides incentive payments for electricity produced and sold by new qualifying RE facilities to utility. Qualifying systems are eligible for annual incentive payments of US$ 1.5 per kWh for the first 10-year period of their operation.


4.110 REPI complements the Energy Policy Act of 1992, which provides tax incentives to certain private sector entities for certain types of new RE facilities. Furthermore, the Energy Policy Act of 2005 allows businesses to claim Investment Tax Credits (ITCs) for eligible solar energy assets, including equipment that uses solar energy to generate electricity.

4.111 Besides REPI, some of the other key incentive programmes available for the promotion of solar PV in USA are:

(a) Residential solar tax credit

(i) The Federal Government provides ‘Residential Energy Credits’ for tax saving. The federal tax credits for home energy-efficiency improvements entitles home owners for a 30% tax credit up to US$ 2,000 for the purchase and installation of residential solar electric and solar water heating system. If the federal tax credit exceeds tax liability, the excess amount may be carried forward to the succeeding taxable year.

(b) Corporate:

(i) Business energy tax credit: Business energy tax credit enables developers to claim a 30% tax waiver on expenditure for solar PV technology and solar hybrid lighting

(ii) Modified Accelerated Cost-Recovery System (MACRS) and bonus depreciation: Under the federal Modified Accelerated Cost-Recovery System (MACRS), businesses may recover investments in certain properties through bonus depreciation deductions. MACRS allows a project with a recovery period of 20 years or less to deduct (through bonus deduction) 50% of the value of the cost in 2008 and the remaining 50% is depreciated under the ordinary depreciation schedule.

(c) Clean Renewable Energy Bonds (CREBs):

(i) The Federal Energy Tax Incentive Act of 2005 offers ‘Clean Energy Renewable Bonds’ (CREBs) as a financing mechanism for public sector RE projects. CREBs may be issued by electric cooperatives, government entities (states, cities, counties, territories or any political subdivision thereof), and certain lenders. CREBs are issued with a 0% interest rate and allow the bondholder to receive federal tax credits in lieu of the traditional bond interest.

(d) State incentive programmes


4.112 Different states have a variety of incentive programmes covering various incentives for the solar PV industry. Although most states offer a similar nature of incentives, the quantum of incentives differs from state to state.

4.113 Presently, more than 13 states have devised RE policies and 25 states have RE mandates. Almost all of the states offer some form of incentive for the promotion of RE and solar PV. Figure 47 highlights the different mechanisms that have been used in the USA for promoting solar PV installation and production as well as the number of states following these mechanisms. The most popular form of incentive is a rebate for solar PV installation which has been adopted by 42 states and the least popular among the mechanisms used is bonds, with only 5 states using it.

Figure 47: Number of states offering different incentives for solar PV promotion

33

26

42

33

24

24

21275

19

Personal Tax Corporate Tax Sales TaxProperty Tax Rebates Investment GrantsLoans Industry Support Bonds Production Incentives

Source: DoE, USA

4.114 Some of the main states that have implemented their own incentives and subsidy programmes to help advance the development of solar energy applications are Arizona, California, Illinois, Massachusetts, New Jersey, NY, and Oregon.

4.115 In the USA, the state of California has taken a pioneering role in the development and roll-out of RE. This includes setting ambitious targets and framing innovative and advanced policy framework to achieve them, backing these targets with adequate fiscal and non-fiscal incentives and taking a very proactive role in the monitoring of the programme.

4.116 Today in the USA, the state of California has progressed further than the Federal Government in pioneering the implementation of sustainable energy solutions. As a result, most states are now in the process of following California’s example and have started using California as a benchmark for


future renewable and solar PV market development.

4.117 Tables 25, 26 and 27 highlight some of the incentive programmes being implemented by 3 proactive states (California, Texas and New Jersey) for the encouragement of solar PV. One of the main highlights of these state incentives is that they differ from state to state and each state has identified specific areas which they need to focus on.

4.118 Table 28 highlights the incentive mechanisms followed by the federal as well as state governments in the USA.

___________________________________________________________________________________________________________ Study on Solar Photovoltaic Industry: ISA-NMCC 2008 124

Table 25: California - main incentives for solar PV

California - Main Incentives for Solar PV

S. No

Type of incentive Applicable

technologies Quantum Description

1 Production incentive

Solar thermal, photovoltaics, wind, biomass, geothermal small hydroelectric, tidal energy, wave energy

Based on the CPUC’s market price and adjusted for time-of-use factors.

The feed-in tariff allows eligible customer/generators to enter into 10, 15, or 20 year standard contracts with their utilities to sell the electricity generated by their systems (maximum 1.5 megawatt (MW)) at time-differentiated market-based prices, which are linked to CPUC’s market price. For these consumers, a special rate is provided for solar electricity generated between 8 a.m. and 6 p.m. These feed-in tariffs are being used as a mechanism for helping meet California's Renewable Portfolio Standard (RPS). The tariffs are available till the combined state wide capacity for eligible generation in water and wastewater facilities reaches 250 MW, and the combined capacity for non-water and wastewater facilities reaches 228 MW.

2 Property tax exemption

Solar water heat, solar space heat, solar thermal electric, solar thermal process heat, photovoltaics, solar mechanical energy

100% of system value and 75% for dual use components

Section 73 of the California Revenue and Taxation Code allows property tax exemption for certain types of solar energy systems installed on or before December 31, 2009. These include solar space conditioning systems, solar water heating systems, active solar energy systems, solar process heating systems, PV systems, and solar thermal electric systems.

3

State loan programme -

agriculture and food processing

energy loans

Solar water heat, solar thermal process heat, photovoltaics, biomass

USA $50,000 (minimum) fixed interest rate of 3.2%. Maximum repayment - 7 years ; programme budget - $3 Million

The California Energy Commission is providing financing to the agricultural and food processing industries for the purchase of cost-effective energy efficient and RE systems. Loans of up US$ 500,000 are available with a fixed interest rate of 3.2%. Eligible business entities include food and fibre processing, animal feeding and processing, breweries, wineries, creameries, irrigation districts and agricultural production.

4

Personal tax deduction - tax deduction for

interest on loans for energy efficiency

Solar water heat, solar space heat, photovoltaics, day lighting

100% of interest from loan

Under this scheme, personal tax deduction is allowed for tax payers up to the interest paid on loans for the use of energy efficient products or equipments for residences in California. The deduction is valid only for loans taken from a publicly owned utility. The equipment/s eligible include lighting, solar, advanced metering of energy usage, windows, insulation, zone heating products, and weatherisation systems.

Source: DoE, USA:


Table 26: Texas - main incentives for solar PV

Texas - Main Incentives for Solar PV

S. No

Type of incentive Applicable technologies Quantum Description

1 Solar and wind energy

device franchise tax deduction

Solar water heat, solar space heat, solar thermal electric, solar thermal process heat, photovoltaics, wind

100% from capital or 10% from profit

The state of Texas allows corporations using solar energy devices to deduct from the franchise (corporate) tax, (1) cost of the system from the company’s taxable income or (2) 10% of the system’s cost from the company’s profit.

2 Solar and wind energy business franchise tax

exemption

Solar water heat, solar space heat, solar thermal electric, solar thermal process heat, photovoltaics, wind

No limit

This incentive allows any corporation located in Texas and in the sole business of manufacturing, selling or installing solar energy devices to be exempt from the franchise (corporate) Tax. As there is no ceiling on this exemption, it is a substantial incentive for solar manufacturers to locate their operations in Texas.

3 Renewable energy

systems property tax exemption

Passive solar space heat, solar water heat, solar space heat, solar thermal electric, solar thermal process heat, photovoltaics, wind, biomass, storage technologies, solar pool heating, anaerobic digestion

100% of assessed value (no limit)

Under Texas Property Tax Code, residential consumers are allowed an exemption in property tax of the amount of the value that has been spent on the installation/construction of a solar or wind-powered energy device used primarily for the production and distribution of thermal, mechanical, or electrical energy for on-site use.

4

“Loan STAR Revolving Loan

Programme” - state loan programme

Passive solar space heat, solar water heat, solar space heat, photovoltaics, wind, geothermal heat pumps

Maximum limit – US$ 5 million ; Interest rate - 3% loan repayment - energy cost savings Payback – less than 10 years.

This programme has been promoted by the Texas State Energy Conservation Office and offers low interest loans to all public entities, including state, public school, colleges, university, and non-profit hospital facilities for Energy Cost Reduction Measures (ECRMs). These measures include lighting and insulation and the funds under this programme can be used for retrofitting the existing equipment or, in the case of new construction, financing the difference between standard and high efficiency equipment. Based on data available till November 2007, Loan STAR had funded 191 projects with a total outlay of US$ 240 million dollars and had shown an approximate energy saving of US$ 212 million

Source: DoE, USA:


Table 27: New Jersey - main incentives for solar PV

New Jersey - Main Incentives for Solar PV

S. No

Type of incentive Applicable

technologies Quantum Description

1

Production incentives - NJ Board of Public Utilities - Solar

Renewable Energy Certificates

(SRECs)

Solar PV From June 2008 - US$ 711 per MWh (US$ 0.71 per kWh)

As a part of its RPS, the state of New Jersey requires each electricity suppliers/provider in the state to include in the electricity it sells 22.5% generated through renewables by 2021. To achieve this, the state has constituted the Solar Renewable Energy Certificates (SRECs) that represent solar energy generated and bundled in minimum denominations of one megawatt-hour (MWh) of production. New Jersey’s SREC programme is basically a mechanism by which SRECs are created, verified and traded. All electricity suppliers are required to use the SREC programme to demonstrate compliance with the RPS. The price of SRECs is determined primarily by their market availability and the price of the Solar Alternative Compliance Payment (SACP) for the state RPS.

