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.
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