47058480 Solar PV Industry Global and Indian Scenario[1]

8/6/2019 47058480 Solar PV Industry Global and Indian Scenario[1]

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Study on Solar Photovoltaic Industry: ISA-NMCC 2008

Disclaimer of Warranties and Limitation of Liability

This report is provided by ISA on an "as is" and "as available" basis. ISA and PricewaterhouseCoopers haveprovided information that is provided by market participants, survey respondents and secondary research ofpublicly available information. ISA and PricewaterhouseCoopers take no responsibility for any incorrectinformation supplied to us by market participants (manufacturers or users). Quantitative market information isbased primarily on interviews and therefore is subject to fluctuation. No claims are made for the accuracy orapplicability of the information to any specific situation.

ISA and PricewaterhouseCoopers make no representations or warranties of any kind, express or implied, as tothe information, content, materials, etc., included in this report. The user of the report shall do so at the userssole risk. In the event the user intends taking any steps that could have an adverse effect on the usersbusiness, ISA expressly states that the user should consult its legal, tax or other advisors, in order to protectthe interests of the user, which may be specific from case to case. It is emphasized that ISA has participated inpreparation of this report with PricewaterhouseCoopers in an independent manner and should not be construed

as necessarily being reflective of the views or position of any individual member company of ISA or of therepresentatives of such member companies that may serve on the ISA's executive council or other memberforums.

To the full extent permissible by applicable law, ISA and PricewaterhouseCoopers disclaim all warranties,express or implied, including, but not limited to, implied warranties of merchantability and fitness for aparticular purpose. ISA will not be liable for any damages of any kind arising from the use of this report,includin , but not limited to direct, indirect, incidental, unitive, and conse uential dama es.


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PREFACE

Solar photovoltaic (PV) based electricity generation costs are declining and expected tobecome economically attractive as technologies improve and the cost of electricity generatedby 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 theSemiconductor Policy 2007 and deployment towards grid-connected power under theGeneration-Based Incentives (GBI) have acted as catalysts for growing interest amonginvestors in this space. Domestic solar PV manufacturing will complement and support thedeployment of solar energy. This will make India competitive and a preferred globaldestination for this industry. Further, generation of power through solar will give India theenergy security requirements and another source for energy. This will boost economic growthand 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 hasallowed us to make specific recommendations which, if implemented, could contribute toIndias emergence as one of the major solar hubs in the world. Given our domestic demandand 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 theinputs of their members in the study.

The concerted efforts of the ISA solar PV subcommittee on industry research andPricewaterhouseCoopers teams are greatly appreciated. We would also like to acknowledge

the support of several individuals and organizations from within and outside the industry forthis study. We take this opportunity to thank each one of them for sharing their valuableinsights.

Poornima Shenoy Jaswinder Ahuja

President, ISA Chairman, ISA


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Table of Contents

Page NoAbbreviations 1

Executive summary 4

A1: Mapping the solar PV manufacturing and production supply chain - Globaland 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 57A3: 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


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A7: Recommendations 159

A8: Annexure I: Assumptions 164

A9: End notes 165


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List of Tables

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


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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) 148Table 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


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List of Figures

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Figure 1: Links of the solar PV value chain 12Figure 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 playersglobally 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


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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 84Figure 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 109Figure 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 135Figure 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


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__________________________________________________________________________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 AreaEA 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


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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

NEDOThe New Energy and Industrial Technology DevelopmentOrganization

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


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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

Euro

$ US Dollar


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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 allinvestments 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 globalstandards. One of the main reasons for this is the lack of adequate investment in solar PVmanufacturing and R&D in India. There is an urgent need to facilitate and enhanceinvestment in solar PV manufacturing in India. This would enable the domestic solar PVindustry to provide cost-effective and sustainable solutions to the domestic market andcompete with the rest of the world. This study has been carried out with the intent to providethe requisite background for investment in this sector.

The study provides a broad overview of the solar PV market globally and in India. It providesthe current status and future trends in solar PV manufacturing, technology, R&D, marketdynamics, commercial and financial aspects, and government policies and market drivers inleading 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 marketviability and the size of these market segments. Based on these analyses, a set ofrecommendations has been made to enhance the growth and competitiveness of the Indiansolar 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 growfour-folds by 2011. In 2007, of the US$ 71 billion invested in new renewable energy capacityglobally, 30% was in solar PV. The main factors holding back an even faster rate of growthfor 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 upfrom an average US$ 20/kg in 2001 to over US$ 50/kg in 2006. On the other hand, theshortage has pushed for higher efficiency in production and the introduction of new solar PVtechnologies, i.e. thin film technology.

