India’s green energy transition is accelerating. In the past decade, the installed capacity for renewable energy went up from about 28 GW in 2013 to over 180 GW currently with another 88 GW in the works. Prime Minister Narendra Modi announced the Pradhan Mantri Suryodaya Yojana (PMSY) in January this year for roof-top solar and that could potentially double the current installed capacity of 11 GW for the same. India could well achieve 500 GW of renewable energy capacity before 2030, the targeted year. In addition, India’s EV sales surged to 1.5 million in 2023, up 50% from the year before.
While the downstream capacities and supplies are expanding, there is no scope for complacency as the green energy upstream story has been less encouraging so far. Solar photovoltaic modules and panels, and Lithium Ferro-phosphate (LFP) batteries, for our solar farms and EVs respectively, are still largely being imported. While the government has designed excellent Performance Linked Incentive (PLI) schemes for solar panel manufacturing and Advanced Cell Chemistry production, our manufacturing plants are still dependent on imports of raw materials and processed inputs of critical minerals required for solar PV cells and EV batteries.
Securing the ecosystem
To be totally Atmanirbhar, Indian companies – especially those that are investing heavily in the green energy capacities – and the government need to work closely together to build a strong presence across the entire value chain so that our dependence on imports reduces.
This would mean securing mining rights for crucial raw materials needed for solar panels and LFP batteries in various geographies. Currently, Lithium required for LFP batteries that run EVs are mined in Australia and the Lithium triangle countries of Argentina, Bolivia, and Chile). Cobalt – another critical mineral required for EV batteries – is mined in the Democratic Republic of Congo (DRC), which has over 50% of the world’s cobalt reserves. Other minerals required in smaller quantities (Tellurium, Selenium, Cadmium, Gallium) are currently sourced from China and a few other countries.
Of late, the interest in Lithium and other minerals has resulted in discoveries of new reserves across the globe, from India to the US. Indian players need to keep track of these too – because while some of these new reserves are in ecologically fragile zones, and therefore not suitable for extraction, other large reserves can be commercially exploited.
We also need to plan for building processing plants for refining these minerals from ore after they have been mined. Currently, we have no presence in the processing part of the ecosystem. For this, we need to source technology from those who have it and that may not be easily available without some government help, in terms of modification of investment policies and visa regulations. The government will also need to ensure that the Approved List of Models and Manufacturers (ALMM) for solar modules – a non-tariff barrier that would encourage domestic manufacturers and help them get more competitive – is not delayed any further. It was initially supposed to come in play in 2021.
Corporate India also needs to speed up research into alternate chemistries such as Sodium Ion and Fuel Cells to reduce dependence on imported Lithium.
Recycling for Minerals
There is another path to securing the critical minerals – and that is by creating a recycling industry that retrieves the minerals from old, decommissioned solar panels and EV batteries. Solar panels have a life of around 30 years while EV batteries can last 10 years or more. Critical minerals can be extracted from end-of-life renewable products. This is an approach that has been favoured by EU nations which have mandated a 75% recycling rate of portable batteries by 2025 and 80% by 2030. It has also passed a law that new batteries should contain 85% recycled lead, 20% recycled cobalt, 10% recycled Lithium and 12% recycled nickel by 2035. This approach also provides a great opportunity for smaller Indian firms which may lack the capital and resources to get into other parts of the ecosystem, such as mining.
Making the Right Policies
The government needs to work closely with the corporate sector to tailor incentives that can help them move quickly. It also needs to ensure that import duties and anti-dumping duties are aligned with our interests in upstream parts of manufacturing. Finally other incentives – such as allowing R&D expenses to be treated as part of CSR, perhaps – could go a long way in helping our energy transition story.
The Capital Question
Building a strong presence across the renewable energy ecosystem will require a lot of capital. Fortunately, global investors ranging from sovereign investment funds to green energy investment funds are prepared to fund projects that have a clear pathway. Global investment in energy transition technologies crossed $1 trillion annually in 2022. The World Bank has also approved $1.5 billion in financing to aid India’s low-carbon transition. It is for the corporate sector to create these plans to take advantage of the investment interest waiting in the wings.
