Renewpower’s entry in module manufacturing.. What does it mean in terms of vertical integration of solar industry.

Recently the Renewpower has announced its investment plan in Module manufacturing of the order of 2 GW in Rajasthan, with host of benefits from Government of Rajasthan including the SGST benefits, stamp duty benefits and electricity duty benefits. The backward integration of Renewpower is to achieve the cost optimization in its module requirements as a project developer. Already many of the solar developers are already using the manufacturing capacity of small solar module laminators to optimize their project costing through purchase of solar cells from International market and using third party module assembly lines in order to optimize their procurement cost of solar modules. This new capacity makes the total Renewpower capacity to 4 GW. The company is already booked for next two years to meet their own captive consumption as a solar developer.

A decade back we have observed the vertical integration by the small module manufacturers such as Firstsolar, Sunpower,  and domestic manufacturers such as Moserbaer, Lanco, and Tatapower solar. While the solar module manufacturers could not significant market share as a solar project developer, now it is to be seen the vertical integration of solar project developers getting in to the module manufacturing. Though it is part of strategic move for Renewpower to take advantage of recently introduced PLI scheme, where GOI has plans to ifuse about INR 19500 Cr, to develop the domestic supply chain. Currently India’s installed capacity of 3 GW solar Cell and 8 MW of solar modules needs to be ramped up to the tune of 50 GW capacity through GOI PLI scheme.

The typical 2GW+ capacity plants is the requirement of new era of solar PV, and apart from Renewpower, Reliance New energy and Adani Infrastructure, Acme, and many other companies are targeting to come of with large capacity solar manufacturing units with latest state of art modules with over 22% efficiency levels.

These Giga factories are threat to the existing 500+ manufacturers, whose plants are under 100 MW capacity and currently operating at 20% of their manufacturing due to cost inefficiencies.   In the new era of competition with the Giga factories, these plants will be redundant if they do not adopt the new technologies such as Monoperc, perovskite cells, bifacial cells, etc. As per the recent analysis by Cstep, the vertically integrated solar manufacturing units are going to be about Rs. 2/Wp cheaper than the smaller manufacturers. This is a significant cost difference in terms of solar module prices. If the developers are having the economy of scale in their project demand, looks like the move can be highly beneficial to companies like renewpower to achieve further lower tariffs in Indian market. With economy of scale and quality assurance and reliability, the Indian Giga factories are expected to be taking reasonable market share in global market. The biggest challenge still remains is the Indian companies dependency on the poly-silicon supply chain, which is still controlled by China.