In 2007, there was an increase in the supply of polysilicon globally by 30%. However, accessto adequate polysilicon supply remained the main bottleneck for growth of the solar PVindustry. The global silicon feedstock capacity servicing the solar PV as well as thesemiconductor industry was up from 38,000 tonnes per annum in 2006 to 52,000 tonnes in2007.

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 newplayers have entered or are set to foray into this space.

Similarly, the global wafer manufacturing capacity grew at 60% in 2006 (over 2005) and73% during 2007 (over 2006). The market for solar PV crystalline wafers has beendominated by multi-crystalline, which had a share of almost 54% in 2007. One of the keyshifts occurring in wafer manufacturing is the emergence of China and Taiwan as major


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players in the near future. Even today, more than 50% of the installed capacity for wafermanufacture 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 asa major player in cell production, displacing Japan as the second largest producer of solar PVcells in 2007.

Concurrently, thin film technology has evolved with a substantial increase in capacity since2005 (at almost 80% in 2006 and more than 100% in 2007) due to polysilicon shortage. In thethin films market, significant expansion is expected in the future and some of the mainplayers lining up are First Solar and Sharp, both of which hope to have a thin films capacityof 1 GW by 2012.

In recent times, the geographical focus of solar PV manufacturing has shifted towardsdeveloping 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 leadingmanufacturers 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 9manufacturers of solar cells and 19 manufacturers of PV modules. Another 60 companies areengaged in the assembly and supply of solar PV systems. During FY07, nearly 45 MW ofsolar cells and 80 MW of SPV modules were produced in the country, of which over 60 MWof solar PV products were exported.

In 2007, the Government of India announced the Semiconductor Policy that offers a capitalsubsidy 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 leastRs 1,000 crore. So far, there have been 12 applications for setting up solar PV plants, whichcumulatively could bring an investment of about Rs 66,394 crore (approximately US$ 16billion).

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

Technology

Crystalline silicon (c-Si) solar cells have a larger surface area and have relatively highconversion 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 alimited supply base. In contrast, thin film technology has the advantage over c-Si technologyin terms of better cost economics for electricity generation. Lower material (silicon) usage


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and lower energy requirements contribute to reduced generation cost. However, the landrequirement 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 ontwo 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 isdown to 10 g/Wp, which till a few years ago was typically 13 g/Wp. There is significantpotential for improvement in manufacturing processes in the near future. The EuropeanUnion (EU) is targeting polysilicon consumption below 5, 3, 2 g/Wp in the short, mediumand long term, respectively.

The main areas where cost reduction is expected are in the development of new, lower costand less energy-intensive techniques for polysilicon production and a reduction in materialusage. According to available market research , crystalline silicon modules (c-Si) may touchUS$ 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, withincreasing standardization of manufacturing equipment and improving efficiencies ofmodules, 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 newtechnologies that can improve system efficiency and maintain low cost production.Researchers are now targeting conversion efficiencies between 30% and 60%, while retaininglow 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 securityaspects and environmental concerns.

Market segments for solar

Power deficits continue to plague the Indian power sector and impede the countrys economicprogress. 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, thegeneration capacity needs to be doubled in 10 years from the current level of approximately142,000 MW. In addition, the Government of India in 2007 mandated that electricity utilitiespurchase power from renewable sources. The target for electricity generation through thisroute is fixed at 10% by 2010 and 20% by 2020.

The approach has shifted towards alternate power sources with the introduction of state-levelRenewable Purchase Obligations (RPOs), increasing demand-supply mismatch and anincrease in short-term trading prices. State Electricity Regulatory Commissions (SERCs)have been looking at indigenous and Renewable Energy (RE) sources, such as wind andsolar. 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


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

Based on the market size and its attractiveness, four market segments appear to have themaximum 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 Indias population and energy is crucial for raisingthe standard of living in rural India and encouraging employment generation. TheGovernment of India has kept a target of providing electricity for all by 2012 with aminimum consumption of 1 kW per day per household. But even grid connected villagestoday experience large power outages. Under the Power for All programme, the

Government of India has targeted electrification of all villages by 2012 in which 18,000remote villages would be electrified using non-conventional power sources. This wouldprovide an ideal situation for the large-scale introduction of DDG technologies, especiallysolar PV. An analysis of the DDG-based model shows that solar PV at present solar PV panelcosts (i.e. Rs 145/Wp) is a more attractive electrification option for a village than extendingthe grid by around 12 km or more.

