The European Union (EU) has undoubtedly been one of the global leaders in spurring the advanced development and deployment of renewable energies worldwide. The vision set forth by the Renewable Energy Directive 2009/28/EC – a directive setting continent-wide targets for all EU-27 member states to increase their share of renewable energy in the national energy mix – continues to stand out as the primary example of a coordinated effort to lead a large-scale energy transformation. While renewable energy targets now exist in 118 countries worldwide, few regional commitments to renewable energy deployment exist, though this trend is beginning to change.

In recent years, certain EU member states have gone beyond what is required under the Directive to set even more ambitious national goals. Denmark, for instance, is now targeting 100 percent renewable energy across their entire energy supply by 2050. These efforts should be applauded and their lessons replicated around the world. However, these successes should not obscure the very serious gap that is emerging between current policies and mechanisms and the significant challenges still facing the European renewable energy sector.

A recent European Commission report has outlined the challenging road ahead for member states as they continue down the path towards their 2020 commitments. The Commission’s report sends a mixed message. On one hand, all but 2 countries – Latvia and Malta – met their first interim final energy targets defined under the Directive. In fact, 13 countries even outperformed the target by over 2 percent.

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On March 15, Suntech Power Holdings Co., one of China’s largest solar photovoltaic (PV) manufacturers, failed to pay its US$541 million convertible debt, causing its stock price to bottom out. (See Figure 1.) Three days later, eight Chinese banks filed a petition asking for the company’s main operating subsidiary, Wuxi Suntech, to be declared insolvent and proceed to restructuring. With Wuxi Suntech owing the banks 7.1 billion RMB (US$1.14 billion), the company was forced to declare bankruptcy on March 20.

Figure 1: Stock price of Suntech Power Holdings Co. (Unit: USD) (Source: Google Finance)

There was discussion about whether the Chinese central government would rescue the former star of China’s solar sector, but the National Development and Reform Commission (NDRC), abiding with its new policies for renewable energy, said the government “wouldn’t and shouldn’t intervene.”

This put the municipal government of Wuxi, in China’s Jiangsu Province, in a dilemma. On the one hand, Suntech had become a model enterprise showcasing Wuxi’s sustainable development success; it would be extremely difficult for the local government to let it go. In 2012, a proposal from Suntech Power to shut down Wuxi Suntech had distressed the local government so much that the municipality made an effort to save the company, securing an additional 200 million RMB ($32.2 million) loan from the Bank of China.

But this time around, having lost the creditworthiness to receive strong support from state banks, government bailout options were limited. Wuxi Guolian Development Group, a financial company controlled by the municipal government, was expected to take over Wuxi Suntech. On March 20, a former senior executive of Guolian was assigned to be the new president of Suntech Power. This marked the official entry of local government into the restructuring process for the suffering Chinese solar company.

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Last month, the United States filed a complaint with the World Trade Organization (WTO) to challenge India’s domestic content requirements (DCR) for projects under the country’s Solar Mission – a national program aimed at reaching 20,000 megawatts (MW) of grid-connected solar power capacity in India by 2022, enough to power almost 30 million Indian homes at current average levels of consumption. According to U.S. Trade Representative Ron Kirk, the DCR provisions in the Solar Mission that require projects to use solar panels produced within the country, as well as subsidies to solar power producers using domestically manufactured equipment, violate WTO rules prohibiting discrimination in favor of domestic goods.

India's domestic content requirements for solar projects has prompted the United States to file a complaint with the WTO. (Source: Treehugger).

Phase I of India’s Solar Mission, which draws to a close at the end of this month, requires crystalline silicon (cSi) solar photovoltaic (PV) projects to use Indian-manufactured modules and concentrating solar power (CSP) projects to use at least 30 percent Indian-manufactured equipment. During Phase I, thin film solar PV panels were exempted from the DCR due to the lack of thin film manufacturing within India.

While the United States has long stated its opposition to India’s Solar Mission DCR provisions, the recent timing of the WTO challenge is likely due to the expectation that India will expand the DCR to cover thin film PV modules in Phase II, which starts next month. While there is significant competition in the global cSi PV manufacturing market, the United States is a dominant player in thin film manufacturing. First Solar, an American company, is by far the world’s largest thin film manufacturer. First Solar thin film systems currently make up more than 20 percent of India’s solar PV market. Conversely, solar projects in India accounted for eight percent of the thin film modules manufactured by First Solar in 2011, and the company continues to seek opportunities in the country. A DCR provision for thin film solar projects in India could deal a significant blow to U.S. solar manufacturers, in particular First Solar.

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While the Jamaican government’s efforts to increase renewable energy production have yet to produce significant results, some private enterprises are forging ahead on their own. Due to the prohibitively high cost of purchasing electricity from the national grid operator (around 40 cents per kilowatt-hour), many companies have found it is cheaper to generate their own electricity – often with renewable energy sources.