2 Solar and wind energy systems

sales tax exemption

Solar water heat, solar thermal electric, photovoltaic, wind

Exemption of the state's 7% sales tax

The state of New Jersey provides an exemption for solar PV, wind and other solar based technologies from the state's sales tax (7%) to all taxpayers. All major types of solar energy equipment, including equipment for passive solar design, are considered eligible for the exemption.

Source: DoE, USA:


Table 28: State wise financial incentive framework in USA

Personal tax

Corp. tax

Sales tax

Prop. tax

Rebates Grants Loans Industry support

Bonds Production incentives

Federal √ √ √ √ √

State

Alabama √ √ √ √ √

Alaska √ √

American Samoa

Arizona √ √ √ √ √

Arkansas

California √ √ √ √ √ √

Colorado √ √ √ √ √ √

Columbia √

Connecticut √ √ √ √ √ √ √

Delaware √ √

Florida √ √ √ √ √ √

Georgia √ √ √ √ √ √

Guam

Hawaii √ √ √ √ √ √

Idaho √ √ √ √ √ √ √ √ √

Illinois √ √ √

Indiana √ √ √

Iowa √ √ √ √ √ √ √

Kansas √ √

Kentucky √ √ √ √ √ √

Louisiana √ √ √ √

Maine √ √

Maryland √ √ √ √ √ √

Massachusetts √ √ √ √ √ √ √ √ √

Michigan √ √ √ √ √

Minnesota √ √ √ √ √ √

Mississippi √ √ √


Missouri √ √ √

Montana √ √ √ √ √ √ √ √ √

N Carolina √ √ √ √ √ √

N Dakota √ √ √

N Jersey √ √ √ √

N. Mariana Islands

Nebraska √ √ √ √ √

Nevada √ √

New Hampshire √ √ √

New Mexico √ √ √ √ √ √ √ √

New York √ √ √ √ √ √ √ √

Ohio √ √ √ √ √ √

Oklahoma √ √ √ √ √ √ √

Oregon √ √ √ √ √ √ √ √

Palau

Pennsylvania √ √ √ √ √ √

Puerto Rico √ √ √

Rhode Island √ √ √ √ √ √ √

S Carolina √ √ √ √ √ √ √

S Dakota √ √

Tennessee √ √ √ √ √

Texas √ √ √ √

Utah √ √ √ √ √

Vermont √ √ √ √ √ √ √

Virgin Islands √ √

Virginia √ √ √

Washington √ √ √ √ √ √

West Virginia √

Wisconsin √ √ √ √ √ √

Wyoming √ √

Source: DoE, USA:


Manufacturing scenario

4.119 The share of the United States in the manufacturing of solar PV cells has come down over the years from 45% in 1995 to 6% in 2007. The main reason is the inadequate focus of the Federal Government, higher cost of production and uncertain regulatory environment. The USA lost market share to countries like China, Europe and Japan in the first decade of the 21st century.

4.120 A majority of the solar PV cells and modules manufactured in the USA were being exported till 2005. It is only in 2005 that parity occurred between the cells being exported and cells imported for domestic applications.

Thin films

4.121 The USA is still the market leader in some new and cutting-edge technologies, like nanotechnology based solar cells and thin films. The USA has over 55% of the global market share in thin films and is set to dominate the thin film market in the future as well. Figure 48 shows the change in USA market share in thin films in the past 5 years.

Figure 48: USA market share in thin films

U S S h ar e in th e G lo b a l T h in F ilm M arke t

5 54 4.5

27 .3

1 6.6

9.7

0

1 0

2 0

3 0

4 0

5 0

6 0

2 00 3 2 00 4 2 00 5 2 00 6 2 00 7

U S S h a re i n T h in F ilm Ma rke t

Source: ISA-NMCC 2008 Research, Prometheus Institutes Review of the Polysilicon Industry,

annual reports of market players and company announcements

4.122 In 2007, the thin films market was dominated by 4 main players, who had more than 75% of market share. Among these, First Solar, with almost 50% of the production and United Solar with about 10% of the total production are based out of the USA. One of the major reasons for the USA market leadership is its strong R&D base. For example, more than 16 companies are in the process of developing and commercialising α-Si and thin-Si PV products. Silicon Valley is the hub of research in thin films globally, with a


large amount of venture capital going into start-ups working in this field.

Solar America Initiative (SAI)

4.123 The objective of the Solar America Initiative is two-fold: to facilitate the lowering of the cost of solar electricity so as to make it cost competitive across all U.S. market sectors by 2015, and to provide a spurt in domestic production of solar technologies. In terms of installed capacity, the SAI aims at providing 5-10 GW of new capacity and employing 30,000 new workers in the PV industry, besides reducing 10 million metric tonnes per year of carbon dioxide (CO2) emissions.

4.124 Under this programme, the USA hopes to achieve grid parity by 2015 through solar PV for all market segments and make solar PV cost competitive with fossil fuels by 2020.

4.125 The SAI is following a two-pronged approach emphasizing the following activities:

(I) R&D in material sciences and solar manufacturing processes

(II) Market transformation to remove barriers to the acceptance of new solar technologies in the marketplace.

4.126 Under R&D, the SAI has been focusing on the following technology areas:

(i) New devices and processes – Invited ideas for new PV device concepts and identified university support to industry for process and product development.

(ii) Supply chain development – Developed a programme to fund development and optimisation of upstream PV supply chains, including new feedstock materials, module packaging solutions, and standardisation of PV manufacturing tools.

(iii) PV grid integration - Developed a set of activities to address grid reliability and economic issues associated with PV market penetration.

(iv) Technology roadmap - Released technology roadmaps for major PV material system and processing approach.

4.127 Under market transformation activities, the SAI has been focusing on the following areas:


(i) Funding the development of the Solar America Board of Codes and Standards

(ii) Engaging and advising key states and utilities for creation of incentives/rebates and favourable regulatory framework

(iii) Developing 13 Solar America Cities and creating a new PV industry roadmap.

The case of California

4.128 California got its first grid interactive solar PV system in 1993 when Pacific Gas and Electric Company introduced a 500-KW system in Kerman, California. Since then California has been a torch bearer for the USA solar PV industry. In 1996 under the Assembly Bill 1890, the state's investor-owned electric utilities were deregulated and incentives created for grid-tied PV systems under the California Energy Commission's RE Programme. This was followed in 2001 by the creation of the solar tax credit allowing a rebate of 15% of the net purchase cost of a photovoltaic system.

4.129 In 2004, California’s Governor laid the groundwork for the California Solar Initiative with the introduction of the Million Homes Solar Plan. Under the plan, the California Energy Commission will offer residential customers with solar PV systems incentives. The California Solar Initiative creates a US$ 3.3 billion 10-year programme to put solar on a million roofs in the state. This programme changes the way the state's renewable energy incentives and rebates will be managed. Figure 49 highlights the development of the solar PV market in California and points out the major initiatives that have lead to the development of the market.


Figure 49: Development of the California solar PV market since 2000


4.130 The California initiative is also very important from the point of view of understanding the development of the solar PV industry in the USA, with California being the role model for RE and solar PV industry. Today, other states are in the process of emulating the California model for the development of their states’ solar PV industry and using the California solar PV roadmap as their benchmark.

The sun shines on California California was the world’s third largest market for solar PV systems in 2006. It was expected to grow by 100% in 2007. The California Solar Initiative (CSI) programme, with a kitty of US$ 3.2 billion government support, is still adding fuel to California’s growth engine. California is also attractive for its entrepreneurial climate. Silicon Valley in California has become the centre of the industry with venture capitalists, start-ups and some of the best manpower globally. Therefore, it is no surprise that companies like Nanosolar, Miasolé, Applied Materials and Sunpower are based in California.

Lessons from USA solar PV industry

4.131 The main learnings from the study of the USA solar PV market have been:

(i) Provide large-scale and attractive benefits for solar PV so as to raise awareness and inclination to invest in solar PV among customers till


the solar PV market reaches a critical mass where cost reduction and technology improvement make it viable without support.

(ii) For promoting solar PV development, there is a need to focus on possible high growth areas, such as commercial and residential PV markets. California has focussed on developing the local residential and commercial markets and provided attractive rates and terms for solar PV installations.

(iii) For promoting solar PV development, there is a need to focus on areas where investors have the purchasing power to take part and be an effective part of the programme. A good example is California where consumers have the purchasing power and are paying such high tariffs that solar PV becomes viable. The USA is also focussing on developing solar cities as consumers in cities pay the highest tariffs and have the ability to invest in long payback technologies, like solar PV.

(iv) For promoting solar PV development, there is a need to aggressively target gaps in demand where solar PV is a cost effective substitute. For example, solar can provide cost-effective power for meeting the daytime energy needs (especially daytime peak).

(v) For promoting solar PV development, there is a need to provide committed and specific government support and lay down aggressive targets. For example, California has laid down an aggressive target of 3,000 MW by 2017 and committed US$ 3.2 billion for the programme.


Benchmarking of global solar PV industry

4.132 For benchmarking, it is difficult to compare the national policies and approach followed by different countries as they are heterogeneous in nature. Moreover, a variety of factors influence their development.