In order to provide an impetus to grid interactive solar power generation, the Ministry of Newand Renewable Energy (MNRE) has decided to support grid interactive solar powergeneration projects. At present, this support in the form of a subsidy is limited to only 50MW 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 gridinteractive solar PV based power generation projects. MNRE is now targeting a capacity of500 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 theguidelines of the Telecom Regulatory Authority of India (TRAI), telecom connectivity has tobe maintained at nearly 100% of the times. This means that in case of a power outage therehas to be a seamless transition to a backup power supply for all telecom towers. Presently,most BTSs in India use Diesel Generation (DG) sets as a backup power source. A lifecyclecost assessment between DG-based backup power and solar PV based backup power wasundertaken with diesel prices assumed to be Rs 35, 40 & 55 per litre. The analysishighlighted 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 forall scenarios when the diesel price is assumed to be Rs 35 and Rs. 40 per litre. Solar PVbecomes a viable option for telecom (based on todays prices) if the retail price of dieseltouches or exceeds Rs 45.9 per litre. The telecom sector has the potential to provide a largeand viable market for solar PV in the future with retail prices of diesel likely to move up andprices of solar PV panels likely to come down. If solar becomes a viable solution in thissector, 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).


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In the past few years, due to a huge increase in the demand for power from commercialbuildings, the utilities are facing an overall deficit of electricity. In such a scenario, mostcommercial buildings rely on DG sets, which is an expensive fuel source. Solar PV basedapplications cannot meet the load requirements as it involves space and cost constraints. Buta 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 theanalysis undertaken under this assignment, solar PV can assist commercial building operatorsin saving as much as 22% in per unit cost. This segment has the potential of adding up to1,000 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 attractivealternative source of energy which till now has a limited market in India. The global solar PVmarket 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 consistentPV 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 PVmarket in these countries. Simultaneously, the authorities related to power at the federal,regional and local levels have been demonstrating a strong commitment in implementingstrategies and programme.

Instead of the stop-and-go approach, the basic requirement for each PV policy framework isits 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 Germanys leading position is its existing regulatory framework andincentive 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 FederalGovernment provides manufacturing incentives to promote production capacity in Germany.For example, the roof top programme in Germany was a mega success after the introductionof the EEG (German renewable energy feed-in law), mandating utilities to purchase allavailable RE-based power. Also, support to PV R&D has created a thrust withinmanufacturers to systematically reduce production costs and to offer more efficient products.As a result of a favourable policy structure, Germany produces solar PV component acrossthe value chain, i.e. silicon production (10,000 tonnes, equal to a PV production ofapproximately 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. Japans solarPV market development has thrown up a number of important lessons for developingcountries on how to develop their indigenous solar PV industry. More precisely, Japansapproach is largely focused on the supply side, especially relying on technologyinterventions. One area where Japan stands out globally is its expertise in solar PVtechnology. 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 bothdemand and supply. On the demand side, Japan targeted the largest possible consumer group,


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i.e. the residential sector and provided it the incentives (subsidy, net metering, access to easyfinance, etc.) to mandate solar PV application. On the supply side, the government has beenworking 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 andnow by Europe (particularly Germany). In the USA, the incentive framework for solar PV isfairly 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 levelincentive programmes - thus development is taking place only in a few states which areproactive in initiating incentives and favourable policies. The overall strategy of these stateprogrammes is to encourage cost reduction through increased manufacturing volume andlowering of transaction costs through the development of local market infrastructure. This, inturn, 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 thenext few decades. Developed economies, like Germany and Japan, have led themanufacturing revolution and the adoption of PV technologies till now. They have fuelled thetechnological progress and cost reductions. China is slowly gaining ground as amanufacturing centre for solar PV. Given that the technology is young and is in an evolvingstage, the government in several countries, like China, Malaysia, Hungary and Mexico, haveannounced initiatives to attract investments in the manufacturing of PV. Now is the time forthe Indian government to frame and implement suitable programmes and policies to attractdomestic and global investments in this sector. Besides serving the expanding global PVmarket, this manufacturing ecosystem will ensure that India has a stake in the development oflow cost photovoltaic panels for local consumption. This will ensure the technology achievesgrid-parity at the earliest, and thereby reduces dependence on conventional energy sources.

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

Duties on the balance of systems, like inverters, batteries, charge controllers, etc. (whichconstitute 30-40% of the solar PV system cost), and are used for setting up solar powerprojects 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.


