India Gets Sunnier for Solar Companies

Solar energy is one of the best alternate energy sources in terms of addressing rising global concerns on pollution from power plants. With about 300 clear days of sunlight and availability of land, India could utilize solar energy on a massive scale to provide green energy to the growing nation.

The Indian government’s intention to implement anti-dumping duties on solar panel imports earlier this year to save domestic panel producers raised concern over the prospects (read: Will India Put U.S. Solar Exports at Stake?). But the recent development revitalizes hope for the industry’s prospects.

What Was the Anti-Dumping Plan?

Anti-dumping duty is a ploy used by governments across the globe to safeguard the interest of domestic players. After a detailed investigation, the Directorate General of Anti-Dumping & Allied Duties, a government unit under the Ministry of Commerce, forwarded a proposal to the Indian government to implement anti-dumping duties, ranging from 11 cents to 81 cents per watt, for imports from countries like the U.S. and China, among others.

We note that the U.S. and China have been at odds with each other, imposing solar tariffs targeting the other country. The million dollar question was that whether India would join the trade conflict by levying anti-dumping duty – a move that wouldn’t have been in the best interest of promulgating solar.

What's the Current Standing?

Last week, the Indian government, through its Commerce Ministry, categorically declared that the anti-dumping proposal is not notified and hence allowed to lapse. This means that solar panel exports to India will be free from any imposition of anti-dumping duties.

The Indian government has a broader take on the issue. The current level of domestic solar panel production is way too low to meet the long-term solar power ambition of the country.

What Does It Mean for the Solar Whales?

U.S. and Chinese solar panel producers are among the largest to manufacture high quality solar panels. At present, nearly 70% of the solar projects in India are being built from Chinese solar panel imports. The Indian government in Jan 2010 had set a target of adding 20,000 MW of grid connected solar power plants by 2022. The newly elected pro-business Modi government now has an ambitious plan of connecting all Indian households with solar energy by 2019.

The Indian government’s measures to both promote solar as well as support healthy trade practices will act as a tailwind for the following Chinese and U.S. solar equipment manufacturing stocks.

First Solar Inc. (FSLR) with a Zacks Rank #3 (Hold) is a U.S. solar cell manufacturer, aiming to further expand its footprint in India. The company has already announced its first self-developed project in India and will start construction on multiple projects in 2014 totaling 45 MW AC.

With continuous investment in R&D to improve the quality and efficiency of its solar products, we believe this Tempe, AZ-based company is well poised to further penetrate the Indian solar markets.

JinkoSolar Holding Co., Ltd. (JKS) currently has a Zacks Rank #3 (Hold) and is based in Shangrao, the Peoples Republic of China. This company is quite optimistic about rapidly rising solar cell demand in the Asia-Pacific region, with India and Japan being the key solar cell markets this Chinese manufacturer is aiming at besides its own country.

JinkoSolar Holding has already signed a strategic distribution agreement with PROINSO, a distributor with a strong presence in the Indian market. With solar cell exports from China to Europe dwindling, the Indian markets could be the next favorable destination.

Trina Solar Ltd. (TSL) also has a Zacks Rank #3 (Hold) and is based in Changzhou, China. The company is looking forward to opportunities in the emerging markets and has secured contracts in South America and in Southeast Asian countries.

India could be the land of opportunity for these Chinese solar cell manufacturers. Trina Solar has plans to set up 1500 MW of grid connected solar power projects in India.

Final Take

We view the decision of the Indian government to eschew anti-dumping duties as a win-win solution for the global exporters as well as the Indian administration. The global players will now find India – the second largest populated country of the world – the happy hunting ground to sell solar. The Indian government on its part is keen on achieving its solar objectives and contributing towards a cleaner and more sustainable environment.

In a nutshell, until the Indian producers come of age and compete with the global players on an equal footing, the non-levy of anti-dumping will allow the large global solar panel producers to tap this growing market.

Read the Full Research Report on TSL
Read the Full Research Report on FSLR
Read the Full Research Report on JKS


Zacks Investment Research