More recently, demand for non-China polysilicon has been heightened by an “obvious decoupling” between the US and China, said Paul Wormser, vice-president of technology at solar supply chain consultancy Clean Energy Associates.

Washington recently passed the Uygur Forced Labour Prevention Act, which bans US imports of products made with polysilicon from Xinjiang over alleged forced labour concerns.

“We do see polysilicon becoming increasingly differentiable – creating viable opportunities for polysilicon in India to succeed,” he said, though he added the US law is unlikely to drive major restructuring of the China-dominated PV supply chain.

The Indian government is taking steps to boost local solar manufacturing, especially through its production linked incentive (PLI) scheme that has allocated a budget of 24,000 crore rupees (US$3 billion) to the industry.

Initially, 4,500 crores was made available under the scheme, which pays manufacturers to meet production targets. But at least 18 companies applied for the incentive, with bids for installed solar capacity totalling 54.8GW, according to renewable energy consulting firm JMK Research & Analytics. As a result, the 2022 budget for the initiative was increased by 19,500 crores.

“By localising the supply chain, jobs are created, Indian rupees stay in India instead of going outside, logistics delays and expenses can be reduced and disruptions in supply can be minimised,” Wormser said.

While most companies applying for the PLI scheme are either planning to expand existing capacity for module production, or enable backward integration from cell to module, three companies have asked for subsidies to set up 4GW of solar module manufacturing capacity across the entire value chain – from polysilicon to modules – by 2025.

These include Indian giants Reliance Industries, which has created a subsidiary Reliance New Energy Solar, and Adani Infrastructure. Shirdi Sai Electricals Limited (SSEL), the country’s leading producer of power distribution transformers, is the third company and a new entrant to the field of solar.

To further aid local manufacturers, India increased custom duties to 25 per cent on imported cells and 40 per cent on imported modules in April.

But establishing a globally competitive, integrated solar supply chain in India is a huge endeavour and faces numerous challenges.

“We don’t have anybody in India who has experience setting up a polysilicon plant,” said Balachander Krishnan, the COO of the solar division at SSEL.

“There is no trained manpower to run the whole factory, especially with safety in mind.”

China on the other hand has years of technical experience with different methods of PV production, he added.

In December 2021, SSEL signed a memorandum of understanding with Viridis.iQ GmbH, a German engineering and consulting firm, to help set up its first integrated plant.

Reliance Solar has also made headway, having acquired a 100 per cent stake in REC Solar Holdings from Chinese National Bluestar. The company has two manufacturing facilities in Norway that make solar-grade polysilicon and will provide Reliance with the technological expertise it needs to set up its own integrated factory.

However, a major hurdle for Indian manufacturers is the cost of production, because industrial electricity in the country is more expensive than in the US and China.

“In Xinjiang province in China, the electricity price that they are running at the polysilicon factory is close to 2.75-3 [Indian rupee per kilowatt],” said Krishnan. “I don’t think we can match that price.”

Wormser said low energy costs are key to operating a plant.

“And there has to be confidence that the energy cost will stay low and absolute confidence that the quality of power feeding the plant is very high,” he said.

Prices for polysilicon are currently five to six times higher than two years ago, which means even with high operating costs it would still be profitable for Indian companies, especially with PLI incentives, Wormser said.

But he added, “if the price collapses, as it likely will at some point, the stress for higher cost producers can be enormous”.

Subsidising electricity costs, as well as providing land subsidies, would help Indian firms maintain profitability, said Krishnan.

He also highlighted there are no certification labs in India to assess the quality of polysilicon and other PV products, which means companies rely on international providers.

Without certification of polysilicon quality, Indian solar companies would have to first convert polysilicon to ingots and wafers before finally measuring efficiency of the solar cell. Only then would they be able to give feedback to the polysilicon manufacturer.

“[Certification] has to happen in India or else it would be very difficult,” said Krishnan.

Although Reliance Industries, Adani and SSEL have committed to setting up integrated plants with 4GW of capacity, “it is very difficult to be globally competitive” at this scale, said Krishnan.

“Most big players are planning for 10GW”, he said.

While India’s domestic solar industry is making progress, scaling up capacity to become internationally competitive is a way off.

“Everybody is in the planning stage and it takes about two years just to set up the production facility and about a year or so to get the right quality,” Krishnan said.

By 2026, India’s polysilicon production capacity will start to register measurable progress, he added.

Wormser said plans to build fully-integrated PV lines in India have failed in the past, partly due to a lack of concrete government support. But that was changing.

“We expect to see progress made by at least one company in localising polysilicon production,” he said.