China is on pace to see its solar power capacity more than double by 2020 as component costs move lower, but at perhaps a cost, a sector analysis finds. Beijing issued a white paper last year, which stated the Communist Party of China is "committed to the concept of environment-friendly development." The paper stated that China has been at the forefront of the effort to infuse environmental protection with state policy, becoming the first country in the world to offer a sustainable development strategy in the 1990s. An analysis of Chinese development on the solar energy front from sector consultant group Wood Mackenzie finds that, when counting all planned and announced projects, solar power capacity will more than double by 2020. "Driven by a decline in component costs and technology advancement, solar generation could be 10 percent cheaper than last year in 2017," Frank Yu, the principal consultant for Asia-Pacific power and renewable at Wood Mackenzie, said in a statement. "We believe the ongoing cost decline will continue to boost solar capacity growth." The European Union in 2013 imposed a duty of 67.9 percent to Chinese solar panel exporters who didn't cooperate with an investigation into allegations the panels were sold to European countries well below market cost. Chinese-manufactured solar products at the time accounted for more than half of the global market and were the main source of European imports of renewable energy goods. For wind power, Wood Mackenzie estimates capacity will increase by 40 percent by 2020. Combined with solar, the capacity will represent about a quarter of China's total power capacity. With U.S. President Donald Trump stepping away from the international Paris climate agreement, China, which has the second-largest economy after the United States, could gain the advantage in the drive to develop a low-carbon economy. Yu said the pace of development carries risks, however, as the rate of growth puts a strain on the government's deficit as it relates to subsidies for renewable energy development. "The subsidy deficit was already at $9 billion by the end of 2016 and could grow to over $26 billion by 2020," he said.

The Hindu SUSTAINABLE LIVING: Off-grid solar can bring sustainable and cheap lighting to the vast segments of India. FILE PHOT TOPICS "Over 300 million people in India don’t have access to the electricity grid and are living in complete darkness," PM said. The slow pace of capacity addition in the solar sector has created room for a variety of off-grid solar solutions to grow and provide electricity to those as yet not connected to the power grid, according to a private sector industry leader. “In solar, there are two parts – one is the government utility projects, and they are going super slow,” NidhiModi, executive director, RAL Consumer Products, the largest off-grid solar company in India, said in an interview. “They are targeting 12 GW a year of capacity addition and they are getting 6 GW a year. So they are heavily dependent on the off-grid solar industry.” Off-grid solar is increasingly being viewed as the way to bring sustainable and cheap lighting to the vast segments of India that are yet to be connected to the electricity grid, especially in difficult terrain. “Over 300 million people in India don’t have access to the electricity grid and are living in complete darkness,” Ms. Modi added. “They live off kerosene lanterns, which are extremely harmful to health and often result in huge losses of life and property due to fires.” The coming together of various factors, both external and domestic, has meant that there are several types of household solar products entering the market, ranging from simple solar lanterns powered by in-built solar panels, to entire solar invertors that use rooftop solar panels. “Solar tariffs have become competitive now, the efficiency of solar panels has improved substantially, battery technology has improved, LED prices have gone down, and the price of plastic has reduced due to the fall in oil prices,” Ms. Modi said. It was a combination of all these factors that has led to a surge in the industry over the last three years. These off-grid solar solutions, apart from helping the government meet its renewable energy target, also provide economical savings — both to the government and the consumer. “The government is spending Rs.30,000crore a year on importing kerosene, which is a complete waste of foreign exchange,” Ms. Modi said. “The average rural household uses 18 litres of kerosene a month, 12 of which are used only for lighting. The rest is for cooking. They spend Rs.150 a month only on kerosene.” Cost factors However, despite some cost factors easing in the off-grid solar industry, others still pinch, leading to economic activity that could have taken place in India moving to China instead. “Most of the input products have zero customs duty on imports,” Ms. Modi said. “But this is a limited benefit. We could create a lot of job opportunities by manufacturing in India if the Centre would cut the battery import duty. We can then just import the battery and make the rest in India.” The battery makes up 30 per cent of the cost of the product, according to MsModi, and the company has to pay a 30 per cent duty on its import. This renders making solar lanterns and invertors in India economically unviable.

