Solar PV Industry - Global and Indian Scenario

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Study on Solar Photovoltaic Industry: ISA-NMCC 2008

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

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
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Study on Solar Photovoltaic Industry: ISA-NMCC 2008 1
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
The New Energy and Industrial Technology Development
NEDO
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
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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
Є 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 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
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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
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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
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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).
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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,
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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
Silicon Ingots and PV System

PV Cells PV Modules
Feedstock wafers Integration
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
Annual production Capacity (Metric Tonnes)
60000
52000
Production Capacity (in mt tonnes)
50000
40000 38000
31280
30000 27300
26000 26600
24200 25000
20000
10000
0
2000 2001 2002 2003 2004 2005 2006 2007
Year
(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)
9050 10500
1300
3100
5800 10000
6000 6250
Hemlock Wacker REC MEMC

Tokuyama 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
Company wise break up of Polysilicon Manufacturing Capacity between 2005 and 2007 (in
12000 MT)
10500
10000 10000
10000
9050
8000 7700
6600
6250
6050 6000
6000 5500 5800
5300 5400
5200
4000
4000 3800 3100
2860
2850
2,190
2000 1300
900 1130
800
0
Hemlock Wacker REC MEMC Tokuyama Mitsubishi Sumitomo Others
Name of Main Companies
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
Future roadmap/ capacity

Present
Market Manufacturing targets (year – 2010 Key characteristics
Technology capacity
players base unless specifically of the player
(MT)
mentioned)
Economies of scale
Hemlock Michigan Siemens 10,500 36,000 MT and polysilicon
expertise
Diversified in
silicones, polymer
Burghausen,
Wacker Siemens 10,000 22,000 MT and chemicals and
Germany
worldwide
distribution network
Montana, USA Siemens
Fully integrated
Washington, 6,250 across PV value
REC Siemens 19,500 MT
USA chain and cost
Washington, efficient
FBR
USA
Texas, USA FBR Granular polysilicon
MEMC 6,000 15,000 MT producer specifically
Merano, Italy Siemens
for PV industry
Yamaguchi, VLD technology
Siemens
Japan allows for faster
Tokuyama 5,800 8,400 MT production more
Yamaguchi,
VLD appropriate for PV
Japan
applications
Albama, USA Siemens No publicly known
Mitsubishi Yokkaichi, 3,100 3,500 MT plans for major
Siemens
Japan expansions
Sumitomo Japan Siemens 1,300 2,700 MT EG polysilicon
New and emerging
China, Taiwan markets in China,
Others N/A 9,050 79,050 MT (2011)
etc Japan, USA and
India
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
Projected target for

S. No Company Country of
2011 (MT)
location
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
__________________________________________________________________________
Projected target for
S. No Company Country of
2011 (MT)
location
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
Joint Solar Silicon GmbH & Co KG Germany
14 850
(JSSI).
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
14.7 18.4
7.7
11.2
5.1
5.1
9.7
6.9
4.1 5.1 7.7
4.3
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
Production/ capacities along the Global Solar PV value Chain
5000
2006 2007
4500
Production Capacity (in MW)
4000
3500
3000
2500
2000
1500
1000
500
0
Polysilicon Wafering Cell PV Modules PV Silicon Thin Film -
Capacity Capacity Production Capacity Cells - Production
Capacity Production
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)
5000
4000
Capacity in MW
3000
2000
1000
0
2005 2006 2007
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

1800 Production in 2006 and 2007 ( in MW)
1556
1600
1382 1380
1400
1177
1200
1000
800
600
400
200
0
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
500 Multi Crystalline Wafer Capacity
400
2006 2007
300
MW
200
100
0
R EC W afer
P V C rystallox
LD K Solar
D eutsche
K yocera
Green E nergy
K aw asaki/JFE
B aoding Y ingli
Technology
new energy
solar

