The Delhi Solar Summit: Posturing Without Substance

The International Solar Alliance (ISA) that meet in Delhi recently, is envisaged as a grand inter-governmental coalition of sun-rich nations, i.e. countries that lie fully or partially between the Tropics of Cancer and Capricorn. The objective of the ISA is to facilitate members to ‘collectively address key challenges to scaling up solar energy’. These ‘key challenges’, as understood by the ISA Framework Agreement, include solar finance, solar technologies, innovation, research and development, and capacity building. While the event in Delhi may have earned the Modi government headlines as a leader of this emerging global alliance, it has little to offer the Indian people in terms of policies that will generate a solar manufacturing base. Without such indigenous manufacturing capacity, India’s solar future will only mean dependence on imported equipment and high tariffs for the Indian people.

The seat of the ISA is the Republic of India and that is why the first summit of the alliance is being held here. It appears that the current BJP Government is attempting to assume global leadership in in solar energy. However, it is important to remember that out of the 121 potential member countries, so far only 61 have signed the agreement, and only 32 countries of have ratified it. Among these 32, India, France, and Australia, feature predominantly and are the only three among the top ten solar energy installers in the world, in the ISA currently. These three countries are ranked 7th, 8th, and 9th respectively in terms of the installed capacity of solar energy they possess. Of the six countries with the highest deployment of solar energy, two (Germany and Italy) do not even feature in the list of potential members and the remaining four (China, Japan, USA, and UK) have neither ratified nor signed the Agreement.

The leadership role that India has assumed in the ISA and the virtual absence from the coalition of the countries well ahead of India in deploying solar energy,  indicates that the Government of India views the ISA as a political tool for more active participation in the global developments on the solar energy front. The only concrete objective of the ISA is to mobilize more than USD 1,000 billion in investments to scale up solar energy deployment. There is no plan of action in terms of increasing manufacturing capacity in the developing countries, including India. Given the global developments in solar cell manufacturing and the jump start that China has in this, it is unlikely that the ISA will provide the impetus that India’s solar cell manufacturing needs to really make it a leader in solar energy.

Historically, the crux of India’s energy woes has been severe inadequacy in domestic production capacity, technological innovation, and the consequent import dependency; from low boiler efficiencies and the inability to handle high ash Indian coal, to imports of super critical coal based power generation technologies, gas turbines, and oil. Even when BHEL had developed indigenous capacity to manufacture and turbines, India decided to ease imports, and foreign investments, fragmenting the market and weakening BHEL’s position. This was at the same time that Chinese government was investing int its state owned companies in tripling to quadrupling their manufacturing capacities. 

Nuclear energy is perhaps the only sector in which the Government of India expended serious effort and money to develop domestic capability.

Lack of public funds in an earlier era, and the aggressive pursuit of neoliberal policies in the recent past has meant that these woes continue to plague the energy sector as a whole even now. Unfortunately solar energy development is but an extension of the same story.

Globally solar cell and module production has been rapid increasing in the last decade alongside a steep reduction in costs. However, this increase in production comes mostly from China.  While India is deploying solar energy projects rapidly with even more ambitious targets for the future, our domestic production capacity remains abysmally low. According to a note by the Ministry of New and Renewable Energy (MNRE), India has only about 3 GW of cell manufacturing capacity and even this is not fully exploited because of obsolete technology. However, the BJP Government has revised the target for solar energy deployment by 2022, set under the National Solar Mission from 20 GW to 100 GW. To do this India would need to add 20 GW of solar energy every year. In the absence of an increase in domestic energy production, this would mean that at least 85% of the new solar modules will have to be imported.

After the WTO ruling in favour of the United States and against India, preventing solar energy projects under the National Solar Mission from including domestic content requirements, the Government seems to have no idea how to proceed further. The simple option to have solar plants in the state sector would meet the WTO requirements of protecting this sector as it would be considered state procurement, where incentives for domestic manufacturing can be provided. But with its bias for promoting private capital, the BJP government does not want to take this route.

The existing manufacturing capacity in India, low as it is, is also already getting outmanoeuvred by low cost module imports from China. The lowest bid in the latest phase of National Solar Mission was for Rs.2.43/kWh, lower than even some of the coal based electricity in the country. Citing the need to protect local manufactures, India’s Directorate General of Safeguards has proposed an imposition of 70% safeguard duty on imported solar cells and modules. The Government is also contemplating an introduction of anti-dumping duties. Such a policy would make sense if there was in fact a concrete plan to increase domestic manufacturing capacity.

If Chinese solar panels continue to flood the Indian markets, the distribution utilities may be able to access cheaper power from solar energy projects; however the collateral damage in this scenario will be energy sector workers, including coal miners.

Energy and environmental think tanks have made tall claims about the potential employment generation in the solar energy sector. This assumes growth in domestic manufacturing which is unlikely in a scenario of large scale imports of Chinese panels. The potential job losses in mining if not made up in other manufacturing sectors such as say alternative energy sources, may create another set of problems, attention to which is necessary in a country such as ours, which is already plagued by high levels of unemployment and underemployment. On the other hand, constraining Chinese imports which seems to increasingly be a path that the Government is likely to take is then likely to increase the cost of solar energy, an increase that power utilities and eventually electricity consumers will have to bear.

At the current stage of development in the solar energy sector, India cannot escape the need to provide state support to renewable energy technologies in some form or the other. Allowing feed-in-tariff to developers is one such popular mechanism to support deployment. The failure of such a regime in Germany and the success of the same regime in China illustrate the fact that full benefits of state subsidies, to both the state and consumers, can only be realized if it is backed by large scale domestic production. India’s need to be seen as a leader in solar energy may be a reaction to the Chinese domination of solar energy markets, but whichever way one looks at the problem, it will remain a pipe dream unless we get our act together on the manufacturing front.

As a developing country with a large percentage of population without access to basic services, amenities, and employment, India has to balance its developmental requirements with its commitment to protecting the environment. To do this, a systematic plan is needed with a commitment to public resources for the public good. However, the aggressive implementation of neoliberal economic policies by the BJP Government means that the future of thousands of workers and the poorest sections of India’s population, as well as the possibility of a sound and rational climate action plan will continue to be plagued by uncertainty. It is highly unlikely that the International Solar Alliance can deliver the country from its woes. Like may other gestures of the Modi Government, this one too seems to be just grand posturing with little concrete action to deliver things that really matter.