Could The Trump Presidency Cast A Shadow On Indian Solar Module Makers?

Could The Trump Presidency Cast A Shadow On Indian Solar Module Makers?

The re-election of Donald Trump as the new President of the United States (US) may alter the market dynamics for Indian solar module manufacturers. Speculations are now rife over the likely fate of the Indian solar industry with Trump’s re-election.

Those who have business interests in the US solar market are likely to get affected by any changes in the tariff changes or any alterations of the Inflation Reduction Act (IRA), brought forth by the Joe Biden administration to boost clean energy investments in the country.

For many Indian solar module makers, the US market has been one of the biggest and most preferred export destinations. According to data from the Ministry of New and Renewable Energy (MNRE), Indian solar module makers exported around 97% of their total exported panels to the US alone in 2022-23. The data said that while India exported solar modules to 120 countries, the US remained its hotspot.

US remains the most preferred export market for Indian solar module makers. Source: MNRE

The continuation of higher tariffs for Chinese solar cell and module makers and even an escalation of the same during the Joe Biden administration indicates the bipartisan consensus in the US on allowing cheap Chinese solar cells and solar modules in the US. This opened new opportunities for the Indian solar module makers to cash in and export to the US.

However, the interests of many Indian solar module makers are not limited to exports alone. Companies like Waaree Energies, Vikram Solar and others have publicly announced opening their solar module manufacturing units in the US to benefit from the tax credit incentives under the Inflation Reduction Act (IRA), with many more waiting in the wings.

Manipulation of IRA

While retracting the IRA would be a complex task, aligning it to benefit more American solar module makers can also affect the future manufacturing plans of the Indian solar module makers. Keep in mind that even in the US, close to 50% of the manufacturing plans under the IRA in solar have been announced by Chinese-owned firms. Add to those Indian firms, and Trump might not see a huge downside in targeting foreign-owned firms, as unlikely as it might seem to the normal person.

Add to that two key factors, namely, the widespread adoption of solar by large ‘blue’ or democrat states like New York or California, and the concentration of much of the manufacturing initiatives in ‘blue’ states, and Trump will find it very difficult to pull back now, Finally, his new and powerful friend, Elon Musk himself backs solar and storage especially, with strong interests in the space. That would indicate the odds remain in favour of business as usual.

The Trump administration has also tried to impose higher tariffs against the imports of Aluminum and Steel from India.  On the other hand, the US and India under the Biden administration have also signed several pacts to work together to boost clean energy investments in the two countries. It will be interesting to watch if the earlier commitments, pacts and legislations continue to bolster the growth of the industry if it will see a setback with any new change of stance under the new regime.

Conclusion

Drastic action would be highly surprising, as one would expect in any large government manned by a strong executive and bureaucracy. Perhaps the most compelling argument that will check trump’s hand is the drop in prices since he was last president in 2020. Solar is today an even more competitive option to fossil fuels, making an attack on costs well nigh impossible. However, the risk of wide-ranging tariff increases that impact Indian imports to the US as well is real.

If Trump continues to be a climate skeptic and indifferent to solar, then we might actually see some cooling off in terms of the pace of solar additions. If anything, wind, especially offshore wind remains more at risk considering its higher costs and mixed performance so far.  But depending on his next moves, and as the clock ticks by on IRA incentives and their deadlines, some, if not many firms might not move ahead on plans if they haven’t progressed far enough already. Especially Chinese firms that anticipate troubles or uncertainty down the road at a time when their own financials are stretched due to a poor year and market conditions. Ironically, that might actually provide some more space for the few Indian players to make the most of the opportunity and make it locally in the US.