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
Future
Capacity
roadmap (2010 Key
Market Manufacturing (2007 unless
Products unless characteristics of
players base specifically
specifically the player
mentioned)
mentioned)
Multi- 35 MW
Heroya 2 GW (of
crystalline (mono- Fully integrated
which 300 MW
REC wafer and crystalline across PV value
→ mono-
Wafer mono- wafer) / 468 chain,
Glomjford crystalline)
crystalline MW (multi cost efficient
ingots crystalline
3.6 GW (2012)
Erfurt, Germany Wafer wafer)
1 GW (2008 Both virgin and
LDK Multi 580 MW
end) recyclable
Solar Xinyu, China crystalline (March
2 GW (2009 polysilicon for
wafer 2008)
end) ingot production
Trina China Multi- Not 1 GW Since 2007, Trina
__________________________________________________________________________
Future
Capacity
roadmap (2010 Key
Market Manufacturing (2007 unless
Products unless characteristics of
players base specifically
mentioned)
mentioned)
Solar crystalline available Solar has been a
ingots and player in five of
wafers, the six major
cells and steps in the solar
modules industry value
chain.
One of the first to
Multi-
PV develop multi-
Oxfordshire crystalline
Crystalox 300 MW Not available crystalline
plant, UK ingots and
technology on an
wafers
industrial scale
Mono- and
Deutsche multi-
A Solar World
solar Freiberg, Saxony crystalline 270 MW 500 MW (2009)
group company
silicon
wafers
Baoding Produce SOG
Yingli silicon from
new Baoding, China Wafer 200 MW 500 MW metallic silicon
energy with almost same
efficiency
Multi- Diversified into
crystalline fine ceramics,
Kyocera
USA silicon 180 MW 500 MW (2011) semiconductor
wafers and parts, electronic
ingots device group
Kawasaki
Leading ingot
/JFE Japan Ingots 170 MW 1000 tonnes
manufacturer
Wholly owned
subsidiary of BP,
Polysilicon, 82 MW in vertically aligned
BP Solar Fredrick, USA wafers and Polysilicon > 200 MW – from silicon
cells and Wafers 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
Solar PV Production Global 2005 - 2007
3436
3500
3036
3000 2007 2006 2005
Production Capacity in MW
2500
2217
2021
2000
1663
1555
1500
1000
400
500
196
108
0
Total Solar PV Production PV Silicon Cells - Production Thin film production
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
Production Capacity (MW) of the Top Ten Solar PV Cell Producers in 2006/ 2007
800
710
700
600
540
516
500
420 2007 2006
400
308
300
250 240
240
180
200 170 170
160 150 150 140
110
100
100
60 60
30
0
Sharp Suntech Q-Cells First Solar Kyocera Motech SolarWorld Sanyo Yingli JA Solar
Name of Cell Producers
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
Capacity
Future
(MW)
roadmap Key
Market Manufacturin (2007
Technology (2012 unless characteristics of
players g base unless
specifically
mentioned)
mentioned)
Developed a
proprietary process
Upscaling on technology (nano-
California, CIGS Thin cards – No particle ink) which
NanoSolar 1 GW
USA Films details makes it possible
available to produce thinner
solar cells faster.
1 GW (of
Sachsen- Multi- Technology leader
Q-Cell 516 which
Anhalt, crystalline and advantages of
500 MW thin
Germany silicon economies of scale
Film)
Japan’s only
manufacturer to
Mono/ produce for space
Sharp Katsiuiragi, multi- 710 1 GW (Thin applications. Super
Nara Perfecture crystalline Film) high efficiency cell
silicon for low cost solar
concentrator
module
Multi-
Suntech
Wuxi crystalline 540 1 GW (2008) Forward integrated
silicon
Diversified into
Multi- Fine ceramics,
Kyocera
USA crystalline 240 Not available semiconductor
silicon parts, electronic
device group
Cost advantage
Perrysburg Cadmium over traditional
First Solar
Frankfurt Telluride 308 1,012 MW crystalline silicon
Malaysia (Thin Films) solar module
manufacturers
R&D centre to
Multi-
Motech produce next
Taiwan crystalline 240 1 GW
generation solar
silicon
cell
Group of
Solar World Crystalline companies fully
USA 205 1 GW
silicon integrated across
value chain
Amorphous
silicon/ Technology leader
350 MW
Sanyo mono- for HIT cells
Japan 180 (2008);
crystalline having efficiency
1 GW
silicon of 22%
hybrid
__________________________________________________________________________
Capacity
Future
(MW)
roadmap Key
Market Manufacturin (2007
Technology (2012 unless characteristics of
players g base unless
specifically
mentioned)
mentioned)
Multi- Polysilicon ingots
Yingli 600 MW
China crystalline 200 and wafers, cells
(2009)
silicon and module
Manufactures high
performance solar
JA Solar Crystalline 500 MW
Hebei, China 175 cells which are
silicon (2008)
then sold to
module producers
Multi-
Integrated
crystalline
Mitsubishi Iida Factory, manufacturing and
silicon,
Electric Nagano 150 500 MW marketing/ sales of
amorphous
Prefecture solar PV
silicon thin
equipment
film
Fully integrated
Multi- 225 MW
across PV value
REC Solar Norway crystalline 50 (2010),
chain,
silicon 1 GW by 2012
cost efficient
LDK Solar is
mainly a multi-
crystalline solar
wafer
Crystalline manufacturer
LDK Solar China 0 1 GW
silicon trying to integrate
across the value
chain from
polysilicon to
modules
Solar World
Industries America
covers the entire
solar energy
Crystalline 500 MW
Solar World USA 1 GW manufacturing
silicon (2008)
value chain i.e.
from raw silicon to
complete solar
electric systems.
Trying to
undertake
Wafers, backward
150 (Six
Trina Solar China ingots, cells 1 GW integration across
lines)
and modules the value chain
from polysilicon to
modules
130 MW Early mover in
Kaneka Japan Thin Films 55 MW
(2010) 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)
6000
4849
5000
4000
3190
3000
2000
1000
0
2007 2006

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
Camarillo (USA), Gallivare
Solar World 185
(Europe)
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

200
175
180
160
140
140
120
100
80
80 65
60 45 45
36 37
40 32
22 23 25
20 20
14 17
20 9.5 11
0
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
Total Subsidy
Name of
Products Capacity investment (Rs requested (Rs
company
crore) crore)
Solar PV (wafer to
Lanco Solar
module) and Not available 12,938 Not available
(P) Ltd.
polysilicon
Solar Solar PV – cells and

Not available 11,821 Not available
Semiconductors modules
Polysilicon, wafers,
Reliance
cells and modules 1 GW 11,631 2,326
Industries Ltd
(solar photovoltaic)
Signet Solar Thin film 1 GW 9,672 1,934
1.3 GW
Silicon cells, {580 MW (cells),
Moser Baer PV
modules, thin film 540 MW (modules) 6,000 2,393
Technologies
concentrators 282 MW (thin film
concentrators)}
Solar PV 500 MW (cells,
Titan Energy cells/modules, modules and
5,880 496
Systems polysilicon and wafers) 250 MW
wafers (polysilicon)
PV
Technologies Solar PV Not available 5,880 Not available
India Ltd
Integrated solar
KSK Energy
panel based on thin
Ventures Private 700 MW 3,211 642
film and
Limited
CulnSe2/CdTe
__________________________________________________________________________
Total Subsidy
Name of
Products Capacity investment (Rs requested (Rs
company
crore) crore)
technology
TF Solar Power Silicon thin film

