Challenges faced by local solar panel manufacturers: Solar manufacturing challenge

Source: The post challenges faced by local solar panel manufacturers has been created, based on the article “Solar manufacturing challenge” published in “Business standard” on 5th April 2024.

UPSC Syllabus Topic: GS Paper 3- economy- infrastructure – Energy

News: This article discusses how subsidies and import restrictions aimed at boosting local solar panel manufacturing may not be effective due to lower costs of imported panels and the commoditized nature of the product.

For details information on Solar Energy in India read Article 1, Article 2

What challenges are faced by local solar panel manufacturers?

Competition from Low-Cost Imports: Local manufacturers struggle to compete with cheaper solar panels imported from Southeast Asia. These imports are often more affordable even with tariffs applied. For instance, best-in-class modules from Southeast Asia are becoming “irresistibly cheap” for US developers.

Standardized Product Issue: The solar industry produces highly standardized products. This makes it challenging for local manufacturers to offer something unique or superior. As Pol Lezcano of Bloomberg NEF notes, the solar industry’s commoditized nature limits the competitive advantage of local production.

Global Manufacturer Dominance: The sheer scale of production by global leaders like China’s JinkoSolar overshadows local manufacturing. JinkoSolar alone shipped over 78 gigawatts in 2023, with plans to increase to 100-110 gigawatts in 2024, surpassing demand in major markets outside China.

Economic Shifts: Companies like Meyer Burger are moving operations from Europe to the US due to deteriorating business climates, demonstrating the challenging environment for local solar panel production in certain regions.

What efforts are being made to boost local solar panel manufacturing?

Subsidies and Incentives: The article highlights that countries like the US and Europe are offering subsidies to encourage local solar panel manufacturing. These include financial incentives to make local production more viable against cheaper imports.

Import Disincentives: Alongside subsidies, there are disincentives for importing solar panels. This approach includes imposing tariffs on imported solar products to make locally manufactured panels more competitive.

Strategic Company Movements: An example is provided with Meyer Burger, a Swiss solar panel maker. Facing a challenging business environment in Europe, the company is refocusing on manufacturing in the US, influenced by the local manufacturing push there.

What is the status of methane control efforts?

Methane emissions, mainly from the energy sector and agriculture, are a significant concern.

Global efforts are underway to monitor and reduce these emissions. For instance, over 50 oil and gas companies have committed to reducing their methane emissions by the end of the decade.

Tools like the MethaneSAT satellite and initiatives like the International Methane Emissions Observatory are helping in tracking and managing methane emissions effectively.

However, whether these efforts will lead to actual reductions in methane emissions remains uncertain.

Questions for practice:

Examine the strategies being employed to support local solar panel manufacturing in the face of competition from low-cost imports.