Will In­dia find its place in the sun with so­lar power?

As In­dia pur­sues its global am­bi­tions, it is us­ing its ex­per­tise in so­lar en­ergy to project soft power in the de­vel­op­ing world through the In­ter­na­tional So­lar Al­liance.

Financial Nigeria Magazine - - Contents -

Since gain­ing in­de­pen­dence in 1947, In­dia has as­pired to be a leader in the de­vel­op­ing world. Its strat­egy for achiev­ing that goal has tra­di­tion­ally re­lied on what po­lit­i­cal sci­en­tist Joseph Nye calls "soft power": ex­ert­ing in­flu­ence through at­trac­tion rather than co­er­cion. In­dia used the legacy of its non­vi­o­lent free­dom move­ment to in­crease its in­flu­ence abroad – par­tic­u­larly among newly in­de­pen­dent colonies in Africa and Asia – dur­ing the first decades following its in­de­pen­dence. And af­ter shift­ing its fo­cus to trade lib­er­al­iza­tion and in­te­gra­tion with ad­vanced economies over the past quar­ter­century, In­dia to­day is once again try­ing to make in­roads with de­vel­op­ing coun­tries, this time us­ing so­lar power.

In 2015, In­dia joined with France to launch the In­ter­na­tional So­lar Al­liance (ISA), a co­op­er­a­tive en­deav­our to fa­cil­i­tate the spread and adop­tion of so­lar en­ergy. The ISA, the first in­ter­na­tional or­ga­ni­za­tion head­quar­tered In­dia, is open to 121 coun­tries ly­ing in the sun­shine-rich area be­tween the Tropic of Can­cer and the Tropic of Capricorn. To­gether, these coun­tries – of which 68 have joined the ISA so far – ac­count for nearly three-quar­ters of the world's pop­u­la­tion but only 23 per­cent of global so­lar ca­pac­ity, and most are poor or mid­dle-in­come states. The or­ga­ni­za­tion, which held its first sum­mit in March of this year, will af­ford In­dia an op­por­tu­nity not only to demon­strate its knowl­edge of scal­ing up so­lar power, but also to assert its lead­er­ship in the de­vel­op­ing world. But turn­ing its so­lar power ini­tia­tive into en­hanced soft power abroad will be a steep task for New Delhi.

Scal­ing Up To­gether

The ISA doesn't re­quire bind­ing com­mit­ments of its mem­bers, nor does it aim to dis­burse large vol­umes of fund­ing. In­stead, it rec­og­nizes the chal­lenges coun­tries, par­tic­u­larly poorer coun­tries, still face in adopt­ing re­new­able en­ergy. Fi­nanc­ing the con­struc­tion of so­lar in­fra­struc­ture, for ex­am­ple, re­mains a ma­jor ob­sta­cle for de­vel­op­ing coun­tries, ac­count­ing for up to 75 per­cent of to­tal project costs in some cases. The costs of some of the tech­nol­ogy re­quired to gen­er­ate and use so­lar power, such as stor­age tech­nol­ogy, also is pro­hib­i­tive for up-and-com­ing states, de­spite a steady de­cline in prices. On top of that, the mar­ket for so­lar en­ergy in smaller states may be too limited to at­tract in­vestors, and gov­ern­ments may strug­gle to dif­fer­en­ti­ate among the ar­ray of tech­nolo­gies and poli­cies to find the best fit for their do­mes­tic en­ergy needs. De­signs and cer­ti­fi­ca­tion stan­dards for so­lar ap­pli­ances rel­e­vant to ru­ral liv­ing – like wa­ter pumps and street lights – have sig­nif­i­cant room for im­prove­ment as well.

