301 Moved Permanently
U.S. Slams India’s
‘Discriminatory’ Rules
Simmering solar trade tensions between the U.S. and India have now approached a full boil: The U.S. government has sent the World Trade Organization (WTO) a formal complaint over India’s domestic-content requirements and requested that dispute-settlement proceedings begin.
The quarrel concerns the origin of solar cells and modules used in projects deployed under India’s Jawaharlal Nehru National Solar Mission (NSM), a government-backed long-term solar initiative. According to U.S. Trade Representative Ron Kirk, the NSM’s “forced localization requirements” violate the U.S.’ trade rights and prevent U.S. solar manufacturers from fairly competing in the Indian solar market.
“Unfortunately, India’s discriminatory policies in its national solar program detract from … successful cooperation, raise the cost of clean energy and undermine progress toward our shared objective,” Kirk said in a statement.
The U.S.’ WTO filing drew vigorous support from the Solar Energy Industries Association (SEIA). The organization noted that the U.S. has sought to engage with India’s government for years to have the NSM’s domestic-content requirements removed, only to see them strengthened instead.
Rhone Resch, president and CEO of SEIA, added in a statement that such “trade-distorting measures” represent a worrisome trend in the global solar sector. (Elsewhere, the WTO ruled late last year that Ontario’s domestic-content requirements for its solar feed-in-tariff program violate international trade law. The government of Canada has appealed the decision.)
The U.S. government’s WTO petition represents the latest volley in an extended trade spat that has often been overshadowed by the U.S.-China trade battle.
Last year, after an Indian research organization publicly accused the U.S. of “killing” Indian solar manufacturing, India’s Ministry of Commerce & Industry formally launched an anti-dumping investigation into PV products imported into India from the U.S. and several other countries.
By including thin-film modules in the investigation (unlike in other solar trade cases) and expanding its scope to countries such as Malaysia, India was believed to be targeting U.S.-based cadmium-telluride module supplier First Solar in particular. First Solar, which has manufacturing facilities in both the U.S. and Asia, has been an active player in India’s solar market.
In fact, a full 50% of projects in the NSM’s Phase I used thin-film modules. Although some industry professionals have attributed this unusually high percentage to India’s warm climate, the exemption of thin-film PV from the domestic-content requirements in place at the time probably also factored into project developers’ procurement decisions.
For the NSM’s Phase II, that loophole may be closed, to the displeasure of the U.S. government and solar sector.
“The [NSM] aims to establish the country as a solar manufacturing hub, to feed both a growing domestic industry as well as global markets,” India’s Ministry of New & Renewable Energy (MNRE) wrote in a draft document outlining the NSM’s Phase II plans. “The solar mission, while leveraging other government policies, looks to provide favorable regulatory and policy conditions to develop domestic manufacturing of low-cost solar technologies.”
Current manufacturing capacity in India totals approximately 15 MW of ingots and wafers, 848 MW of solar cells and 1,932 MW of solar modules.
In an effort to maintain and expand that production during Phase II of the NSM, the government is contemplating a range of options for its modified domestic-content requirements. The first - and potentially most severe - option would require that all cells and modules used in PV projects be produced in India.
Other possibilities include giving a price preference for domestically manufactured cells and modules, requiring a percentage of products to be manufactured in India, or applying a 100% domestic-content requirement to certain project batches.
The Phase II strengthening of domestic-content requirements - as well as higher guaranteed feed-in-tariff rates for developers that use solar modules made in India - violates India’s obligations under WTO agreements, according to a fact sheet from U.S. trade officials.
But as the two countries’ governments prepare to begin dispute-resolution discussions, Indian officials have publicly denied breaking WTO rules. Tarun Kappor, joint secretary of the MNRE, told the Wall Street Journal that although a few project developers were required to use domestically produced solar equipment, those installations totaled only 350 MW.
In the coming weeks, Indian and U.S. government officials will be given the opportunity to find a solution to their conflict without litigation, according to a notice from the WTO. The U.S. may request adjudication by a panel if no agreement is reached within that window.
Phase II of India’s NSM is expected to reach a cumulative installation total of 10 GW of on-grid solar and 1 GW of off-grid solar. For the U.S. solar market, the extent to which companies can participate in that massive deployment will likely be determined by the outcome of both the anti-dumping investigation and the WTO dispute.
Hawaii Launches
Grid Connection Plan
As solar integrators and utilities across the U.S. grapple with grid-connection challenges, a new initiative proposed by Hawaiian Electric Co.’s (HECO) utilities could provide a valuable framework to ease the pain. Working in collaboration with renewable energy groups and state agencies, HECO has developed a new plan that solar proponents praise as a proactive approach to accepting distributed solar onto utility grids.
