India Decides Against Solar Import Duties, Continues Renewables Push

10 September 2014

The Indian Ministry of Finance confirmed in late August that it would not be imposing anti-dumping duties – meant to counter instances where goods are sold abroad at prices below their normal value – on imports of solar energy products from the US, China, Taiwan, and Malaysia.

The highly-awaited decision was welcomed by many Indian solar power developers, who had expressed concern that levying such duties would increase the cost of importing cells and other key products needed to make solar panels, while also raising consumer costs of solar energy.

The eleventh-hour announcement came despite a recommendation earlier this year from the Ministry of Commerce under the previous administration to move ahead with the duties after claiming to have found evidence of such dumping. (See Bridges Weekly, 22 May 2014)

The duties were reportedly set to range from 11 to 81 cents per watt on solar cells, modules, panels, and thin films; however, calculations over how much this would have impacted solar energy prices have varied substantially. Indian solar cell makers, which had favoured the duties, said that these would have had little effect on solar energy prices, while domestic power developers countered that energy prices could actually increase two-fold.

Clean energy investment boom?

Increasing India’s share of renewables in the country’s energy mix is one of the key goals of the recently-elected Modi government. The new Prime Minister pledged in May to scale-up the country’s solar capacity to the point where every household across the country would be able to run at least one light bulb from the renewable energy source.

The Indian leader has also been credited with much of the success in setting up a solar scheme in Gujarat in 2009 during his time as the western state’s chief minister.

Solar energy currently makes up just one percent of India’s total power generation. In a bid to boost the renewable energy source, India set up the Jawaharlal Nehru National Solar Mission (NSM) in 2010, with the goal of deploying 20 gigawatts’ (GW) worth of solar generating capacity by 2022, which would in turn be connected to the country’s energy grid. More recently, the Modi government has reportedly asked for this target to be increased to as much as 100GW by 2027.

To that end, the current government has been implementing various policies aimed at ramping up solar energy production. For instance, New Delhi recently announced that it will be providing cheap grants and loans to establish solar power “parks” nationwide, which would together create up to 20 GW of energy. The scheme still requires approval by the Indian cabinet, expected later this month.

The reasons cited by officials and experts alike for increasing India’s renewable energy capacity are manifold.

For one, India relies on coal – much of it imported – for 60 percent of its energy generation, which analysts have blamed for contributing to the country’s trade deficit. Meanwhile, the sub-continent’s power demand continues to increase, with approximately one-third of its 1.2 billion population still lacking access to electricity.

To date, the South Asian economy has solar projects that can produce approximately 2.5 GW of power, with another 2.2 GW expected through state and central government initiatives currently underway, according to the Associated Chambers of Commerce and Industry of India, which had been critical of the proposed duties.

Analysts now predict that the country’s solar potential may be substantially higher than the 20 GW goal set for 2022. A recent joint report by Tata Power Solar and Bridge to India has predicted that this potential could reach up to 110-144 GW in the next decade depending on the types of projects involved.

Such prospects have drawn in various new developers into the Indian solar market, keen to get involved in the rapidly growing field. For example, the US-based company First Solar, one of the world’s top producers of solar modules, made headlines last month when it confirmed that it would be building a 4.5 GW project in the state of Telangana. Built across two sites, the project would be in operation by May 2015, expected to power on average over 92,000 homes in the region.

The process of adding new solar projects has not been without its own share of hurdles, however.

Plans for a 4 GW solar power plant in the state of Rajasthan stalled last month, according to the Wall Street Journal, after the newly-elected local government said the land involved should be used exclusively for salt production while other officials contended the plans would threaten the ecology of the area. Should the project move forward, however, the plant would be the world’s largest such station.

Meanwhile, the National Solar Mission continues to face international scrutiny, four years after its launch. Specifically, the NSM’s local content provision has come under challenge by the US at the WTO, with Washington claiming that the requirement for new Indian solar projects to source at least half of their inputs from domestic producers is in breach of international trade rules.

The trade dispute is now set to be reviewed by an expert panel, and is likely to spark renewed questions around how best to design sustainable energy expansion policies that will not run afoul of WTO rules. (See Bridges Weekly, 28 May 2014)

ICTSD reporting; “India Drops Plan to Impose Antidumping Tariffs on Solar Cells,” WALL STREET JOURNAL, 25 August 2014; “India Dumping Duties Risk Choking Modi’s Solar Revolution,” BLOOMBERG, 11 June 2014; “India's Solar Power Plans Stalled,” THE WALL STREET JOURNAL, 21 August 2014; “First Solar to develop 45 MW of solar farms in Telangana,” THE HINDU BUSINESSLINE, 5 August 2014; “India Plans Solar Parks to Host Up to 20 Gigawatts,” BLOOMBERG, 4 August 2014; “How a Solar Crisis was Averted by Three Ministers,” NDTV, 24 August 2014.

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