In this blog, we delve into how solar power actually works and who are the biggest beneficiaries of this rising sector.
In our newsletter dated June 29th (yes, the day India won the T20 World Cup), we explored the perks of installing solar panels at home. Not only can they help you save big bucks during those scorching summer months, but they can also help you earn some money over time!
When it comes to saving money, solar energy is a clear winner over traditional electricity sources. As more homes, factories, and commercial properties jump on the solar bandwagon, its popularity is skyrocketing. The growth in solar energy capacity is also nothing short of mind-blowing. Picture this: India’s current solar power capacity is 85 GW, and it’s set to soar to 195.11 GW by 2029. That’s a 1.3x increase in less than 5 years!
Now that we know how impactful and fast-growing solar power is, let’s get into the nitty-gritty. Today, we’ll uncover how solar panels work their magic and who are the big players in the solar manufacturing game. Get ready to meet the giants fueling this sunny revolution!
Understanding Solar Panels
Let’s uncover the intricate steps that go into creating the solar panels that power our homes and businesses. Ever wondered what makes these panels so efficient at capturing sunlight? Let’s break it down together.
The manufacturing of solar panels involves several key steps, each typically occurring separately. Let’s walk through these steps:
Polysilicon Production: Its journey starts from Sand! Sand has a lot of silicon in it. This sand is cleaned to get pure silicon, which is then mixed with special gases. Finally, this mixture turns into polysilicon, which looks like tiny rods or beads.
Ingot and Wafer Production: Imagine you have a big block of chocolate and you wish to share thin chocolate slices with your friends. You will melt the chocolate, turn it into a liquid mass, then pour it into a mould and let it cool. This is exactly how polysilicon is turned into wafers. Polysilicon is placed into a container that is heated to form a liquid mass, followed by cooling to form large-grained multicrystalline silicon ingots. These are then sliced into very thin wafers.
Cell Fabrication: Silicon wafers are then processed to create solar cells. This involves adding layers and treatments to enhance their ability to capture sunlight. It is like icing and decorating a cake to make it more appealing and functional.
Module Assembly: Finally, solar cells are assembled into modules. This is where the individual cells are connected and encapsulated to form a complete solar panel.
The table below captures the critical inputs of the solar panel along with their % of total cost and the leading Indian players in this space.
Interestingly, China is a dominant player across the value chain
We are increasingly noticing how other regions are trying to develop indigenous capability in manufacturing quality solar components and are adopting various measures to reduce the dependency on cheap China modules (US$ 10–15 cents/Watt).
Take the case of India – the ALMM (Approved List of Module Manufacturers) strategy, which is helping players manufacturing good quality solar modules like Waaree Energies, Vikram Solar, Navitas Green, Goldi Solar, etc. take the center stage in India.
(The Approved List of Models and Manufacturers (ALMM) is a regulatory measure by India’s Ministry of New and Renewable Energy (MNRE) to ensure the quality and reliability of solar photovoltaic (PV) modules used in solar projects within the country. This list includes only those models and manufacturers that have been approved by the MNRE, ensuring that they meet specific standards and criteria.)
In fact, it is not false to say that one major tailwind for the growth of the solar sector is the government’s enthusiastic push.
Government Benefits for Solar Power
National Schemes
1. Rooftop Solar Programme Phase II: Offers up to ₹18,000 per kW for systems up to 3 kW and ₹9,000 per kW for systems above 3 kW and up to 10 kW, promoting residential solar installations.
2. PM Surya Ghar Muft Bijli Yojana: Provides up to 40% subsidy on installation costs, targeting poor and middle-class households to offer 300 units of free electricity per month.
3. Pradhan Mantri Kisan Urja Suraksha evam Utthaan Mahabhiyan (PM-KUSUM): Shares the installation cost between the central government, state government, and farmers to promote solar irrigation systems.
State-Specific Subsidies
1. Tamil Nadu: Up to ₹18,000 per kW for the first 3 kW and ₹9,000 per kW for the remaining capacity up to 10 kW.
2. Gujarat: 40% subsidy for rooftop systems up to 3 kW and 20% for systems between 3 kW to 10kW.
3. Uttar Pradesh: Financial incentives for solar parks and rooftop installations.
Additional Incentives
Net Metering: Sell surplus solar energy back to the grid for financial benefits.
Accelerated Depreciation: Claim 40% of the investment as depreciation in the first year to reduce tax liabilities.
Viability Gap Funding: Financial support for projects needing viability at the reference tariff.
Renewable Energy Certificates (RECs): Tradeable certificates offering financial incentives for green power generation.
These are just some of the initiatives taken by the central and state governments to support the growth of the solar sector as they embark on the mission to make India a global leader in solar power. It will be exciting to see how the race for energy transition unfolds!
We hope you now have a good perspective on how the solar energy sector works.
✍🏻Author of this newsletter – Shiwani Kumari (LINKEDIN)
📄Shiwani Kumari is an equity research analyst at Monarch Networth Capital Ltd, covering multiple companies operating in the Solar Energy sector.
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