Minerals in our solar future

The current crisis in ties with China requires us to review critical energy sector dependencies on the northern neighbour. Our drive to achieve ambitious goals for generating solar energy — 100 GW by 2022 — has provided China a major market for its solar PV cells and modules over the last decade. As Indian enterprise focussed on solar power generation plants, imports of solar panels, modules etc soared to over $3 billion in 2016, most of it from China. Safeguard duties have reduced the import bill of the solar sector to $1.7 billion, but 80 per cent is still from China.

If India actually walks the talk towards greater self-sufficiency in the renewable energy industry, it could have the spin-off effect of slowing the seemingly inexorable march of China to global dominance in the full spectrum of the solar energy industry. India was the largest market for Chinese solar PV modules, till safeguard duties kicked in last year, and Vietnam and EU became larger buyers. 

Even the current export of $1.3 billion to the Indian market is vital for Chinese solar manufacturers; and we need to be watchful of exports being routed through Vietnam, from where our imports have surged this year. With US, and possibly EU, fighting back against China flooding their solar markets, the Chinese industries’ export-led strategies will face turbulence. Analysts estimate that removal of subsidies caused the Chinese domestic solar market to shrink from 53GW to 40GW a year. The global capacity is 120GW, but China’s solar industry is already producing equipment for 90 GW capacity annually. No surprise then that last year China launched the International Alliance for Renewable Energy, as part of the Belt and Road Initiative, to boost new export markets.

Weaning the sector off Chinese imports will be difficult, as backward integration will entail costs. Alternative suppliers in the US, EU and Korea have higher prices, and it will take time for domestic manufacturers to scale up from the present 3 GW solar cell capacity (10 GW for modules). However, the opportunity is huge; over the next decade, 70 per cent of global growth of solar energy is likely to be in India, China and the US. A Make in India strategy with incentives and technological alliances with companies from Japan, Korea, Europe and the US can ensure that any costs of reliance on Indian industry will be short term. The alternative of importing solar equipment for, say, 20 GW per year, would cost $5 billion annually, and employ only people abroad.

A solar manufacturing strategy for India has much to learn from China’s experience. Till the mid 1990s, it was a small solar player with low levels of technology. It then provided incentives, low costs, and quick approvals, to the technologically pioneering German companies looking to expand capacity to take advantage of feed-in-tariffs in their own country. Thereafter, China followed a strategy of vertical integration, becoming a producer of crystalline silicon with machinery and expertise from abroad; moved up to PV modules and after EU/US delicensed technologies, invested in polysilicon, thin film PV cells etc. 

It created a huge domestic market and made technology transfer a condition for foreign companies’ access to it. By the time of the global economic crisis of 2007-08, China had built enterprises with competitive scale to capture world markets in all except the most technologically advanced industry segments. In 2006, two out of the world’s top 10 solar companies were Chinese; in 2019, seven out of 10 and two of the other three had plants in China. The Made in China 2025 plan intends to carry this forward with technological dominance and complete self sufficiency.

As China engages in ruthless competition, dependencies anywhere along the value chain become vulnerabilities. Apart from quartz silica which is abundant, deficiencies in lead, silver and titanium can be managed. But technological advances in solar PVs are generating demand for more exotic sounding minerals like cadmium, selenium, tellurium, germanium and indium (the so called “minor minerals”), essential for durability, enhanced electrical conductivity, and for better light absorption and conversion to electricity. Small quantities are used but they are critical for performance. These now critical minerals are usually produced as by products from processing other minerals – like copper (tellurium), zinc (cadmium, indium and germanium), bauxite (gallium) and coal ash (germanium).

China today produces over 60 per cent of the world’s tellurium; it is the largest producer of cadmium, gallium, germanium, and among the largest in selenium. India imports most of its requirements from China, Korea, Japan and Belgium. Presently access to minor minerals is not seen as a concern; but shortages could develop. The World Bank projects 500 per cent growth in global demand for minerals from renewables by 2050.

Minor minerals are not viable for stand-alone mining and processing; hence they — and other critical minerals — need to be incentivised through tax and royalty waivers/discounts as is done by other countries for many critical minerals. Our PSUs and private companies engaged in mining, smelting and processing of coal, zinc, copper and aluminium have the technological capacity to extract a range of critical minerals as byproducts of refining, or from “waste” storages. They should be incorporated in a national solar manufacturing strategy.
The author is a former foreign secretary

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