To over­come these ob­sta­cles, the ISA pro­poses to pool re­sources such as tech­ni­cal ex­per­tise and pol­icy know-how, along with de­mand for so­lar power it­self, among its mem­bers. The or­ga­ni­za­tion hopes that the re­sult­ing in­te­grated mar­ket will draw $1 tril­lion in in­vest­ment and ad­di­tional so­lar ca­pac­ity of 1,000 gi­gawatts across mem­ber states by 2030. In an­swer to the fi­nanc­ing prob­lem, the ISA is launch­ing a new ini­tia­tive called the Com­mon Risk Re­duc­tion Mech­a­nism, ex­pected to come on­line in De­cem­ber. The mech­a­nism will, as its name sug­gests, re­duce in­vestor risk – from fluc­tu­at­ing lo­cal cur­rency ex­change rates, po­lit­i­cal change or nonpayment from a new so­lar util­ity's cus­tomers – by pool­ing and se­cur­ing fi­nance across mul­ti­ple projects in mul­ti­ple coun­tries. Banks, pri­vate in­vestors and the Green Cli­mate Fund are pledg­ing $1 bil­lion to the ini­tia­tive, and the ISA ex­pects the in­vest­ments to lever­age an ad­di­tional $15 bil­lion of pri­vate sec­tor fund­ing. All told, the or­ga­ni­za­tion es­ti­mates that the Com­mon Risk Re­duc­tion Mech­a­nism will lower costs for so­lar projects in its poorer mem­bers states by about half. Other ini­tia­tives in­clude train­ing 10,000 so­lar tech­ni­cians and set­ting up cen­tres in mem­ber coun­tries to fo­cus on in­no­va­tion, re­search and de­vel­op­ment, test­ing, qual­ity con­trol, and cer­ti­fi­ca­tion.

A Chance to Shine

In­dia has seized on so­lar power as a tool to ex­er­cise soft power for sev­eral rea­sons. For one, the coun­try has first­hand ex­pe­ri­ence

with en­ergy poverty and un­der­stands the plight of other states with limited fuel re­sources. For an­other, In­dia is home to one of the world's largest and most suc­cess­ful mar­kets for so­lar power. The coun­try has in­stalled 23 gi­gawatts of gen­er­a­tion ca­pac­ity (enough to power more than 16 mil­lion homes) in the span of about four years us­ing poli­cies based mostly on mar­ket forces, rather than on sub­si­dies. In­dia's pri­vate sec­tor leads the do­mes­tic so­lar in­dus­try and in­cludes some ma­jor cor­po­ra­tions with deep pock­ets. And since the coun­try lacks the in­vest­ment ca­pac­ity that China has par­layed into bud­ding in­ter­na­tional part­ner­ships through the Belt and Road Ini­tia­tive, its ex­per­tise in so­lar power may be its best bet for forg­ing trade and po­lit­i­cal ties with the de­vel­op­ing world.

To test this strat­egy, In­dia has fo­cused much of its ef­forts with the ISA on sub­Sa­ha­ran Africa. The re­gion made a log­i­cal place for In­dia to roll out its en­ergy en­deav­our given its prox­im­ity to In­dia – and China's grow­ing in­ter­est and in­vest­ment there. Coun­tries such as Tan­za­nia, Ethiopia, Guinea, Mali, Niger, Burk­ina Faso and Mada­gas­car signed onto the ISA treaty on the first day it was open for sig­na­tures, and since then, Nige­ria, Ghana, Gabon and Benin have also joined. Out­side the frame­work of the ISA, un­der which New Delhi has ex­tended a $1.4 bil­lion line of credit to mem­bers of the al­liance, In­dia has al­lot­ted $2 bil­lion for so­lar projects in sig­na­tory states in Africa. It has also stepped up its out­reach to coun­tries across the con­ti­nent over the past decade by hold­ing sum­mits with African lead­ers every three years.

