Tycoon drives India’s push against China’s solar-energy dominance

Adani Group, which built its energy empire on coal, is setting up an entire solar supply chain starting with indigenous manufacturing of ingots, wafers, cells and panels, and soon polysilicon. It is also constructing a solar farm in Khavda, western India, that will cover an area over five times the size of Paris.

The group’s goal reflects India’s twin aims of aggressively chasing renewable-energy targets while reducing dependence on Chinese imports, goals that are often in conflict with each other.

India wants to install 500 gigawatts of renewable-energy capacity by 2030, but it is only two-fifths of the way there. Solar makes up nearly half of the country’s renewable mix. Although India has managed to start building solar panels within its borders, the raw materials are mainly imported from China.

At the same time, India is forcing domestic solar-power developers to buy panels from approved Indian manufacturers that sell at almost twice the price of Chinese panels and are often of inferior quality.

That tension offers opportunities for firms with deep pockets, such as the $200 billion Adani Group, that can afford to take on enormous investments throughout the supply chain.

“We are playing the entire energy game," said Sagar Adani, who oversees the group’s renewable-energy businesses and is Gautam Adani’s nephew.

India has long had a strained relationship with its neighbor. Ties between the countries hit a nadir in 2020 after clashes between Indian and Chinese troops along the Himalayan border turned deadly. Since then, India has intensified its efforts to build out local production in new technology sectors.

In 2022, India imposed tariffs of 40% on solar panels and 25% on solar cells to discourage imports from China. In April, the country dictated that Indian solar-power producers must purchase from an approved list of domestic solar-panel makers—Adani’s Mundra facility among them. Similar rules for solar cells could come in 2026.

India has offered subsidies of close to $3 billion to the solar manufacturing industry, but putting a dent into China’s dominance is a formidable challenge. China’s share in all the manufacturing stages of solar panels exceeds 80% globally, according to the International Energy Agency, a Paris-based intergovernmental organization. Wood Mackenzie estimates China invested $130 billion in the solar industry last year.

Adani Enterprises, the group’s flagship firm, started manufacturing the wafers and ingots used for making solar-power cells and panels earlier this year, making it India’s first company to do so. The facility in Mundra, a small port town on India’s west coast, is capable of producing ingots and wafers to feed about half of its current panel production of 4 gigawatts. China’s wafer capacity is over 300 times that of India’s.

By the end of the year, it will firm up a timeline for investing in the manufacture of polysilicon, the high-purity silicon that is the building block for solar panels. India doesn’t produce that material now.

But safeguarding the energy supply chain from China is depriving India’s solar-power developers of cheap, technologically advanced panels and other raw materials that are slowing its renewable-energy build-out.

Analysts say India is likely to miss its target of having 500 gigawatts of renewable capacity by 2030 by a wide margin, and many assign a significant share of the blame to the country’s insistence on localizing its supply chain. Wood Mackenzie estimates India may succeed in installing only 375 gigawatts by the deadline.

“The intent of the government is to make everything in India," said Nikhil Nigania, an analyst at Bernstein, who tracks Adani Green Energy and ReNew Power, another renewable-energy firm in India. “At this point in time, it makes sense to allow imports to come. The public is paying more because you are not importing, you are using expensive domestic modules."

The most commonly available India-made panels are priced around 18 cents a watt, or roughly double the prices of Chinese-made panels, according to August data from BloombergNEF. Panels account for about 40% of the cost of developing a solar farm.

Beyond panels, other parts of the supply chain will be more difficult and expensive to replicate in India.

JMK Research & Analytics and the Institute for Energy Economics and Financial Analysis estimate the cost of developing polysilicon for 1 gigawatt of solar power in India would be about $130 million, or more than twice the cost in China, in large part because of higher industrial power prices.

Sagar Adani acknowledges that using Indian components can make projects more expensive and that Adani doesn’t use them when it doesn’t make business sense. “That’s why we buy from outside," he said. “Because they are much cheaper than what we make here today."

Adani Green Energy continues to buy panels from China and Southeast Asia, as well as Adani Enterprises, depending on what the rules allow. The mandate to source locally doesn’t apply to private projects, and import contracts for projects with the government that predate the new rule are exempt. Meanwhile, the bulk of Adani’s panel production is sold to the U.S.

India’s harder stance on China has at times tripped up firms trying to help India compete with its neighbor—including Adani.

The company’s facility in Mundra has hundreds of workers clad in blue protection gear manufacturing missile-shaped ingots that are the building blocks of solar panels. It relies largely on Chinese equipment to make these.

A projected increase in power demand across India adds another challenge to the country’s effort to add renewables while weaning itself off Chinese imports. India’s per capita electricity consumption is a third of the global average, according to government estimates, but is expected to surge to power its economic engine.

“If we add that much capacity of thermal coal-based power, whatever decarbonization efforts are going on in the world will all be neutralized or negative just because of India," said Sagar Adani.