Are U.S. Thin-Film Deals ‘Killing’ Solar Module Manufacturing In India?


As solar manufacturers battle it out under cutthroat pricing conditions, accusations of unfair competitive tactics against particular countries have become common. Of course, the most well-known conflict pits the U.S. – specifically, the Coalition for American Solar Manufacturing (CASM) – against China, which, according to a ruling earlier this year by the U.S. Department of Commerce, provided illegal subsidies to its PV manufacturers and allowed them to flood the U.S. market.

The latest controversy, however, paints the U.S. as the aggressor rather than as the victim. India's Centre for Science and Environment (CSE), a research and advocacy organization, claims the U.S. is ‘killing’ India's domestic PV manufacturing industry.

Through its Export-Import Bank (Ex-Im Bank) and Overseas Private Investment Corp. (OPIC), the U.S. government has long promoted the export of domestically manufactured PV modules and related products to projects in India through low-interest loans to Indian solar developers.Â

Last month, for instance, the Ex-Im Bank authorized $57.3 million in loans to India's Solar Field Energy Two Pvt. Ltd. and Mahindra Surya Prakash Pvt. Ltd. Both developers will use cadmium-telluride thin-film PV modules from Tempe, Ariz.-based First Solar.

Similar deals involving the shipping of U.S.-manufactured thin-film PV modules to projects under development in India have regularly dotted the PV finance landscape over the past few years. Ex-Im Bank and OPIC officials consistently praise the contracts as supportive of both U.S. manufacturing and India's ongoing drive to ramp up its solar deployment.

‘In a current environment of limited liquidity, this OPIC facility will provide [India's Infrastructure Development Finance Co.] with precisely the long-term funding it needs to serve India's vast capital needs for the renewable energy and infrastructure sectors,’ said OPIC President and CEO Elizabeth Littlefield in a press release announcing a $250 million renewable energy loan earlier this year.

The CSE takes a drastically different view. In a strongly worded press release issued this week, the organization slams the Ex-Im Bank and OPIC for using loan programs in order to gain a ‘perverted advantage’ in the solar manufacturing marketplace.

‘The U.S. Ex-Im Bank and OPIC have been offering low-interest loans to Indian solar project developers on the mandatory condition that they buy the equipment, solar panels and cells from U.S. companies,’ said Chandra Bhushan, deputy director of the CSE, in a statement. ‘This has distorted the marketplace completely in favor of U.S. companies.’

The group names First Solar and now-bankrupt Abound Solar as the primary winners in this marketplace. Meanwhile, as a result of the U.S.' stronghold on the market, the CSE adds, a full 80% of India's PV manufacturers have fallen on hard times, with empty order books and idle production lines.

Thin-film loophole?
Unlike the U.S.-China trade war, the Indian conflict focuses on thin-film PV modules. Thin film has struggled to gain sizable market share in most locales, but it has enjoyed an unusually strong presence in India.

In fact, 50% of the first batch of PV projects in the government-promoted Jawaharlal Nehru National Solar Mission used thin film, compared to just 14% of the overall solar market, Anjali Jaiswal, director of the Natural Resources Defense Council's (NRDC) India initiative, told Solar Industry in May.

Although thin-film technology is generally believed to be well suited for strong power production in the local climate, domestic-content requirements (DCR) likely play a larger role. India's rules require crystalline modules used in NSM projects to be manufactured in India, but thin film is currently exempt.

‘The domestic-content requirement – as currently structured – has contributed to a growing of the thin-film market, combined with low-cost imports and low-cost international financing,’ Jaiswal said.

The CSE concurs, accusing U.S. companies and government finance agencies of ‘taking advantage of this loophole.’

According to the organization, the Ex-Im Bank and OPIC have been able to close thin-film supply deals by luring Indian developers with attractive interest rates (approximately 3%) and generous 18-year repayment schedules. In comparison, Indian banks' interest rates typically reach 14% or higher.

The CSE further accuses the U.S. government of misusing ‘fast-start financing,’ a $30 billion fund developed at 2009 international climate-change meetings and designed to help developing nations mitigate and adapt to climate change.

‘Fast-start financing was supposed to benefit the developing-country recipient,’ Bhushan stated. ‘Instead, the U.S. has managed to turn it into a game where funds registered as climate funding are given out as loans to projects that promise to buy equipment made in the U.S.’

‘In the long run, this is doing more harm than good to the Indian solar sector,’ Bhushan concluded, calling such actions ‘unethical.’

For India, helping its solar sector and lessening the U.S.' module-supply role could be as simple as modifying its domestic-content requirements to remove the so-called thin-film loophole. In its April report, the NRDC recommended that the Indian government structure the rules to be ‘technology-neutral and market enabling.’

Options include requiring that all PV modules – including thin-film products – used in NSM projects be manufactured in India and, alternately, mandating that a certain percentage of PV components be domestically manufactured.

Other tactics are also available. ‘To avoid being restrictive and to lessen the potential for international controversy or trade disputes, [the government] could consider incentives other than a DCR, such as a preferential tariff, to promote domestic manufacturing,’ the report noted.

Photo: This 4.5 MW PV plant, installed by GreenBrilliance for Dahanu Solar in Pokhran, Rajasthan, India, uses thin-film PV modules from First Solar. Photo credit: GreenBrilliance

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