China's indigenous innovation and First Solar’s Indian foray

India aims to be a solar power by 2022 with 22 GW of solar generation capacity target. Companies like First Solar and Astonfield are foraying in the Indian solar market. But their strategic alliance with China for manufacturing thin films might increase the risk for Indian power sector which is increasingly sourcing power equipment from China.

Forbes reported that :

First Solar, a leading thin-film solar company based in Phoenix, has signed a “strategic cooperation framework agreement” with state-owned China Power International New Energy Holding (CPINE).

First Solar’s Dangerous Game - Forbes: "Under China’s innovation policy, foreign firms like First Solar are allowed to participate in government procurement opportunities if they agree to transfer core technologies to Chinese-owned companies.

The extent of China’s “indigenous innovation” policies is alarming. Alan Wolff, a partner at the law firm of Dewey & LeBoeuf, told the Commission:

When the word went forth from the highest levels that “indigenous innovation” was a central precept of Chinese industrial policy, ministries and government agencies throughout China began to translate the policy into reality, especially in the area of government procurement . . . The U.S. China Business Council as of February of this year identified 61 indigenous innovation catalogues at the provincial and municipal level, and noted that in Shanghai’s catalogue, of 523 products made in China only two appeared to involve foreign companies, and in these two cases, the companies were joint ventures with majority Chinese partner ownership.

Although First Solar has publicly denied being strong armed, the company’s recent history in China has all the trappings of exactly the sort of IP-squeeze described by U.S. industry groups and intelligence sources."

India's Carbon Footprint in top 5

Tip of the foot !

India's greenhouse gas emissions grew more than half between 1994 and 2007, helped up by a largely coal-reliant power sector that nearly doubled its share in emissions, making the country one of the top five carbon polluters in the world. 


About 54% of country's power generation is met through coal and the trend is not showing any signs of waning away with Ultra Mega Power Plants (4000 MW each) being planned in various parts of the country based on coal. This despite the fact that India is increasingly reliant on imported coal from Australia and Indonesia. Are coal washeries an answer and an opportunity to invest? 


India has a renewable purchase obligation (RPO) and renewable energy certificates(REC) mechanism already in place. It is expected that the REC market in India will easily overshadow that CDM market which has not been taking off. But a stronger lobby of coal based producers poses risks for this fledgling market. Argulably, in US the coal lobby did not allow the RPO mechanism to take off and US did not sign the Kyoto Protocol even when the rest of the world did.

Power Equipment Quality Risk

Power Equipment quality is a major risk factor and will affect the long term viability of generation sector in India. With the country reeling under deficit of power equipment manufacturers the quality of imported equipment from China which is arguably cheaper in price is a risk which the policy makers and investor need to keep in mind.

As reported by Forbes, the senior managers of a three-year-old thermal power plant in North India say that the Chinese equipment they installed has been giving them trouble due to low quality. They are not alone. Around the country, power plants have claimed that they bought cheaper Chinese boilers, turbines and generators in preference to Indian equipment only to see them malfunction too quickly.

But not everyone is unhappy. Take Lanco Infratech, in the power business for more than two decades. It has enough confidence in its Chinese suppliers to have them equip half its requirements for the next four years.

Risks for Power Sector

The risks refer to the current and future supplies of natural gas, electricity, oil and coal.  The term Current refers to a 1 or 2 year horizon; the term Future refers to a 5 to 10 year horizon.

Values mean as follows:  1 for no perceptible risk; 2 for low risk; 3 for medium risk; 4 for high risk; 5 for not applicable. Risk Factors Electricity Current Future Geopolitical exploitation of supplies 3 2 Global competition for resources 3 4 Inadequate international transport capacity 2 2 Insufficient or inadequate interconnector capacity 3 2 Insufficient or unreliable transmission networks 2 1 Insufficient or unreliable distribution networks 4 3 Inadequate or insufficient reserve capacity 4 3 Insufficient or inadequate conversion capacity 3 2 Inadequate peaking capacity 4 3 High domestic energy prices 3 4 Low domestic energy prices 3 2 Declining demand and/or low prices for oil and gas exports 2 2 Natural disasters, terrorism and warfare 2 2 Poor national energy policies 2 2 Poor or inadequate internal regulation 3 2

Geopolitical exploitation of supplies refers to both supplier and transit countries.

Global competition for resources refers to both energy resources that are physically scarce and to resources whose availability is limited by international cartels.

Inadequate international transport capacity refers to transport of energy crossing over  two or more borders. This is different from risks deriving from  Geopolitical exploitation of supplies by transit countries which are generally independent of limited transport capacity.

Insufficient or inadequate interconnector capacity refers to transmission between states and includes such aspects as, for example, lack of reverse flow in the case of natural gas  transport.

Insufficient or unreliable transmission networks refer to internal high voltage or high pressure gas transport infrastructures.

Insufficient or unreliable distribution networks refer to internal generally medium and  low voltage or medium and low pressure gas transport infrastructures.

Inadequate or insufficient reserve capacity refers to natural gas storage, oil products  depots as well as hydropower reservoirs, etc.

Insufficient or inadequate conversion capacity refers to any kind of energy conversion  and includes: power generation; refining; heat production; etc. Include under this item  risks coming from outdated and worn out equipment with frequent outages.

Inadequate peaking capacity refers specifically to withdrawal of natural gas from storage,  production fields and linepack and to flexible generating capacity able to meet peaks  in power demand.

High domestic energy prices refers to the impacts on supplies especially to lower income households caused by supply demand imbalances or imposed by international cartels or by monopoly/oligopoly suppliers.

Low domestic energy prices refers specifically to the risks of deterring energy companies from entering the market or from making adequate investments in energy infrastructures to satisfy future demand.

Declining demand and/or low international prices for energy exports regards essentially the impact on global supplies of insufficient investments in the longer term: for example, resulting from  strong and overly ambitious targets for biofuels production.

Natural disasters, terrorism and warfare include risks coming from political instability within supplier countries.

Poor national energy policies refers specifically to supply deficits in particular fuels, regions of a state or over different periods of time (daily, seasonal) attributable to weak or inadequate government energy policies.

Poor or inadequate internal regulation regards unbundling between monopoly and  competitive segments of energy companies and the regulation of tariffs and quality of service.