Not available 2,348 Not available
Ltd panels
Solar PV – cells and

TATA BP Solar Not available 1,692 Not available
modules
Phoenix Solar
Solar PV Not available 1,200 Not available
India
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

Proposed
Sl. investment Proposed
Name of the company Line of activity
No. (in USD employment
Mn)
Photovoltaic solar cell fab, PV
solar module assembly line,
Solar Semiconductor
1 thin film solar and system 1,525 8,500
(P) Limited
integration of solar energy
solutions
Titan Energy Systems Solar photovoltaic
2 700 2,670
Limited manufacturing unit
M/s. XL Telecom &
3 Solar cells & solar modules 69 186
Energy Limited
KSK Surya
4 Photovoltaic Ventures Solar photovoltaic panels 98 1,720
Private Limited
Surana Ventures Solar photo voltaic cell and
5 13 400
Limited modules
Photonne Energy Silicon wafers, solar cells and
6 NA 200
Systerms Limited solar PV modules
Air Liquide India Gasses & chemical facilities
7 27 100
Holdings (P) Limited unit
Photovoltaic module design
manufacturing and installation
Radiant Solar Private
8 company with a large R%D 37.5 500
Limited
centre for solar and other
renewable energy sources
__________________________________________________________________________
Proposed
Sl. investment Proposed
Name of the company Line of activity
No. (in USD employment
Mn)
9 BOC India Limited Centralised industrial gases unit 11.36 10
LEDs, LED based display and
MIC Electronics LED lighting solutions and
10 193 1,200
Limited solar based LED lighting
products
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
Projected Cell Manufacturing Capacity over the next few years (in MW)
2500
2210
2000
1500
1000
1000
500 580
500
120
10
0
Reliance Titan Energy Moser Baer PV TATA BP Solar CEL Total Cell
Industries Systems Technologies Production
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.
__________________________________________________________________________
Table 8: Investors: Indian solar PV manufacturing companies
Name of Focus area in

S. No. Brief profile (manufacturing)
investor solar
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
Manufacturing US$ 27 billion.
Reliance and
1 Industries development of Manufacturing: RIL is also planning to set up a manufacturing plant for the
Limited (RIL) SPV based manufacture of polysilicon, solar-grade wafers and SPV modules. The plant is expected
power plants 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.
Moser Baer India Ltd. is India’s largest and the world’s third largest manufacturer of
removable optical storage devices.
Manufacturing Area of investment in Solar PV: Moser Baer has set up a subsidiary called MBPV for
Moser Baer
and its foray into SPV.
Photo Voltaic
2 development of
Limited Manufacturing: MBPV has invested US$ 58 million (Rs. 2.6 billion) in an SPV cell and
SPV based
(MBPV) module manufacturing plant in India with a capacity of 80 MW. The company has also
power plants
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.
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
Manufacturing provides customized solar solutions for lighting, water pumping, water heating and
3 TATA BP Solar and consultancy backup power. TATA BP Solar has also designed specialized applications for railway
services 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
_______________________________________________________________________________________________________________
investor solar
manufacturing capacity of 300 MW by 2010.
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
4 Signet Solar Manufacturing 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.
MSTPL, an ISO 9001:2000 certified company, was established in 1999 to harness solar
energy for application in residential, commercial, industrial and agricultural areas.
Maharishi Solar
Manufacturing: The company has set up a vertically integrated manufacturing facility
Technology (P)
5 Manufacturing to produce multi-crystalline silicon ingots, wafers, cells, modules and systems. The plant
Limited
capacity is 2.5 MW per annum and is being expanded to 15 MW per annum by 2010.
(MSTPL)
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.
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
Webel SL Manufacturing
6 so far focused only on mono-crystalline cells but is making a transition to multi-
Energy Systems and consultancy
crystalline cells. Almost 95% of its income was derived through exports in FY07.
services
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 BHEL is the largest engineering and manufacturing enterprise in India in the energy-
and consultancy related/infrastructure sector today. BHEL manufactures over 180 products under 30
_______________________________________________________________________________________________________________
investor 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.
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-
Central Manufacturing crystalline silicon solar cells and modules with the state-of-the-art screen-printing
8 Electronics and consultancy technology. The company has supplied over 0.15 million SPV systems in India and
Limited (CEL) services 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.
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
TITAN Energy
solar cell technologies - crystalline, amorphous-silicon and CIGS. Titan's manufacturing
9 Systems Ltd Manufacturing
centre in Hyderabad, India, has an installed module manufacturing capacity of 50 MW
(TESL)
and is expanding to 200 MW by end of 2008.
Manufacturing: TESL manufactures modules using crystalline, thin film and CIGS
_______________________________________________________________________________________________________________
investor 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.
REIL is a joint venture between the Government of India and the Government of
Rajasthan Rajasthan and has been conferred the status of a ‘Mini Ratna’. REIL started operations in
Manufacturing
Electronics & the SPV sector in 1985 through the development of a SPV module manufacturing facility
10 and consultancy
Instruments Ltd that has now expanded to cover Balance of Systems for a large number of applications.
services
(REIL) The company develops products through in-house R&D and has a capacity of 2 MW per
year on single shift basis.
KSK Energy, a premier project development & asset management company, was
Project promoted by K&S Consulting Group Pvt Ltd in 2001 and structured as a holding
KSK Energy financing and company for their energy sector initiatives in the country.
11 Ventures execution in the KSK Energy Ventures, under the special incentive package scheme for semiconductors,
Private Limited energy sector in is planning to establish an integrated solar panel plant based on thin film and
India 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.
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.
Hospitality, VREP is part of the Velankani Group’s diversification plans to get into renewable energy
Velankani
SEZ’s, IT Parks, equipment manufacturing. They are currently preparing their business plan and proposal
12 Renewable
Electronic for the entire solar PV value chain (polysilicon to modules) to be submitted to GoI to
Energy Pvt Ltd
Manufacturing 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
_______________________________________________________________________________________________________________
investor solar
modules. The approximate consumption of polysilicon to produce solar panels is around
9 grams per Wp.
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
Solar Solar cells and
13 manufacturing facility in Fab City, an SEZ near Hyderabad, for its future expansion. The
Semiconductors modules
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.
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
From application under the Semiconductor Policy for capital subsidy. Lanco is planning to
Lanco Infratech
14 polysilicon to invest both in conventional crystalline and the thin film technology. But exact details on
(P) Limited
solar modules 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
_______________________________________________________________________________________________________________
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
Crystalline silicon Non-silicon feedstock
Wafers & ingots Thin film process
Cells
Modules
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.
________________________________________________________________________
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
Inverter
Battery
Laminator Modules Mount Structure
Grid Interconnection Equipment
Installation Process
BoS (Balance of System) – To Equip and Install