Rather than ordering individual studies of each PV project that requests interconnection (a common approach at high penetration levels), HECO will preemptively forecast the solar generation expected to come online during specified planning periods.
The amount of anticipated solar development will be analyzed in individual areas, explains Tim Lindl, an attorney at the Interstate Renewable Energy Council (IREC). IREC was among the groups to provide recommendations to HECO during the multi-party planning process.
As HECO’s utilities develop their PV forecasts, they will simultaneously examine their existing infrastructure to see how much solar generation can be absorbed and what upgrades may be needed. In doing so, the utilities will become better prepared to promptly process photovoltaic system interconnection requests, Lindl says.
The plan comes at an opportune time, as Hawaii is experiencing a rooftop PV surge that has rapidly changed the electricity mix on many of its circuits. According to a recent report from the Blue Planet Foundation, Hawaii’s solar installation total in 2012 doubled compared to all previous years combined, and some areas of the state experienced even more dramatic growth. Waianae, for instance, issued 521 PV permits in 2012 after processing 173 between 2002 and 2011.
“I’m not sure many utilities have seen the levels of PV penetration that Hawaii is seeing,” Lindl says. More than 20% of the state’s circuits have surpassed 15% peak-load penetration of PV, he explains, adding that the 15% mark is typically considered the benchmark for a high-penetration scenario.
The addition of significant levels of solar to the grid can introduce technical concerns, such as grid instability caused by anti-islanding requirements, additional interconnection requirements and costly reactive power/voltage support. Utilities have publicly warned that as PV penetration increases, these problems will become more acute.
In Hawaii, the grid has yet to experience significant technical problems caused by PV, despite surpassing several circuit penetration limits in order to accommodate the state’s PV market growth, according to IREC.
However, the solar boom did create what Lindl describes as a logjam. When every customer-sited project required an individual study, installation timelines stretched longer and longer, and project budgets were strained by the added expense of the impact study - much to integrators’ frustration.
“For project developers, the [new approach] will improve timeliness and cost-effectiveness,” Lindl predicts.
An additional benefit is the removal of what IREC has criticized as “conservative blanket limits” on renewable energy connected to individual circuits. Instead, HECO aims to create a “grid that is planned to fully incorporate rooftop solar,” as IREC characterized the approach in a recent press release.
While highly attractive to the solar sector, this interconnection plan is not quite final, Lindl warns. The Hawaii Public Utilities Commission (PUC) must still initiate a proceeding in order for the plan to be implemented. Given that all parties involved thus far concur that the approach is reasonable and cost-effective, Lindl is optimistic that the PUC will quickly seal the deal and that other utilities and utility commissions across the U.S. will also take notice.
“This is a model that other utilities can look at as they approach high penetration - and hopefully before, so they don’t start to hit the logjam problem that they are having in Hawaii,” Lindl says.
Can Solar Be
Cheaper Than Gas?
Could solar power be less expensive than natural gas in Texas? According to new analysis from the Electric Reliability Council of Texas (ERCOT), cost-competitive renewable energy is a reality under updated cost models that reflect current prices and performance data for solar and wind.
The ERCOT study could send powerful signals to unleash new interest in solar deployment in Texas - often considered a promising but underdeveloped solar market. Major utility-scale PV projects have begun to spring up, but the state is home to a heavy fossil-fuel industry presence and significant wind power deployment that has often crowded out solar as utilities fulfill renewable energy mandates.
The most recent edition of ERCOT’s Long-Term System Assessment, which is designed to help policymakers, utilities and regulators make decisions on power generation and grid issues, uses updated metrics for the cost calculations of solar and wind power.
Previous studies had used outdated 2006 numbers for power output assumptions and costs, explained Colin Meehan, a clean energy analyst at the Environmental Defense Fund (EDF), in a recent blog post.
As it turns out, crunching the numbers with modern, real-world data makes a big difference in how solar and wind power fare in cost-competitiveness and likely deployment over the next two decades. Factoring in potential rises in natural gas prices or the addition of new environmental regulations further shifts costs in favor of renewables.
“Looking at the scenarios in the study, what I find remarkable is their consistency,” Meehan tells Solar Industry. “While the business-as-usual scenario and other sensitivities based on those assumptions show only natural gas additions [to the grid], all other scenarios - including scenarios with high natural gas prices, additional environmental regulations and updated renewable energy assumptions - show strong growth of wind and solar power in Texas over the next 20 years.
“The scenario with updated renewable energy assumptions is already a reality, and it’s not difficult to envision a future with higher natural gas prices or additional environmental regulations, especially given the environmental regulations currently tied up in courts,” he adds.
