Question

• What is the market’s perception of the quality of solar panels manufactured in India compared to those from China? Can Indian manufacturers match the quality standards of their Chinese counterparts?

Q.1 Do we have an idea on the Cost Structure and Profit Margins on the various processes on Solar Manufacturing and installation and whether there are any listed peer companies for across the world to compare the valuation with for each of the processes

For e.g some of the lifecycle stages

1. Poly Silicon Manufacturing
2. Ingot Manufacturing
3. Cell Manufacturing
4. Module Manufacturing
5. Inverter and which technology
6. Transformers ( Inverter Duty Transformers / Power Transformers )
7. EPC Players
8. Service & Maintenance
9. Any other

Q2. Also which are the proxy industries like Solar Cables etc which can be the beneficiaries to the growth in the Solar Industry

Q3. For Solar farms & commercial projects, what is the % of String Based Inverter vs Central Inverters

Q4. I guess different type of Transformers are required in a Solar Project . Considering this , what is the contribution of Inverter Duty Transformers ( Step Up transformer ) & Power Transformers in a Solar Project.

Q5. What is the market size of Rooftop Solar Projects & Solar Pumps ? What are the margins in the Resedential space

Answer

Before delving into solar PV basics, it is crucial to note two primary solar power manufacturing technologies: Photovoltaics (PV) and Concentrated Solar Power (CSP). PV, being more cost-effective, is the prevailing choice for solar power generation.

• Solar PV technology bifurcates into two primary categories based on the primary raw material: crystalline silicon-based and non-silicon-based. The predominant share, exceeding 95% of global capacity, is held by crystalline silicon, with First Solar being the only large contributor in the non-silicon-based module sector.

• Within the crystalline silicon domain, the developmental trajectory has transitioned from polysilicon to multi-crystalline and presently to mono crystalline. Mono-crystalline, particularly in N-type cells, is gaining traction due to enhanced efficiency, especially on a smaller scale, superior performance in lower light conditions, and a higher Internal Rate of Return (IRR).

• CdTe (cadmium telluride) ranks as the second-most prevalent PV material post-silicon and finds application in thin film PVs. Another material, copper indium gallium diselenide (CIGS), is utilized in the same context. Despite their cost-effectiveness, these alternatives do not parallel the efficiencies achieved by silicon cells.

• Another material which Is gaining prominence is Perovskite which is also used in thin film cells. Though the efficiencies have matched silicon-based cells in labs, it is yet to become commercially viable for large scale usage.

Within crystalline silicon N-type technology continues to upgrade, with opportunities in cost cuts and efficiency gains- TOPCon may swiftly become a mainstream technology in the industry, the industrialization of HJT will likely accelerate and xBC is poised for a breakthrough in the higher-end market segment.

Technology cycle

• Historically, a new technology has come every 3 years and companies have had to tweak their plant & machinery accordingly. In 2022, with super normal profits for Chinese companies, this technology cycle was faster, and they moved swiftly from Mono PERC to TOPCon.

• Currently, CLSA believes solar technology innovation is progressing slower than anticipated due to reduced willingness to invest in solar capital expenditures during the sector’s down-cycle. Among the key technology introductions for 2024, only laser-enhanced contact optimization (LECO) is on track, while the adoption of 0 bus bar (0BB) and HJT technologies may proceed more slowly than expected. This situation could benefit Indian players, as capex planned around a three-year technology cycle may be extended by one to two years.

• Chinese companies are the technology leaders along with First Solar for Thin Film, currently Indian companies have been doing tech tie-ups to get latest technologies. Research institutes in India are focusing on developing new technologies, however this may take its time. Waaree Energies has collaborated with IIT Bombay for R&D.

• Transition from Mono PERC (P type) to TOPCon (N type) is at solar cell level, which can be done with an incremental capex of 100-150 cr. At solar module level there are no changes in the manufacturing process.

Answer

• Solar cell manufacturing stabilization depends on the type of equipment ordered, if the order is given to a single credible vendor, stabilization can be as fast as a couple of months.

• However, if the order is given to multiple vendors who in turn have given orders to other companies, stabilization can take 6-9 months due to coordination efforts required and resulting back and forth.

• Currently, Chinese engineers are required to stabilize the cell line, over time as more cell capacity comes in India, domestic engineers might be able to learn the relevant skills. Also, the visa restrictions to Chinese experts have been withdrawn.

Answer

• Majority of the countries are trying to build their own solar PV manufacturing facilities for energy security, the policies are also supportive of this.

• Given that currently, non-Chinese manufactured components like polysilicon, wafers, cells and modules trade at a premium, we believe if the current sentiment persists the prices of domestically made wafers and cells will be higher and will support the IRRs of the companies.