Energy security has been one of the foremost priorities of governments worldwide. Historically, control over oil and gas markets has been the primary cause of many geopolitical disruptions. However, over the past few years, clean energy products such as batteries and solar cells have led to the evolution of many trade conflicts.
With much of the world’s supply of silicon cells, batteries and critical minerals concentrated in just a few countries, governments are rightly concerned about the future of clean energy deployment in their respective nations. The lessons from the Covid pandemic and its successive waves, the Russia-Ukraine conflict and the Red Sea trade route disruption have emphasised the need for diversification of supply chains and building domestic manufacturing capacities.
Thus, many countries are implementing policies to restrict imports and promote local products. For instance, India has a basic customs duty of 25 per cent on solar cell imports and 40 per cent on solar module imports. Further, the Approved List of Models and Manufacturers has been revived to further promote the uptake of solar modules made by domestic manufacturers. Production-linked incentives have also been announced for batteries and solar manufacturing.
In the US, too, there is a significant focus on reducing imports. Recently, US President Joe Biden announced steep tariff hikes for solar cells (to 50 per cent), lithium-ion electric vehicle (EV) batteries (to 25 per cent) and EVs (to 100 per cent) that originate in China. Further, the Inflation Reduction Act provides credits for the use of local equipment.
Other countries are also discussing the localisation of manufacturing, diversification of import routes and formation of new alliances for the refining of critical minerals. This trend is expected to continue as nations race to secure their place on the clean energy leaderboard.