Inverter
Battery
Mount Structure
Grid Interconnection Equipment
Installation Process
Completed Solar PV System
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
CdTe Cell Glass
Cross
Manufacturing Section CSnO2Cd2SnO4 (0.2 – 0.5 A)
Process
CdS (600 – 2000 A)
CdTe (2.8 µm)

Cell Insulation
C Paste with Cu or Metals
Laser Scribe Cell Laser Scribe

Isolation Front Contact
Electrical
Assembly and Testing Stage

Lead Assembly
Cell Definition Stage
Re-Crystallisation Deposit Inner

Film Layer
Laminate
Deposition Stage
Deposit
Semiconductor Metalisation
Layers Module Bussing
Prepare Glass Laser Scribe

Post Heat Treatment
Substrate Back Contact
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
Current Cost of
S.
Technology type conversion manufacture (in
No
efficiency (%) US$ per W)
Crystalline Mono-crystalline 17-23 2.4
1
silicon Poly-crystalline 15-18 2.15
Amorphous silicon 6 1.35
Tandem micro-crystalline 8.5 1.35
2 Thin films
CdTe 11 1.15
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
30 Cell Efficiency Pattern

24
25 22
Efficiency in %
17
20
14
15
10
0
1999 2000 2010 2020
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

50.00
500
450 450
45.00
40 40.00
360 35.00
Gram per Watt (g/W)

300
Thickness(µm)
30 30.00
270 250
25.00
200
20.00
16
180 150
180
15.00
9
8 100 10.00
90
5
3 5.00
1.5
0 -
1990 2000 2010 2020
Years
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
Year Module target System target Silicon Wafer
price (US$/W) price (US$/W) consumption g/W) thickness (µm)
2010 2 3 5 <150
2020 <1 2 3 <120
2030 < 0.5 1 2 <100
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
Upto Upto Upto
Flat plate module efficiencies (%) Upto 8% Upto 40%
15% 20% 25%
Typical system payback time (years) >10 2 1 0.5 0.25
________________________________________________________________________
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. Broad 2012 2020 2030
No parameters
1 Industry low cost packaging demonstration of next Module costs and
manufacturing solutions/reliability generation equipment efficiencies
aspects Module costs and with lower material
efficiencies use cost < 0.4 €/Wp at
cost < 0.95 €/Wp higher throughput and 500 MW, ή 15%
for 100 MW, ή higher efficiency (rigid)
>10% (Glass) simplified production
processes cost < 0.3 €/Wp at
________________________________________________________________________
S. Broad 2012 2020 2030
No parameters
cost < 0.75 €/Wp ultra-low cost 500 MW, ή 13%
for 50 MW, ή > 9% packaging solutions (flexible)
(flexible) Module costs and
efficiencies
cost < 0.65 €/Wp for
200 MW, ή 12%
(rigid)
cost < 0.5 €/Wp for 10
MW, ή > 11%
(flexible
2 Applied/ large area plasma development of new design of ultra-high

advanced processes for deposition reactor throughput
technology amorphous and concepts lines/reactors
aspects microcrystalline Si introduction of fully process
plasma process optimised light simplification
control trapping schemes on full integration of
advanced large area production line
embedding modules with ή > 15%
materials
alternative
techniques for
absorber deposition
demonstration of
modules with ή >
12%.
3 Basic research understanding of new techniques for identification and
electronic very high rate introduction of
properties of layers deposition higher performance
and interfaces in incorporation of as well as new
devices quantum dots or materials
understanding of spectrum-converting testing of new
light trapping effects in thin film Si concepts
demonstrate stable combination of thin identification of
cells with ή > 15% film Si with other best
absorbers/PV ideas/possibilities
technology
demonstrate stable cells
with ή > 17%
________________________________________________________________________
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
Direct manufacturing cost
Technology Module efficiency (%)
(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
Current USA Target for PV Target for PV Required

