Image Courtesy: Freepik

Image Courtesy: Freepik

Image Courtesy: Freepik

Image Courtesy: India Briefing

Image Courtesy: Freepik

Production-Linked Incentives Catalyzing India s Green Revolution

Prashant Singh

28 Jul 2024

India's ambitious strides towards a sustainable future are underpinned by its Production-Linked Incentive (PLI) schemes, designed to ignite domestic manufacturing in green energy sectors. This comprehensive analysis delves into the intricate details of these schemes, examining their impact, showcasing real-world business examples, and projecting the government's future plans for a greener India.

Global Context:
 

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In a global context, several countries are implementing similar incentive programs to boost domestic manufacturing of clean technologies. China's aggressive PLI schemes have been instrumental in its dominance of the solar PV market. The United States and the European Union are also introducing policies to incentivize domestic production of electric vehicles and batteries. India's PLI schemes, while relatively new, are demonstrating promise in attracting investments and fostering a robust green ecosystem. However, India's unique approach of targeting specific sectors and prioritizing high-efficiency technologies sets it apart. The government's emphasis on creating a complete domestic supply chain, from raw materials to finished products, is also a distinguishing feature.

Electric Vehicles (EVs): Powering a Cleaner Future



The Indian EV market, projected to be a US$206 billion opportunity by 2030 if India maintains steady progress to meet its ambitious 2030 targets (according to an independent study by the CEEW Centre for Energy Finance), is experiencing accelerated growth fueled by the government's Production-Linked Incentive (PLI) schemes.
 

• PLI Scheme for Automobile and Auto Component Industry : This scheme, with a budgetary outlay of ₹25,938 crores from FY23 to FY27, is designed to incentivize the production of advanced automotive technology vehicles and components, including electric vehicles. It aims to create a complete domestic supply chain, from battery manufacturing to vehicle assembly.
   
  • Key Features:
     
    • Financial Incentives: Manufacturers receive incentives based on incremental sales of eligible products over a base year.
    • Eligibility: Includes manufacturers of electric vehicles, hydrogen fuel cell vehicles, and advanced automotive technology components.
    • Investment Threshold: Manufacturers need to meet minimuminvestment criteria to be eligible for incentives.
       
  • Challenges and Solutions:
     
    • Supply Chain Bottlenecks: Ensuring a steady supply of critical components like batteries and semiconductors is crucial for the success of the PLI scheme. The government could consider additional incentives for component manufacturers to attract investments and create a robust local ecosystem.
       
    • Skilling and Training: A skilled workforce is essential for the growth of the EV industry. The government could invest in training programs and partnerships with educational institutions to bridge the skill gap.
       
  • Sustainability Impact:
     
    • Reduced Emissions: By promoting the adoption of electric vehicles, the PLI scheme contributes to reduced greenhouse gas emissions and improved air quality in cities.
       
    • Energy Security: Shifting towards EVs reduces India's dependence onimported fossil fuels, enhancing energy security.
       
  • Benefits:
     
    • Driving Domestic Manufacturing- The PLI scheme has spurred major automakers like Hyundai, Ola Electric, and Mahindra & Mahindra to invest heavily in expanding their EV manufacturing capabilities within India. This localization not only reduces import dependence but also paves the way for job creation and cost reduction.
       
    • Charging Infrastructure- To complement the growth of EVs, the government is actively considering extending PLI benefits to electric buses and commercial vehicles, as well as bolstering charging infrastructure through additional incentives. This holistic approach aims to address range anxiety and promote the widespread adoption of EVs for both personal and public transportation.

• FutureFactory: World's Largest Two-Wheeler Plant:  Ola's FutureFactory, located in Krishnagiri, Tamil Nadu, boasts the title of the world's largest two-wheeler manufacturing facility. With a staggering annual production capacity of 10 million units, this fully operational plant has significantly boosted India's EV production capabilities. The factory utilizes advanced automation and robotics, ensuring high efficiency and quality control.   
   
• Gigafactory: Pioneering EV Innovation: Ola's ambition doesn't stop at two-wheelers. The company is currently constructing a state-of-the-art Gigafactory in Tamil Nadu, dedicated to manufacturing electric car batteries. This facility, aimed for a 2024 launch, will be crucial for Ola's entry into the electric car market. It's a testament to Ola's commitment to driving innovation in the EV space and reducing India's dependence on imported battery technology.   
   
• PLI Scheme's Impact: The PLI scheme has played a pivotal role in enabling Ola Electric's rapid expansion. The financial incentives provided by the scheme have helped the company to invest in cutting-edge technology, scale up production, and create a robust supply chain. Ola's megafactories are a shining example of how PLI schemes can catalyze the growth of the EV sector in India.   
   