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Recommendations

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

The manufacturing base in India comprises of cell and module manufacturing, with the bulkof the value addition taking place outside the country. Additionally, the current scale ofmanufacturing in India is small in comparison to global standards. Hence, there are twoissues to be addressed: scale and integration. Significant and immediate steps would berequired from the Government of India to facilitate a bigger and vertically integratedmanufacturing base in the country. The availability of capital subsidy would ensure earlycapital recovery or break even for the investor and allow the investor to commit higherinvestments into this sector. It is recommended that the incentives as per the SemiconductorPolicy 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 thisdirection include collaborative research amongst government, R&D institutions and industry,enhancing coordination amongst various government departments and institutes undertakingR&D, commercialization of the developed technology and developing a proper frameworkfor technology transfer and collaboration within India and other countries to obtain the bestavailable technology.

On the deployment side, it is recommended that the government extends the GBI scheme toall project developers for unlimited capacity addition in the next 5 years. In addition, theexisting period of 10 years for GBI incentives should be extended to 20 years. Besides, thegovernment should allow developers to take benefits of the accelerated depreciation. Toaccelerate 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 REsegments. Also, within the RE segments, higher allocation should be given to purchasingpower from solar sources. This will help in creating sustainable demand for power fromrenewable sources, which will immensely help the solar manufacturing industry. . Besides thelarge scale applications, the government should encourage solar PV applications for small &medium scale niche market segments (residential, commercial and telecom). It isrecommended that the government agree for net metering for all grid connected consumersgenerating solar power, which will incentivise all consumers to adopt solar PV

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

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


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

REVIEW

Background

1.1 A detailed analysis of the global and Indian solar PV manufacturing andproduction supply chain has been undertaken in this section. The first step ofthis task is to identify the various components/links of the solar PV supplychain and map the major players. Subsequently, a review of the stages of thesupply chain has been undertaken that includes an analysis of productioncapacity 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, ofwhich 30% was accounted for by solar PV (Source: REN 21 Report).

1.3 The fastest growing energy technology globally is grid-connected solarphotovoltaics (PV) with an annual cumulative installed capacity increase ofmore 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 ofbasic 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 siliconbased, making access to adequate solar grade polysilicon the main growthbottleneck.

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 theelectronics (semiconductor) industry. Another factor promoting the use ofcrystalline silicon technology has been its efficiency that is between 15 and20% during commercial production.

1.6 Shortage of polysilicon has provided an opportunity for bringing in efficiencyin production and introduction of the next generation of solar PV technology,i.e. thin film technologies. Thin film modules are produced by depositingextremely thin layers of photosensitive materials on to a low cost backing(substrates), such as glass, stainless steel or plastic. Due to lower usage ofmaterial, thin films have lower production cost as compared to crystalline

silicon. On an average, thin films use only 1% of the active material comparedto crystalline silicon.

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


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

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

Figure 1: Links of the solar PV value chain

Ingots andwafers

PV Cells PV ModulesPV SystemIntegration

SiliconFeedstock

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 adequatepolysilicon supply remained the main bottleneck for the solar PV industry theworld over. The global silicon feedstock capacity servicing the solar PV as wellas the semiconductor industry was around 52,000 tonnes per annum towardsthe end of 2007, up from 38,000 tonnes per annum from 2006. The maindrivers 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 polysiliconproduction as well as through waste silicon supply from the electronicsindustry.

1.11 In 2001, the dotcom bubble burst and the consequent downturn in thesemiconductor industry caused a glut in polysilicon, which discouragedproducers from investing in additional capacity. Although the solar PVindustrys demand for polysilicon was growing, most polysilicon producers didnot 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 globalcapacity addition in polysilicon was only 6,800 (Metric Tonne) MT between2000 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 experiencedsubstantial growth due to renewed focus on renewable energy in the face ofglobal warming and national energy security issues among nations withsustained high price of oil. In 2006, the solar PV industry consumed about 45-


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47% of the total global polysilicon supply for production of solar photovoltaiccells which went up to 54% in 2007. As a result, the solar PV industry for thefirst 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 polysiliconmanufacturing unit to come online has resulted in a steady demand supply gapfor polysilicon, which has led to an escalation in prices of polysilicon fromUS$ 9 per kg in 2000 to US$ 75 in early 2006, with spot market pricesoccasionally 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 numberof 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 MTin 2007 due to some rapid expansions by established players as shown inFigure 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 2600026600 27300

31280

38000

52000

0

10000

20000

30000

40000

50000

60000

ProductionCapacity(inmttonnes)

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


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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 oftechnical knowhow. As a result, the development of the polysilicon productionindustry has been confined basically to countries like the USA, Germany andJapan. 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 comingfew years will see the polysilicon industry developing in countries likeNorway, China, Spain, and Korea. However, the USA is expected to continueas the top producing country till at least 2010.