4.133 Therefore, this benchmarking process entails an open and qualitative approach which is based on a relative comparison of quantitative information.

4.134 Broadly, there are two performance (input) measures which would be used to further distinguish the factors responsible for the state of the solar PV industry in the 3 countries being highlighted above. These are:

(i) Regulatory measures: legislation/regulatory and standards

(ii) Support schemes: subsidies and incentives

4.135 Largely, these two performance (input) measures represent key input factors that are responsible for shaping the national PV promotion strategy. Based on these two performance (input) measures, which directly or indirectly promote the solar PV sector, the performance of any country can be measured with four output factors, which are:

(i) Market development

(ii) Industry development

(iii) Cost reduction of solar PV system

(iv) Country wide acceptance of PV

4.136 The subsequent section represents the benchmarking analysis based on the above mentioned performance (input) measures. The benchmarking analysis is not only evaluated with regards to the availability of identified input factors but also the effectiveness of output factors, like its impact on development of overall solar PV industry in the country.

4.137 The following diagram illustrates the benchmarking approach and selection of parameters for the subsequent section:


Figure 50: Illustration of the benchmarking framework


Selection of performance indicators:

4.138 Subsequent to defining the assessment areas, the following figure summarises the broad outline of selected factors and mapping of these parameters for the benchmarking analysis:

Figure 51: Selection of assessment areas of benchmarking parameters


(a) Energy purchase obligation through solar PV: Targets defined by the government in support of renewable obligations are good indicators of a sustainable business for developers. These are important indicators to convey reliability to the PV industry and investment security to the investors. The benchmarking analysis assesses the official PV target


through solar PV purchase obligation to the local utility and the achievement until now.

(b) Attractiveness of feed-in tariff (FIT) mechanism: It is the key regulatory instrument that stimulates the demand and creates market for investors. Attractiveness refers to the characteristics of the feed-in law, such as tariff, investment security or guaranteed period and payback period, etc.

(c) Attractiveness of indirect support mechanism - tax incentive: This measure particularly assesses the tax incentive schemes applicable for solar PV investment for its application. It is a combined impact of scale of incentives available, its expected duration, stability and complexity of the process.

(d) Attractiveness of manufacturer incentives: This reflects the availability, accessibility and volume of overall subsidies allocated for solar PV manufacturing. Also, it takes in the time requirement and complexity of the process.

(e) Availability and accessibility of finance: Installation of a solar PV system requires high capital expenditure. Access to easy and cheap finance greatly enhances the ability of consumers to purchase solar PV based systems, and in conjunction improves the market size.

(f) National PV economics development: Reduction in the cost of a solar PV panel is a crucial factor in the development of a country’s PV market. Cost reduction is the combined impact of the economies of scale and technology interventions.

(g) National PV market development: The result of a policy framework indicates the success of the national PV market. Performance is based on market size, growth and future market perspective. Also, the objective of the PV policy is to establish a prosperous national industry with long-term perspectives, including the establishment of a manufacturing base, employment, technology development through R&D, etc.

(h) National PV acceptance: This indicates awareness among consumers about the benefit of solar PV and their inclination to invest in a new technology product.


Table 29: Key policy highlights of leading countries

KPIs Germany Japan USA

Renewable energy obligations

No exclusive RPS for solar PV. But target of 12.5% by 2010 and 20% by 2020

Target for solar is 4.8 GW by 2010 and 100 GW by 2030

3 GW of new, solar-produced electricity by 2017 (California). Target for RE is

20% by 2010 and 33% by 2020 (California)

Attractiveness of feed-in tariff (FIT) mechanism

Є 54.53 cents (for <30 kWp), Є 51.87 cents (for 30-100 kWp), Є 51.30 cents (for >100

kWp), bonus of €5 cents/kWh for BIPV and Є 42.42 cents for ground mounted;

decrease of 5% pa and 9% from 2008 onwards.

Guarantee period – 20 years

Only net metering and electricity sold to grid at the same price at which it is bought (retail tariff)

FIT (California) is US $ 0.39 per kWh for residential and non-residential and

US $ 0.50 for public (government agencies and non-profit organisations) as

they do not get any tax benefits; 27 states have declared FITs

Attractiveness of indirect support mechanism -tax

incentive Under discussion None

41 states have some sort of tax incentive available to consumers

Attractiveness of manufacturer incentives

Manufacturing incentives are available for solar in terms of capital subsidy and direct

and indirect taxes. Capital subsidy (10-50%) varies from industry

to industry and volume of investment

None 19 states offer industry support to the

solar industry

Availability and accessibility of finance for

consumers

Soft loan (approx. 2% interest rate)

Available but not to the scale of the USA and Germany

34 states offer subsidised loans to consumers for the purchase and

installation of solar PV equipment

National PV cost economics development

Germany has one of the most active R&D landscape in the PV area. It has helped

Germany cut down the solar panel cost from €9-10 /W in 1998 to €4 /W in 2007

Reduction in cost of system from 2 million yen / kW (1994) to 0.67

million yen/ kW (2007)

National PV market development

German PV industry (including sales of equipment and sale of power) turnover for 2007 reached Є 5.7 billion. There are around 60 manufacturers and more than 12000 firms dealing in solar PV business employing app. 40,000 people.

Market growth of ~40% year on year over the period 1997 to 2007, third largest market globally, second in thin films production and largest producer of solar cells in 2007

Market growth of 37% year on year over the period 2003 to 2007, fourth largest

market globally, leader in thin films production and fourth largest producer of

solar cells in 2007

National PV acceptance Very high – as a result of favourable PV policies, there has been significant growth in

Low - as there has been a significant decrease (46%) in residential PV

High - most states have offered some sort of incentive for promoting solar PV


KPIs Germany Japan USA

PV installations between 2002 and 2007. Germany has overall accumulated PV power installation of 3.8 GWp.

installations between 2005 and 2007 after the removal of the subsidy for residential consumers as highlighted

by the decrease from 7,00,000 households in 2005 to 5,00,000

households in 2007

and USA is now turning into a net importer of solar PV panels

Source: ISA-NMCC 2008Research

___________________________________________________________________________ Study on Solar Photovoltaic Industry: ISA-NMCC 2008 139

Results of country benchmarking

4.139 Based on the parameters highlighted above, a relative qualitative assessment was undertaken for the 3 countries studied above. The objective of mapping these 3 counties is to identify (qualitatively) the best practices that have enabled them to become global leaders in the production and deployment of solar PV technologies.

4.140 Based on the study of above mentioned policy scenario, a relative assessment has been made in the form of web chart. It is apparent that Germany has been able to leverage the growing sentiment against fossil fuels to promote RE technologies, like solar PV. Germany has, therefore, been rated the highest on parameters such as attractive FITs, availability and accessibility of finance and manufacturing incentives, which in turn, has led to a significant reduction in the cost of solar PV power. All of these factors have made Germany a global leader in solar PV.

Figure 52: Mapping of solar PV industry in Germany

Germany

0

1

2

3

4

5

Energy Purchase Obligation

through Solar PV

Attractiveness of Feed-in tariff (FIT)

Mechanism

Attractiveness of Indirect Support

Mechanism: Tax Incentive

Attractiveness of Manufacturing

Incentives

National PV Economics

Development (EU countries)

Availability and Accessibility of

Finance for Consumers

National PV Market Development

National PV Acceptance


4.141 The web chart for Japan highlights Japan’s focus on developing its solar PV market. Japan has been highly successful in setting aggressive targets for solar PV manufacturing and installation and has time and again met these targets. It has now defined an aggressive target for 2030 and detailed roadmap for accomplishing this target. This has resulted in the Japanese solar PV market being rated the highest on national PV market development and energy purchase obligations through solar.


Figure 53: Mapping of solar PV industry in Japan

Japan

0

1

2

3

4

5

Energy Purchase Obligation

through Solar PV

Attractiveness of Feed-in tariff

(FIT) Mechanism

Attractiveness of Indirect Support

Mechanism: Tax Incentive

Attractiveness of Manufacturing

Incentives

National PV Economics

Development

Availability and Accessibility of

Finance for Consumers

National PV Market Development


Source: ISA -NMCC 2008 Research

4.142 The web chart for the USA has been constructed based on not just its overall solar market but also the initiatives taken at the state-level for solar PV market development. Although the USA market is today more state driven than federal (central government) driven, the USA market stands out (highest) in areas such as energy purchase obligations through solar PV. This has been adequately highlighted by California, which has kept an aggressive policy target of 3,000 MW by 2017. The USA has also been rated the highest in the attractiveness of indirect support mechanisms as has been documented earlier in the mapping section on the USA.

Figure 54: Mapping of solar PV industry in USA

USA (including State Incentives)

0

1

2

3

4

5

Energy Purchas e Obligation through

Solar PV

Attractivenes s of Feed-in tariff (FIT)

Mechanis m

Attractivenes s of Indirect Support

Mechanis m : Tax Incentive

Attractivenes s of Manufacturing

Incentives

National PV Econom ics

Developm ent

Availability and Acces s ibility of

Finance for Cons um ers

National PV Market Developm ent


Source: ISA -NMCC 2008 Research


A5: POLICY FRAMEWORK OF SOLAR PV IN INDIA

Introduction

5.1 The previous chapter outlined the various government programmes and incentives that helped provide Germany, Japan and the USA the right ecosystem to develop a solar PV manufacturing base and its market. In this chapter, the regulatory framework and incentive programme provided by the Government of India to Indian industry is discussed. India clearly has a long way to go in terms of favourable policy-making for the industry.

