Mixed Views on US Tariffs in Renewable Energy Sector, Emphasis on Key Bilateral Talks

Key Takeaways

The US has imposed a 26% reciprocal tariff on Indian goods, prompting mixed reactions in the solar industry.
Some industry leaders view the tariffs as a potential opportunity, while others express concern over possible negative impacts.
India’s solar equipment exports to the US are significant, accounting for $1 billion, with potential growth anticipated despite tariff uncertainties.

Mixed Reactions to US Tariff on Indian Solar Goods

The recent imposition of a 26% reciprocal tariff by the United States on Indian goods has elicited a varied response from the renewable energy sector, particularly among solar component manufacturers. While some view this as a setback, others see it as an opportunity for growth. Vikram V., Vice President & Co-Group Head – Corporate Ratings at ICRA, stated that the situation could be seen as neutral or slightly positive for the solar industry. Higher tariffs on major solar-exporting countries can potentially help India, as they may lead to lower landed costs for solar equipment.

Industry experts are anticipating more specific insights regarding the sector’s response in the coming days. Deepto Roy, a partner at Shardul Amarchand Mangaldas & Co, mentioned, “The overall impact on the energy sector could be limited,” emphasizing the need for clarity in the fine print of the tariff details. Meanwhile, Vinay Rustagi, Director at Premier Energies, expressed caution, noting the potential undesirable effects on Indian manufacturers if the duties significantly disadvantage domestic exports.

India’s solar equipment exports primarily consist of modules, amounting to nearly $1 billion, with around 3.5-4 GW exported in FY25, mostly to the US. However, these exports are relatively small compared to India’s overall shipments to the US and its domestic market consumption. Industry players remain optimistic about future growth in shipments, even with projected capacity increases in the US due to domestic investment.

Currently, India’s solar module manufacturing capacity stands at 74 GW, projected to reach 100 GW by 2030, while solar cell manufacturing capacity is at 25 GW. Conversely, the US has surpassed a module capacity of 50 GW, facilitated by the Inflation Reduction Act, with plans for 56 GW in cell capacity.

Despite US investments in domestic module manufacturing, there is a significant shortfall in solar cell capacity. The Indian Solar Manufacturers Association (ISMA) recently highlighted this gap, indicating that Indian manufacturers are well-equipped to fill it. However, there are concerns that domestic market consumption could suffice to absorb the total production capacity if exports decline due to the tariffs.

In light of these developments, the ongoing negotiations for a bilateral trade agreement (BTA) between the US and India are deemed crucial for the solar industry. Amit Paithankar, CEO of Waaree Energies Ltd, which is India’s largest solar module exporter, emphasized the importance of strengthening trade relations with the US, given its significance as a key market for Indian solar manufacturing.

As the industry assesses the implications of the new tariffs, stakeholders are watching closely to see how the evolving situation might shape the landscape for solar exports and domestic consumption in India. The balance between opportunity and challenge will largely depend on continued dialogue and negotiation between the two nations.

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