Date: 25/02/2023

Relevance: GS-2: Effect of Policies and Politics of Developed and Developing Countries on India’s interests.

Relevance: GS-3: Effects of Liberalization on the Economy; Foreign Trade Policy and effects.

Key Phrases: Export Ban, Solar Panel, Cutting Edge Technology, Ultra-thin silicon squares, Technological Collaboration, Institutional Setup, Regulatory Framework, Import Cover, Policy stability, Tariff and Non-Tariff Barrier, Renewable Energy.

Context:

• China has recently amended its rules to ban the export of several core solar panel technologies in order to maintain its leading status and global market share in the sector.

Key Highlights:

• Chinese firms have mastered cutting-edge technology to produce bigger, thinner and smarter wafers which play a big part in reducing the cost of solar power by more than 90 per cent.
• Wafers are ultra-thin silicon squares that are pieced together into solar panels, and China accounts for 97 per cent of global output.

Reason and Impact:

• The ban is aimed at reducing the development of alternative supply-chain ecosystems anywhere in the world thus making key nations dependent on China to propagate their solar energy targets.
• Given China’s dominant position in wafers, it makes sense for China to consider the ban in order to avoid leaking of technology to overseas players.
• China’s solar industry is worried about efforts from the US, EU and India to develop home-grown solar manufacturing industries.
  • So these recent tech export controls are aimed at scuttling the plans to develop alternative supply-chains at the national level or even under Indo-Pacific Economic Forum (IPEF) initiative.
• The export ban aims to slow-down the speed at which its competitors can develop their own supply chains.
  • The stakes are higher because manufacturers who have already established facilities using Chinese equipment may find it difficult to obtain services and replacement parts due to the export ban on large silicon, black silicon, and cast-mono passivated emitter and rear cell (PERC) technologies.
• The ban is the Chinese agenda to scuttle India’s plan to support domestic industry by imposing high tariffs.
  • When Indian firms started importing wafers (HSN-3818) instead of solar panels, the prices of polysilicon prices shot up, an area where India doesn’t hope of ramping up capacities for some time.
• The move underscores the growing strategic importance that countries like India, the US and from the EU are placing on solar-cell manufacturing as it becomes the planet’s biggest source of renewable energy.

Way Forward:

• If Indian manufacturers have to use older wafers, it will diminish the cost and energy competitiveness of their panels thus pricing them out in the international market.
  • Therefore, it is important to learn that the ban is not on export of finished material but is targeted on technology, tech-knowhow and manufacturing methods of advanced solar wafers, thus restricting the development of such production ecosystems in countries like India, the US and EU.
• Business firms in India are trying to develop domestic supply-chains to chip-away China’s advantage but still lack the technical expertise in development of larger wafers to cut costs and increase productivity.
  • So, it is time to re-strategise and reorient our focus not only on enhancing domestic production under PLI but also fostering research and innovation on development of smarter, thinner and agiler wafers to pursue our mission of 450 GW of solar energy.
• Considering the issues of availability and high costs of energy, India should explore the possibility of co-developing polysilicon with a partner country which has a cheap and abundantly available energy source, for example, Oman or the UAE.
• Further to ape-out China’s tech advantage, Indian firms should be open to technology purchases but simultaneously nurturing indigenous R&D and innovation systems supported by incentivised policy interventions.
• India should explore enhanced academic partnership, joint research with countries like Japan, South Korea and the West to confront the Chinese agenda of alleviating the world with its solar-tech ban.
• India lacks in-house material, technical know-how, production capabilities and manufacturing capacities at the initial three stages of value which are sourcing polysilicon, ingots and converting them into cells.
  • Thus, our policy interventions in the form of incentives/subsidies, both at the vertical and horizontal levels, should be focussed on only these stages.
  • India has requisite capabilities for the last three stages of the value-chain.
• The intended ban may look like a tech-war between the US and China, but we should not underestimate the collateral damage to us with the butterfly-effect of this export ban.
  • Therefore, considering the challenges at various stages of manufacturing of solar cells, we should not only be strategising for localisation but must be vigilantly open to collaboration, joint research, co-designing, co-developing, and co-production at the initial three stages of the solar value-chain.

Conclusion:

• India can transform itself by transitioning not only into renewable energy but also leading the path of net carbon-neutrality.

Source: The Hindu BL

Mains Question:

Q. Discuss briefly the effects of China's export ban on solar tech and also suggest measures to address these effects. (150 Words).