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India plans to triple PV manufacturing base by 2022

A week after taking up an anti-dumping investigation into Chinese solar modules, the Indian government has stated its intention to more than triple the size of the nation's PV manufacturing base over the next decade.

The plan comes as part of a draft policy issued today underscoring India’s commitment to adding 9GW of solar capacity by 2017 as part of the second phase of the National Solar Mission (NSM), including 1.7GW of PV capacity to be auctioned in 2013.

Other key elements of the draft policy include the government’s intention to provide grants of up to 40% of the cost of some large PV projects to jump-start financing, and to allocate 30% of the phase 2 capacity to the concentrated solar power (CSP) sector – lower than the 50% carve-out in the first phase.

The direction that India takes on its domestic-content strategy is perhaps the most hotly-anticipated element of its final phase 2 strategy – covering the period 2013-2017, and set for publication early in the new year.

The stakes are even higher in the light of the Ministry of Commerce’s recent decision to take up the anti-dumping investigation at the request of embattled domestic PV producers, including Indosolar and Jupiter Solar.

India currently has about 1.5GW of viable PV manufacturing capacity – mostly downstream at the cell and module level. The government says it wants to see the country with 4-5GW of integrated capacity by the end of phase 3 in 2022.

In order to get there, Delhi is considering a number of options, ranging from the extreme and unrealistic – mandating that all cells and modules used must be produced in India – to taking a softer touch, such as offering a bonus for projects using India-made kit.

Another option would see the government mandate that some project batches put to auction be built using 100% Indian components, while other batches would be open to international competition.

That the government is keeping its options open – rather than pressing forward with ever more stringent local-content requirements, as it originally suggested – will likely be taken as a positive signal by international PV manufacturers.

The government acknowledges that cheaper financing has typically been available to developers using foreign modules.

The draft policy does, however, specifically mention that “attention will be given” in phase 2 to thin-film modules – exempted from the local-content requirements in phase 1 to the chagrin of Indian manufacturers. First Solar has been the biggest beneficiary of the thin-film loophole.

While the CSP sector will be relieved that the government does not intend to move towards technology-neutral auctions immediately, some observers will be disappointed by the planned 30% capacity allocation.

The lowest bid for a PV project in phase one was 7.49 rupees ($0.137) per kWh, while for CSP it was 10.49 rupees per kWh.

While the NSM has been “a success story”, the government says that CSP has “still to prove its operational prowess”. The seven CSP projects awarded in phase one are legally due for commissioning in 2013, but all have asked for more time.