Update: Indian solar industry suffocated by US thin-film manufacturers

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Non-governmental organization (NGO), the Centre for Science and Environment (CSE), is accusing US thin-film manufacturers of using a loop hole in the Indian government’s renewable energy scheme to “ruin the Indian domestic PV industry”. The Jawaharlal Nehru National Solar Mission (JNNSM) initiative mandates a domestic content requirement, however, only for crystalline PV and not for thin-film.

CSE researchers state that with 80% of Indian manufacturing capacity in a state of disarray, forced to shutter operations or initiate debt restructuring proceedings, the government is under a great deal of pressure to meet its target of adding 22GW of solar energy to the national grid by 2022.

In three years, India has gone from almost zero to close to 1,000MW of solar installations in the country.

Owning to the United Nation’s Copenhagen Accord, the US fast start finance option has been implemented to encourage overseas private development. Under this scheme, the US has currently loaned US$26.8 million to India – more than any other country it is involved in under the UN programme.

According to figures from the fast start finance website, both The Netherlands and Germany have offered grants to India totalling US$35.4 million and US$27.6 million, respectively.

Chandra Bhushan, CSE's deputy director general, said, “The US has been very disingenuously using this fund to promote its own solar manufacturing. The US Export-Import Bank of the United States (Ex-Im) and the Overseas Private Investment Corporation (OPIC) have been offering low-interest loans to Indian solar project developers on the mandatory condition that they buy the equipment, solar panels and cells from US companies. This has distorted the market completely in favour of US companies.”

The CSE claims the Ex-Im and OPIC are seducing Indian companies by offering low interest rates of approximately 3%, payable over an 18-year period. Loans from Indian banks come with an interest rate of close to 14% or more. The CSE attests that, “Close to 60% of panels installed in India are thin-film even though only 14% of global capacity is thin-film.”

Despite these claims, MJ Shiao, a solar analyst for GTM Research speaking to PV Insider, believes that it is not the JNNSM loophole, but thin-film performance that is the key reason for India’s increased deployment of thin film.

“A lot of thin-film manufacturers have been able to communicate to the Indian solar market that thin-film does produce better in the Indian climate than crystalline silicon technologies,” he said.

“With hot, muggy Indian weather the thin-film panels will produce more kilowatt-hours per kilowatt than a crystalline silicon module. You're getting a little more bang for your buck.”

Conversely, Stefan de Haan, principal photovoltaic analyst at IHS iSuppli, maintains the more widely accepted idea that, “The underlying reason is that they [US manufacturers] can get around the local content criteria using thin-film. That's why the American CdTe producers First Solar and Abound Solar are very successful there.”

Regarding the domestic content requirement, Dr Tobias Engelmeier, managing director of Bridge to India said, “In Gujarat, where there is no local manufacturing stipulation, thin film still dominates. That tells me that probably that argument isn't valid.”

Finlay Colville, VP of Solarbuzz told PV-Tech that, “The fact that Indian manufacturing capacity is having such a difficult problem is much broader than any domestic policy within India. Indian c-Si manufacturing has never fulfilled the expectations of a few years ago and by the time capacity was finally ramped up in India; the PV industry globally had changed significantly.

“PV manufacturing in India is not cost-competitive today with industry leaders, with or without any domestic protectionism. For any domestic suppliers to be competitive – locally or globally – they need to be at the top of their game.”

Ex-Im has agreed numerous loans to export US-made solar panels and ancillary services to India. Two such loans totalled US$57.3 million to Solar Field Energy Two and Mahindra Surya Prakash, in July.

Thin-film market leader and number two ranked PV module supplier First Solar was reported to have almost secured around 80-90% of projects (200MW-plus) under India’s 2012 National Solar Mission projects, according to Deutsche Bank analyst Vishal Shah, in February this year. Ex-Im was said to have played a critical role in this agreement.

Last year, Ex-Im also agreed to fund CIGS module manufacturer MiaSolé’s foray into Gujarat for a 2MW solar PV project. In November 2011, Ex-Im has awarded loans totalling US$103.2 million to two Indian companies to help finance planned projects in Gujarat and Rajasthan.

The list goes on.

Nevertheless, last week Ex-Im signed a declaration of intent with the Industrial Development Corporation of South Africa, to provide financing up to US$2 billion. The DOI aims to progress the South African government’s Integrated Resource Plan and the South African Renewable Initiative.

Notably, domestic thin-film plants in India do exist. Indian manufacturer Moser Baer had a small scale thin-film plant in India; however, contentions between an undisclosed company and the Delhi government arose when the state called for the “debarring of Moser Baer for poor performance of solar projects.”

CSE’s Bhushan continues: “The misuse of fast start financing by the US is unethical. Fast start financing was supposed to benefit the developing country recipient. Instead, the US has managed to turn it into a game where funds registered as climate funding is given out as loans to projects that promise to buy equipment made in the US thereby benefiting themselves while knocking out the Indian manufacturing competition that doesn't have the same government backing. In the long-run, this is doing more harm than good to the Indian solar sector.”

Kushal Yadav, head of CSE's Renewable Energy team says, “Interestingly, the US government has put anti-dumping duties on solar equipment imported from China because of the alleged subsidies that China is giving to its solar manufacturers. However, the US is engaging in a similar practice in India by subsidising loans for buying American equipment!”

Update: OPIC and Ex-Im have refuted the allegations of CSE

Judith Pryor, vice-president of external affairs at OPIC told Environmental Finance that, “OPIC provides financing that is unavailable from local or foreign private-sector financial institutions. In other words, we don’t compete with the local markets. And before OPIC supports a project, we determine whether that project will be subject to any trade-related performance requirements”.

A spokesman for Ex-Im stated, “Any OECD member country can offer financing for up to 18 years – this is not special to the US. “We don’t set the interest rates, [those are] negotiated between the borrower and the lender.”

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