The Ministry of New and Renewable Energy (MNRE) has issued guidelines for the implementation of the production-linked incentive (PLI) scheme, the National Programme on High Efficiency Solar PV Modules, for achieving gigawatt-scale manufacturing capacity. Through this scheme the MNRE aims to promote the manufacturing of high efficiency solar photovoltaic (PV) modules in India and thus reduce the country’s import dependence in the area of renewable energy. The MNRE has appointed the Indian Renewable Energy Development Agency as the implementing agency for the PLI scheme.
On November 11, 2020, the cabinet approved the PLI scheme for 10 key sectors to enhance India’s manufacturing capabilities and exports under the Atmanirbhar Bharat initiative. One of these sectors is “High Efficiency Solar PV Modules”. The cabinet approved a financial outlay of Rs 4.5 billion for the scheme over a five-year period.
Eligibility and selection
The beneficiaries of the PLI scheme will be selected through a bidding process. Applications will be shortlisted on the basis of parameters such as the extent of integration in manufacturing, manufacturing capacity and minimum module performance. As per the guidelines, manufacturers that propose to set up a fully integrated solar PV manufacturing plant using silicon-based technology or fully integrated thin-film technology will be given preference. To qualify for the bid, the applicant manufacturer will have to promise minimum integration across solar cells and modules. Further, the applicant manufacturer will have to set up a manufacturing plant with a minimum capacity of 1,000 MW. Preference will also be given to those that plan to set up higher capacity plants.
The bidder can be a single company, or a joint venture (JV) or a consortium of more than one company. For JVs or consortiums, a partner company will be allowed to tie up its manufacturing capacity with another partner company for one bid only under any stage. The selection of the beneficiaries will be done using the bucket filling method.
Determining the incentive
At the time of bidding, the bidders will also have to submit the total quantum of PLI required over the five-year period post the commissioning of the manufacturing unit. This will be calculated on the basis of a formula specified in the guidelines document issued by the MNRE. The actual PLI given to a manufacturer will be determined on the basis of a combination of factors such as actual sales or the maximum capacity awarded under the PLI scheme, whichever is less; its actual position in the performance matrix; and actual local value addition. Though a manufacturer can bid for any capacity, the maximum capacity that can be awarded to one bidder under the PLI scheme is 50 per cent of the bid capacity or 2,000 MW, whichever is less, to accommodate at least three manufacturers under the overall budget of Rs 4.5 billion.
Using a performance matrix (see Table), a base PLI rate will be determined on the basis of module efficiency and temperature coefficient. The PLI rate will be higher in the beginning and lower towards the end of the five-year period to ensure that the solar PV manufacturing industry becomes competitive after five years. The manufacturing units sanctioned under the programme will be eligible for PLI on an annual basis, on the sale of high efficiency solar PV modules for five years from the data of commissioning or five years from the scheduled commissioning date, whichever is earlier. Manufacturers will be encouraged to source their material from the domestic market. The PLI amount will increase with local value addition.
Currently, the solar capacity addition in India largely depends on imported solar PV cells and modules as the domestic manufacturing industry has limited operational annual capacities of around 2,500 MW for solar PV cells and 9,000-10,000 MW for solar PV modules. By providing PLIs for solar modules, the scheme can help augment the country’s solar PV manufacturing capacity of high efficiency modules. Advanced technologies can be introduced in the Indian market to improve the efficiency of modules and scale up the production of such models. The technologies that help improve module performance will be incentivised under the scheme. This will further help in setting up integrated plants for better quality control and competitiveness.
Domestic manufacturers such as Vikram Solar, Tata Solar, Adani Solar and Premier Energies have already announced capacity expansion plans. Independent power producers such as ReNew Power and Azure Power have also decided to venture into the manufacturing space. In sum, with the PLI scheme, the government has moved one step closer to promoting the development of a solar manufacturing ecosystem with sourcing of local material, which in turn will help manufacturers achieve economies of scale.