Published on August 24th, 2012 | by Andrew5
First Solar Launches India Expansion Plan as Trade Tensions Escalate
India’s massive, well-publicized electric grid failure is adding fuel to the country’s drive to develop renewable power sources. That spells opportunity for solar power market participants such as global thin-film solar PV market leader First Solar, which Wednesday (Aug. 22) announced plans to build solar power farms in India.
The Tempe, Arizona-based company is aiming to capture a 20% share of India’s solar PV market by expanding its role as an equipment supplier, Sujoy Ghosh, the new leader of First Solar’s India subsidiary, told Bloomberg News. First Solar is looking to commercial and industrial sector customers as the main drivers of demand, he added.
First Solar’s expansion plans are set against an increasingly worldwide backdrop of rising international trade tensions regarding government support programs for solar and renewable energy manufacturing, imports, and exports.
Strategic Change for First Solar
First Solar management sees building solar power plants and selling the clean, renewable electricity they produce as a better means of producing profit than competing with Chinese silicon and thin-film solar PV producers, which benefit from direct, export-oriented government subsidies, according to Bloomberg’s report.
At an estimated 30 GW, the Indian market for back-up power is huge, Bloomberg noted, citing India’s Ministry of New and Renewable Energy (MNRE). The need for back-up power came into stark light with the occurrence of the world’s largest blackout this month, which left some 600 million Indian residents and businesses across 20 states without electrical power.
“Our focus really is to create a new stream of demand in the market from industrial and commercial businesses,” Bloomber quoted Ghosh. “That would require us to do a lot of the development” of projects, including building, arranging financing and supplying modules.”
Indian industry and commercial businesses have relied on diesel power generators to produce power in the event of power outages and shortages. That’s been changing fast with the 2010 launch of the Indian government’s Jawaharlal Nehru National Solar Mission (JNNSM), along with ongoing drops in the cost of solar and wind power systems. Solar PV panel prices fell 47% this past year in India, according to Bloomberg’s report.
India’s National Solar Mission
The JNNSM program includes a solar power feed-in tariff (FiT) scheme that requires utilities to pay above-market rates for solar power, along with solar-specific Renewable Purchase Obligations (RPOs), and a complementary Renewable Energy Certificate (REC) market. The program also includes reductions in customs duty and excise exemptions on imports for the initial stages of solar power project development.
Renewable energy investment in India grew the fastest of any national market in the world, according to the United Nations Environment Program’s (UNEP) “Global Trends in Renewable Energy Investment 2012” report. Investors put some $12.3 billion to work in India’s renewable energy market in 2011, a 62% year-over-year increase.
The Indian government in June raised its 2012 target for new renewable power capacity to 4,125 MW, the highest annual goal that’s been set so far. New wind power capacity is expected to contribute 2,500 MW, followed by solar (800 MW), small hydro (350 MW), and waste-to-power (20 MW), according to a Panchabuta-Renewable Energy & Cleantech in India report.
Launching of the JNNSM solar power mission has spurred rapid growth in solar and renewable power. India’s installed solar power project capacity totaled 1,040 MW as of mid-August, according to the latest publicly announced statistics from MNRE. JNNSM’s longer term goal is to have 20,000 MW of solar power capacity up and running in India by 2022.
Increasingly Politicized Solar Trade
Rapid growth in international trade in solar power technology and products has become increasingly politicized in the past year, however. Governments around the world have enacted a wide variety of incentive and subsidy programs as they look to solar and renewable energy as economic growth engines that come with substantial environmental and social benefits. Some, industry participants and supporters in various countries assert, clearly violate internationally agreed-upon World Trade Organizations (WTO) rules, and they’re seeking redress through national WTO legal processes.
That’s the situation in India, whose renewable energy sector has rapidly grown to be the fourth largest in the world. India recently enacted a regulation that solar PV panels used in JNNSM-financed projects be manufactured in India. US solar industry participants assert that the regulation is a clear violation of WTO rules, and they’ve been urging the US government to take legal action.
More recently, India’s Centre for Science and Technology (CSE) publicly denounced US solar PV manufacturers, claiming that they’re ruining India’s domestic solar PV manufacturing sector by taking advantage of the a loophole in JNNSM rules via the UN’s Fast Start Finance Fund.
Indian solar PV manufacturers accounting for some 80% of India’s total manufacturing capacity are in a “forced closure and debt restructuring” because Indian project developers are placing orders with their US-based counterparts, according to CSE, which is analyzing the results of the first phase of the national solar mission.
JNNSM’s domestically manufactured solar panel requirement only applies to crystalline silicon solar PV cells and panels. Excluded are thin-film solar PV cells and panels, the type for which First Solar has forged a lowest-cost producer position.
The US Export-Import Bank (Ex-Im Bank) Overseas Private Investment Corp. (OPIC) have been exploiting this loophole by offering Indian solar power project developers long-term loans with interest rates as low as 3% if they purchase thin-film panels from US manufacturers, CSE asserts. Indian banks, by comparison, are offering project developers long-term loans at interest rates of around 14%, the CSE says. This isn’t an apples-to-apples comparison, however. The 14% loans being offered by Indian banks are for Indian rupee loans whereas the Ex-Im Bank and OPIC loans are based in US dollars.
The US Ex-Im Bank and OPIC have provided loans totaling some $248.4 million for grid-connected solar PV projects in India, according to the US Dept. of State’s report on US Fast Start climate change mitigation financing between 2010 and 2011.