• Beyond Manufacturing: Ola Electric's impact extends beyond manufacturing. The company is actively involved in building charging infrastructure and promoting the adoption of EVs across India. Its ambitious plans to launch electric cars and expand its charging network are poised to further accelerate the transition towards electric mobility.   

Ola Electric's success story underscores the transformative power of PLI schemes in fostering a vibrant EV ecosystem in India. By combining innovation, government support, and a focus on sustainability, Ola Electric is driving India's EV revolution and paving the way for a cleaner and greener future.

Solar Energy: Harnessing the Sun's Power through High-Efficiency Modules

 

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The Ministry of New and Renewable Energy (MNRE) is at the forefront of India's solar revolution, implementing the Production Linked Incentive (PLI) Scheme for the National Programme on High-Efficiency Solar PV Modules. With a substantial outlay of ₹24,000 crore, this ambitious initiative is driving the growth of a domestic manufacturing ecosystem for high-efficiency solar PV modules, aiming to achieve gigawatt-scale production capacity and reduce import dependency.

• PLI Scheme for National Programme on High-Efficiency Solar PV Modules: With an outlay of ₹4,500 crores, this scheme incentivizes the manufacturing of high-efficiency solar PV modules in India. It aims to reduce import dependence and make solar power more affordable.
   
  • Aims and Objectives- The PLI scheme, divided into two tranches, focuses on building a robust manufacturing base for high-efficiency solar PV modules in India. The key objectives are:
     
    • Capacity Building: Establish gigawatt-scale manufacturing capacity for high-efficiency solar PV modules.
    • Technology Adoption: Encourage the adoption of cutting-edge technologies to enhance module performance.
    • Integrated Manufacturing: Promote the establishment of integrated plants for better quality control and competitiveness.
    • Local Sourcing: Develop a comprehensive ecosystem for sourcing local materials in solar manufacturing.
    • Employment Generation: Create job opportunities and fostertechnological self-sufficiency.
       
  • Tranche-I: Laying the Foundation- Under Tranche-I, with an outlay of ₹4,500 crore, the Indian Renewable Energy Development Agency Limited (IREDA) awarded Letters of Award to three successful bidders in November and December 2021. These bidders are set to establish 8,737 MW of fully integrated solar PV module manufacturing units.
     
  • Tranche-II: Scaling Up Manufacturing- Tranche-II, with a significantly larger outlay of ₹19,500 crore, aims to further scale up manufacturing capacity. The Solar Energy Corporation of India (SECI) issued Letters of Award to 11 bidders in April 2023, collectively committing to establish a massive 39,600 MW of fully or partially integrated solar PV module manufacturing facilities.
     
  • Challenges and Solutions:
     
    • Raw Material Availability: India relies heavily on imported polysilicon, a key raw material for solar cell manufacturing. The government could incentivize the development of domestic polysilicon production to reduce dependence on imports.
       
    • Land Acquisition: Large-scale solar manufacturing facilities require significant land area. Streamlining land acquisition processes and promoting the use of wasteland for solar projects can address thischallenge.
       

• Sustainability Impact:
   
  • Clean Energy Generation: Solar energy is a clean and renewable source of power, helping to reduce greenhouse gas emissions and mitigate climate change.
     
  • Job Creation: The solar industry is a major source of employment, with opportunities across manufacturing, installation, maintenance, and research.
     

• Benefits:
   
  • Gigawatt-Scale Production- The PLI scheme is projected to add a substantial 10 GW of integrated solar PV manufacturing capacity in India, as highlighted in a report by JMK Research & Analytics. This surge in domestic production will alleviate reliance on imports, potentially leading to a 30-40% reduction in solar module prices, making solar power more affordable and accessible.
     
  • Technological Leapfrog- The emphasis on high-efficiency modules encourages manufacturers to adopt cutting-edge technologies like bifacial modules and PERC cells. This technological leapfrog is not only boosting India's solar manufacturing prowess but also contributing to global advancements in solar efficiency.

• Integrated Giga Factories: The complex houses five giga factories dedicated to photovoltaic panels, fuel cell systems, green hydrogen, energy storage, and power electronics. This integrated approach not only streamlines production but also creates synergies across different renewable energy technologies.   
   
• Gigawatt-Scale Solar Manufacturing: RIL aims to establish a world-leading solar PV manufacturing capacity within the complex, with the goal of enabling at least 100 GW of solar energy by 2030.  The solar factory will be a first-of-its-kind "quartz-to-module" facility globally, covering the entire value chain from raw materials to finished modules.   
   