Consumer
market prices for 2011 (c/ for 2020 (c/ system price in
categories
(c/ kWh) kWh) kWh) 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
Production cost of PV
1 100 75 <50
module (in Yen/W)
2 Durability of PV module 30 years
Silicon based feedstock
3 1 g/W
consumption
4 Inverter cost (Yen/Wh) 10
Crystalline silicon solar cell
5 20 25 25
conversion efficiency
Crystalline silicon solar
6 module conversion 16 19 22
efficiency
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)

160000
140301
Installed Capaicty in MW
140000 124287
118426
120000 107877
105046
100000
81171
80000 63634
60000
42584
40000 28448
16664
20000 9027
1362 2695 4653
0
FY47 FY50 FY61 FY66 FY74 FY80 FY84 FY90 FY95 FY02 FY03 FY04 FY06 FY07
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
Peak Deficit Across Regions in FY07 (MW, %)

North West South East North-East
0 0%
-433 -311
-2,000 -5%
-1,826
-10%
-4,000
MW
-15%
-6,000 -4,872
-20%
-8,000 -25%
-10,000 -8,990 -30%
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 (%)

Maharashtra
West Bengal
TamilNadu
Karnataka
Rajasthan
Haryana
Pradesh
Pradesh
Madhya
Andhra
Gujarat
Punjab
Kerala
India
0
-1.7
-2.1
-2.4
-2.7
-2.7
-3.0
-2.9
-5
-5.1
-6.6
-7.1
-7.1
-10
-9.3
-10.6
-11.0
-11.5
-12.3
-13.1
-13.2
-13.8
-15
-14.6
-15.4
-15.4
-15.8
-16.0
-15.9
-16.3
-20
-20.3
-20.8
-21.7
-22.2
-23.1
-25
-26.2
-26.4
-26.9
-27.4
-30
-30.2
-35
FY 06 FY 07 Apr-Feb 2008
Source: ISA-NMCC 2008 Research
________________________________________________________________________
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)
32870,
22% 13299, 55, 0%
4120, 3% 606, 5% 2046,
9%
18%
1202, 1%
11275, 3, 0%
12687, 8%
9%
7845,
71% 720, 6%
72809,
48%
Coal Gas Diesel Nuclear Hydro Captive RE 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
11 8.5 7.5 5.5

16.5
22
39
225
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

500 MW
end of 11th Plan
Grid based solar PV capacity to be developed by 2012 (assumed @
250 MW
50%)
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
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
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
________________________________________________________________________
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
35.00 15.00
33.00 32.26 14.00

Levelised Cost of Power Delivery (Rs/W)
31.09
31.00 13.00
29.38
29.00 12.18 12.00
Distance from Grid (Km)

27.69
11.57
27.00 26.03 11.00
10.70
25.00 24.40 10.00
23.26 9.73
23.00 22.11 9.00
9.00
20.97
21.00 8.20 8.00
19.82
7.60
19.00 7.00
7.01
17.00 6.43 6.00

5.84
15.00 5.00
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 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
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
12
Life Cycle Cost Analysis (LCCA) Solar PV vs DG (Diesel)
10 10.04
LCCA Present Value (Rs Mn)
8.62
8
7.70
6.85
6.92
6 5.82
5.29 5.25
4.77 4.42 3.67
4 4.08
3.69 3.03
2.88
2.61
2
1
0
12 8 6 4
Number of hours of Back Up
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
40
Levelised Cost of Generation (Rs/kWh)
32.89
Levelised Cost of Generation (Rs/kWh)
31.46
30.08 30.79
30
26.53 27.23
25.83 26.18 25.88
24.48
23.07 23.78
23.54
22.14
20 21.44
20.73
10
12 8 6 4
Number of Hours
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
2008 2009 2010 2011 2012
line (million square feet)
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%)
7 9 12 15 16
mn sq feet
Retail (@10%)
5 6 8 9 10
mn sq feet
Logistics
(@10%) 3 3 4 5 5
mn sq feet
Total (million
14 19 24 28 31
square feet)
Total (square
meters) 1,303,563 1,773,049 2,215,250 2,604,471 2,864,918
Roof based Solar
PV Potential 130 177 222 260 286
(MW)
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
Diesel Cost (Rs/ Litre)

32 34 36 38 40 42 44 46 48 50
12 12
11 10.64 10.91 11.46 11

10.37 11.18
Levelised Cost of Generation (Rs/
Levelised Cost of Generation (Rs/

10.1
9.82
10 9.55 10
9 9.28 9
9.01
8 8
kWh)
kWh)
7.78
7 7.47 7
6.99
6 6.5 6
6.03
5 5.56 5
5.19
4.82
4 4.45 4
4.08
3 3
60 70 80 90 100 110 120 130 140 145
Panel Cost (Rs/W)
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
20
15
€ct/kWh
10
0
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
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 > 100
≤ 30kWp >30 kWp & ≤100 kWp
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
60
Solar FIT and Electricity Rates in Germany
55
50
45
40 40
€ct/kWh
35
30 28 31
25
25
20 19 22 19 15
10
0
2005 2010 2015 2020
<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

850 850
New Feed-in Law 600
Feed-in Law
100,000 Roof Top Programme
150
1000 Roof Top Programme 78 80
40
3 3 3 3 4 7 12 10 12
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Annual Installed Power Capacity ( in MWp)
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)
1200
1000
Capacity in MW
800
600
400
200
0
2001 2002 2003 2004 2005 2006 2007
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)
250
196
Cap acity in M W
200
150 138
108
100 88
66 58
50 30
22 20
10
0
2003 2004 2005 2006 2007
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
5 27 21
24
19
24
33
33
26
42
Personal Tax Corporate Tax Sales Tax