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


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

1050010000

7700

10000

6600

5500

62506050

5300

6000

4000

3800

5800

5400

5200

3100

28602850

1300 900

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 notexpected to reduce dramatically. However, with increased production capacityin 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 isfurther 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 dominantrole despite a number of new players entering the market. Based on the datacollated on the Big-7 in the polysilicon market, it is estimated that they wouldadd 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.


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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 investmentsin polysilicon. The table below shows that 79,050 MT of polysilicon capacitywould come online from new players by 2011.

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

S. No Company Country oflocation

Projected target for2011 (MT)

1 LDK Solar China 15,0002 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

Marketplayers

Manufacturingbase

TechnologyPresentcapacity

(MT)

Future roadmap/ capacitytargets (year 2010unless specifically

mentioned)

Key characteristicsof the player

Hemlock Michigan Siemens 10,500 36,000 MTEconomies of scaleand polysiliconexpertise

WackerBurghausen,

GermanySiemens 10,000 22,000 MT

Diversified insilicones, polymerand chemicals andworldwidedistribution network

Montana, USA Siemens

Washington,USA

SiemensREC

Washington,USA

FBR

6,25019,500 MT

Fully integratedacross PV valuechain and costefficient

Texas, USA FBRMEMC

Merano, Italy Siemens6,000 15,000 MT

Granular polysiliconproducer specificallyfor PV industry

Yamaguchi,Japan

Siemens

TokuyamaYamaguchi,

JapanVLD

5,800 8,400 MT

VLD technologyallows for fasterproduction moreappropriate for PVapplications

Albama, USA SiemensMitsubishi Yokkaichi,

JapanSiemens

3,100 3,500 MTNo publicly knownplans for majorexpansions

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

Others

China, Taiwan

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

New and emergingmarkets in China,

Japan, USA andIndia


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S. No Company Country oflocation

Projected target for2011 (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

14Joint 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 theestablished players, it is estimated that around 55% of installed capacityglobally would be from the Big 7 (established players in the market today).

Figure 5 highlights the projected change in the polysilicon market in terms ofmarketshare of major polysilicon manufacturers in 2011. A few new entrants,like LDK, could break into the top five players in terms of marketshare by2011.

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 madebased on a number of sources, like company announcements, media reports onspecific sectors and companies, and annual reports. However, doubts remain insolar PV circles on whether all the capacity that has been publicly announced


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

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

Link 2 Silicon wafers/ ingots

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

Figure 6: Production along the global value chain in 2007

0

500

1000

1500

2000

2500

3000

3500

4000

4500

5000

ProductionCapacity

(inMW)

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) and73% during 2007 (over 2006) based on estimates by REC. Figure 7 highlightsthe change in solar PV wafer production capacity between 2005 and 2007.


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

0

1000

2000

3000

4000

5000

2005 2006 2007

CapacityinM

W

Source REC Annual Reports 2006 & 2007

1.30 The market for solar PV crystalline wafers is segmented into two broadcategories for mono-crystalline and multi-crystalline wafers/ingots. According

to 2006 data, multi-crystalline had a share of almost 54% and the rest wasmono-crystalline. According to the REC Annual Report 2007, the share ofmulti-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 thesetwo 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

12001400

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 forthese players is given in Figure 9.


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1.32 REC today is the largest producer of multi-crstalline wafers with a capacity of468 MW. It is now focussing on mono-crystalline wafers and plans to enhanceits capacity from 35 MW in 2007 to 300 MW by 2010. REC is the onlyintegrated company in the whole solar PV chain from polysilicon to modules. Itis 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

RECWafer

PVCrystallox

LDKSolar

Deutsche

solar

Kyocera

GreenEnergy

Technology

Kawasaki/JFE

BaodingYingli

newenergy

MW

2006 2007


Future shift

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

1.34 Table 3highlights 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

Marketplayers

Manufacturingbase

Products

Capacity(2007 unlessspecificallymentioned)

Futureroadmap (2010

unlessspecificallymentioned)

Keycharacteristics of

the player

Heroya

Glomjford

Multi-crystallinewafer and

mono-crystalline

ingots

REC

Wafer

Erfurt, Germany Wafer

35 MW(mono-

crystalline

wafer) / 468MW (multicrystalline

wafer)

2 GW (ofwhich 300 MW mono-crystalline)

3.6 GW (2012)

Fully integratedacross PV value

chain,cost efficient

LDKSolar Xinyu, China

Multicrystalline

wafer

580 MW(March2008)

1 GW (2008end)

2 GW (2009end)

Both virgin andrecyclablepolysilicon foringot production

Trina China Multi- Not 1 GW Since 2007, Trina


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Marketplayers

Manufacturingbase

Products

Capacity(2007 unlessspecificallymentioned)

Futureroadmap (2010

unlessspecificallymentioned)


the player

Solar crystalline

ingots andwafers,

cells andmodules

available Solar has been a

player in five ofthe six majorsteps in the solarindustry valuechain.