National level manufacturing linked incentives

5.2 Manufacturing of solar PV is a technology intensive process, which until now has been under the developmental stage. Currently, the cost of solar PV is exorbitant, which hampers the adoption/use of solar PV for electricity generation. The government promotes the solar PV industry by giving incentives to solar manufacturing and its use for electricity generation.

5.3 Currently, two key incentives are offered by the Government of India (GoI) to promote solar PV manufacturing in India.

(i) Special Incentive Package Scheme (SIPS) - to encourage investments for setting up semiconductor fabrication and other micro and nano technology units

(ii) SEZ policy – to encourage export oriented manufacturing

Special Incentive Package Scheme (SIPS)

5.4 SIPS is formulated to encourage investments for setting up of semiconductor fabrication and other micro and nano technology manufacturing units, including solar PV manufacturing. SIPS is applicable for a ‘fab unit’ as well as an ‘ecosystem unit’.

5.5 A threshold limit is set as the minimum investment of Rs. 2,500 crore (approx US$ 625 million) in case of a fab unit and Rs. 1,000 crore (US$ 250 million) in case of an ecosystem unit. The amount is calculated as net present value and should be made during the period of first 10 years from the financial year in which the application is made.

5.6 Under this scheme, the Central Government or its pertinent agencies will provide capital subsidy against the total capital cost in the form of investment grant or interest subsidy. A capital subsidy of 20% is set for manufacturing units set up in SEZ and 25% for units set up in non-SEZ areas.


5.7 Alternatively, the unit can ask for government’s equity participation in the project, not exceeding 26%. The entire equity contribution will be taken towards the value of incentive package. There shall be an exit option, to be exercised by the government, at a suitable time in the future after the project goes on stream.

5.8 This scheme shall be available till March 2010. There shall be a ceiling on number of units - 2 to 3 ‘fab’ units and 10 eco-system units.

SEZ policy

5.9 The manufacturing of solar PV components is a permissible economic activity in SEZs, which covers trading, servicing and manufacturing of solar PV components exported or imported or procured from the Domestic Tariff Area (DTA) by a solar PV unit in SEZ. These units are entitled for all applicable fiscal and non-fiscal benefits highlighted under the SEZ policy.

5.10 Manufacturing of solar PV in SEZs shall be exempt from payment of taxes, duties or cess including excise duty, CST, service tax, security transaction tax and import duty.

(i) SEZ units will be given certain exemptions from income tax for 15 years. These exemptions are structured in a way that a SEZ unit can avail 100% income tax exemption for the first 5 years, 50% for the next 5 years and rest 50% of the reinvested profits ploughed back into the business for the next 5 years. But no income tax is exempted if 10 years IT benefit is already availed by the beneficiary firm.

(ii) The SEZ policy allows 100% foreign direct investment in the manufacturing sector and gives flexibility to make overseas investment out of export earnings in foreign currency.

(iii) The units in the SEZ have to be net foreign exchange earners but they need not be subject to any pre-determined value addition or minimum export performance requirements.

Generation Based Incentives (GBI)

Grid interactive solar power generation under the GBI scheme

5.11 The high cost of solar PV equipment results in a higher cost of generation, which restricts the growth of power generation through solar PV. MNRE has decided to support large-sized grid interactive solar power generation projects as demonstration projects. The Ministry recently announced a Generation Based Incentive (GBI) scheme to support a total capacity of 50 MWp from 2007 to 2012. The key attributes of the GBI scheme are:


(a) Solar PV power generation plants of a minimum installed capacity of 1 MWp per plant; either a single unit or modular units at a single location will be eligible for generation based incentive. However, 1 MWp capacity may be set-up through modular units at a single location.

(b) GBI is available only for a maximum cumulative capacity of 10 MWp of grid interactive solar PV power generation projects in a state. Any developer can set up grid interactive PV projects up to a maximum of 5 MWp capacity in the country, either through a single project or multiple projects of a minimum capacity of 1 MWp each.

(c) The incentive scheme is applicable only to those projects that are connected to the grid and not getting any advantage of accelerated depreciation under other income tax benefits.

(d) The GBI scheme guarantees an overall tariff of Rs. 15 per kWh for solar PV, which consists of GBI (GBI is a much higher component than the tariff offered

by the state government) and the preferential tariff offered by the state utility. Under the scheme:

(i) Utilities would offer rates as per tariff order or equal to highest rate offered by any other source for which guidelines are issued by the SERC. Wherever the SERC has fixed a separate tariff for solar power or tariff for the period for which the Ministry is providing incentive, the utilities will offer a minimum of that tariff to the solar PV grid interactive power projects in their respective states. In the absence of such tariff orders, the utilities will offer the highest tariff for purchase of power to the solar PV power project developers.

(ii) In addition to the preferential tariffs offered by the state, the Ministry/MNRE may provide GBI of a maximum incentive of Rs. 12 per kWh to SPV and Rs. 10 per kWh to STP. (GBI = Rs 15 per unit –

state utility tariff)

(e) Any project that is commissioned after 31st December, 2009 would be eligible for a maximum incentive with a 5% reduction and ceiling of Rs. 11.40 per kWh. The generation-based incentive will continue to decrease as and when the utility signs a PPA for power purchase at a higher rate.

Solar PV incentives in different states

Punjab

5.12 The Punjab Government is keen to tap this resource for strengthening power infrastructure in the state by setting up solar based power projects with an aggregate capacity of 25 MW by 2020.


5.13 Manufacturing incentives: To promote manufacturing and sale of NRSE devices/systems, and equipment/machinery required for NRSE power projects, value added tax (VAT) shall be levied at 4%. Also, octroi on energy generation and NRSE devices/equipment/machinery for NRSE power projects shall be exempted.

5.14 Tariff policy: The State Government had notified the tariff for power purchase from solar based power generation in the NRSE policy. Tariff for purchasing solar power by PSEB in the year FY08 is Rs. 7.35 per unit. PSERC has stated that rates as prescribed in the NRSE Policy will be applicable for 5 years (up to 2011-12) after which the last applicable tariff shall continue.

5.15 Land related incentive: If government land is available, the required land for setting up any RE project will be provided on a nominal lease rent of Rs. 1 per square metre for 33 years subject to further renewal on mutually agreed terms and conditions. Wherever the land belongs to local bodies/panchayats, the state would encourage them to provide the land for the NRSE project on similar terms and conditions.

5.16 Exemption from electricity duty: The power generation from NRSE projects shall be exempt from electricity duty.

Rajasthan

5.17 RERC has proposed the following tariff plan for power purchase from solar power plants:

Table 30: Proposed tariff for solar power plants in Rajasthan

Particulars Solar PV power plants Concentrated solar power plants

(a) Plants commissioned up to 31.12.2009 and

(i) Covered under MNRE GBI scheme

Rs. 15.78/kWh Rs. 13.78/kWh

(ii) Not covered under MNRE GBI scheme (Limited to 50 MW)

Rs. 15.60/kWh Rs. 13.60/kWh

(b) Plants commissioned after 31.12.2009 but by 31.03.2010,the above tariff shall be reduced by 60 /kWh

Source: RERC

5.18 The project developer under the GoI policy shall enter into a PPA with the state distribution company (discom) for 20 years and the tariff payable by discom will be the difference of the above mentioned tariff and MNRE incentives. (not applicable for category (a) (ii) above)


West Bengal

5.19 WBERC came out with a tariff order for solar energy on March 25, 2008. As per the WBERC tariff order, the eligible grid connected solar PV power plant should be of capacity ranging from 1.0 MWp to 5.0 MWp. The highest tariff in West Bengal currently is Rs 4/unit. Hence, a developer who avails the GBI scheme for setting up a plant in West Bengal in FY09 can enter into a PPA of Rs. 4/unit with the distribution licensee. To support this tariff, the developer will additionally be given incentive of Rs. 11/unit of power generated under the GBI scheme from MNRE.

5.20 On withdrawal of the incentive by MNRE, the commission will review the sale price. The capped price of energy for grid connected solar PV plants (including those plants which are availing accelerated depreciation benefit) and are not eligible for GBI declared by MNRE, shall be Rs.11.00/kWh for sale to the distribution licensees. This tariff will be applicable for the grid connected solar PV projects commissioned up to 2009-10 and shall remain valid for 10 years from the date of coming into force of these regulations. Similarly, the sale price for the units for the electricity generated from the plants commissioned after 2009-10 but on or before March, 2012 will be Rs.10/kWh which shall remain valid for 10 years.

5.21 At any stage in the future, if any solar PV plant, which was ineligible for the generation based incentive, becomes eligible for the incentive declared by MNRE or by the State or Central Government, the SERC may review the rate of Rs.11.00/Kwh or Rs.10.00/kWh, as the case may be, for sale to the licensees and fix a new rate by taking into consideration the allowable incentive to such solar PV plants. Any incentive received by the licensee from MNRE on this account shall be passed on to their purchasers of electricity. The SERC will take a fresh view on the price cap for grid connected solar PV projects commissioned from 2012-13 onwards.

Haryana

5.22 HERC has approved an overall tariff (inclusive of GBI) of Rs. 15.96 per unit (plant commissioned before 31.12.2009) and Rs. 15.16 per unit (for plant commissioned after 31.12.2009 but before 31.03.2010). These tariffs shall remain constant for five years.