Property Tax Rebates Investment Grants
Loans 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.
________________________________________________________________________
Table 25: California - main incentives for solar PV
California - Main Incentives for Solar PV

S. Applicable
Type of incentive Quantum Description
No technologies
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-
Solar thermal,
differentiated market-based prices, which are linked to CPUC’s market
photovoltaics, wind,
Based on the CPUC’s price. For these consumers, a special rate is provided for solar electricity
Production biomass, geothermal
1 market price and adjusted generated between 8 a.m. and 6 p.m.
incentive small hydroelectric,
for time-of-use factors. These feed-in tariffs are being used as a mechanism for helping meet
tidal energy, wave
California's Renewable Portfolio Standard (RPS). The tariffs are
energy
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.
Solar water heat, solar
Section 73 of the California Revenue and Taxation Code allows property
space heat, solar
100% of system value tax exemption for certain types of solar energy systems installed on or
Property tax thermal electric, solar
2 and 75% for dual use before December 31, 2009. These include solar space conditioning
exemption thermal process heat,
components systems, solar water heating systems, active solar energy systems, solar
photovoltaics, solar
process heating systems, PV systems, and solar thermal electric systems.
mechanical energy
The California Energy Commission is providing financing to the
USA $50,000 (minimum)
State loan agricultural and food processing industries for the purchase of cost-
fixed interest rate of
programme - Solar water heat, solar effective energy efficient and RE systems. Loans of up US$ 500,000 are
3.2%. Maximum
3 agriculture and thermal process heat, available with a fixed interest rate of 3.2%. Eligible business entities
repayment - 7 years ;
food processing photovoltaics, biomass include food and fibre processing, animal feeding and processing,
programme budget - $3
energy loans breweries, wineries, creameries, irrigation districts and agricultural
Million
production.
Under this scheme, personal tax deduction is allowed for tax payers up
Personal tax
Solar water heat, solar to the interest paid on loans for the use of energy efficient products or
deduction - tax
space heat, 100% of interest from equipments for residences in California. The deduction is valid only for
4 deduction for
photovoltaics, day loan loans taken from a publicly owned utility. The equipment/s eligible
interest on loans for
lighting include lighting, solar, advanced metering of energy usage, windows,
energy efficiency
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.
Type of incentive Applicable technologies Quantum Description
No
Solar water heat, solar space The state of Texas allows corporations using solar energy devices
Solar and wind energy
heat, solar thermal electric, solar 100% from capital to deduct from the franchise (corporate) tax, (1) cost of the system
1 device franchise tax
thermal process heat, or 10% from profit from the company’s taxable income or (2) 10% of the system’s
deduction
photovoltaics, wind cost from the company’s profit.
This incentive allows any corporation located in Texas and in the
Solar water heat, solar space
Solar and wind energy sole business of manufacturing, selling or installing solar energy
heat, solar thermal electric, solar
2 business franchise tax No limit devices to be exempt from the franchise (corporate) Tax. As there
thermal process heat,
exemption is no ceiling on this exemption, it is a substantial incentive for
photovoltaics, wind
solar manufacturers to locate their operations in Texas.
Passive solar space heat, solar
Under Texas Property Tax Code, residential consumers are
water heat, solar space heat, solar
allowed an exemption in property tax of the amount of the value
Renewable energy thermal electric, solar thermal
100% of assessed that has been spent on the installation/construction of a solar or
3 systems property tax process heat, photovoltaics,
value (no limit) wind-powered energy device used primarily for the production
exemption wind, biomass, storage
and distribution of thermal, mechanical, or electrical energy for
technologies, solar pool heating,
on-site use.
anaerobic digestion
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
Maximum limit – non-profit hospital facilities for Energy Cost Reduction Measures
US$ 5 million ; (ECRMs).
“Loan STAR Passive solar space heat, solar
Interest rate - 3%
Revolving Loan water heat, solar space heat,
4 loan repayment - These measures include lighting and insulation and the funds
Programme” - state photovoltaics, wind, geothermal
energy cost savings under this programme can be used for retrofitting the existing
loan programme heat pumps
Payback – less than equipment or, in the case of new construction, financing the
10 years. 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. Applicable
Type of incentive Quantum Description
No technologies
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
Production
through renewables by 2021. To achieve this, the state has constituted the Solar
incentives - NJ
Renewable Energy Certificates (SRECs) that represent solar energy generated and
Board of Public From June 2008 -
bundled in minimum denominations of one megawatt-hour (MWh) of production.
1 Utilities - Solar Solar PV US$ 711 per MWh
New Jersey’s SREC programme is basically a mechanism by which SRECs are
Renewable Energy (US$ 0.71 per kWh)
created, verified and traded. All electricity suppliers are required to use the SREC
Certificates
programme to demonstrate compliance with the RPS. The price of SRECs is
(SRECs)
determined primarily by their market availability and the price of the Solar
Alternative Compliance Payment (SACP) for the state RPS.
Solar water
The state of New Jersey provides an exemption for solar PV, wind and other solar
Solar and wind heat, solar
Exemption of the based technologies from the state's sales tax (7%) to all taxpayers. All major types of
2 energy systems thermal electric,
state's 7% sales tax solar energy equipment, including equipment for passive solar design, are considered
sales tax exemption photovoltaic,
eligible for the exemption.
wind
Source: DoE, USA:
___________________________________________________________________________________________________________
Table 28: State wise financial incentive framework in USA
Personal Corp. Sales Prop. Rebates Grants Loans Industry Bonds Production
tax tax tax tax support 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 a r e in th e G lo b a l T h in F ilm M a rk e t
60
50 55
4 4 .5
40
27 . 3
30
1 6. 6
20
9. 7
10
0
2 00 3 2 00 4 2 00 5 2 00 6 2 00 7
U S S h a r e i n T h in F il m M a r k e 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

