India- China Fallout to Drive Radical Change in India’s Renewable Energy Sector

While India has become one of the largest markets in the world in terms of solar and wind energy installations, the manufacturing industry has not really kept up. The Chinese manufacturers through their state-driven capitalism have managed to bankrupt most Indian solar companies like others around the world. Through massive subsidies and state support, the Chinese companies have built huge capacities and low costs resulting in other players not being able to compete with the Chinese who sell more than 80% of the global solar equipment.

While countries like USA, India, and Europe have tried to stop the Chinese onslaught through duties, levies and even price controls, the Chinese nations have easily managed to circumvent these low-speed bureaucratic techniques through innovative strategies such as using bases in friendly SE Asian countries as well as products which don’t fall under the ambit of anti-dumping duties (eg. bifacial solar modules in the USA). The Chinese companies have also been helped by strong domestic developer lobbies who love the cheap Chinese products to increase their margins and profits. India too has tried in the past to boost its domestic industry through DCR and other measures but it has not come too far given the overwhelming strength and scale of the Chinese industry.

Also, read Long-running Solar War Between China and USA continues unabated

While the Indian government under the NDA leadership has introduced stronger measures to protect and boost the domestic industry through some measures, the local industry is still struggling through surviving. But now the Chinese India border fight in which 20 Indian soldiers were killed has changed the situation with the India-Chinese relations now crossing a red line. The incentives to boost the local industry have been turbocharged as Indian ministers are openly calling for stopping all Chinese activity in the country. Already digital Chinese companies have received a huge setback. The Indian government has banned 59 Chinese apps and is also looking to come down heavily on other Chinese imports in other industries.

The Indian power and renewable energy Mr. RK Singh has already called for strict measures to boost local manufacturing. It is being proposed that once the anti-dumping duty is removed, import duty on solar panels will be imposed. This will not only affect the imports of Chinese panels from China but also other countries such as Vietnam, Malaysia, and the Philippines which had gained from the anti-dumping duty.  The import duty is expected to be progressively increased from 20% in August to 40% next year. This will give a strong boost to the domestic industry as the costs of the Chinese panels which were nearly equal to that of the Indian solar panels with the anti-dumping duty will become much costlier next year if the 40% duty is imposed. Besides solar cells and panels, the Indian government is also thinking of imposing duties on solar inverters a large portion of which is imported from China. The RE industry is expected to change dramatically over the course of the next year with the Indian companies becoming more and more dominant even in the manufacturing part of the supply chain. The major change will be in prices of solar energy which might slightly increase in the near term as the Indian industry starts to increase its market share and the imports of the cheap Chinese products comes down.  Over the long term, it is expected that strong domestic competition will ensure that the prices of solar energy remain equal to that in the other parts of the world.