DRAGON’S EYE on LION’S PIE

Alright! It gave mostly new narratives to apprehend the ‘Solar’ relation between India and China.The then thought China’s shabby rural-oriented solar program in the 1990s today throws an incremental progression amid the western economic powers.

What can be more assertive to say that China is today global leader has divulged as the world’s largest renewable energy source. China’s move eclipsed the leadership of the U.S. solar industry, which fueled the technology with innovations and still holds many of the world’s patents and led the industry for more than three decades. Just how China accomplished that and ousted the global economies to slate its name as a “Solar Godfather”.

India and the Solar Modus-operandi

It’s not been long that the treading solar sector in India has shown iconic figures determining the country’s mammoth solar dream. To note, it’s worth mentioning the figures which inscribed a quadruple solar power generation capacity from 2,650 MW on 26 May 2014 to 10,000 MW on 10 March 2017. And “In the next 15 months, the installed solar power capacity would cross 20,000 MW. India could not have completely focused on Make in India in the last 3 years as being in the nascent stage; its solar power sector needed technological and financial boost from abroad to rapidly expand horizons. Now, the sector has reached certain maturity level that will lead the country into becoming self-reliant in meeting its Green Energy needs,” said Power Minister Piyush Goyal recently. India added 4 GW of solar power capacity in 2016, the highest of any year. The prologue of The International Solar Alliance (ISA), brainchild of Prime Minister Narendra Modi made a global paradigm-shift with congregating more than 20 countries and the aligning rate is unparalleled. The ISA – a collective voice of sunshine rich nations – entered into force once 15 countries ratify it after completing their respective domestic processes. It will help these countries to bargain their positions as a group to get low cost finance and technology to boost solar energy.

Indian Solar Flavor Tasted China

Today, India is poised to become the world’s third-largest solar market in the world next year, with analysts in agreement that the country will likely support 10 GW of growth over the coming few years. The Indian government’s decision to double imports of solar cells and modules from China over the last two years has turned out to be a lifeline for the Chinese solar industry, which was hit by low prices in the international market. To achieve its longer-term goal of 100 GW of solar PV capacity by 2022, India will have to bolster its domestic manufacturing capacity, which currently stands at around 6.5 GW for modules and 1.6 GW for cells according to recent data from MNRE. India imported solar and photovoltaic cells worth about USD 826 million from China during April-September period of 2016-17. India imported USD 2,344.56 million worth of cells last fi scal, out of which USD 1,960.26 million was from China constituting 83.61 per cent of the total and USD 134 million from Malaysia. Of the $2.34 billion worth of solar equipment brought into India over FY 201516, a massive $1.96 billion worth of solar cells and modules were produced in China, said Goyal. The volume of photovoltaic (PV) product imports to India is likely to keep growing. An official at Solar Energy Corporation of India (SECI) told that SECI is not planning more tenders with a domestic content requirement (DCR) category. Equally startling was the increase in investment compared to FY 2014-15, when solar imports amounted to $820.95 million. That year, Chinese imports were $603.34 million of that figure, which highlights that India’s reliance on cheap Chinese solar goods has increased in the past 12 months.

WTO Dispute and China’s Wake in India

Narendra Modi government tacitly admitted that domestic industry didn’t have the manufacturing capacity to transform India’s power sector. “India does not have enough manufacturing capacity currently for solar cells and modules to cover full demand. We are dependent on imports and China is our biggest supplier of solar cells and modules,” Nirmala Seetharaman. India’s crave for solar energy is actually a savior for Chinese firms, as the global spot price for solar panels fell to record levels across the world due to low demand. As soon as a solar developer or EPC player bags an order for solar power plant, first thing they do is dial a Chinese company for the panels to be shipped to India. According to a developer, the solar panels from China are far cheaper regardless of distance and logistics. There is a difference of Rs 5 to Rs 6 per panel–than what a manufacturer in the country would quote and it hardly take about 1-2 months for the consignment to be delivered. It is very much clear that because of the price difference there are still no takers for locally-made ones. Politically whatever the relation is in between India and China, but on the solar front China is undoubtedly playing evident role to help India achieve its solar dream. India has turned a big importer beginning 2009 after the global financial turmoil.

Last year China supported India’s stand on providing incentives and subsidies to domestic manufacturers of solar cells and panels, which was challenged by the US at the World Trade Organisation (WTO). As in several sectors, Chinese solar manufacturer and products have disrupted the global ecosystem for new and renewable energy markets. Before letting unrestricted solar energy exports from China, the Indian government will have to take calls on fiddly issues pointed out by domestic players. Especially, after losing legal dispute at World Trade Organisation (WTO), putting check on Chinese imports has become virtually impossible.

The Modi government recently announced to set up 50 solar parks with 500MW each and double the targeted solar power capacity to 40,000MW in less than three years is a tall order. However, this seems achievable only when all the stakeholders, both domestic and foreign come along. At the same time imported solar module and cells are equally important to achieve the goal. The move to create 40,000MW solar power capacities is expected to generate 64 billion units electricity and reduce 55 million tonnes of carbon dioxide which demonstrates India’s steady vow to green energy policies. Lack of scale, large unutilized capacities and very high financing costs owing to huge risk perception has tilted the scales against domestic solar power equipment producers. Many have shut down their shop or have become spares producers for their European counterparts. What has perhaps seriously dampened the spirit of “Make in India” companies was that this year’s budget that has shown any symptom to bring in any policy package to revive the industry and meet the exponentially rising domestic demand for equipment.