PVCrystalox

Oxfordshireplant, UK

Multi-crystallineingots and

wafers

300 MW Not available

One of the first todevelop multi-crystallinetechnology on anindustrial scale

Deutschesolar Freiberg, Saxony

Mono- andmulti-

crystallinesilicon

wafers

270 MW 500 MW (2009)A Solar Worldgroup company

BaodingYinglinew

energyBaoding, China Wafer 200 MW 500 MW

Produce SOGsilicon frommetallic siliconwith almost sameefficiency

KyoceraUSA

Multi-crystalline

siliconwafers and

ingots

180 MW 500 MW (2011)

Diversified intofine ceramics,semiconductorparts, electronicdevice group

Kawasaki/JFE Japan Ingots 170 MW 1000 tonnes

Leading ingotmanufacturer

BP Solar Fredrick, USAPolysilicon,wafers and

cells

82 MW inPolysiliconand Wafers

> 200 MW

Wholly ownedsubsidiary of BP,vertically aligned from siliconthrough to thefinalinstallation

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 theemergence 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 alreadyannounced plans of installing 1 GW of capacity each by 2010.


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Link 3 - Solar PV cells production

1.36 Figure 10highlights the current production between 2005 and 2007 for solarPV cells, PV crystalline cells and thin films. It is noteworthy that unlikepolysilicon and wafer capacity, additions in cell capacity outpaced modulemanufacturing capacity in 2007.

1.37 Total PV production grew by 55% during 2007 over 2006 with both mono andmulti-crystalline losing ground to thin films. Thin films have grown at asubstantial rate since 2005 (at almost 80% in 2006 and more than 100% in2007, albiet on a small base) due to polysilicon shortage which began to havean 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

ProductionCapacityinMW

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 ofsemiconductors.

1.39 According to the Earth Policy Institute, Washington D.C., the five largest solarPV 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. Chinas capacity has been growing at a phenomenal rate. Chinatrebled its PV cell production in 2006, more than doubled that output in 2007and emerged as the second largest producer of solar PV cells. Going by the rateat which China is adding capacity, it is poised to displace Japan as the largestproducer of solar PV cells in 2008-09.


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1.40 Figure 11 highlights the top 10 solar PV cell producers globally. From thefigure, it can be seen that a number of players are adding capacity at aphenomenal rate. The major movers in the solar PV cell production are Q-Cell,Suntech and Chinese manufacturers, like Yingli. Q-Cell has moved from thenineth 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 hasthe second largest installed capacity of crystalline cells segment, overtook theleader, 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

ProductionCapacity(inMW)

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 thewith entry of new players. These new players have introduced better productiontechnology and processing plants, scale and volume, which in turn, lead tobetter economics and lower cost base. They are also able to address the mainissue, 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 YingliSolar 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 isfollowing suit. Investments in the rest of the production value chain, like PVcell production, might not be as high as polysilicon as over-capacities still existin other parts of the supply chain. Table 5 highlights the plans of a few of themain players in the solar PV market, including the capacity for particular


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

Table 4: Present and future capacity of PV cell players

Marketplayers

Manufacturing base

Technology

Capacity(MW)

(2007unless

specificallymentioned)

Future

roadmap(2012 unlessspecificallymentioned)


the player

NanoSolarCalifornia,

USACIGS Thin

Films1 GW

Upscaling oncards No

detailsavailable

Developed aproprietary processtechnology (nano-particle ink) whichmakes it possibleto produce thinnersolar cells faster.

Q-CellSachsen-

Anhalt,Germany

Multi-

crystallinesilicon

5161 GW (of

which

500 MW thinFilm)

Technology leader

and advantages ofeconomies of scale

Sharp Katsiuiragi,Nara Perfecture

Mono/multi-

crystallinesilicon

710 1 GW (ThinFilm)

Japans onlymanufacturer toproduce for spaceapplications. Superhigh efficiency cellfor low cost solarconcentratormodule