The Indian solar energy sector is in the middle of unprecedented growth, fed by rapidly declining tariffs, improved technology and a global oversupply of photovoltaic panels and other material, mainly in China. Although a smaller market than the United States, China or Japan, it is expanding the fastest among major nations. India expects to add as much as 5.4 gigawatts of solar capacity in 2016, making it the fourth largest solar market globally. The country currently has a total capacity of 7.8 gigawatts of solar power. In comparison, installed capacity in the United States is 25 gigawatts . The prospect for India looks bright. “The tailwinds are exceptionally strong with rapidly falling costs and greater environmental agenda in the post COP21 (Paris climate summit) world,” Bridge to India, an energy consultancy, said in its new India Solar Handbook. “The solar development pipeline now stands at 22 GW [gigawatts] with over 13 GW under construction,” Mercom Capital Group said in their India Solar Quarterly Market Update. Fall in prices The bullishness benefits from a global glut in photovoltaic equipment. “Recent market reports suggest that an oversupply situation is building up in PV [photovoltaic] module manufacturing in China, especially for the second half of 2016 and this is likely to lead to significant price corrections in the market,” Bridge to India says. This has forced Chinese industry, particularly tier II firms, to lower prices and look at overseas markets. “Several major solar manufacturers have announced plans to expand their production capacities ahead of 2017. In total, we expect 15 GW of new module capacity to come online in 2016, across 10 major producers, with the majority (14 GW) added by Chinese manufacturers,” Morgan Stanley, an investment bank, said in a report on August 2. At the same time, Chinese demand is expected to slow down sharply in the remaining part of 2016, according to market research firm IHS. The leading information provider noted that module prices for the fourth quarter of 2016 have already declined by as much as 10% since the first half. The fall in prices comes at a perfect time for the Indian solar market as the first three months of 2017 ARE expected to be the biggest quarter for new capacity addition of around 2 gigawatts according to Bridge to India. The circumstance of lowered capital costs, overseas slowdown and proactive policy thrust has not being accompanied by strengthening India’s domestic manufacturing capacity. “In the absence of manufacturing, India will need to import $42 billion of solar equipment by 2030 corresponding to 100 GW of installed capacity,” warns a report by KPMG, an advisory firm. India has emerged as a key growth market for the Chinese suppliers, Bridge to India said in an industry update. “Unless there is a change in Chinese demand sentiment or the European Union removes its trade barriers against Chinese suppliers, we expect prices to stay soft for the next few quarters,” the consultancy said. Cheaper Chinese imports have left local suppliers uncompetitive. “It is clearly very difficult to promote domestic manufacturing in India without solving the macro issues such as ease of doing business, infrastructure, cost of power, cost of finance and local ecosystem for raw materials,” Bridge to India said in a recent update. Cheap Chinese imports have made Indian products uncompetitive [image by Gerry Machen] The remarkable pace of adding capacity through imported material has hurt rickety local manufacturing firms. The Indian Solar Manufacturers’ Association has asked for safeguard and anti-dumping duties. Safeguard levies seek to protect local industry against sudden import surges. Anti-dumping duties are imposed when overseas exporters are seen to be selling products below fair market value. Their protest may not hold much water. “It would be hard for the small outdated Indian module manufacturers to throw stones with any credibility,” Tim Buckley, a director at Institute for Energy Economics and Financial Analysis in Sydney, told thethirdpole.net. “The quality of their product is widely reported as substandard and uncompetitive.” Domestic strengthening However, things may improve. “I think Energy Minister (Piyush) Goyal is on the right path in terms of trying to encourage global module majors like Trina Solar, Canadian Solar, Hanwha Solar and First Solar to consider joint venturing with a local established power company to build a new modern, latest technology facility in India, with appropriate capital concessions and inducements to ease the cost of new builds,” said Buckley. “I recall Tesla received a $1 billion incentive to build their Gigawatt factory in Nevada, so there is nothing new in incentivising the establishment of new industries and easing first mover barriers.” The local industry cannot cope with the recent surge in demand so Chinese imports are inevitable, according to SrinivasKrishnaswamy, chief executive officer of Vasudha Foundation, a clean energy think tank. “On its part, the government does provide some support to Indian firms by stipulating domestic supply requirements, Krishnaswamy told thethirdpole.net. “Unfortunately, the domestic manufacturing industry lacks capacity and depth. If solar maintains a sustained growth, we expect it will lead to investments in manufacturing as well.” “Given the likely 10 gigawatts plus annual demand for modules across India going forward, there is scope for a number of new plants to be built to localise the supply chain in line with Prime Minister NarendraModi’s Make in India campaign,” said Buckley. Till that happens, it is likely that the extraordinary growth of the Indian solar energy sector will be fuelled by imports, mostly from China. “It is a happy coincidence that there is a combination of large solar project announcements in India and oversupply and depressed prices of Chinese equipment,” JasmeetKhurana, an associate director at Bridge to India, told thethirdpole.net. “We should make the most of it.”