India Says China Dominance Is a Risk to Clean Energy Transition

(Bloomberg) -- India’s government flagged China’s dominance in clean energy gear as a potential risk to its low-carbon transition, advocating a more diverse global supply chain and targeted incentives.

The annual Economic Survey, released Friday, put a spotlight on China’s control over renewable supply chains — from components to machinery — for solar, wind and batteries. It stressed India’s reliance on its northern neighbor for procuring most of these materials. 

These risks surfaced prominently during Covid-19 pandemic, prompting nations including the US and India to forge partnerships to create a parallel production network for clean energy products. Deadly clashes in 2020 along the Indo-Chinese Himalayan border exacerbated the rivalry. In the following months, India put import barriers on solar panels and cells and announced incentives to promote domestic manufacturing.

While such efforts have shown some results — India’s local modules capacity has surpassed demand — China’s presence continues to loom large over the industry.

“As the world navigates the challenges of climate change, the road to energy transition runs through China,” the survey said. While acknowledging the country’s massive manufacturing capacities have helped bring down costs of components, such as solar modules, it said that such “geographical concentration in global supply chains also creates supply disruption risks that must be kept in mind.”   

The survey proposed grants for lithium-ion cells, encouragement to investments in battery recycling and international technology transfer agreements to bring down costs. The document, presented a day before the annual budget, is an account of the government’s performance and ambitions for various sectors of the economy. 

India has rapidly built enough solar-module-making capacity since 2020 to free itself from the need to import. Still, it depends heavily on China for the cells that go into those panels and almost entirely for other upstream products, such as wafers and polysilicon. 

Manufacturing solar’s upstream products domestically is a challenge due to China’s tight control over technology and machinery, and its reluctance to part with the critical equipment.

Decarbonizing ground transport too hinges on trade with China, the survey said, noting its dominance over critical battery minerals, such as nickel, cobalt, lithium and rare earths. India sources 75% of its lithium-ion batteries from its neighbor, it said. 

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