Clouds on the Hori­zon

But In­dia's ac­tiv­i­ties in Africa, in and be­yond the ISA, also ex­em­plify one of the dif­fi­cul­ties its so­lar power diplo­macy will face. If New Delhi takes too ac­tive a role in im­ple­ment­ing the ini­tia­tive, ISA mem­ber states could per­ceive it as an over­bear­ing out­side power. (What's more, In­dia's ties with the African coun­tries par­tic­i­pat­ing in the ISA haven't al­ways been smooth.) To en­sure that ISA mem­bers see it as a bene­fac­tor rather than as an op­por­tunist – a par­tic­u­lar risk since In­dia can't af­ford to bring much of its own money to the ta­ble – New Delhi will have to work to cre­ate equal part­ner­ships with lo­cal gov­ern­ments and businesses. Do­ing so could also help mit­i­gate the In­dian govern­ment's strong ten­dency to bu­reau­cra­tize do­mes­tic in­sti­tu­tions, which could eas­ily spill over to the ISA. The tar­iffs New Delhi re­cently im­posed on im­ports of Chi­nese and Malaysian so­lar mod­ules, how­ever, will un­der­mine the ISA's mar­ket-friendly image.

Be­yond the chal­lenges of main­tain­ing mem­ber coun­tries' good­will, In­dia will run up against some tech­ni­cal dif­fi­cul­ties, too, as it works to pro­mote and ex­pand the ISA. The coun­try is home to sev­eral prom­i­nent think tanks ac­tive in the sphere of cli­mate change and en­ergy pol­icy, but it has yet to de­velop a ro­bust so­lar man­u­fac­tur­ing sec­tor or spear­head se­ri­ous re­search and de­vel­op­ment in so­lar tech­nol­ogy. These de­fi­cien­cies will ham­per In­dia's ef­forts to po­si­tion it­self as a leader in so­lar power, though France's con­tri­bu­tions could help com­pen­sate for its short­com­ings.

Then there's the ques­tion of in­sti­tu­tional over­lap. The ISA emerged sev­eral years af­ter the found­ing of the In­ter­na­tional Re­new­able En­ergy Agency (IRENA) in 2009. The more es­tab­lished or­ga­ni­za­tion, with close to 150 mem­bers, has its head­quar­ters in re­source-rich Abu Dhabi and ben­e­fits from the ma­jor role that Ger­many, an eco­nomic pow­er­house and leader in re­new­ables tech­nol­ogy, plays in it. To prove its own unique value propo­si­tion, the ISA will need to dif­fer­en­ti­ate it­self from IRENA, renowned for achieve­ments in en­ergy pol­icy and in fa­cil­i­tat­ing the scale-up of re­new­ables. Sup­port from the world's two great pow­ers – the United States and China – could help set the ISA apart and make it more ef­fec­tive, but Wash­ing­ton has re­port­edly been am­biva­lent about the idea. Bei­jing, mean­while, re­cently an­nounced do­mes­tic sub­sidy cut­backs that may send com­pa­nies in the Chi­nese so­lar in­dus­try look­ing for ways into de­vel­op­ing mar­kets. Given China's for­mi­da­ble man­u­fac­tur­ing and or­ga­ni­za­tional ca­pac­ity, any co­or­di­nated Chi­nese ini­tia­tive to that end could eas­ily over­shadow In­dia's ef­forts to turn so­lar power into soft power gains.

Even so, with such a wide set of pri­or­i­ties, the ISA doesn't nec­es­sar­ily need to meet all its goals to suc­ceed. The or­ga­ni­za­tion's ini­tia­tives in fi­nanc­ing, train­ing and in­no­va­tion will go a long way to­ward in­creas­ing so­lar ca­pac­ity in the de­vel­op­ing world and per­haps make Gu­ru­gram – the fast-grow­ing satel­lite city of New Delhi where the ISA is based – a so­lar hub along the way. So while the en­deav­our may fall short of In­dia's ex­pec­ta­tions as a con­duit for geopo­lit­i­cal in­flu­ence, it will lead the way to a brighter, more sus­tain­able fu­ture for dozens of de­vel­op­ing coun­tries.

“Will In­dia Find Its Place in the Sun With So­lar Power?” is re­pub­lished un­der con­tent con­fed­er­a­tion be­tween Fi­nan­cial Nige­ria and Strat­for.

A so­lar farm

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