5.23 If a project qualifies for GBI of Rs. 12/kWh for the project commissioned before December 2009, and Rs. 11.40/kWh for the project commissioned after December 2009, only the net rate after deducting incentive amount shall be payable by state distribution companies (DISCOMs).

___________________________________________________________________________ Study on Solar Photovoltaic Industry: ISA-NMCC 2008 146

A6: ECONOMICS OF SOLAR PV MANUFACTURING IN INDIA AND NEED FOR GOVERNMENT SUPPORT

Introduction

6.1 Government support is crucial for the growth of the industry, as has been seen in other countries. The Central Government and a few State Governments are providing incentives to the solar PV industry in the country and the respective states. The solar PV sector will see its full potential in the country only with sustained, long-term support from the government through focused programmes and incentive schemes.

6.2 Solar PV manufacturing is a capital intensive business. Solar PV adoption globally is at an early phase and is expected to grow significantly over the next few decades. Countries in the developed world, like Germany and Japan, have led the manufacturing revolution and adoption of PV technologies till now and have fuelled the technological progress and cost reductions seen to date. China is slowly gaining ground as a manufacturing centre for solar PV. Given that the technology is young and is in an evolving stage, the government in China, Malaysia, Hungary and Mexico have announced initiatives to attract investments in PV manufacturing in the respective countries. This is an ideal opportunity for the Indian government to frame and implement programmes to attract domestic and global investments to this sector. Besides serving the expanding global PV market, this manufacturing ecosystem will ensure that India has a stake in the development of low cost photovoltaic panels for local consumption. This would help achieve grid-parity at the earliest, thereby reducing dependence on conventional energy sources.

6.3 India has some inherent advantages for developing the solar PV sector, viz. abundant sunlight, sound manufacturing capability and availability of an abundant talented workforce. However, the cost of capital and availability of capital for this sector are limiting the ability of entrepreneurs and corporations’ to enter this field. Timely government programmes and incentivisation schemes would contribute significantly in developing a broader solar PV manufacturing base in the country.

6.4 The current manufacturing base in India is rather small compared to the gigawatt scale capacities being set up in China, Malaysia, Taiwan, Korea, etc. Since the industry is capital intensive, increase in scale would lead to reduction in the cost of production per watt of solar panel. The entire manufacturing base in India comprises of cell and module manufacturing, leaving the bulk of the value addition outside the country. Hence, there are two issues to be addressed: scale and integration. Significant and immediate steps would be required from the Government of India to facilitate a bigger and vertically integrated manufacturing base in the country. The availability of capital subsidy would ensure early capital recovery or break even for the investor and allow him to commit higher investments into this sector. It also has the potential of attracting


foreign direct investments in the solar PV manufacturing sector. A reduced cost of production of modules would lead to a fall in the cost of generation of solar power and move it closer to the cost of other incumbent power sources.

Solar PV manufacturing

6.5 The players currently operating in India in the solar PV sector are not vertically integrated. The bulk of the current players buys wafers and converts them into cells, or buys cells and converts them into modules. As would be seen later in this section, more than 50% of value addition of the entire value chain is captured in polysilicon and wafer manufacturing. This leads to substantial margin loss and increases the cost of solar panel, and thereby of energy generated from solar.

Investment requirements in solar PV manufacturing

Crystalline silicon technology

6.6 The following table shows the typical investment required to set up a vertically integrated 100 MW poly-crystalline module manufacturing unit in the SEZ and a non-SEZ area. Estimated investment requirements for each part of value chain are also shown. An overall saving of about 30%viii in various duties and taxes is assumed for the SEZ case. (A conversion rate of Rs 40 to a US $ has been assumed for all the analyses)

Table 31: Investment required for setting up a 100 MWp vertically integrated poly-crystalline module manufacturing unit (All figures in Rs. crore)

SEZ Non-SEZ Value chain link

Rs cr Rs cr /MWp Rs cr Rs cr /MWp Quartz to polysilicon 638 6.38 829 8.29

Polysilicon to wafer 308 3.08 400 4.00

Wafer to cell 264 2.64 343 3.43

Cell to module 55 0.55 71 0.71

Total investment 1,265 12.65 1,643 16.43


(Based on information provided by industry experts)

6.7 Typical Indian solar PV manufacturers are partially integrated, viz. they procure wafers and produce cells and modules. While there are technical reasons to this partial integration, viz. unavailability of technology, raw materials etc, an important factor could be high capital requirements for setting up such manufacturing capacities comparable with the larger players in the industry. Capital subsidy could give a push towards vertical integration and reduce the cost of production of the module. The subsidy would encourage manufacturers to increase capital content in their manufacturing process rather than rely purely on labour arbitrage.


Thin film technology

6.8 The investment required in setting up a 100 MW integrated thin film plant (based on A-Si/Micro-Si) from glass to module is around Rs.1,500 crore with per MW cost of about Rs.15 crore (in SEZ). If the unit is outside an SEZ, the capital investment would be roughly Rs. 1,950 crore with per MW cost of about Rs.19.5 crore. This excludes cost for making float glass, which has many potential suppliers in existing glass manufacturers in India. It is assumed that glass would be purchased locally and the cost of the same has been included in the cost structure.

Cost structures

Crystalline silicon cost structure

6.9 The cost structure of various parts of the poly-crystalline value chain is presented in Table 31.

Table 32: Cost structure of crystalline silicon value chain (in Rupees per Wp) #.

Cost heads Poly-silicon

Wafer Cell Module Vertically integrated

Rs/Wp Rs/Wp Rs/Wp Rs/Wp Rs/Wp % of total

Raw material and consumables**

1.1 26.4 8.8 14.0 50.3 57%

Salary & wages 0.8 1.2 0.8 2.0 4.8 5%

Power and fuel 5.4 2.7 1.3 0.5 9.9 11%

Stores, spares, repairs and maintenance

1.2 2.8 2.0 0.1 6.1 7%

Selling & administrative expenses

0.2 0.2 0.2 0.2 0.8 1%

Research & Development expenses

1.0 1.0 1.0 1.0 4.0 5%

Depreciation & amortisation

3.4 1.6 1.4 0.3 6.7 8%

Interest cost 3.1 1.5 1.3 0.3 6.1 7%

Total 16.2 37.4 16.8 18.4 88.7 100% * Percentages may not add to 100% due to rounding off

** The cost head of ‘Raw Materials and consumables’ for each step of the value chain comprises of

incremental raw materials and consumables cost incurred in that step only. For example, the ’Raw

material and consumables’ head under wafer does not include the cost of production of polysilicon.

# The manufacturing unit is placed in an SEZ

Source: Source: ISA-NMCC 2008 Research and interactions with solar PV manufacturers

6.10 It is worth noting that close to 60% of value addition (Rs. 50 per watt) in the chain occurs in the polysilicon and wafer manufacturing. The bulk of the value addition in the solar PV value chain is, therefore, not taking place in India. A push towards vertical integration hence makes strong logic for the development of this sector in India.


6.11 A look at individual cost components would tell us the scope of reduction in cost of production. For example, the cost of energy is around 11% of the total production cost. In addition to high cost of energy being a concern in India, it is also critical that a manufacturing unit receives uninterrupted and high quality power. Industrial consumers in India are typically charged higher tariffs to cross-subsidise domestic and agricultural consumers. In addition, electricity is not reliable in large parts of the country. Interrupted and poor quality electricity can cause serious disruptions in production and economic loss for the solar PV manufacturer. If semiconductor units (including PV manufacturing) are assured of better quality power (through high voltage dedicated transmission lines), this sector would get a boost.

6.12 Interest cost and depreciation are two other big cost components, comprising 15% of production cost. These are related to the capital costs and cost of finance, where targeted subsidies can help reduce these costs. Relaxation of norms for raising funds (debt or equity) abroad for this sector and waiver of customs duties on key inputs and equipment should be contemplated. Similarly, if service providers and suppliers to a PV manufacturing unit are levied lower or no excise duty and CST, it would further help to make the cost of production competitive. Although, these exemptions are currently available to units placed in SEZsix, extending these benefits to non-SEZ based solar PV manufacturers would make them cost competitive too.

Thin film cost structure

Table 33: Cost structure of thin film modules (in Rs per Wp))

Cost heads Rs /watt peak % of total

Raw material and consumables 32.2 51%

Salary & wages 1.6 3%

Power and fuel 4.8 8%

(Stores, spares, consumables and maintenance 5.0 8%

Selling & Admn. expenses 0.8 1%

Research & Development expenses 4.1 6%

Depreciation & amortisation 7.9 12%

Interest cost 7.2 11%

Total 63.6 100%

# The manufacturing unit is placed in an SEZ. Source:ISA- NMCC 2008 research and interactions with solar PV manufacturers

6.13 A similar cost structure of A-Si-thin film based module is given in Table 33. Here again, a significant part of value chain could be captured in India if the right set of capital subsidy, duties and tax structures is available.


6.14 As visible from Table 33, the current cost structure of thin film silicon based module varies anywhere between Rs.50 and Rs.64 per watt peak depending on the efficiency (6% to 8.5%) of the module. The latter case is represented above. The thin film module provides the opportunity to locally source all the raw materials required to make a solar cell within the country with minor modifications to the existing infrastructure in glass manufacturing and leverages one of the key raw materials used in the auto industry, viz. PVB for lamination.

