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US Appeals to WTO: Stop India's Solar Domestic Content Provisions

Almost exactly one year to the day after launching an initial probe into India's solar energy policies, the U.S. yesterday officially followed through by filing a petition with the World Trade Organization challenging domestic content provisions within India's "Phase II" of its National Solar Mission (NSM). Technically, as a formal first step the U.S. has requested for the WTO to help find common ground with dispute settlement consultations; if no resolution happens within 60 days the U.S. may press for a formal WTO panel to settle the issue.

"These domestic content requirements discriminate against U.S. exports," stated U.S. Trade Representative Michael Froman, reiterating the U.S. argument from the formal complaint it lodged with the WTO last February. "These types of 'localization' measures not only are an unfair barrier to U.S. exports, but also raise the cost of solar energy, hindering deployment of solar energy around the world." India, for its part, says it will dispute the complaint, and sees plenty of room for imports.

India's NSM was launched in 2010 to tap and expand India's solar energy sector, with aggressive goals of 20 GW of grid-connected solar over roughly a decade, and including domestic content requirements (DCR), initially specifying silicon-based solar PV cells and modules but not thin-film solar PV technologies -- a loophole that helped First Solar quickly target and establish India as a key growth region. But in Phase II of the NSM finalized late last year the DCR was tweaked to include thin-film technologies as well.

How successful those DCR rules have been is unclear at best. Last month India's long-awaited NSM Phase II national solar auction attracted three times the allotted 750 MW of capacity, and far more proposals involving the DCR than had been expected. Yet the World Bank recently suggested rather than rely on DCRs for c-Si manufacturing India should strengthen manufacturing capabilities elsewhere such as solar thermal which aligns better with other strong domestic industries.

Domestic content provisions have cropped up as sore points in many nations' energy incentives policies, with the industry itself split on this issue depending where in the value chain you ask. The strong growth of Brazil's wind energy sector has been somewhat tempered by its own domestic content provisions and their impact on project economics going forward. A year ago the WTO ruled against Ontario's domestic content provisions, thus establishing possible precedent for its take on this newest case.

This dispute might not have the same broader economic and geopolitical implications as the U.S.' other solar PV trade case against China. But India is a key ally in the region and Asia's third-biggest economy, and trade between the U.S. and India has surged fourfold in the past decade, points out Bloomberg. And India's solar energy goals are as lofty as anyone's, including several gigawatts' worth of massive "ultra-mega" solar plants.

While vocal about pursuing a negotiated solution to the U.S.-China dispute, the U.S. Solar Energy Industries Association (SEIA) says it "strongly support[s]" the U.S. pursuit against India's solar DCR, as it did with the initial complaint last winter. "Localization barriers are a growing threat to U.S. solar exports and clearly violate WTO rules," stated SEIA president/CEO Rhone Resch. "Over the past three years, the U.S. government has provided India every opportunity to remove restrictive and unfair marketplace requirements. In the absence of any meaningful effort by India to find common ground, it's now time for the WTO to finally resolve these long-festering issues." The SEIA's John Smirnow separately cited $200-$300 million worth of U.S. solar exports harmed by India's DCR.

Lead image: USA and India, via Shutterstock

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