• Strategic Investments: RIL has strategically invested in ten global technology innovators with expertise across the new energy value chain. This includes partnerships with REC Solar, Suzhou Maxwell Technologies, and SC Solar for high-efficiency HJT cell and module production lines. These collaborations ensure that the complex leverages cutting-edge technology and global best practices.   
   
• PLI Success: RIL has secured PLI incentives under both rounds of the solar module PLI scheme, with a total allocation of USD 0.7 billion for 10 GW of manufacturing capacity. Additionally, RIL is the only company, apart from Greenko, to win incentives under both the green hydrogen and electrolyzer PLI schemes, further solidifying its position as a leader in the green energy space.
   
• Renewable Energy MoU with Gujarat: RIL has signed a Memorandum of Understanding (MoU) with the Gujarat government to invest ₹5 lakh crore in setting up 100 GW of renewable power capacity in the state. This commitment demonstrates RIL's long-term vision for renewable energy development in India.   
   
• Sustainability Impact: The Dhirubhai Ambani Green Energy Giga Complex is expected to have a significant positive impact on India's sustainability goals. It will not only contribute to reducing carbon emissions and promoting clean energy but also create thousands of green jobs, boosting the local economy.

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• PLI Scheme for National Green Hydrogen Mission (NGHM): This scheme, with an initial outlay of ₹19,744 crores, aims to promote the production of green hydrogen and the development of a comprehensive green hydrogen ecosystem. It offers incentives for electrolyzer manufacturing and green hydrogen projects, fostering innovation and scaling up production.
   
• Strategic Interventions for Green Hydrogen Transition (SIGHT): This program specifically focuses on incentivizing domestic electrolyzer manufacturing, a critical component for green hydrogen production. With an allocation of ₹4,440 crores by FY30, SIGHT provides incentives ranging from ₹4,440 per kilowatt in the first year to ₹1,480 per kW in the fifth year.
   
• Challenges and Solutions: Despite the significant potential, green hydrogen production faces challenges:
   
  • High Costs: Currently, green hydrogen production is more expensive than traditional methods using fossil fuels. To address this, the government is providing financial incentives through PLI schemes and exploring other measures like carbon pricing to make green hydrogen more competitive.
     
  • Technological Advancements: Further research and development are needed to improve the efficiency and reduce the cost of electrolyzers, a key component for green hydrogen production. The government is supporting research initiatives and promoting international collaborations to accelerate technological advancements.
     
• Sustainability Impact: Green hydrogen offers a multitude of environmental benefits:
   
  • Decarbonization: It can replace fossil fuels in various sectors, including transportation, industry, and power generation, reducing greenhouse gas emissions significantly.
     
  • Energy Storage: Green hydrogen can be stored and used as a fuel when renewable energy sources are not available, providing a reliable and sustainable energy solution.

Real-World Impact

The Adani Group, a leading Indian conglomerate, has pledged significant investments in green hydrogen as part of its ambitious $100 billion plan to transition its portfolio companies to clean energy sources. The group aims to leverage the PLI schemes to develop large-scale green hydrogen projects, contributing to India's goal of becoming a global hub for green hydrogen production and utilization.

The Road Ahead: Expanding the Green Horizon
 

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While EVs and solar energy are at the forefront of the PLI revolution, the government's vision extends to other renewable energy sectors:
 

• Wind Energy- India's wind energy sector, with an installed capacity exceeding 43.7 GW as of June 2023, is a major player in the global landscape. While a dedicated PLI scheme is yet to be launched, the government is committed to fostering growth in this sector. Its ambitious target of achieving 500 GW of renewable energy capacity by 2030 includes a significant share for wind power, and the recent announcement of viability gap funding-based bids for offshore wind energy projects signals a strong push towards harnessing India's vast offshore wind potential.
   
• Bioenergy- Biofuels in India, primarily ethanol and biodiesel, are gaining traction as a means to reduce dependence on fossil fuels and promote cleaner transportation. The National Biofuel Policy, 2018, sets an ambitious target of 20% ethanol blending in petrol by 2030, although challenges like limited production capacity need to be addressed. Some states, like Madhya Pradesh and Rajasthan, have implemented their own ethanol policies, offering subsidies to producers.
  
  While a dedicated PLI scheme for biofuels is yet to be launched at the national level, the introduction of such an incentive could significantly bolster the industry's growth, attracting investments and scaling up production. This, in turn, would contribute to achieving the ethanol blending target, reducing greenhouse gas emissions, and creating employment opportunities in the agricultural and bioenergy sectors. The expansion of biofuel production aligns with India's broader goals of sustainable development and energy security..