Profitability of solar PV sector

Crystalline silicon technology

6.15 An analysis of a vertically integrated (Greenfield) 100 MW poly-crystalline module manufacturing company is considered here on a sample basis. Assuming an investment of around Rs. 1,265 crore, the Equity Internal Rate of Return (IRR) for the investor has been worked out over a 10-year investment horizon. The debt-equity ratio has been assumed as 50:50. Production is expected to commence in the FY 2010-11. The cost of production is expected to drop due to the improvement in manufacturing technologies as well as a reduction in raw material prices which are currently high. The selling price too is projected to drop with increasing international competition and thinning of margins for manufacturers. In the analysis, it is projected that with maturing of the market, margins made by manufacturers would decrease over time. An upper band and lower band of cost of production and selling price (reflecting a highly aggressive and a milder cost and price trajectories respectively) have been used for the analysis. The analysis consisting of 2 cases is presented in Table 34:

(i) Case I: A manufacturing unit located in an SEZ and gets capital subsidy

(ii) Case II: A manufacturing unit located in an SEZ but does not get capital subsidy

6.16 To analyse a non-SEZ case, an investor would need to take into account tax and duties structures on capital goods, raw materials, services, electricity, etc. of the concerned state.

6.17 For case I, it is assumed that the capital subsidy will be used to repay the debt.


Table 34: Assumptions and profitability parameters for 100 MW poly-crystalline unit in 2 different scenarios

Assumptions/ outputs

I-SEZ case with capital subsidy

II-SEZ case without capital subsidy

Capital investment Rs. 1,265 crore Rs. 1,265 crore

Commencement of operations 2010-11 2010-11

Cost of production Rs per Wp Rs per Wp

Lower Upper Lower Upper

First year 67 72 68 73

Annual reduction in cost (1-3 years) 5% 5% 5% 5%


Selling price Rs per Wp Rs per Wp


Average annual reduction in price (1-10 years)

5% 5% 5% 5%

Capital subsidy 20% -

Equity IRR 18% 22% 10% 14%

Source: ISA-NMCC Research 2008 (Based on information provided by industry expert)

6.18 The cost of production and the selling price trajectory assumed for the above analysis is shown in the following figure. The cost of production trajectory refers to case I.

Figure 55: Cost of production and sales price trajectory for c-Si modules

Cost of production and sales price trajectory

67

62

58

5553

5150 49 48 48

85

78

72

68

65

6260

5957

56

72

67

63

6058

5654

54 53 52

94

86

80

74

71

6866

6563

61

40.00

50.00

60.00

70.00

80.00

90.00

100.00

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Year

Rs p

er w

att

Cost of production: Lower band Sales Price: Lower Band

Cost of production: Upper band Sales Price: Upper Band

Source: ISA-NMCC 2008 Research and interactions with solar PV manufacturers

6.19 As the analysis indicates, without capital subsidy, the sector is not attractive enough for international investors, especially in a scenario where global competition exists among nations to take the lead in establishing a solar PV manufacturing base.


Thin film technology

6.20 Similar profitability parameters have been worked out for an amorphous-silicon based green-field thin film module manufacturing capacity placed in an SEZ area. Production is expected to commence in financial year 2010-11. Again, two cases have been considered and their profitability over 10-year horizon is provided in Table 35.

Table 35: Assumptions and profitability parameters for 100 MW thin film unit

Assumptions/ Outputs

I-SEZ case with capital subsidy

II- SEZ case without capital subsidy

Capital investment Rs. 1,500 crore Rs. 1,500 crore

Commencement of operations 2010-11 2010-11

Cost of production Rs per Wp Rs per Wp

Lower Upper Lower Upper





Selling price Rs per Wp Rs per Wp


Average annual reduction in price 10% 10%

Capital subsidy 20% -

Equity IRR 20% 24% 11% 16% Source: ISA-NMCC 2008 Research and interactions with solar PV manufacturers

6.21 The cost of production and selling price trajectory assumed for the above analysis is shown in chart below (Case I).


Figure 56: Cost of production and sales price trajectory for thin film modules

Cost of production and sales price trajectory

49

43

39

35

31

2826 25 25 25

75

67

58

52

46

39

3432

31 30

52

46

42

37

34

30

28 27 27 26

83

73

64

58

50

43

3735

33 32

20.00

30.00

40.00

50.00

60.00

70.00

80.00

90.00

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Year

Rs p

er

watt

Cost of production: Lower Band Sales Price: Lower Band

Cost of production: Upper Band Sales Price: Upper Band

Source: ISA-NMCC 2008 Research and interactions with solar PV manufacturers

6.22 Encouraging thin film technology is relevant to Indian conditions because it offers better economics of power generation for ground based systems and is likely to be the cheaper alternative for utility scale power generation. Hence fiscal incentives would be critical to the growth of thin film based manufacturing capacities in India.

Impact of vertical integration on selling price

6.23 In Table 36 below, we present two cases for a manufacturer – partially integrated (wafer to module as is the case for incumbent Indian manufacturers) and completely vertically integrated. In the partially integrated case, wafer is typically procured at Rs. 86 per watt. With value addition of about Rs. 35 per watt, the cost of production of a partially integrated manufacturer would be about Rs. 120 per watt. A vertically integrated manufacturer, in comparison, may be able to produce the same at Rs. 89 per watt. (Table 32). It is assumed that both the partially integrated manufacturer and the vertically integrated manufacturer would be able to sell the module at around Rs.145 (international pricing of c-Si module). This gives the vertically integrated manufacturer a margin gain of 42 percentage points (63% - 21%) over the partially integrated one. With a lower cost of production, a vertically integrated manufacturer would be internationally competitive with healthy margins.


Table 36: Impact of vertical integration on manufacturer margins (costs in Rs per Wp)

Partially integrated Vertically integrated

Cost of

production Margin Selling price

Cost of production

Margin Selling price

Polysilicon 16.2 64% 26.6

Wafers 26.6

+37.4=64.0

35% 86.4

Cells

Modules

86.4+16.8+18.4=121

.6

21% 145.00

16.2 +37.4 +16.8 +18.4

----------- 88.7

63%

145.00

Source: ISA –NMCC 2008 Research

China –India comparison in solar PV manufacturing

6.24 While studying the manufacturing economics of solar PV in India, it would be worthwhile to study the same in its neighbouring country, China. China has some inherent strength in manufacturing, which it has successfully extended to develop its renewable energy base. A few facts about the Chinese renewable energy industry would illustrate the above:

i. China has 80% of the world market for solar water heating. ii. It is world’s third largest manufacturer of bio ethanol. iii. It has the fifth largest installed wind capacity. iv. China is the world’s largest generator of hydropower, with 115 GW of

installed capacity at the end of 2005. Most of this (80GW, or 70%) was from large hydropower, but a significant proportion (35 GW) came from small hydro (less than 50 MW capacity).

6.25 To develop its solar PV base, China has been taking significant steps since the past few years and has charted out an aggressive roadmap for the next decade and a half. Already, investment in Chinese solar companies totalled US$ 1.1 billion in 2006, consisting of US$ 638 million of venture capital and private equity, plus US$ 466 million of public market fund raising. China had a production capacity of 1,221 MW and 2,850 MW in cells and modules respectively in 2006. This rose to about 2,500 MW and 4,600 MW in cells and modules respectively in 2007. One of the targets of the government is to develop the complete value chain since the current production is dependent on imported feedstock (polysilicon and wafer).

6.26 China has numerous inherent strengths in addition to the policy measures that have been put in place to bring China at par with the other world majors in PV manufacturing. Some of these are enlisted below:

i. Uninterrupted power supply at a low rate ii. Income tax holiday iii. VAT refund iv. Low labour costs with high productivity


v. A strong OEM and balance of system components base vi. Lower cost of construction and ease of land acquisition

6.27 India shares some of the inherent strengths and policy measures with China, viz. lower labour costs, fairly adequate balance of systems base, low cost of construction, etc. However, on many other fronts, the Indian government could take steps to improve the investment climate:

i. Industrial power continues to be a problem in India for the manufacturing sector, particularly because of its high tariff and poor quality. As has been discussed above, power is the second largest cost component for the module cost. Industrial power in India is currently more than twice as costly as it is in China.

ii. Income tax holidays in India are restricted to production in SEZ areas and for profits earned from exports only. Government could consider extending these benefits for local consumption as well, considering that such a move would encourage setting up of utility scale solar PV generation projects.

iii. Value Added Tax (VAT) exemptions are only as per the state policy and for manufacturing units in SEZ only. A manufacturer may end up paying around 4% VAT for within-the-state sale and an equal percentage of Central Sales Tax (CST) for inter-state sale of modules. A uniform VAT and CST exemption for solar PV manufacturers could reduce the prices of solar PV systems and components.

Power generation from grid connected solar PV system

6.28 One of the ideas behind studying economics of solar PV manufacturing in India is to make it competitive to be able sustain local deployment of solar based grid connected projects.

6.29 With an objective to improve the economics of solar power and reach closer to grid parity, we will look at the current cost of generation and its sensitivity to future module costs and cost of finance. The purpose here is also to understand at what cost a project developer would be interested in setting up a solar PV power project. The key assumptions for a typical grid connected solar PV power plant based on poly-crystalline and thin film technologies are given in the Table 37. A thin film module typically requires almost double the area for panel mounting as polycrystalline module for the same energy output. We assume that there would not be significant impact of additional land requirement on project cost since the state government may be able to offer unutilised/waste land at low prices for such projects.

