India appeals WTO domestic content ruling for solar

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India has lodged an appeal at the World Trade Organization’s (WTO) Appellate Body challenging a ruling by the organization upheld in February that effectively struck down its domestic content requirements (DCR) for solar products.

The WTO confirmed earlier this year that an appeal against India’s DCR lodged by the U.S. would be upheld, stating that India’s stance – ostensibly taken to support its ambitious National Solar Mission – was discriminatory against foreign companies and thus violated WTO international trade rules.

However, Indian energy minister Piyush Goyal this week oversaw the appeal at the Appellate Body, particularly regarding the interpretation of Article III: 8 (a) dealing with government procurement and Article XX (d) and XX (J) of general exceptions under which DCR was justified.

The Appellate Body is the highest appeal court at the WTO and can uphold, modify or dismiss the WTO’s previous rulings.

Within the solar industry, however, this action by India’s government is largely viewed as part of an unnecessarily inflammatory tit-for-tat response, and could prove more damaging than it is helpful. Speaking at a solar conference last week, Goyal remarked that he had already identified 16 potential cases to file against the U.S.

While this appeal to the Appellate Body is a more sober, and indeed common, response to WTO rulings, Goyal’s words were labeled as "dangerous rhetoric" by Mercom Capital CEO Raj Prabhu, who told pv magazine that "nobody wins in trade wars", adding: "Rest assured, if India were to file 16 new cases against the U.S., there will be a similar number filed by the U.S. against India."

However, Goyal’s impassioned defense of the Indian solar industry stems from very real and tangible progress the country has made in just a few short years. Speaking at a press conference on Monday, the minister said that a new coal plant in the country "would give you costlier power than a solar plant".

He continued: "Of course there are challenges of 24/7 power. We accept all of that – but we have been able to come up with a solar-based long term vision that is not subsidy based." India’s 2022 goal is to install 100 GW of solar PV capacity, and the country is on course to enjoy its most active year yet in terms of installations, with Prabhu confident that more than 4 GW will be added this year.

The chief concern for the Indian solar sector – trade disputes aside – are the low prices being set at auction, falling as low as INR 4.34/kWh, or $0.06/kWh, which some analysts believe could be off-putting for investors. Aware of these gathering concerns, Goyal recently reiterated that the government is open to the idea of pricing solar power tariffs in U.S. dollars, euros and even the yen, to guard against investor concern that rupee rates can fluctuate wildly.