While recent shifts in US trade policy have created opportunities for companies from countries like India to gain greater access to the US solar market, ongoing protectionist challenges confronting the global photovoltaic industry underscore the necessity for collaboration and engagement among key solar industry players, particularly those from China.
Indian companies are moving to fill the gap left by the exclusion of Chinese exports from the US solar industry, the Financial Times reported on Sunday.
The news came amid the backdrop last week that the US Commerce Department had announced preliminary duties on solar imports from Vietnam, Cambodia, Malaysia and Thailand – countries that account for the majority of US solar cell and module imports, where Chinese solar manufacturers have established operations, according to Bloomberg.
On the surface, the US move seems to target the “transshipment hub” strategy that circumvents its tariff barriers on Chinese-made products, potentially opening new market opportunities for countries like India, which have a solid foundation in the photovoltaic industry. However, this approach does not fundamentally address the contradiction between the US goal of protecting its own solar industry and its ongoing reliance on imports.
Despite the US government’s efforts to restrict imports of Chinese solar products, many American solar companies continue to depend on imported raw materials and components. Given the fact that India’s production capacity and technological capabilities currently fall short of fully meeting US market demands, this US policy may lead to a constrained market supply, driving up costs for solar projects and slowing the deployment of solar technologies.
Thus, relying solely on tariffs and trade barriers is inadequate to address the structural challenges facing the US solar industry. Such an approach may instead complicate international trade relations and market dynamics.
While India and other developing countries may seize this opportunity, they need also be aware of the potential protectionist risks it entails. It has become more common than ever for the US to adjust its tariff policies to protect domestic industries. It employs a trade strategy that resembles a “whack-a-mole” game, constantly hitting threatening targets to protect industrial interests. This approach exposes countries and companies reliant on the US market to significant risks.
Consequently, India and other developing nations need to stay vigilant against the possibility of stricter market access conditions or a new wave of trade barriers, as the solar tariffs imposed on four ASEAN countries may signal the beginning of a more self-centered trend in Washington aimed at protecting its industries.
In addition, it is important to note that the US cannot squeeze China out of the global solar industry chain and supply chain. As India has amped up its production of solar panels, it has remained dependent on China’s renewable energy supply chain.
After the US restricted imports of Chinese solar panel material because of so-called human rights issues, Indian exports of solar panels to the American market spiked in 2022, increasing in value by almost 150 percent, according to US government trade figures. The next year saw an even sharper increase.
However, India sourced between half and all of its solar panel components from China between 2021 and 2023, according to a report by The Washington Post.
China’s dominant position in the global solar supply chain is underscored by its comprehensive industrial ecosystem, which encompasses the production of polysilicon, silicon wafers, solar cells and modules. This advantage stems from large-scale production capacity and ongoing technological innovation.
China’s solar industry clearly excels in both production costs and product competitiveness, spanning the entire spectrum from raw material supply to equipment manufacturing and end applications.
In contrast, while India’s solar industry has established a foundation, it still requires enhancements in the completeness of its industrial chain and technological innovation capabilities.
Nevertheless, the relationship between the solar industries of the two countries is not solely competitive; rather, it presents a substantial opportunity for collaboration. By fostering enhanced cooperation, both nations can strengthen the competitiveness of their respective photovoltaic industries and also play a pivotal role in advancing the global solar energy sector.
