India’s renewable manufacturing ambitions: Bridging the technology, talent and supply chain gaps

The renewable energy market in India has witnessed explosive growth over the last decade. Driven by massive capacity additions in solar module manufacturing in China, solar module prices have dropped dramatically. Solar energy has moved from being expensive and aspirational to becoming one of the cheapest sources of electricity generation, rapidly overtaking not just wind energy but also thermal power in terms of capacity addition.

India today has multiple gigawatt-scale solar farms, and renewable energy capacity addition continues to grow at a rapid pace. This massive domestic demand has enabled the government to adopt a more aggressive approach towards strengthening domestic solar module manufacturing through both tariff and non-tariff barriers on imports.

These restrictions, initially imposed on modules, have now extended to solar cells, with the government indicating its intention to move further upstream in the value chain to wafers and polysilicon.

Indian module manufacturers have witnessed exponential capacity expansion. Those who invested early in cell manufacturing have seen a marked difference in their financial performance compared with companies that were slower to make such investments.

The Challenge of Moving Up the Solar Value Chain

While modules and cells require relatively lower capital investment, moving upstream into wafer manufacturing is extremely capital-intensive. Understandably, module manufacturers remain hesitant to assume the substantial financial risks involved.

One of the key challenges facing Indian companies is the near-total absence of a domestic supply chain ecosystem. India’s manufacturing and supply networks have been built around imports, not merely of raw materials, components and manufacturing equipment, but, more importantly, of technology and specialised manpower.

Foreign technology specialists remain critical to domestic manufacturers. Their expertise is required for installing and commissioning machinery, standardising production processes, ensuring consistent output quality, and training local teams in manufacturing operations and maintenance.

Geopolitical headwinds frequently result in visa delays or refusals for these specialists and trainers, leaving domestic manufacturers struggling to operationalise new capacities.

Battery Energy Storage: The Next Big Opportunity

Beyond solar manufacturing, the next major opportunity in India’s renewable energy industry is battery energy storage systems (BESS).

The days of standalone wind and solar projects are increasingly giving way to integrated renewable energy solutions. Without storage, renewable energy sources such as wind and solar will continue to have low utilisation factors despite substantial installed capacity. For renewable energy to be integrated effectively into the grid, storage is becoming an essential component.

Even large industrial and commercial consumers are increasingly exploring round-the-clock renewable energy solutions that can support their decarbonisation objectives. Consequently, India is witnessing a growing pipeline of BESS projects, both standalone and integrated with renewable energy generation.

However, the import dependency in BESS is arguably even more challenging than in solar manufacturing.

Initial BESS installations have relied heavily on imported components, with minimal domestic value addition. Several companies have established local BESS manufacturing facilities, but most continue to follow an asset-light, assembly-focused approach.

While the government has expressed its intention to encourage domestic value addition through policy interventions, the absence of a robust domestic battery cell manufacturing ecosystem calls for a more measured approach.

Large-scale adoption of BESS will be critical to achieving India’s renewable energy integration goals. Although lithium prices have declined significantly over the past decade, batteries remain relatively expensive additions to renewable energy projects.

Concerns also persist regarding battery performance, fire safety, cell life and derating. Some industry reports suggest that integrating plug-and-play BESS solutions has proved considerably more challenging than independent power producers (IPPs) initially anticipated.

Building Domestic Technology and Manufacturing Capabilities

It will be interesting to see how Indian manufacturers rise to the challenge. The opportunity, to put it mildly, is massive. There is also the added incentive of exports, but that will depend on the ability of Indian companies to compete globally on costs as well as technology. One can understand the reluctance of manufacturers to invest massive capex into “static” technologies that they do not fully understand. There is also the risk of obsolescence. One of the biggest gaps that leaves us exposed is the skills gap – not just downstream (in manufacturing), but at the very source – we do not have access to leading technologies/IP or have any significant presence in R&D. Bridging this gap requires a large and concerted effort encompassing academia, industry and government at a scale far greater than what we have at the moment. It also requires patience, long-term commitment and significant monetary investment from India’s corporates.

The good news is that renewable energy and sustainability are not just buzzwords or needs restricted to this decade – solutions will continue to be required at scale and across the world for at least the next five decades, and most likely beyond! While China’s recently announced restrictions on exports of critical materials and technology may create an immediate headwind, they should also galvanise India’s domestic manufacturing industry into investing in upskilling and creating a world-class talent pool capable of driving real and sustainable growth for the foreseeable future.

Amrop India is part of Amrop, a global executive search and leadership advisory organisation that works with companies on senior leadership, talent and organisational challenges across industries.