The Jamaica Broilers "Best Dressed Chicken" mascot looks forward to solar power. (Source: Facebook, Best Dressed Chicken)

The Jamaica Broilers Group, the largest poultry producer in the Caribbean, is one of the companies pioneering the transition to renewable energy. As with many other industries and services in Jamaica, electricity is the largest single cost in chicken farm operations. In order to reduce this expense, Jamaica Broilers is currently installing solar photovoltaic (PV) systems – along with efficient LED lighting – at its chicken houses. The first phase of the project will install 15 kW systems at about 40 chicken houses by the end of March, for a total capacity of approximately 600 kW.

The project will cost an estimated US$10 million over two years. Rather than require that chicken farmers leverage their farms as collateral to purchase the solar equipment, Jamaica Broilers will facilitate obtaining supplies and financing to allow farmers to lease the equipment. Each participating farmer applies for the loan, which is financed by the Development Bank of Jamaica (DBJ) through the PanCaribbean Bank at 8.5 percent interest – a relatively low rate for the country. The expected payback period – that is, the amount of time it takes for reduced electricity costs to make up for the solar panel investment costs – is five to six years.

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I visited Berlin a week after President Obama’s reelection, and came away envious of the strategic clarity and political consensus that mark Germany’s new energy strategy. After months of watching Democrats and Republicans bash each other with vacuous and contradictory rhetoric about where our country’s energy future lies, it was refreshing to see that one of our key allies has a plan—and is implementing it.

Despite having a relatively weak solar resource, strong domestic policy has enabled Germany to dominate the global solar PV market (Source: REN21).

In 2012, Germany got more than 25 percent of its electricity from renewable energy, up from 5 percent in 1995 and 10 percent as recently as 2005. Since 1995, the U.S. share of renewable electricity has hardly budged—going from 10 percent to 11.5 percent.) At the same time, Germany has rapidly increased its energy efficiency, and reduced its carbon dioxide emissions and dependence on imported fossil fuels. Government plans are even more ambitious—at least 80 percent of the nation’s electricity is to come from renewables in 2050.

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India has yet to take a definitive step in the anti-dumping war that is currently raging in the solar energy sector; however, its policymakers may be guided by decisions made by U.S. and European Union regulators. An ongoing question is whether the Indian government should create a trade barrier against cheap imports from foreign solar manufacturers, primarily those from China. Options include levying an anti-dumping duty (such as a countervailing duty to offset the huge subsidies offered by China to its solar manufacturers) or offering preferential tariffs to domestic solar equipment manufacturers.

Solar power industry in India must overcome numerous development challenges in order to continue its rapid growth. (Source: Solar Thermal Magazine)

One reason why Indian solar manufacturers might be harder hit than those the United States is because India’s solar industry is relatively new, not more than a decade old. It lacks the same level of technical capacity that its foreign counterparts have. As a new entrant, the Indian industry is relatively small scale and fragmented, leading to higher production costs.

Production capacities for Indian module manufacturing range from only 10 to 20 megawatts (MW), compared to the global average of 75 megawatts. Countries such as China and Taiwan have a clear price advantage over Indian manufacturers because of their economies of scale. Both subsidies and economies of scale have helped Chinese manufacturers produce solar panels and equipment that are 25 to 30 percent cheaper than those produced in India.

What makes India’s case singular is that the Indian manufacturers have not only condemned the Chinese solar manufacturing industry as a cause for their trouble, but also accused U.S. financial institutions, such as the U.S. Export Import Bank (Exim) and the Overseas Private Investment Corporation (OPIC), of adding to India’s woes through their pro-U.S. solar equipment policies.

Indian solar panel manufacturers and the media have raised concern about the fact that both ExIm Bank and OPIC offer low-interest loans (with long repayment periods) to Indian solar project developers—under the mandatory condition that they purchase the panels from U.S. manufacturers. While the ExIm Bank and OPIC refer to these loans as “Fast Start Finance,” some Indian environmental think tanks, such as the Centre for Science and Environment, allege that these programs undermine India’s broader development goals by pushing Indian solar equipment manufacturers out of competition.

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Jawaharlal Nehru National Solar Mission Timeline. (Source: Wikimedia Commons)

Over the past several years, India has swiftly developed its solar power sector. Not only has the country already reached its target of 1 gigawatt (GW) of installed solar capacity this year but the cost of domestic solar power is now on par with the cost of electricity from new coal-fired power plants.

For India, this is the first step toward achieving overall grid parity for solar, a goal that the consulting group KPMG projects will be attainable in the country by 2017–19. This estimate is based on two assumptions: (1) that the cost to consumers of conventional power generation will continue to increase, and (2) that the costs of solar power will continue to decrease.

