Donald Trump’s solar module tariff barrier may help India’s green economy

New Delhi: India’s solar power sector may benefit from the US President Donald Trump’s decision on Monday to levy tariff on imported solar panels.

In what will impact Chinese module manufacturers, Trump whose presidential campaign and term has been built around growing American manufacturing, imposed a 30% tariff on imported solar cells and module in the first year, with the duties declining to 15% in the fourth year. However, Trump allowed tariff free imports of 2.5 gigawatts (GW) of unassembled solar cells annually.

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Modules account for nearly 60% of a solar power project’s total cost.

The US President’s decision to impose protectionist measures comes in the backdrop of US’s withdrawal from the Paris climate agreement. Monday’s decision may result in Chinese manufacturers further reducing their solar module prices to drive sales in India because they may not have a significant US market left any longer.

Interestingly, India is also conducting an anti-dumping investigation on solar equipment from China, Taiwan and Malaysia. Additionally, India is exploring to levy a 70% provisional safeguard duty on imported solar panels and modules from China and Malaysia, as recommended by the Directorate General of Safeguards. A final government decision is awaited.

“On January 22, 2018, U.S. Trade Representative Robert Lighthizer announced that President Trump has approved recommendations to provide relief to U.S. manufacturers and impose safeguard tariffs on imported residential washing machines and solar cells and modules, based on the investigations, findings, and recommendations of the independent, bipartisan U.S. International Trade Commission (ITC),” according to a US President’s office statement.

The USITC in a unanimous vote in September last year concluded that cheap imports are hurting US manufacturers.

Indian developers are upbeat about the development.

“I am looking at this as a positive development. With Chinese exports to US reducing, prices shall fall for the Indian markets,” said Sunil Jain, chief executive officer, Hero Future Energies Pvt. Ltd, a company promoted by the Munjal family.

Of China’s solar module manufacturing capacity, estimated to be around 70 GW per year, the major markets are the US, India and China itself. With green energy activity expected to slow down in the US, China’s solar equipment makers may adopt a more competitive stance on pricing to drive demand. This will help India’s plan to add 100 GW of solar power capacity by 2022.

However, some believe that the real impact on the US decision will be felt on India’s trade investigation process.

“The decision is largely in line with market expectation. We don’t expect any major impact on international demand-supply or prices. US accounts for only about 12% of global solar demand. Even a 15-20% volume reduction would mean just about 2% fall in global demand. From an Indian point of view, a far more interesting issue is how will this decision affect the Indian trade investigation and decision process,” said Vinay Rustagi, managing director at consulting firm Bridge to India.

Major Chinese solar module manufacturers include Jinko Solar, JA Solar Holdings, ET Solar, Chint Solar, GCL-Poly Energy Holdings Ltd and Trina Solar Ltd.

“From 2012 to 2016, the volume of solar generation capacity installed annually in the United States more than tripled, spurred on by artificially low-priced solar cells and modules from China,” the US statement said and added, “China’s industrial planning has included a focus on increasing Chinese capacity and production of solar cells and modules, using state incentives, subsidies, and tariffs to dominate the global supply chain.”