India is on the cusp of becoming a global leader in green energy, with the potential to become the lowest-cost producer of green ammonia, according to a recent report by Nuvama. This advantage stems from India's significantly lower costs in solar photovoltaic (PV) and wind energy, which are 16-44% and 17-40% lower than global averages, respectively. If India's financing costs, currently at around 10%, decrease to align more closely with the global range of 4-8%, the country could further solidify its position as a major player in the green ammonia market.

Projections from NITI Aayog suggest that by 2030, India's green ammonia production costs could be approximately 29% lower than China’s and 43% lower than Australia’s. Major Indian companies, such as Reliance Industries (RIL), are expected to lead the country’s new energy transformation. RIL plans to commission the first phase of its solar PV manufacturing by the end of FY25, with an ambitious goal to scale up to 20GW by CY26.

RIL has secured Production Linked Incentives (PLIs) worth USD 0.7 billion for both solar modules and green hydrogen production. These incentives are anticipated to cover 18% of the green hydrogen value chain, positioning RIL as a key beneficiary of India’s green energy policies.

The Indian government has demonstrated its commitment to strengthening domestic solar module manufacturing through the Solar PV Modules PLI-Tranche II, which has allocated Rs 140 billion for 39.6 GW of domestic capacity. This initiative is expected to add 48GW of solar module manufacturing capacity over the next three years, with 7.4GW becoming operational by October 2024, 16.8GW by April 2025, and the remaining 15.4GW by April 2026.

The PLI scheme is instrumental in positioning India as one of the lowest-cost producers of solar modules, which are currently 23% cheaper than the global average and 6% lower than those produced in China. The allocation of 6GW each to RIL and IndoSolar for end-to-end PWCM (polysilicon, wafers, cells, and modules) manufacturing marks a significant milestone in India’s energy sector, including the establishment of the country's first-ever polysilicon manufacturing unit, which is expected to significantly reduce overall module costs.

Polysilicon, which currently accounts for one-third of the total module cost and enjoys around 70% margins, will play a crucial role in revolutionising the domestic solar manufacturing landscape.

While India makes significant progress in the new energy sector, China faces challenges in its lithium-ion battery market. Despite a 14% year-on-year drop in lithium-ion battery prices in 2023, China's manufacturing capacity is expected to exceed demand by 3.6 times by the end of CY24, leading to an oversupply that could keep battery prices under pressure. This situation may benefit global electric vehicle manufacturers but presents challenges for Chinese producers.

The recent decline in input prices across the value chain, along with India’s PLI rollouts for modules, electrolyzers, and batteries, has bolstered the country’s economies of scale. As of August 2024, solar module prices have reached historic lows, dropping 49% year-on-year, while lithium-ion battery prices have decreased by 14% year-on-year.

These developments, coupled with ongoing government initiatives, are expected to accelerate India’s progress toward achieving round-the-clock renewable energy, positioning the country as a formidable force in the global energy market.

(newsX)