The numbers are striking: ERCOT found that under the business-as-usual scenario (without updated assumptions), Texas’ utilities could meet their energy needs over the next 20 years almost solely through 20,000 MW of natural gas, along with a limited demand-response initiative. The updated scenario, on the other hand, projects 17,000 MW of wind power and 10,000 MW of solar power.
Moreover, the EDF points out that the study found that adding renewable energy led to lower market prices for electricity at many time points.
A 2012 study commissioned by the Solar Energy Industries Association came to similar conclusions. According to that analysis, adding PV to Texas’ grid during its capacity-challenged summer of 2011 would have saved customers an average of $155/MWh to $281/MWh, as well as helped prevent emergency voluntary shutoffs.
Those 10,000 MW of solar power in Texas referenced in the ERCOT study may be cost-competitive, but how will they be built? How large will the projects be?
“I think the distinction between large- and small-scale plants is shrinking, in terms of both price and characteristics,” Meehan says. “For instance, all of the large-scale solar plants built in Texas to date have been relatively small - under 40 MW - and located within or near major cities.”
The existing projects’ locations help reduce the need for extensive transmission work. Meehan reports that the bulk transmission build-out for Texas’ Competitive Renewable Energy Zones, projected to be completed by the end of this year, will likely be sufficient to handle future solar and wind projects as well. Some additional minor upgrades near cities and in the Panhandle region may be needed, he adds.
But for solar developers, a more immediate obstacle to getting new capacity built is Texas’ current price signals, which Meehan says are not favorable to building any new type of generation, whether renewable or fossil-fuel energy.
“If and when regulators resolve this issue - so long as they don’t put in place any new rules that bias the market against renewable energy - we are likely to see a significant expansion of both solar and wind energy in Texas,” he adds.
Large generators NRG and Luminant, for instance, already boast sizable wind portfolios and have begun venturing into solar.
“Texas’ utilities are fundamentally businesses, and I expect them to continue making calm, rational decisions, as they have shown in the past as the cost of wind energy came down,” Meehan notes. “Texas generators are happy to invest in any technology that will help them compete in the market.”
Latest Trade Tussle
Targets Glass
After a few months of relative quiet, the Chinese solar trade war has heated up once again, with a new focus on the glass used in photovoltaic modules.
Shortly after the U.S.-based Coalition for American Solar Manufacturing (CASM) stated that it was pursuing legal action to challenge the U.S. Department of Commerce’s (DOC) decision not to investigate Chinese subsidies of rolled glass, a group of European companies announced they had filed a formal complaint with the European Commission to request an investigation of solar glass produced in China.
The complaint, led by Germany-based GMB Glasmanufaktur Brandenburg GmbH and unnamed cohorts in the European Union’s (EU) ProSun Glass coalition, accuses Chinese manufacturers of flooding the global market through illegal trade practices, to the detriment of the EU’s glass producers.
EU ProSun Glass claims to represent more than 50% of solar glass produced in the EU. Despite their name similarities, the group is not affiliated with EU ProSun, the SolarWorld-led coalition whose complaint to the European Commission last fall kicked off an ongoing investigation into Chinese solar modules. (The commission is expected to rule on the module case before June 6.)
Nevertheless, Milan Nitzsche, president of EU ProSun and head of marketing and communications at SolarWorld, was quick to note the group’s support of EU ProSun Glass.
“The new case shows that China’s strategy to dominate the solar sector is not limited to just solar modules, but also materials like glass,” Nitzsche said in a statement. “It’s a question of time [as to] when equipment and raw material manufacturers will follow.”
Current production capacity for solar glass in China now totals more than 400 million square meters - more than double global demand, according to fact sheets presented on EU ProSun Glass’ website.
Like their counterparts in the PV module manufacturing business, Chinese glass producers receive a plethora of subsidies and other forms of government support, the group added. Consequently, although rock-bottom pricing means that most of these companies are currently operating at a loss, the state’s support has kept them buoyant.
EU ProSun Glass offers the recent history of its leader - GMB - as an example of the toll that the Chinese solar glass sector has taken on European manufacturers: After years of sold-out inventory, the company immediately suffered when Chinese companies began offering their products at prices that undercut European suppliers’ offerings - and continued to plummet.
“If no action is taken, the Chinese producers could easily take over the entire EU market,” EU ProSun Glass warned.
But China’s domination of the solar glass market hurts more than just European glass producers, according to the coalition. As a highly energy-intensive process, glass-making requires close attention to resource efficiency, and manufacturing location can play a key role.
One square meter of glass produced in China creates more than three times the carbon-dioxide emissions of one square meter of glass produced in Europe, EU ProSun Glass said, citing Global Emission Model For Integrated Systems data.
“The most important task of solar technology - to produce energy responsibly and sustainably - has degraded into a purely financial investment,” the group remarked. “Financial profit is the only thing that counts.”
