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Jun 2, 2014  | Tobias Engelmeier  | 0 Comments

Rough waters ahead for Indian solar market?

Antidumping duties on imported PV cells and modules threaten to torpedo the Indian solar market

Antidumping duties threaten to torpedo the Indian solar market at a time when the new BJP government led by Narendra Modi has made clear its intention to grow the solar sector in the country. The duties are an ill-conceived and ill-timed vestige of the previous government and serve a very small section of the Indian solar industry at the detriment of the majority of the rest, as well as the power consumers and the taxpayers.

–As a result of the duties, solar will become more expensive (by at least 70 paisa per kilowatt-hour) and up to 1GW of existing projects could be scrapped. This will set the solar market back by two years.

–A small group of Indian industry players will win in the short term. The majority of Indian industry players (including manufacturers) will lose. In the long term, everyone will lose.

–India should focus on making solar cheaper, not more expensive. Supporting domestic manufacturing is possible under this premise, e.g., by extending cheap loans.

The Ministry of Commerce in India has proposed antidumping duties of between $0.11-$0.81 on cells/modules imported from China, United States, Malaysia, and Taiwan (which account for about 80% of modules used in Indian projects). The decision is based on a very narrow, two-year-old data set and now threatens to affect the entire industry for years to come. In addition, the proposed duties would be very detrimental to India’s larger energy, investment, development, and growth story.

The duties will result in an increase in the cost of solar power in India of at least 10%, or 70 paisa per kilowatt-hour. Just for the planned new government-incentivized projects of 7.5GW by 2017, this would cost the Indian power consumer or taxpayer around INR 3,581 cr (or about $600 million).

But more likely, antidumping duties would badly shake investor confidence and bring the market to a halt, setting it back by at least two years. Up to 1GW of solar projects could be scrapped. Project developers will be forced to reconsider their plans and commitment to the Indian market.

International investors and banks, which are just gaining cautious new confidence in the Indian market, will be put off as a result. The duties will even harm the majority of domestic module manufacturers, which are almost entirely dependent on cell imports, mainly from China. The panel suppliers will find it very difficult to sell in India. At the same time, they (like Indian cell manufacturers) may also be exposed to retaliatory measures in export markets.

The negative sentiment will affect the entire solar ecosystem in India, including EPC contractors, installers, and thousands of other entrepreneurs who sell solar products and services across the country. In addition to harming the solar industry, the antidumping duties will have a broader negative effect in the country. More expensive solar will contribute less to ameliorating India’s power deficit and energy import woes. Millions of unelectrified households will not get access to a solar solution.

The duties will arguably give a short-term boost to the three-to-five Indian solar cell manufacturers whose sales in India will increase. However, in the long term, they will also be hit by a decline in demand for solar.

We doubt that a one-off measure such as antidumping duties would entice investors to set up more manufacturing capacity in India. What would really drive investment into manufacturing in India is the creation of a vibrant, large solar market and long-term measures to boost competitiveness of Indian manufacturing: for example, a consistent and transparent policy framework, investment in R&D and engineering skills development, or the creation of special investment zones with fast-track project clearances. India needs to focus on making solar cheaper, not more expensive.

At this point, the antidumping duties can only be stopped by a strong political intervention in this narrow, quasilegal process, in the name of the larger public good.

This post is an edited version of an article that originally appeared on the Bridge to India blog. Used with permission. The author, Tobias Engelmeier, is the Director and Cofounder of Bridge to India, a strategic consulting, market intelligence, and project development company that focuses on the Indian cleantech market. For more information about Bridge to India and its offerings as well as Tobias and his team’s background and interests, visit www.bridgetoindia.com; also check out their downstream consumer-oriented site, http://indiasolarhomes.com


 
Sources: Bridge to India

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