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Solar Energy Protectionism – Italy joins India,Canada in formulating Domestic Content Requirements

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Solar Energy has seen a massive boom in 2010 growing by more than 150% as falling solar product prices and increasing subsidies by governments looking to prevent climate change,peak oil and reduce pollution.However most of the solar panel production has become concentrated in China and Taiwan with almost 60% of the world’s solar panel production being done in those regions.The lower costs of labor,cheap cost of capital and good infrastructure has made this possible.However the massive amounts of imports of green products has raised the hackles in developed countries.France had suddenly cut subsidies to the solar power industry citing massive imports of cheap solar panels from China.Note this argument has some basis as European solar module manufacturers have seen huge losses and are shifting factories from Europe to Asia.

Ontario,India also have domestic content requirements

Ontario Canada has a comprehensive solar subsidy policy which mandate that a large percentage of solar components be manufactured in Ontario in order to receive the Feed in Tariffs.The province has managed to attract a lot of manufacturing investment as well due to its local content requirements which requires around 50-60% locally produced parts.This has made Solar Module companies like Silfab and Canadian Solar to set up module plants while companeis like Enphase,Schneider and SMA are setting up inverter plants in the province.Note the local content requirements for Renewable Energy Equipment are nothing new with China implementing a 70% requirement in 2005 for Wind Turbines.Japan which is also a large manufacturer of solar panels with major Japanese solar companies like Sharp,Kyocera has taken Canada to the WTO citing improper competitive practises.India which has one of the largest potential in solar energy installation too has promulgated a law that requires domestic content requirements.Solar Modules must be produced in India to gain FIT under the JNNSM.This law is expected to become stricter with solar cells also to be produced in the country in the future.This has drawn howls of protest from American officials who too tried domestic content in their subsidies under the Stimulus Act.

Italy joins the Solar Energy Protectionism Bandwagon

Italy has joined the bandwagon as well with the latest version of  the solar subsidy law Conto Energia 4 giving additional 5-10% incentives for solar components manufactured in the European Union.Note it won’t benefit Italy too much as most of the manufacturing in located in Germany,Spain and cheap eastern European countries.What it is going to do is cause more disruption to the Italain Solar Market as China may take Italy to the WTO.Not that China is any better as it implicitly supports domestic companies as most of the government companies award contracts only to Chinese companies without being explicit about it.In fact the growth of the Chinese Wind Power Industry was due to the domestic content requirements law implemented in  2007.


Abhishek Shah

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