India Vs China - The Solar War | Explained

The global war within the solar industry is heating up with each passing day. While on one side world leaders like President Biden and PM Modi are announcing ambitious targets to shift to renewable energy. On the opposite side, China is waging a price cutting war on India with its exorbitant price hikes on the import of solar modules. This has resulted into the legendary solar war between India and China.

 

 While on one side, the Chinese vendors are using their monopoly to make it very difficult for India to develop. On the opposite side, we have legendary industrialists’ like Ambani, Adani, and the Tatas who are pushing their limits to revolutionise India into a solar superpower.

But Why?

So the question here arises here is, what's this solar war all about? How is China trying to strangle the expansion of India? What is India doing to stop against the Chinese powers? Why is the solar and wind energy such an enormous deal for a country's economy within the 21st century?

The Globe-Heating Crisis

As we all know, oil has shaped the 20th century better than any other commodity and the fight for oil has led countries to start a war, dictated foreign policies, determined global dominance, and overall, and majorly transformed the world economy.

But with the crisis of global warming so intense. In the 21st century, developed countries have no options but to curb their emissions and move far from fossil fuels. This is result we are seeing such a large amount of global summits where world leaders have ambitiously pledged their transition to renewable fuels.

However, this task very easy to be said than done because this can be what the numbers seem like.

As of 2019-20, coal and crude petroleum together accounted for 76.61% of India's energy consumption, whereas electricity from hydro, nuclear, and all other alternates combined only accounted for 14.3% of our consumption.

 

And this is not only the case of India, but also with every other nation within the world. Even the US as of 2020 has only 12% energy coming from renewable resources, whereas gas, petroleum, and coal accounted for 79% of their consumption.

This is the rationale why leaders from across the planet are working very hard to transition to solar energy production. But here the real question arises is what's so special about Solar and Wind that every other country shifting to Solar and Wind now?

I mean, we always knew that coal was causing pollution, we always knew about oil dependency, and that we also knew that emissions are bad for the environment, then why are we talking about solar and also the wind suddenly in 2021, instead of 2010? And why aren't we using nuclear energy instead?

 

Well, the solution to the current lies during this mind-boggling chart that I found. This can be disastorous. As of 2009, the value of electricity from coal was $111 per megawatt-hour, the value from nuclear was $123, from wind it had been $135, and from solar, it had been extremely costly with a tag of $359 per megawatt-hour.

But you recognize what, guys, as of 2019, while the price of electricity from coal has dropped by just 3% to $109, the price from nuclear has increased by 26% to $155. Whereas the value from onshore wind has dropped by 70% to simply $41 per megawatt-hour.

 

Other than this, the cost from solar has dropped by 89%, from $359 to merely $40 per megawatt-hour. And whether or not you think about the price of solar from different countries, you'll see that solar is nearly on the verge of providing you with the most cost effective electricity in world history.

This is the explanation why they assert:

"Just like the country with oil went on to become a dominating force within the global economy, In the 21st century, the country that dominates the solar supply chain, the technology, and the manufacturing capacity will persist to become a world superpower." 

 

And this is when the India-China solar war comes in. The question is, what's this India-China solar war all about?

Well, if you take a look at the first components needed to line up solar panels, you may need three major elements-

• Polysilicon
• Ingots
• Wafers

And the second phase of the strategy is by incentivizing domestic manufacturing and this can be where the Tatas, Ambani’s, and Adani’s get to enter. The Indian government has offered lucrative incentives to increase domestic manufacturing as an element of something called a production-linked incentive program.

Production Linked Incentive

People when it involves putting in giant factories, the largest pain for an organization is that the exorbitant amount of investment which can go up to 1000s of crores.

And this heavy cost is incurred to import giant machines from across the globe, the heavy cost of land and the construction cost of the factory then, of course, there's the expense of labor. Therefore, the entry barrier and also the risk is extremely high for an organization to line up their factory in India. So what the govt. does is under the Production linked scheme, the govt. decreases their cost price by giving them tax incentives.

For example, the govt will tell the corporate that it'll not charge tariff in the imports of machinery from other countries or it'll give them a 30% tax rebate on the land if it's acquired in a very special economic zone.

How PLI is Helping?

This way, if you see the entry barrier for a solar company is reduced such it becomes much easier for them to line up their factories. Now on the surface, it'd seem like the govt is unnecessarily losing many crores worth of taxes.

But when you recognize, the production-linked scheme gives the govt. three incredible superpowers within the long term.

 

1. Recurring Income  

When the corporate starts functioning and begin selling solar panels, the govt are able to get a recurring income for the following 20 to 50 years from every single solar battery sold by the company.

2. Taxes and Thousands of Jobs

 The company will have many white-collar employees who will again pay taxes and 1000s of jobs are going to be created for the blue-collar workers (an invaluable contribution to the economy of the country). 

 

3. Dependency on Fossil Fuels

 And last and most significantly, with the establishment of the solar industry, the dependency on fossil fuels decreases, which is that the goal of the scheme.

In this case, India's 2021-22 budget has already allocated approximately $620 million to push domestic production of high-efficiency solar components. And nearly 1/2 this allocation has gone to of two of the most prominent India's public sector companies which are Solar energy Corporation of India and the Indian Renewable Energy Development Agency.

According to the Ministry of New and Renewable Energy, the National Programme, on high-efficiency solar PV modules aims and have a target of direct employment of 30,000 people and indirect jobs to 1.2 lakh people. This is the full process of how the production-linked scheme works out.

And one in all the main developments during this process was in June 2020 when Adani Green bagged the solar contract from the Solar Energy Corporation of India,, and this was to develop eight gigawatts of projects whose transaction was valued at $6 billion. 

 

Indian Solar Industry

 

Apart from that Reliance Industries, Adani group, Tata Power, First Solar, and 16 other firms have bid for installing solar manufacturing units under the government's PLI scheme.

And the total investment costs for the same is about $3 billion.

Meanwhile, Borosil Renewables is going to be a serious big player within the solar space of India because it's the primary and only manufacturer of solar glass in India.

 
And now Borosil Renewables has announced its plans for almost doubling its capacity to 900 tonnes per day with a planned investment of more or less Rs 500 Crores. This capacity is enough to power 2.5 gigawatts of solar plants within the upcoming times.

 

These are the measures that India has taken to destroy the Chinese powers to misue its monopoly. And adding that, we've succeeded in drastically reducing the imports of solar components from China, due to which our total imports have gone down from $3.42 billion in 2018 to $1.7 billion in 2019, to $1.2 billion in 2020. 

 

That's all for the geo-political issue for India Vs China Solar Industry. Hope this case study gave you resourceful insights and enjoyed reading. 

 

Thank You!