INDIA’S ambitious Jawaharlal Nehru National Solar Mission, which envisages the generation of 100GW of solar power by 2022, received a minor setback earlier this month.

A World Trade Organisation dispute settlement panel ruled in favour of the US and agreed that the country violated trade rules by imposing local content requirements for solar cells and modules.

While the WTO has not announced its ruling officially, it has reportedly sent confidential reports of its ruling to India and the US — as is usual practice while settling disputes — before making it public. India is expected to appeal against the ruling.

The US first filed a case against India in 2013 when the then-United Progressive Alliance (UPA) government unveiled the Jawaharlal Nehru National Solar Mission (JNNSM), which proposed generating 20GW of solar power by 2020. A year later, after the BJP-led National Democratic Alliance (NDA) came to power, Prime Minister Narendra Modi raised the target to 100GW.

The Indian government offers financial aid of up to Rs10m per MW to the implementing agency for setting up solar units on the condition that the project developers source 30pc of the required equipment from domestic manufacturers.

The US has accused India of unfairly restricting access to American suppliers, though India claims that the local content requirement relates to orders accounting for just a tenth of the total power generation capacity.

Domestic manufacturers in India, led by the Indian Solar Power Producers Association, have been strongly advocating that all solar modules be sourced from them. The industry accuses international suppliers, including many from the US, of dumping outdated technology on India.

Interestingly, while the US accused India of violating provisions of the Trade-related Investment Measures (Trims) under the WTO, India retaliated as well, claiming the US too provides subsidies to its domestic manufactures and also stipulates domestic content requirements for solar companies.

But despite the public posturing at the WTO by the two nations, bilateral ties in the area of renewable energy between them remain cordial. Just two months after the US dragged India to the WTO, the two countries signed a memorandum of understanding (MoU) over the extension of cheap loans by the US for development of renewable energy in India.

Indian government sources also believe that the WTO ruling is unlikely to impact the country’s solar power plans and it will also not dampen the sentiments of global investors seeking to tap opportunities in the country. Estimates are that India will need investments of about $250bn to meet its target of installing 100GW of solar power and 60GW of wind power by 2022.

American firms, including First Solar and SunEdison Inc., have invested in the country, while green energy major NRG is also looking at foraying into the Indian market.

Last week, SunEdison Inc., the world’s largest renewable energy development firm, signed a MoU with the government of the southern state of Tamil Nadu to develop 2GW of wind and solar power over the next five years. SunEdison aims to develop over 15GW of renewable energy in India by 2022.

“SunEdison is dedicated to furthering India’s renewable energy programme, and has committed to develop and construct 15.2GW of clean and cost effective wind and solar power projects in the country by 2022,” said Pashupathy Gopalan, president of Asia-Pacific and Sub-Saharan Africa.

INDIA’S power generation capacity adds up to nearly 275GW, but renewable energy accounts for just a fraction at 37GW. Earlier this month, the Ministry of New and Renewable Energy revealed that the installed capacity of grid-connected solar power had crossed the 4GW mark. Just five years ago, India’s solar energy capacity added up to a mere 12MW.

The ministry has set a target of 1,400MW of additional solar capacity for the current year and is confident that this would be easily achieved. During the first four months of the current fiscal (April to July), about 866MW of renewable energy capacity (both solar and wind) were added.

The government is also moving on several fronts to boost the solar energy sector. Recently, it asked the state-owned National Thermal Power Corporation (NTPC), the largest power utility in the country, to bundle cheap thermal power with the more expensive solar power to ensure that the distribution companies can afford to buy electricity.

Many state-owned distribution companies — which have been forced over the years to offer highly subsidised tariffs to farmers and the poor — are virtually bankrupt and are reluctant to clear their bills. Increasingly, with India’s power generation capacity soaring, the distribution companies are reluctant to buy the additional power as they are unable to pay for it.

But fortunately for the government’s JNNSM, solar power is rapidly reaching the level of grid parity (which means its cost would be equivalent to that of traditional, thermal power).

The cost of solar power has tumbled from a high of nearly Rs18 per unit about five years ago to a little above Rs5 at present. In contrast, the price of thermal power has almost doubled from Rs2.5 per unit about two years ago.

One reason for the sharp decline in the cost of solar power is the remarkable drop in the price of solar modules, which account for 80pc of the cost of a power plant. It has fallen from a high of $2 per unit about three years ago to just around 60 cents. Chinese manufacturers are selling solar modules at rock-bottom prices, slashing the cost of solar energy.

Demand for solar equipment will continue to soar over the coming years. Indian Railways, for instance, plans to put up solar panels on the roofs of over 500 trains to generate electricity and slash its energy costs. It also plans to set up 500MW solar capacity panels on the rooftops of railway stations.

And earlier this month, the Kochi international airport in the southern state of Kerala became the world’s first airport to operate completely on solar energy. The privately-managed airport has deployed over 46,000 solar panels across 45 acres of land, which helps generate nearly 60,000 units of electricity, making it ‘absolutely power neutral’.

Published in Dawn, Business & Finance weekly, September 14th, 2015

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