SuntechWuxi

Multi-crystalline

silicon540 1 GW (2008) Forward integrated

KyoceraUSA

Multi-crystalline

silicon240 Not available

Diversified into

Fine ceramics,semiconductorparts, electronicdevice group

First SolarPerrysburgFrankfurtMalaysia

CadmiumTelluride

(Thin Films)308 1,012 MW

Cost advantageover traditionalcrystalline siliconsolar modulemanufacturers

MotechTaiwan

Multi-crystalline

silicon240 1 GW

R&D centre toproduce nextgeneration solarcell

Solar World USA Crystallinesilicon

205 1 GW

Group of

companies fullyintegrated acrossvalue chain

SanyoJapan

Amorphoussilicon/mono-

crystallinesiliconhybrid

180350 MW(2008);1 GW

Technology leaderfor HITcellshaving efficiencyof 22%


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Marketplayers

Manufacturing base

Technology

Capacity(MW)(2007unless

specificallymentioned)

Futureroadmap

(2012 unlessspecificallymentioned)


the player

YingliChina

Multi-crystalline

silicon

200600 MW(2009)

Polysilicon ingotsand wafers, cells

and module

JA SolarHebei, China

Crystallinesilicon

175500 MW(2008)

Manufactures highperformance solarcells which arethen sold tomodule producers

MitsubishiElectric

Iida Factory,Nagano

Prefecture

Multi-crystalline

silicon,amorphoussilicon thin

film

150 500 MW

Integratedmanufacturing andmarketing/ sales ofsolar PVequipment

REC Solar NorwayMulti-

crystallinesilicon

50225 MW(2010),

1 GW by 2012

Fully integratedacross PV valuechain,cost efficient

LDK Solar ChinaCrystalline

silicon0 1 GW

LDK Solar ismainly a multi-crystalline solarwafermanufacturertrying to integrateacross the valuechain frompolysilicon tomodules

Solar World USACrystalline

silicon500 MW(2008)

1 GW

Solar WorldIndustries Americacovers the entiresolar energymanufacturingvalue chain i.e.from raw silicon tocomplete solarelectric systems.

Trina Solar ChinaWafers,

ingots, cellsand modules

150 (Sixlines)

1 GW

Trying toundertakebackwardintegration acrossthe value chain

from polysilicon tomodules

Kaneka Japan Thin Films 55 MW130 MW(2010)

Early mover inthin films

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


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1.44 The thin film market is dominated by four main players who have more than75% of marketshare. Among these, First Solar is the biggest with almost 50%of the production, followed by United Solar and Kaneka, each with amarketshare of about 10-12% and Mitsubishi Heavy Industries with a share ofabout 8%.

1.45 In the thin film market, signifcant expansion is expected and some of the mainplayers lining up for this expansion are First Solar and Sharp, both of whichhope to have a thin film capacity of 1 GW by 2012, and Moser Baer andReliance Industries in India. Reliance Industries is targeting an integrated 1GW facility in India, while Moser Baer is in the process of commissioning a200 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 theSemiconductor Policy of India to set up a new plant with a capacity of 282 MWfor thin films. International solar players, such as Signet Solar, and Indianinfrastructure 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 than50% in 2007 over 2006. Polysilicon shortages marred complete capacityutilization in the supply chain and this was also the case in solar PV modulemanufacturing.

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

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

4849

3190

0

1000

2000

3000

4000

5000

6000

2007 2006ProductionCapacity(inMW)


1.48 The solar PV module manufacturing link in the solar PV manufacturing valuechain 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. Indiaand China, which have low labor costs, have been able to upscale in thissegment.


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1.49 Table 5 highlights the main players in the solar PV module manufacturingspace, 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 WorldCamarillo (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

Indias energy targets

1.50 India is one of the fastest growing economies globally and energy is one of thebasic requirements to maintain this rate of growth and to serve itsdevelopmental objectives. To maintain this rate of growth (of around 7-9% perannum), access to cheap, clean and reliable sources of energy has becomecrucial.

1.51 India has projected its demand for electricity to go up to 210 GW by 2012 andto 800 GW by 2032. To meet this demand, it has laid down a comprehensiveplan for adding capacity, in which renewable energy technologies play a crucialrole. By 2012, India has targeted 24 GW of capacity through renewable sourcesof which 0.5 GW would be through solar. By 2017, MNRE expects Indiassolar capacity to touch 4 GW.

1.52 The Government of India has kept a target of electrification of all villages by2009 and Power for all by 2012 with a minimum energy consumption of 1unit per day per family. Solar PV based decentralised distributed generationcan contribute to this target.


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Solar PV manufacturing in India

1.53 India houses a sizeable industrial base for the production of solar cells, PVmodules and PV systems which comprises of 9 manufacturers of solar cells and19 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 wereproduced in the country. During the same period, over 60 MW capacity of solarPV products were exported. In 2007-08, the MNRE expects the solar PVindustry to produce 140 MW for solar cells and 170 to 180 MW of solar PV

modules.


