Leo Franco
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We are all aware of the hold China has on global PV production, but now the Indian government is trying muscle in on this territory. India intends to build a solar power capacity of 100 GW by 2022. To provide some comparison, their total electricity consumption in 2017-18 was 164 GW and is expected to be 235 GW by 2021-22. To achieve this they must build more than 4 times their current capacity for the next 4 years.
In accordance with this goal the Indian government is continuing plans to aid domestic solar panel manufacturers to contest their more established Chinese counterparts. Currently 90% of all solar cells and panels are imported from China. The question is, will these actions be successful, or simply fall by the wayside like previous attempts?
Situation
On Jan 30th, the Solar Energy Corporation of India, a government body, issued a tender for 3 GW of solar capacity. The accepted bid would also have to provide new PV manufacturing facilities capable of producing 1.5 GW of new panels. This action was supported by India’s central cabinet, when on Feb 5th they initiated new legislation requiring all state-owned firms to purchase 12 GW of home-made panels over the next 4 years. These both come off the back of a 25% safeguard duty applied to all imported solar modules.
Analysis
The problem is that China is already a huge player in this industry and currently produces modules of greater performance on larger economies of scale. Though this legislation is welcome news for Indian manufacturers ‘[it] fails to provide the much needed immediate support to the sector’ as stated by Sunil Rathi, director of Mumbai-based PV manufacturer Waaree Energies. Legislation will provide relief for the next four years but it is likely to take 1 year to get off the ground, by which time these Indian manufacturers could already be finished.
What’s more, there is some uncertainty as to whether these actions will violate World Trade Organisation (WTO) regulations. In 2016 the US already filed a complaint claiming that India had been favouring local manufacturers against WTO rules. It is highly possible that a similar problem may arise again. The Indian government, however, claims that this is not the case, and points out that the WTO allows for preferential treatment of locally-made products by government firms.
This is the second time the Indian government is trying a tender of this style. In May last year a more ambitious tender was proposed for a 10 GW installation alongside 5 GW of production capacity. After several deadline extensions it had to be abandoned due to a lack of interest from developers. Sadly it seems that this could be the fate of this new tender. Amit Kumar, partner at PwC says ‘without long-term clarity of viability of solar manufacturing, nobody is going to put up that much capacity’.
Another twist in this tale, which will certainly help shift the balance back towards Indian manufacturers, is the reduction of support shown by China’s government for its own PV manufacturers. The Chinese domestic market for solar panels has lately seen a downturn and in response to this the government has put a stop to any allocation of quotas to new projects. This move will also help bring down the 100 billion yuan (13 billion euros) deficit for the state-run renewable energy fund but more importantly will give a vital opportunity for competition in the Indian PV market.
Outlook
The goal of the Indian government is to reach 100 GW of installed solar capacity by 2022. They also intend to push their way into the PV production market, using these capacity goals as a manufacturing springboard. India already has 5 of the 10 largest solar parks currently under construction and with such ambitions this looks set to increase in the future. We will have to wait and see if this new legislation will help them play a similar role on the production side.
About the author:
Leo Franco
Solar Energy Specialist
"What does it mean to be a member of the energy transition? For me it means an opportunity to rethink the way we do things…" says Leo Franco who likes to write about doing this differently in the energy transition.
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