Reaching grid-parity for solar has great significance for India for several reasons:

• Greater reliance on solar power will boost the country’s energy security and loosen its heavy (and costly) dependence on coal. Contrary to the belief that India has huge domestic coal reserves, the country in fact must import coal to meet its energy demands. Currently, India’s top power producer, National Thermal Power Corporation Ltd, meets about 15 percent of its needs through imported coal, and it plans to increase coal imports to 16 million tons this fiscal year due to local shortage. Already this year, the company has called bids seeking 7 million tons of imported coal to supply its 16 power stations. This import reliance makes India not only politically vulnerable, but also economically shaky. Fossil fuel subsidies contribute to India’s mounting public deficit in the fuel sector—a deficit that has led rating agency Standard and Poor to consider downgrading India’s debt from “investment-grade” to “junk” status.
• Cheaper solar power will help thousands of Indian homes gain access to electricity for the first time ever. According a 2010 report from the International Energy Agency, the government of India has pledged that the entire nation will have access to electricity by 2012. This plan appears to be ambitious, however, because India would need to install an estimated 200 GW of generation capacity to sustain economic growth of 8 percent.
• Solar power at grid-parity can help address India’s 9 percent power deficit. The nationwide blackout that affected India this July, which has been attributed to poor grid management and over-drawing of the power supply, is still fresh in the country’s memory. Such problems will likely continue unless new power supplies are identified and connected to the grid.
• Comparable costs for solar and conventional generation could lead to an increase in solar’s share of India’s power generation portfolio. This in turn would contribute to an associated decrease in the power sector’s greenhouse gas emissions.

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At the close of a summer in which environmental news was dominated largely by record temperatures, devastating drought in the U.S. Midwest, and lackluster progress at the Rio+20 summit, reasons for optimism can seem few and far between. But in two seemingly unlikely places—countries commonly (though simplistically) associated with poverty, ecological disaster, and violence—renewable energy projects are demonstrating their ability not only to reduce greenhouse gas emissions, but to power economic and social recovery.

Solar panels stacked on the roof of Mirebalais National Teaching Hospital. (Source: Partners in Health)

In both Haiti and Rwanda, recent stories of progress and achievement reveal how renewables are powering national development from the ground up.

Haiti: Building back better

In the wake of Haiti’s disastrous 2010 earthquake, which thrust the country once more into the international spotlight as tragic victim, the Haitian government and international organizations voiced the intention to “build back better.” The goal was to ensure that the post-earthquake rebuilding process focused not only on reconstructing fallen buildings, but on making sure that the country as a whole became more resilient.

According to the Haiti Regeneration Initiative, Haiti currently faces four major challenges: post-earthquake recovery and reconstruction; economic and social development; environmental stabilization and restoration; and increasing resilience against future hurricanes, floods and earthquakes, and economic shocks. A crucial element for achieving all four of these goals is the extension of affordable, reliable, and sustainable electricity services.

The Haitian government recognizes the importance of electricity access. In January 2012, the government launched the “Ban m limyè, Ban m lavi” (“Give me light, give me life”) program, an ambitious plan to extend electricity access to 200,000 rural households over the next two years. The program demonstrates an explicit commitment to making rural electrification a central component of the country’s broader development strategy.

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New policies in Central America are connecting small-scale renewable energy users to the grid—but not in the direction you might expect.

Net metering policies allow owners of small-scale distributed renewable energy systems to feed power produced by their installations back into the grid. Under net metering, utility customers who own such systems can install a bi-directional meter that records both incoming and outgoing power and calculates the net difference. If customers produce more electricity than they use, they receive compensation from the utility company, often in the form of avoided costs or by receiving a pre-selected payment per kilowatt-hour (kWh).

Solar project in Esterillos. Source: Instituto Costarricense de Electricidad

Net metering is a low-cost, low-risk policy and has been successfully implemented in many countries around the world. The right of utility customers to produce renewable energy and connect their systems to a distribution network – in conjunction with other polices that promote renewables such as tax concessions and financial assistance —is helping individuals and communities to introduce renewables into the grid on a small scale. In Central America, Panama, Costa Rica, and Guatemala have already introduced net metering policies to promote renewable energy deployment.  

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As I discussed in a previous blog, renewable energy trade disputes are becoming a particularly contentious issue between many nations. The United States and China are facing off in one of the most publicized of these disagreements. Further action was taken last week as the U.S. Department of Commerce made its second ruling of the year on this issue, placing tariffs on solar photovoltaic (PV) imports from China.

A Suntech Power Holdings employee at a Chinese solar PV manufacturing facility. The Commerce Department ruling placed a 31.22% tariff on Suntech products. (source: China Daily)

The previous Department of Commerce ruling from March 2012 placed countervailing duties on solar PV imports in order to balance what the department determined to be illegal subsidies to solar PV manufacturers from the Chinese government. The initial tariff rates, which were set between 2.9 and 4.73 percent, came in much lower than what was expected by most experts.

The new preliminary ruling comes in response to the second set of claims by the Coalition for American Solar Manufacturing (CASM) that Chinese solar companies have been dumping their products in the U.S. market at below market value. The coalition, led by SolarWorld USA, looks to level the playing field for U.S. solar manufacturers against what they see as artificially cheap imports coming from China.

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