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1.55 The Indian PV industry has been regularly exporting solar cells, PV modulesand PV systems to other countries. Indias capacity for the manufacture of SPVsystems has remained less than 200 MW. During the past five years, more than220 MWp of PV products have been exported. The Indian PV industry importssilicon wafers, solar cells, PV modules, raw materials and components used in

the manufacture of solar cells and modules and components used for PVsystems.

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 2225

3237

45

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 inIndia are imported. However, with the announcement of the Special IncentivePackage (SIP) under the GoIs Semiconductor Policy Guidelines announced inSeptember 2007 for setting up of semiconductor fabrication and otherecosystem units, including solar cells and photovoltaics, MNRE expects thedomestic solar PV manufacturing industry to grow substantially.

1.57 The announcement of the Semiconductor Policy in 2007 has spurredinvestment in the solar PV sector in India. Under this policy, units coming upin this space and with approved applications would be eligible for a capitalsubsidy of 20% for plants located in SEZs and 25% for plants located outsideSEZs 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 energyproducts will continue to increase, while the domestic market share willdecline. This decline is mainly due to increasing demand for improved andmore cost effective technologies that are not within the cost range of mostplayers in the country.


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SPV investors for manufacturing and commissioning of solar power plants

1.59 The solar industry is now dominated by large organised players, either in thepublic sector or joint ventures with major global players. The majorgovernment-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, SignetSolar and SELCO International USA, are also active suppliers in India. Themarket is dominated by joint ventures and technical collaboration with foreignfirms that specialise in RE products. New firms that are setting up or expandingmanufacturing units and developing forward linkages to develop solar powerplants are Reliance Industries, Moser Baer, Signet Solar, Solar Semiconductors,etc.

1.60 Twelve proposals/applications have been received under the SIP, the details ofwhich have been captured in Table 6. Details on some of the applications werenot available. It is estimated that a cumulative investment of about Rs. 66,394

crore under 10 applications/proposals are for solar PV manufacturing. Thedetails of these applications are provided in Table 6.

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

Name ofcompany

Products CapacityTotal

investment (Rscrore)

Subsidyrequested (Rs

crore)

Lanco Solar(P) Ltd.

Solar PV (wafer tomodule) andpolysilicon

Not available 12,938 Not available

SolarSemiconductors

Solar PV cells andmodules Not available 11,821 Not available

RelianceIndustries 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 PVTechnologies

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 PVcells/modules,

polysilicon andwafers

500 MW (cells,modules and

wafers) 250 MW(polysilicon)

5,880 496

PVTechnologies

India LtdSolar PV Not available 5,880 Not available

KSK EnergyVentures Private

Limited

Integrated solarpanel based on thin

film andCulnSe2/CdTe

700 MW 3,211 642


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Name ofcompany

Products CapacityTotal

investment (Rscrore)

Subsidyrequested (Rs

crore)

technology

TF Solar PowerLtd

Silicon thin filmpanels

Not available 2,348 Not available

TATA BP SolarSolar PV cells and

modulesNot available 1,692 Not available

Phoenix SolarIndia

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 applicationfor setting up manufacturing facilities under the incentives available under theSemiconductor Policy. However, the implementation status of these proposalsis not available.

1.62 In particular for solar PV, 10 proposals have been received for setting upmanufacturing facilities in Fab City, which will bring a cumulativeinvestment of about US$ 2.6 billion. Details of these proposals are shown in thefollowing table.

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

Sl.No.

Name of the company Line of activity

Proposedinvestment

(in USDMn)

Proposedemployment

1Solar Semiconductor

(P) Limited

Photovoltaic solar cell fab, PVsolar module assembly line,

thin film solar and systemintegration of solar energy

solutions

1,525 8,500

2Titan Energy Systems

LimitedSolar photovoltaicmanufacturing unit

700 2,670

3M/s. XL Telecom &

Energy LimitedSolar cells & solar modules 69 186

4KSK Surya

Photovoltaic VenturesPrivate Limited

Solar photovoltaic panels 98 1,720

5Surana Ventures

LimitedSolar photo voltaic cell and

modules13 400

6Photonne Energy

Systerms Limited

Silicon wafers, solar cells and

solar PV modules

NA 200

7Air Liquide India

Holdings (P) LimitedGasses & chemical facilities

unit27 100

8Radiant Solar Private

Limited

Photovoltaic module designmanufacturing and installation

company with a large R%Dcentre for solar and otherrenewable energy sources

37.5 500


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47058480 Solar PV Industry Global and Indian Scenario[1]

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