3 GW of new, solar-produced electricity
Renewable energy No exclusive RPS for solar PV. But target of Target for solar is 4.8 GW by 2010 by 2017 (California). Target for RE is
obligations 12.5% by 2010 and 20% by 2020 and 100 GW by 2030 20% by 2010 and 33% by 2020
(California)
Є 54.53 cents (for <30 kWp), Є 51.87 cents
FIT (California) is US $ 0.39 per kWh
(for 30-100 kWp), Є 51.30 cents (for >100
for residential and non-residential and
kWp), bonus of €5 cents/kWh for BIPV and Only net metering and electricity
Attractiveness of feed-in US $ 0.50 for public (government
Є 42.42 cents for ground mounted; sold to grid at the same price at
tariff (FIT) mechanism agencies and non-profit organisations) as
decrease of 5% pa and 9% from 2008 which it is bought (retail tariff)
they do not get any tax benefits;
onwards.
27 states have declared FITs
Guarantee period – 20 years
Attractiveness of indirect
41 states have some sort of tax incentive
support mechanism -tax Under discussion None
available to consumers
incentive
Manufacturing incentives are available for
solar in terms of capital subsidy and direct
Attractiveness of 19 states offer industry support to the
and indirect taxes. None
manufacturer incentives solar industry
Capital subsidy (10-50%) varies from industry
to industry and volume of investment
Availability and 34 states offer subsidised loans to
Soft loan (approx. Available but not to the scale of the
accessibility of finance for 2% interest rate) USA and Germany
consumers for the purchase and
consumers installation of solar PV equipment
Germany has one of the most active R&D
Reduction in cost of system from 2
National PV cost landscape in the PV area. It has helped
million yen / kW (1994) to 0.67
economics development Germany cut down the solar panel cost from
million yen/ kW (2007)
€9-10 /W in 1998 to €4 /W in 2007
German PV industry (including sales of
Market growth of ~40% year on year Market growth of 37% year on year over
equipment and sale of power) turnover for
over the period 1997 to 2007, third the period 2003 to 2007, fourth largest
National PV market 2007 reached Є 5.7 billion. There are around
largest market globally, second in market globally, leader in thin films
development 60 manufacturers and more than 12000 firms
thin films production and largest production and fourth largest producer of
dealing in solar PV business employing app.
producer of solar cells in 2007 solar cells in 2007
40,000 people.
Very high – as a result of favourable PV
Low - as there has been a significant High - most states have offered some
National PV acceptance policies, there has been significant growth in
decrease (46%) in residential PV sort of incentive for promoting solar PV
_______________________________________________________________________________________________________________
KPIs Germany Japan USA
PV installations between 2002 and 2007. installations between 2005 and 2007 and USA is now turning into a net
Germany has overall accumulated PV power after the removal of the subsidy for importer of solar PV panels
installation of 3.8 GWp. residential consumers as highlighted
by the decrease from 7,00,000
households in 2005 to 5,00,000
households in 2007
Source: ISA-NMCC 2008Research
_______________________________________________________________________________________________________________
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
Energy Purchase Obligation

through Solar PV
5
4 Attractiveness of Feed-in tariff (FIT)
National PV Acceptance
Mechanism
3
2
1
Attractiveness of Indirect Support
National PV Market Development 0
Mechanism: Tax Incentive
Availability and Accessibility of Attractiveness of Manufacturing

Finance for Consumers Incentives
National PV Economics
Development (EU countries)
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
Energy Purchase Obligation

through Solar PV
5
4 Attractiveness of Feed-in tariff

National PV Acceptance
3 (FIT) Mechanism
2
1
Attractiveness of Indirect Support
National PV Market Development 0
Mechanism: Tax Incentive
Availability and Accessibility of Attractiveness of Manufacturing

Finance for Consumers Incentives
National PV Economics
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
U S A (including S tate Incentives )
Energy Purchas e Obligation through

Solar PV
5
4 Attractivenes s of Feed-in tariff (FIT)
N ational PV Acceptance
Mechanis m
3
2
1
Attractivenes s of Indirect Support
N ational PV Market D evelopm ent 0
Mechanis m : Tax Incentive
Availability and Acces s ibility of Attractivenes s of Manufacturing

Finance for C ons um ers Incentives
N ational PV Econom ics

D evelopm 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
Rs. 15.78/kWh Rs. 13.78/kWh
scheme
(ii) Not covered under MNRE GBI
Rs. 15.60/kWh Rs. 13.60/kWh
scheme (Limited to 50 MW)
(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).
________________________________________________________________________
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)
Value chain link SEZ Non-SEZ
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) #.
Poly-
Cost heads Wafer Cell Module Vertically integrated
silicon
Rs/Wp Rs/Wp Rs/Wp Rs/Wp Rs/Wp % of total
Raw material and
1.1 26.4 8.8 14.0 50.3 57%
consumables**
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
1.2 2.8 2.0 0.1 6.1 7%
maintenance
Selling & administrative
0.2 0.2 0.2 0.2 0.8 1%
expenses
Research & Development
1.0 1.0 1.0 1.0 4.0 5%
expenses
Depreciation &
3.4 1.6 1.4 0.3 6.7 8%
amortisation
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/ I-SEZ case with capital II-SEZ case without capital
outputs subsidy 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- 5% 5% 5% 5%
10 years)
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