Table 37: Assumptions for a grid connected solar PV system

Parameter Units Poly-crystalline Thin film Size MWp 1 1

Capital cost of project Rs. Crores 21.0 17.2

Cost of solar panels Rs. Crore 14.5 10.0


Parameter Units Poly-crystalline Thin film Balance of system Rs. Crore 6.5* 7.2*

Insolation Hours per day 5.5 5.5

No. of sunny days Days/year 325 325

Annual generation Millions kWh 1.61 1.61**

Debt: equity ratio Ratio 70:30 70:30

Interest rate % 12% 12%

Repayment period Years 12 12

Tariff (1-10 years)-including GBI

Rs/kWh 15 15

Tariff (11-20 years) Rs/kWh 10 10 Source: ISA-NMCC 2008 Research and interactions with solar PV manufacturers

** Benefits of ‘Energy harvesting’ have not been considered

Analysis of equity IRR and cost of generation

6.30 A power developer would typically look at the benchmark equity IRR of 11% to 13%. This is equivalent of 14% post-tax return on equity under existing regulatory environment in conventional generation projects. Based on current tariff incentives offered by MNRE (which is limited to a total national capacity of 50 MW), viz. Rs. 12 per kWh (total tariff of Rs. 15 per kWh), the equity IRR falls well short of the expected levels for power developers, as is indicated in the table above. Further, there is uncertainty over tariffs available after 10 years. (The GBI is only available for 10 years)

Table 38: Cost of generation from a solar based grid connected power project

c-Si based system Thin film based system Equity IRR 2.77% 7.33%

Levelised cost of generation (Rs./ kWh)

12.21 10.68

Levelised cost components (Rs./ kWh)

O&M 0.63 0.86

Interest 5.43 4.45

Depreciation 5.32 4.37

Tax 0.83 1.00


6.31 Without gaining control over the value chain, the cost of production and prices of modules cannot be brought down significantly. If the cost of modules cannot be brought down, a power developer would find it hard to justify investments in solar generation today, given the low IRRs at current module prices. The way to attract investment in solar based grid interactive projects is by tackling cost of finance and module cost, as these are the biggest components of cost of generation.

6.32 As demonstrated earlier, a fully integrated manufacturer has a large margin to play with and developers gaining control over this value chain can aim realistically at developing utility scale solar generation projects. While government capital subsidy and fiscal incentives would be critical to encourage developers to integrate backwards and invest in manufacturing to lower the cost of modules, preferential interest subsidy for solar based power projects is also


essential early in the solar development lifecycle in India. It will also encourage financiers to take a closer look at the sector and gain appreciation of its economics.

6.33 In Figure 57 below, we present the industry outlook on the possible trajectory of cost of generation from a c-Si based solar system. In this analysis, we assume the lower band panel price trajectory as shown in Figure 57. For balance of system pricing, we assume an annual decline of 3.4% and 4.7% for c-Si and thin film, respectively, till 2015. The panel price and balance of system price together constitute the system price.

Figure 57: Trend of cost generation with changing system price

Trend of cost of generation with changing system price

210

183

160144 135 127 121 116 113 111 110 108 107

12.21

10.91

9.81

9.068.62

8.277.95 7.73 7.61 7.51 7.44 7.37 7.30

-

50.00

100.00

150.00

200.00

250.00

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Year

Syste

m p

rice (

Rs/W

p)

-

2.00

4.00

6.00

8.00

10.00

12.00

14.00

Co

st

of

gen

era

tio

n (

Rs/k

Wh

)

System price Cost of Generation


6.34 As is visible above, with falling panel and balance of system costs, the cost of generation is expected to fall significantly from Rs. 12 to Rs 8 per kWh in a span of 10 years. (2008 to 2017). In comparison to this trend, cost of generation from conventional sources (coal, gas etc) is expected to rise substantially due to the shortage and increasing cost of fuel. With falling cost of generation, the economics of generating power from solar based system is also projected to improve significantly.

6.35 It needs to be noted that such a trend in module (and balance of system) pricing (as projected in chart above) is achievable within a short span only by providing immediate and the right set of incentives to set up a large-scale manufacturing base in India. The role of capital subsidy has been already quantified above to illustrate the immediate need to implement the government’s Special Incentive Package Scheme (SIPS) for semiconductors and the solar PV manufacturing sector.


6.36 Further, to understand the impact of interest rates on the cost of generation, we look at its sensitivity to interest rates at various lower band systems pricing as projected in Figure 58 below.

Figure 58: Sensitivity of cost of generation to interest rates (at various system prices)

12.2

9.1

8.6

8.3

8.07.7

7.67.5 7.4 7.4 7.3

11.40

10.21

9.20

8.51

8.11

7.78

7.497.29

7.18 7.09 7.02 6.95 6.89

10.60

9.52

8.59

7.97

7.60

7.30

7.046.85

6.74 6.66 6.60 6.54 6.48

9.80

8.82

7.99

7.42

7.09

6.81

6.586.41

6.31 6.24 6.19 6.13 6.08

10.9

9.8

6

7

8

9

10

11

12

13

210 183 160 144 135 127 121 116 113 111 110 108 107

System price (2008 to 2020) Rs per watt

Co

st

of

gen

era

tio

n (

Rs/k

Wh

)

Cost of generation at 12% Cost of generation at 10%Cost of generation at 8% Cost of generation at 6%


6.37 It is clearly visible from the chart above that if lower interest rates could be offered, the cost of generation could drop to make solar based power more competitive with incumbent sources. This would also improve the equity IRR of the developer and would attract increased investments in developing grid connected solar based plant in India.


A7: RECOMMENDATIONS

7.1 India today is at the crossroads in its quest for energy. India’s energy needs are growing and so are the needs of a number of other developed and developing countries around the world. Fossil fuels are becoming scarce and most of what is left is concentrated in the hands of a few nations. These two factors, along with the rising demand, are driving up the cost of fossil fuels. Market speculation is further adding to the misery in terms of cost spikes and all time high crude trading. On top of this, our planet is suffering due to climate change and global warming and fossil fuels are a major contributor to this phenomenon.

7.2 India’s need for cheaper energy options for lifting the millions still under the poverty line is becoming focused more and more on either imported gas and oil or polluting coal. India has also embarked on a journey to exploit renewable energy resources, like wind, solar and small hydro, that are available in plenty. India's RE programme is among the largest and most extensive among developing countries. India is already the leading player in the use of decentralized SPV and fourth in wind.

7.3 However, most of these resources, like wind and small hydro, are site specific and have a limited potential and cannot be relied upon to meet all of India’s energy needs. Solar PV, on the other hand, is a technology that offers a solution for a number of problems associated with fossil fuels. It is clean, decentralised, indigenous and does not need continuous import of a resource. On top of that, India has among the highest solar irradiance in the world which makes solar PV all the more attractive for India. India (Orissa and Andhra Pradesh) also houses some of the best quality reserves of silica (basic feedstock for metal grade Si) and has globally proven metallurgical capacities and capabilities. India is already an established low cost producer and assembler of solar PV cells and modules.

7.4 The major issue with solar is its high upfront costs. Companies and countries around the world are investing in scale to bring down costs and in R&D to improve efficiencies. India, on the other hand, faces the danger of missing the solar PV opportunity. Solar industry in India has been till now a low cost producer of solar PV cells and modules. Its cumulative processing capacity is less than 400 MW for both cells and modules. On the other hand, companies around the world are now planning and developing production facilities that run into giga-watts. India has neither invested in scale nor has it invested in a focused manner in R&D. China, Japan, USA, Germany, Malaysia and Taiwan are doing just this.

7.5 If the Indian solar PV industry does not focus on both these issues immediately, there is a high likelihood that it would be not be able to compete and would become a net importer of solar PV products.


7.6 Today, India needs to focus on the solar PV sector and the government needs to provide impetus to this sector. Solar PV in India is at a nascent stage and a push from the government by way of the right policy framework, a facilitating growth environment and adequate financial support, like incentives and access to cheap capital, would allow the industry to mature, become self-sufficient and compete globally.

7.7 Based on interactions with various stakeholders, data and information collection and its analysis thereof, the salient recommendations for promoting solar PV sector are given below:

Generation

7.8 Presently, Generation Based Incentive (GBI) is applicable only up to a total of 50 MW through grid interactive solar based power generation in the country. The current environment is conducive for the promotion of solar PV in the country. The target of more than 1 GW capacity being commissioned by the year 2012 seems possible. But for that it needs ample push from the government. It is recommended to extend this scheme (of providing GBI) to all project developers for unlimited capacity in the next 5 years.

7.9 It is recommended that the Central Government do away with an overall cap of Rs. 15 per unit under the GBI scheme. Instead, it should put a cap of Rs. 12 per unit for solar power from PV and state governments/utilities should further extend it without any limit on the cost of purchase of this power. Though this revised scheme will become more attractive for developers, it will generate enhanced competition between different states to attract this investment.

7.10 Under the existing scheme, the GBI is limited for a period of 10 years. As the solar PV based projects are capital extensive, uncertainty of off-take of power generated beyond the period of 10 years would hold back investors to set up solar PV based power projects. It is, therefore, recommended that the existing period of 10 years for GBI incentive should be extended to 20 years.

