India needs to support domestic manufacturers in order to achieve its solar energy targets

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  • India plans to achieve 100 gigawatts of solar energy capacity by 2022.
  • Imports from China, Taiwan and Malaysia comprise more than 80% of solar panels and cells used by power producers in India.
  • India needs to support domestic manufacturers of solar cells and modules.
As Prime Minister Modi inaugurated the International Solar Alliance’s first summit on March 11th, he reiterated his aim to make India a solar energy powerhouse. With 33 countries in attendance, Modi also unveiled a credit line of $1.4bn for 27 solar power projects in around 15 countries.

Modi was instrumental in forming the alliance. The ISA — which now boasts the membership of 121 countries located between the northern and southern tropics — will be headquartered in the Indian city of Gurgaon, on the outskirts of Delhi. The overall goal of the alliance is to create a 1000 gigawatts of solar energy capacity by 2030 by mobilising $1trn worth of investments.

However, India’s leadership hinges on the government’s target to achieve a domestic renewable energy capacity of 175 gigawatts by 2022, 100 gigawatts of which is earmarked from the solar energy sector.

But can it meet this target?

India has made significant progress so far by facilitating the construction of a number of plants, rooftop systems and solar parks across the country. It has secured financing from multilateral institutions like the World Bank and introduced regulations for the procurement of solar power through auctions.

According to the Central Electricity Authority, its total renewable energy generation stood at 62.8 gigawatts at the end of January 2018. Solar energy generation counted for 17.1 gigawatts.

This represents a near doubling in total solar production since the end of 2016.

However, there is a catch. This growth has been enabled by the imports of cells and panels from countries like China.

India does not have the domestic manufacturing capacity to meet its solar targets.

Imports from China, Taiwan and Malaysia comprise more than 80% of solar panels and cells used by power producers in India. Domestic manufacturers don’t have the requisite scale, technologies and supply chain efficiencies to compete with their east Asian competitors and have hence clamoured for government intervention.

A looming 70% anti-dumping duty on solar equipment made in these countries threatens to drive prices up for producers and distribution companies, scare foreign investors and lead to project delays or cancellations.

The end result? India won’t be able to meet its solar energy target.

It is therefore critical for India to support domestic manufacturers of solar cells and modules.

In December 2017, the Ministry of Renewable Energy released a concept note with a list of steps to boost the competitiveness of local manufacturers. These included a 30% subsidy for the construction or expansion of manufacturing facilities, cheap financing, customs exemptions for heavy machinery and a local sourcing requirement scheme in government projects.

The government will have to go further if it wants to reduce its dependence on solar cell imports. The proposals outlined mainly entail the subsidising of local production along with discrimination against foreign manufacturers. In addition to improving transmission infrastructure, the government needs to invest in industrial training programmes and support innovation by providing domestic manufacturers with research and development (R&D) incentives. It can also subsidise the production of upstream raw materials like polysicons and wafers that are necessary for the manufacturing of cells and panels.

The International Solar Alliance can help in this regard. It will enable the sharing of technologies between member countries and plug resource gaps. India must therefore leverage its leadership of the group to its advantage.
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