100.00
Cost of production: Lower band Sales Price: Lower Band
94 Cost of production: Upper band Sales Price: Upper Band
90.00
85 86
80.00 80
78
74
Rs per watt
72 72
71
70.00
68 68
67 67 66
65 65
63 63
62 62 61
60.00 60 60
58 59
58 57
55 56 56
54 54
53 53
51 52
50.00 50 49 48 48
40.00
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Year
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/ I-SEZ case with capital II- SEZ case without
Outputs subsidy 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%
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
90.00
Cost of production and sales price trajectory
83 Cost of production: Lower Band Sales Price: Lower Band
80.00 Cost of production: Upper Band Sales Price: Upper Band
75
73
70.00
67
64
60.00
58 58
Rs per watt
52 52
50.00 50
49
46 46
43 43
42
40.00 39 39
37 37
35 35
34 34
32 33 32
31 31
30.00 30 30
28 28 27 27 26
26 25 25 25
Year
20.00
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
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 Cost of Sellin
Margin Selling price Margin
production production g price
Polysilicon 16.2 64% 26.6
16.2
26.6
+37.4
Wafers +37.4=64. 35% 86.4
+16.8
0 145.00
+18.4 63%
Cells 86.4+16.8
-----------
+18.4=121 21% 145.00
Modules 88.7
.6
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
Rs/kWh 15 15
GBI
Tariff (11-20 years) Rs/kWh 10 10
** 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./ 12.21 10.68
kWh)
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
250.00 14.00
12.21 12.00
200.00
10.91
Cost of generation (Rs/kWh)

9.81 10.00
System price (Rs/Wp)
9.06
150.00 8.62
8.27
7.95 8.00
7.73 7.61 7.51 7.44 7.37 7.30
210 6.00
100.00
183
160
144 135 4.00
127 121 116 113 111 110 108 107
50.00
2.00
- -
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Year
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)
13
12.2
Cost of generation at 12% Cost of generation at 10%
Cost of generation at 8% Cost of generation at 6%
12
11.40
10.9
11
Cost of generation (Rs/kWh)
10.60
10.219.8
10
9.80
9.52
9.1
9.20
9 8.6
8.82
8.59 8.51 8.3
8.0
8.11
8 7.99 7.97 7.7
7.6
7.78 7.5 7.4
7.60 7.4 7.3
7.42 7.49
7.30 7.29
7.09 7.18 7.09
7 7.04 7.02 6.95
6.81 6.85 6.89
6.74 6.66
6.58 6.60 6.54
6.41 6.48
6.31 6.24 6.19 6.13
6 6.08
210 183 160 144 135 127 121 116 113 111 110 108 107
System price (2008 to 2020) Rs per watt
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:
Telecom Grid
DDG tower connected
Unit model model 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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Disclaimer of Warranties and Limitation of Liability

Study on Solar Photovoltaic Industry: ISA-NMCC 2008

Poornima Shenoy Jaswinder Ahuja

President, ISA Chairman, ISA

Study on Solar Photovoltaic Industry: ISA-NMCC 2008

Study on Solar Photovoltaic Industry: ISA-NMCC 2008

Study on Solar Photovoltaic Industry: ISA-NMCC 2008

Study on Solar Photovoltaic Industry: ISA-NMCC 2008

Study on Solar Photovoltaic Industry: ISA-NMCC 2008

Figure 1: Links of the solar PV value chain 12

Study on Solar Photovoltaic Industry: ISA-NMCC 2008

Study on Solar Photovoltaic Industry: ISA-NMCC 2008

A-Si Amorphous Silicon

Solar PV industry – the global scenario

Solar PV is a technology-intensive industry. Over the period, technology interventions have

Market segments for solar

• Rural electrification – Decentralised Distributed Generation (DDG)

Benchmarking and policy

Based on the above analysis of market segments, solar PV appears to be an attractive

Economics of solar PV manufacturing

Figure 1: Links of the solar PV value chain

Silicon Ingots and PV System

Source: ISA-NMCC 2008

Global manufacturing supply chain

Link 1 – Silicon feedstock or polysilicon

1.15 Production of polysilicon has gone up from 24,200 MT in 2000 to 52,000 MT

(Source: Prometheus Institutes Review of the Polysilicon Industry)

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

Capacity of Polysilicon Manufacturers ( Tonnes per Annum)

Hemlock Wacker REC MEMC

Source: REC Annual Report 2007

2007 2006 2005

Future roadmap/ capacity

Projected target for

Share of Major Producers of Polysilicon by Capacity in 2011

Hemlock Wacker REC

Figure 6: Production along the global value chain in 2007

Production/ capacities along the Global Solar PV value Chain

Source: REC Annual Reports 2006 & 2007

Source – REC Annual Reports 2006 & 2007

Relative Share of Multi and Mono Crystalline Wafer

Source: REC Annual Reports 2006 & 2007

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

500 Multi Crystalline Wafer Capacity

Source: REC Annual Report 2007

Solar PV Production Global 2005 - 2007

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

Source: REC Annual Report 2006/2007

Source: REC Annual Report 2007

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

India’s energy targets

Figure 13: Characteristics of the value chain in India

Source: ISA-NMCC 2008

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

Annual Production growth of PV Cells and Module in India

1.57 The announcement of the Semiconductor Policy in 2007 has spurred

Solar Solar PV – cells and

TF Solar Power Silicon thin film

Solar PV – cells and

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

Source: PTI 2008 release

1.67 India’s cell production is expected to be around 140 MW in 2007-08, which is