7.11 Adopt the Feed-in Tariff (FIT) model followed by Germany for grid interactive solar projects. Under FIT, an innovative tariff structure was recommended under which FIT was considerably higher than the cost of retail electricity (currently about 44 Є Cents for solar vis-à-vis about 21 Є Cents for retail electricity supply). FIT would be reduced every year for projects commissioned in these years to compensate for reduction in production costs and improvements in efficiency. For example, the RE plant commissioned in 2008 would get a lower tariff rate than a plant commissioned in 2007. This is known as digression and the rate of digression is based on the technology progress ratios. Germany also used FIT and digression rates to define a roadmap for solar PV cost reduction till it reaches grid parity between 2017 and 2020.


7.12 Grid connected power would continue to be the mainstay of solar energy deployment, as is the trend in other countries with 91% of the generation from solar PV fed to the grid in Germany. The government should enact a Renewable Energy Law requiring all utilities to progressively increase their purchase of power (year after year) from the RE segments. Also, within the RE segments, higher allocation should be given to purchasing power from solar sources. This step will help in creating sustainable demand for power from renewable sources, which will immensely help the solar PV manufacturing sector

7.13 The government should allow entrepreneurs to develop solar farms with a minimum capacity of 50 MW like Ultra Mega Power Projects (UMPP). An SPV could be formed for this purpose, which carries out the entire initial spadework, like land acquisition and getting all necessary clearances, etc. Competitive bids could be invited from project developers thereafter.

7.14 Sectors, such as backup power for residential, commercial and telecom, use Diesel Generation (DG) sets for power when there is a grid outage. Diesel, being a fossil fuel, not only pollutes but costs the government precious foreign exchange and subsidy. A number of these applications used for telecom, commercial establishments and residential purposes can be completely or partially switched to solar PV if appropriate incentives are provided by the government. The market segments’ analyses has shown that solar PV is a more will become an attractive option as back up power generation for telecom towers as the diesel prices increase and the panel cost comes down. Besides, solar PV is also viable in case of high power outages in commercial buildings. The government needs to undertake the following steps to encourage the use of solar PV in these sectors:

(i) Access to low cost and large gestation period financing for the implementation of solar PV in these sectors.

(ii) Rebate/subsidy on electricity bills in case of an integrated solar PV system installed at any site.

(iii)Continuation of accelerated depreciation for these sectors.

(iv) Net metering and declaration of attractive FIT for these installations during peak hours.

7.15 The government should agree for ‘net metering’ for all grid connected consumers generating solar power. This will provide immediate incentive to all onsumers in BIPV and roof top segments to install solar PV systems.

7.16 Other initiatives recommended to make the solar PV based generation of power more cost competitive and the sector more attractive for power developers are as follows:-


(i) Access to funds at cheaper interest rates

(ii) Reduction in duties on the balance of systems like inverters, batteries, charge controllers, etc. (which constitute 30-40% of the solar PV system cost) and are used for setting up solar power projects

(iii) Creating and promoting the awareness of the use of solar energy. The government should consider charging a higher rate for the use of diesel and furnace oil for power generation in industry, commercial and residential use. It will help in reducing our dependence on imported petroleum products and promo

Manufacturing

7.17 Incentives to encourage scale and vertical integration: Industry size and volume of production are key issues to address the economies of scale. Scale and integration should be encouraged through provision of higher incentives as they lead to reduction in the manufacturing cost. Besides, such units can negotiate volume discounts with the suppliers of the capital equipment, raw materials and consumables required during production. Similarly, plants with vertical integration are more competitive. It is recommended that incentives in the form of capital subsidy on the lines specified under the Semiconductor Policy should be made available to a larger no. of units engaged in solar PV manufacturing. However, in the present context when there is a need to carry along all players and create economies of scale, 75% of the subsidy should be reserved for large manufacturers and 25% for small scale manufacturers. Small scale manufacturing units would be all units investing less than Rs. 1,000 crore or integrated plants with a capacity lower than 75 MW.

7.18 Lack of adequate financial resources, particularly at attractive interest rates, is a key barrier for the development of this industry. The availability of funds at a cheaper rate will go a long way in attracting a large number of players in this area. The government can float tax saving ‘Renewable Energy Bonds’, like infrastructure bonds, to collect low-cost funds from the general public. Entrepreneurs can avail these funds to reduce their cost of capital for manufacturing solar PV products. This scheme could be managed by IREDA, a financial institution managing renewable portfolio in MNRE.

7.19 Subsidised electricity tariffs for solar fab units can also enhance their competitiveness, as electricity cost forms a significant part of the manufacturing cost. Further, uninterrupted power should be made available to these units.

7.20 It is well recognised that R&D and innovation are one of the key drivers for development of the solar PV industry. Accordingly, the following initiatives are recommended to encourage R&D in this industry in India:-


(i) Collaborative research amongst government, R&D institutions and industry

(ii) Coordination amongst various government departments doing research and development in this field.

(iii) Enhancing coordination amongst stakeholders namely industries, research institutions under CSIR, government departments like DST etc.

(iv) Commercialization of the developed technology

(v) Developing a proper framework for technology transfer and collaboration within India and globally in order to obtain the best available technology as well as provide direction of future R&D

(vi) Development of high end skills for R&D to overcome the shortage of scientists and researchers in this area.

7.21 The main focus of the research should be in the following areas:

(i) Basic research on materials and design of solar PV cells (both c-Si and thin films) so as to enhance their efficiency.

(ii) Cost reduction measures such as research on lower utilisation of active semiconductor materials, better and cheaper substrates, reduction in losses and lower energy requirements for manufacturing for c-Si and thin films.

(iii) Research on low cost and high output continuous run manufacturing processes for thin films and c-Si.

(iv) Setting standards for materials and components so as to create an integrated value chain within the country.

(v) Enhancing life cycle, reliability of BoS and associated cost reduction of its components.

7.22 Equity fund/Venture fund should be created to nurture solar PV start-ups and seed funds for solar PV research projects.

7.23 A comprehensive National Policy for Solar Energy in India based on the recommendations made should be formulated to achieve set objectives and goals at the national level and encourage the growth of this sunrise industry in a big way. It is recommended that the growth of the solar PV industry should be implemented under Mission mode.


A8: Annexure I: Assumptions

The following assumptions have been considered for various analyses:

Unit DDG model

Telecom tower model

Grid connected

model

Capital cost assumptions

Solar PV panel - for crystalline silicon Mn Rs/MWp 145 145 145

11 KV transmission line Mn Rs/km 0.25 - -

Capital cost for distribution network Mn Rs/Sq Km 0.45 - - Inverter cost/charge controller (for telecom tower) Mn Rs/MWp 40 20 40

Battery cost Mn Rs/MWp 45 45 - Other costs, including installation, insurance, contingency Mn Rs/MWp 25 25

System sizing

Size of solar PV panel kW 20 12 1000

Size of DG set for telecom towers kW - 5 -

O&M assumptions

O&M of 11kv transmission line % of capital cost 5 - -

O&M of distribution network % of capital cost 5 - -

O&M of solar PV system % of capital cost 0.5 - 0.3 Technical assumptions on solar PV panel, inverter, etc

System efficiency of solar module (incl. of inverter/controller) % 80 80 90 Conversion efficiency of battery % 80 80 -

Insolation hours/day 5.5 5.5 5.5

No. of sunny days Days 325 325 325

Annual generation per MW from solar panel Million kWh 1.43 1.43 1.61

Annual derating of solar panel 1% 1% 1%

Inflation & escalation rates

O&M of 11kv of transmission line % 5 - -

O&M of distribution network % 5 - -

O&M of solar PV system % 5 5 5

Cost of grid power delivered to consumer % 5 - -

Financing assumptions

Debt -equity mix % 1:1 1:1 70:30

Interest rate on long term loan % 12 12 12

Repayment period Years 10 10 12

Discount rate for levelisation purposes % 12 12 12

Miscellaneous assumptions

Buffer load in distributed generation model % 10 - -

T&D losses for 11KV line % 5 - - Cost of delivered power to a residential consumer Rs per kWh 2.61 - -


A9: End notes

i (Source: Rommel Noufi and Ken Zweibel, National Renewable Energy Laboratory).

ii Material for this segment has been obtained from the base paper on Strategic Research Agenda for Photovoltaic Solar Energy Technology, European Union

iii Material sourced from A Strategic Research Agenda for Photovoltaic Solar Energy Technology; European Union (2007) and Review of PV Inverter Technology Cost and Performance Projections by Navigant Consulting Inc. Burlington, Massachusetts (2006)

iv Material sources from A Strategic Research Agenda for Photovoltaic Solar Energy Technology, European Union

v Material sourced from the US DOE’s Vision 2020 for Solar PV

vi Material sourced from Japan’s PV Roadmap Towards 2030 (PV 2030) – NEDO (2004)

vii It is assumed that the building owner takes benefit of accelerated depreciation rule available for certain asset classes, including solar PV systems. Under this rule, an 80% depreciation rate (on ‘written down value’ or WDV basis) can be taken for taxation purposes. The present value benefit of the depreciation tax shield per kWh has been assumed to decrease the levelized cost of generation from the BIPV system.

viii The additional 30% comprises of basic customs duty, countervailing duty (CVD) and education cess.

ix Manufacturing units in SEZ get 10 year tax holiday (100% in first 5 years and 50% in next 5 years with MAT exempt) on exports. Additionally, the capital imports/raw material are exempt from customs duty, the local procurement of capital goods and raw material and inter-state purchases are exempt from excise duty and CST, respectively.

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