Can coal-heavy India become a 'renewable superpower'?
In an聽interview this week聽with the Guardian newspaper, India鈥檚 power and coal minister, Piyush Goyal, claimed that India would become a 鈥渞enewable superpower鈥� in the next few years.
Before we get too excited about the environmental impacts of that ambitious goal, however, it should be noted that Goyal also envisages a simultaneous huge ramp up in coal-powered electricity production. This illustrates once again that while India sees renewable energy, and solar in particular, as part of the country鈥檚 long term energy plan, the country鈥檚 priority is an urgent need to expand the electricity supply any way possible.
For this and other reasons, investors should be wary of seeing Goyal鈥檚 statement as great news for the major solar power stocks.
India鈥檚 renewed commitment to solar power appears significant, and is more than just talk. Plans to impose anti-dumping tariffs on exporters of solar panels and equipment to the country聽have been dropped聽following protests from the importers of those products as well as the exporting companies. (Related: Why China Is Leading The World In Solar Power)
The U.S., China, along with Taiwan and Malaysia, have been major suppliers to the Indian solar power industry in the recent past, so the abandonment of punitive tariffs, along with the Indian government鈥檚 projected $100 billion investment in renewable energy over the next five years, would appear to be good news for the biggest players from those countries. Appearances, however, can be deceptive.
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In the case of the largest U.S. producer of solar panels, First Solar (FSLR), the abandonment of punitive duty on imported solar cells and panels could actually be bad news, as the original proposal by the Modi government was not for a uniform level of duty. As detailed in聽this Forbes piece, while U.S. and Chinese silicon cells would have seen duties of $0.48 per watt and $0.81 per watt, respectively, First Solar鈥檚 thin film panels would have attracted only around $0.11 per watt in punitive tariffs. Obviously, the proposed growth in the market will benefit all suppliers to some extent, but the significant price advantage over Chinese competitors that was expected to accrue to First Solar will no longer exist. (Related: U.S. Warms To Clean Energy)
Nor does that mean that investors should be piling into the major Chinese companies, such as Trina Solar (TSL) or Jinko Solar (JKS). This isn鈥檛 the first time we have heard India make a verbal commitment to cleaner energy, nor will it probably be the last, given the pressure that developed nations are placing on them to reduce emissions.
The cost differential between coal-fired electricity and solar power, however, mean that even the best intentioned plans have difficulty getting off the ground in an economy where rapid growth is needed and margins are thin.
Yes, solar power is becoming more affordable and,聽according to the IEA, could surpass fossil fuels by 2050, but assuming that the news from India will give a short term boost to the stock of FSLR, TSL or JKS would be a mistake.
By Martin Tillier of Oilprice.com
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