Will India Put U.S. Solar Exports at Stake? - Analyst Blog

The world's largest democracy, India, has decided to impose an anti-dumping duty on solar modules imported from the U.S., China, Malaysia and Taiwan. The primary objective is to support domestic solar cell manufacturers and create a competitive price base for Indian producers. Currently, the majority of India's solar cell installations are imported.

India's Solar Landscape

Being a fast-developing country, India's need for energy is steadily on the rise. A large part of the country still does not have electricity but have adequate sunlight. So, the government of India had launched a scheme on Jan 11, 2010, with an objective to bring online 20,000 MW of solar power by 2022.

The scheme also aimed at reducing the cost of solar power generation in the country through long-term planning, aggressive R&D and focus on domestic materials and components to meet the target.

India's Solar Cell Market

India, which has historically relied on dirty coal to generate electricity, has been a relatively new entrant in the alternative path. Initially, there were state-run production units and then a few private players cropped up to produce solar panels to meet domestic demand.

However, these players could barely compete in scale with their far more entrenched international counterparts. And, as far as technology is concerned, the foreign manufacturers scored over Indian solar module makers in conversion rates.   

Finally, the selling price of the solar cells played a major role, with Indian solar producers finding it difficult to match the prices offered by foreign exporters. Let's not forget that most of these homegrown players are presently operating at a much lower capacity level.

Need for Anti-Dumping Duty

With odds sharply against them, Indian solar cell producers had appealed to the powers-that-be against the flooding of imported solar cells in the domestic market. They added that the exporting countries also get due support from their respective governments and in fact supply products at a price cheaper than the cost of producing them.

After a detailed investigation which started in 2011, the authorities came to the decision of imposing anti-dumping duty on solar cell imports. The duties to be levied will range from 11 cents to 81 cents per watt.

And here India is doing nothing different from what the U.S. or the EU has done to grow and support domestic manufacturing of renewable energy. These regions had imposed anti-dumping tariffs on Chinese solar cell products to contain their wide proliferation and support the solar industry at home.

Indian Imports and U.S. Presence

Per a media report, India imported solar cells worth $1.03 billion in 2013 and the market for solar products is expected to expand further going forward. As per industry pundits, the Indian solar cell market is expected to reach 2,000 megawatt MW by the end of this year.

As a result, India is a favorite destination for the U.S. solar cell exporters. Last year, India held the second spot after Japan in total solar cell imports from the U.S. with the import touching nearly $119 million.

Indian presently has no alternative but to depend on solar cell imports as domestic production is woefully short of both requirements and targets.  The global clean energy communications and consulting firm Mercom Capital Group said that the imposition of new duties might lower the total solar installation to 1,000 MW in 2014. So, the duty levy can practically dampen the solar market in India.

Per a report issued by the Indian Ministry of New and Renewable Energy, a total of 148 grid-connected solar power plants with combined capacity of 551 MW have been commissioned under Phase I of the National Solar Mission. Out of these, 77 projects with 391 MW of capacity used foreign solar cells or modules.

Ongoing Difference of Opinion

The U.S. government to safeguard the interest of domestic exporters had requested the World Trade Organization (WTO) to look into India's solar cell program. The appeal contended that the Indian policy appears to discriminate against U.S. solar producers. The policy required Indian solar energy producers to largely use solar cells and modules manufactured in the country. To that end, the Indian government is offering subsidies to those developers using domestic equipment instead of imported modules.  
This U.S. challenge against Indian solar policies was waged even before the Indian government decided on levying anti-dumping duties. The story has been making the rounds ever since last year when the U.S. consulted the WTO on India's "buy local" initiatives.   

What's at Stake for U.S. Solar Players?

Even if the duties are levied by the Indian government, the amount will be the lowest for U.S. exporters compared to other countries. So, U.S. solar module makers like First Solar Inc. FSLR eyeing the expanding Indian solar market will be spared to a large extent.

The Indian solar market is undoubtedly getting bigger and the concerns echoed by the U.S. are only a reflection of that. The global market for solar is expanding in tandem, and any loss from the Indian markets will be amply compensated by demand from Japan and other Asia-Pacific nations. The domestic market in the U.S. is also going from strength to strength, particularly in residential solar installations.  

Nearly 70% of the solar power projects in India were built with imported Chinese solar cells. So the impact will be much more on the Chinese exporters. India plans to levy higher duties on Chinese imports -- 81 cents per watt compared to 48 cents per watt for U.S. imports. This will affect Chinese producers like Yingli Green Energy Holding Co. Ltd. YGE, Trina Solar Ltd. TSL and JinkoSolar Holding Co., Ltd. JKS.

The latest political changes in India, and the new government's industry-friendly outlook and focus on clean energy generation might bring in some downward revision in duties. This might ease some of the tensions brewing between two of the world's largest democracies and further foster bi-lateral trade relations between the two countries.

To Conclude

Solar module demand in India is much stronger than its domestic production. Both production capacity and the quality of the solar cells produced will have to improve tremendously to meet global standards. India's target of bringing 20,000 MW of solar power by 2022 is a laudable goal but difficult to achieve without falling back on imports.

That being said, it is very important to expand renewable manufacturing infrastructure worldwide to resist the climate crisis. Moreover, the gradual widening of the solar markets will bode well for all global players and instill confidence in the industry over the long term.