Potential of India’s power sector

Rampant load-shedding and low-quality electricity supply forces people to resort to private, local, costly and dirty solutions such as diesel generators, which pose both health and environmental concerns. On top of this, estimates suggest that by 2021-22, India’s electricity demand will be more than double the level in 2011-12. One of India’s major advantages today and going forward is that its renewable energy (RE) potential is vast and largely untapped. Recent estimates show that India’s solar potential is greater than 750 GW and its announced wind potential is 302 GW (actual could be higher than 1000 GW). India Energy Security Scenarios 2047 show a possibility of achieving a high of 410 GW of wind and 479 GW of solar PV by 2047. The potential of biomass and small hydro is also significant. Thus, renewable energy has the potential to anchor the development of India’s electricity sector.

It is estimated that during 13th Plan Period, about 62,800 circuit kilometers (ckm) of transmission lines, 15,000 MW of High Voltage Direct Current (HVDC) terminal capacity and 128,000 MVA of transformation capacity of the 400 kV and above voltage level transmission systems would be required. Accordingly, the plan estimates that total fund requirement for 13th Plan would be of the order of Rs. 260,000 crore as against Rs. 234,000 crore required in 12th plan period. This would consist of Rs. 160,000 crore for 400kV and above transmission system and about 100,000 crores for 220 kV and below systems most of which would be for state transmission systems.

A Mismatch of Investment and Export from India

The Indian solar energy sector is in the middle of unprecedented growth, fed by rapidly declining tariffs, improved technology and a global oversupply of photovoltaic (PV) panels and other material, mainly in China. Although a smaller market than the US, China or Japan, it is expanding the fastest among major nations. In April-December 2016 India exported just USD 59 million worth of PV modules and cells, down by 49% on the year. In December alone, exports dropped by 95%. Mercom says the UK was the largest importer of Indian PV products with a 31.87% share in the nine months. Italy, Belgium, the US and China are the other markets in top fi ve. From the current solar power generation capacity, India wants to produce as much as 100 GW by 2022—with a target of attracting a staggering $100 billion into the sector over the next six years. A fairly sizeable chunk of that goal was met, when Japan’s SoftBank, along with telecommunication major, Bharati Enterprises, and Taiwan’s electronic goods manufacturer, Foxconn, announced plans to invest $20 billion for setting up 20 GW of solar power in the country. Other fi rms, including Adani Power, Reliance Power also committed investments worth more billions for setting up solar power plants in India.  The circumstances of lowered capital costs, overseas slowdown, and proactive policy thrust have not been accompanied by strengthening India’s domestic manufacturing capacity. “In the absence of manufacturing, India will need to import $42 billion of solar equipment by 2030, corresponding to 100 GW of installed capacity,” warns a report by KPMG, an advisory fi rm.

Chinese Module Price Falls and Indian Solar Market Fouls

Cheaper Chinese imports have left local suppliers far-fetched. In December alone, with the increase in project installation works, import levels jumped by 74% over the same month of 2015. Reports cite that module prices for the fourth quarter of 2016 have already declined by as much as 10% since in the fi rst half. The fall in prices comes at the perfect time for the Indian solar market as the first three months of 2017 is expected to be the biggest quarter for fresh capacity addition of around 2 GW, according to Bridge to India. India’s growing appetite for solar power has proved to be a savior for Chinese firms, such as Trina Solar and Hanwha Q Cells, as the global spot price for solar panels fell to record levels across the world due to low demand.

The remarkable pace of adding capacity through imported material has hurt rickety local manufacturing firms. The Indian Solar Manufacturers’ Association has asked for safeguard and anti-dumping duties. Safeguard levies seek to protect the local industry against sudden import surges. Anti-dumping duties are imposed when overseas exporters are seen to be selling products below fair market value.

Delhi- Beijing Chemistry

On energy front, both China and India have made great advances in evolving renewable energy and energy efficiency. Although both are known for their high levels of green-house gas emissions, they are taking huge technological and economic steps to reduce their environmental impact.

There are copious opportunities exist for collaboration on technology development and deployment. For example, China has some of the world’s largest manufacturing plants for solar and wind energy, and is the leading investor in clean energy. India’s renewable energy target, if met, will be almost the same amount as the world’s entire installed solar power in 2014.

Solar power plants in China generated 66.2 billion kilowatt-hours of energy in 2016, amounting to 1% of the country’s total power generation. Currently non-fossil fuel sources account for 11% of total generated power. Although these figures may seem relatively underwhelming, China has exciting propositions for its future. It has announced plans to target 20% renewable energy use by 2030, with more than 110 gigawatts of capacity being developed over the next three years.

China’s Energy Agency has vowed to invest a further $360bn in renewable energy sources by 2020. The investment is expected to deal with local environmental issues such as smog, at the same time create an estimated 13 million jobs in the process. With the cost of solar technologies falling, and China increasingly investing in photovoltaic technology, the future is looking bright for the Chinese Solar Industry. On the other hand for Indian there are huge opportunities in its future if it is able to successfully integrate and engage with solar technology. The country is facing rising costs of fossil-fuel power production, increasing environmental concerns over the same, and huge power deficits as the current energy supply struggles to meet rocketing demand. Both countries are in the process of reducing fossil fuel subsidies as well. China has begun an internal review and identified nine subsidies to reform. Going forward, it can learn from India’s experiences of deregulating diesel and kerosene prices and operationalizing a coal cess (a form of tax), with some of the revenue raised going towards a clean energy fund. The decisions these two countries make in the next few years will be enormously consequential for the planet and for global prosperity.

Both China and India are big developing countries, which have maintained rapid economic growth and become important engines of world economy. The economic structures of the two countries are more complementary than competitive. In the context of the sluggish demand and weak growth of the world economy, the bilateral trade continued to grow in 2016. The ambitious plans and commitments made by China and India will put pressure on other nations around the world to do the same. It is only through this global commitment that we can ensure the Paris agreement is adhered to, producing a sustainable relationship between our development and the planet.