In order to restore the balance of priorities and help keep European factories running, EU ProSun Glass is seeking the imposition of unspecified trade remedies. It is expected that these measures - if any are applied - may take the form of tariffs.
Back in the U.S., where the DOC voted last fall to apply tariffs to Chinese PV modules, the CASM’s main complaint since the decision has centered on the fact that PV modules produced in China from cells manufactured in third countries are not subject to tariffs.
Many Chinese manufacturers have simply shifted portions of their manufacturing processes to neighboring countries and have evaded tariffs with minimal hassle or pricing changes.
Another one of the CASM’s recent challenges to the DOC decision focuses on the exclusion of rolled glass from the investigation.
In an October 2012 intra-agency memorandum archived on its website, the DOC acknowledges that the coalition did initially petition for both rolled and float glass to be investigated. But the investigation itself included only float glass.
“The information provided by [the CASM] pertained solely to float glass, which is clearly distinct from rolled glass,” the DOC wrote in the memorandum. “Thus, in light of the evidence presented by [the CASM] in support of its allegation … which was for float glass, there was no basis to expand the allegation to cover rolled glass.”
In response, the CASM has argued that in similar trade cases, the DOC has found that rolled glass was illegally subsidized and dumped in the U.S. EU ProSun Glass has not yet publicly indicated which types of glass it has petitioned for inclusion in its complaint.
Massive Consolidation
Expected This Year
Worldwide, the total number of companies participating directly in the manufacturing of PV solar panels - from polysilicon manufacturing through module assembly - is set to fall to approximately 150 this year, down from about 500 in 2012, according to information and analytics provider IHS. This figure compares to about 650 in 2011 and 750 in 2010.
“It would be a major understatement to say that consolidation is occurring in the PV supply chain this year,” says Mike Sheppard, senior photovoltaics analyst at IHS. “Most upstream PV supply operations will simply cease to exist, rather than being acquired by other companies.
“Most of these suppliers actually have already stopped production - and will never restart,” he adds.
According to the report, the companies at the highest risk of going out of business this year include integrated suppliers that manufacture PV polysilicon, ingots, wafers and cells to offer complete solutions.
Second- and third-tier suppliers of polysilicon, ingots, wafers and cells for crystalline silicon modules also will struggle to stay afloat. Finally, smaller thin-film cell providers will face low sales and limited market sizes, putting them on the endangered list.
Many integrated players are expected to fold up shop this year, as the large expense of building integrated facilities - and then seeing them underutilized for the better part of a year - will prove to be financially unsustainable. Many of these players are based in China.
Government subsidies could be an option to keep integrated suppliers operating. However, although IHS believes that some suppliers may be propped up by the Chinese government this year, the majority will dissolve.
With price declines still occurring across the board in 2013, low-cost players will get the lion’s share of the global market, the report predicts. Upstream second- and third-tier suppliers of polysilicon, ingots, wafers and cells will struggle to survive the year in markets that do not have local-content requirements. Many of these companies will not be able to float operations for a very long period of time.
For second-tier module manufacturers, the key to surviving this year will be establishing and maintaining strong relationships with downstream players in the emerging markets. Second-tier manufacturers must move faster than those in the top tier in order to grab mindshare early.
Flexible business models, with consistent outsourcing, will be needed in order for these companies to succeed, IHS says. Because contract manufacturers require certain levels of business to remain profitable, securing stable relationships with these companies is also critical for second-tier module manufacturers.
Second-tier module makers also must be flexible enough to capitalize on the volatility in high-growth markets, which consist mostly of small and midsize engineering, procurement and construction companies. These companies initially have less allegiance to established top-tier manufacturers.
But as their experience in this area grows, price becomes a primary factor, favoring low-cost producers. This is already true in markets like India, and it is becoming a factor in Latin American countries such as Chile.
Finally, thin-film module manufacturers will have to adopt survival strategies similar to those used by the second-tier c-Si module suppliers. This will be particularly true if pricing for thin-film modules doesn’t remain competitive with c-Si during the year, the report notes. If thin-film pricing does not decline at the same rate as c-Si, the technology will be relegated to select niche markets that generate scant demand.
Module suppliers in these three categories - integrated manufacturing, specialized second-tier manufacturing and thin-film manufacturing - will experience the toughest challenges this year, given the hurdles needed to make those operations successful. Because of such challenges, some of these companies will fail.
Consolidation and reduction in a supply chain results in capacity being taken offline, often benefiting the remaining players in a market. But according to the report, given the weak conditions in today’s PV market, there is no guarantee that the supply-chain shakeout will help surviving suppliers in 2013 - or even make it less likely that they will fail. S
New & Noteworthy
U.S. Slams India’s ‘Discriminatory’ Rules