India's budget targets domestic solar manufacturing, EVs, biomass co-firing

India is to provide Rupee 195 billion ($2.61 billion) under a production-linked incentive (PLI) scheme to support the manufacture of solar components, Finance Minister Nirmala Sitharaman said in a 2022-2023 budget speech Feb. 1.

The Indian government wants to reduce its dependence on Chinese imports of solar equipment, while boosting use of locally-sourced components in its own renewables program.

This adds to the Rupee 45 billion announced in 2021 for domestic manufacturing of solar photovoltaic modules.

The plan would "facilitate domestic manufacturing for the ambitious goal of 280 GW of installed solar capacity by 2030," Sitharaman said.

Funds would encourage the production of high-efficiency modules, encompassing polysilicon through to solar PV cell technologies.

India has a total solar installed capacity of 49.35 GW.

The country has a limited solar manufacturing base, but several Indian renewable companies have recently announced plans to develop their own supply chains.

In November 2021, Adani Solar's CEO Ramesh Nair told S&P Global Platts that the company would more than double the capacity at its solar module plant in the state of Gujarat to 2 GW/year.

The facility would be able to produce around 7.6 million units a year, reducing the cost of its rooftop and EPC solar installation projects.

Adani is an applicant to the solar incentive scheme.

The winners in a competitive bidding process are to be granted five-year subsidies on commissioning of manufacturing plants. The level of the incentive can rise based on unit efficiencies and domestic market sourcing.

The government is also imposing a basic custom duty of 40% on imported solar PV modules and a 25% duty on imported solar cells from April 1.

Battery swapping program

Sitharaman said the government was also focused on encouraging the growth of electric vehicles.

"We will promote the shift to use of public transport in urban areas," she said. "This will be complemented by clean tech and governance solutions, special mobility zones with zero fossil fuel policy and EVs."

In response to space constraints on urban recharging infrastructure, a battery swapping program is to be introduced with interoperability standards allowing EV users to exchange drained batteries for fully-charged ones at a station.

This option is only available at present to a range of two-wheeler EVs that are popular in India. Sales of electric two-wheelers in India increased 132% on the year to 233,971 unitsin 2021, according to the Society of Manufacturers of Electric Vehicles.

"The private sector will be encouraged to develop sustainable and innovative business models for battery or energy as a service," she said. "This will improve efficiency in the EV ecosystem."

India currently has 974,581 electric vehicles, according to the website of the Ministry of Road Transport and Highways.

Co-fired biomass

For the power sector, meanwhile, the minister said the government would enable co-firing of 5%-7% biomass pellets in coal plants with the aim of reducing CO2 emissions by 38 million mt annually.

"This will also provide extra income to farmers and job opportunities to locals and help avoid stubble burning in agriculture fields," Sitharaman said.

Indian coal plants emitted around 1,200 million mt CO2 in 2021. Under a reference scenario, Platts Analytics forecasts these emissions to rise to 1,500 million mt/year by 2030.

Under a two-degree outlook, India's coal plant emissions would need to peak next year at 1,225 million mt/year and fall to 999 million mt/year in 2031 in order to get on a trajectory with the Paris climate change agreement.