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13 February 2017 Editorial


13 FEBRUARY 2017

Solar power breaks a price barrier

In another barrier-breaking development, the auctioned price of solar photovoltaic (SPV) power per kilowatt hour has dropped below ?3 to ?2.97 in Madhya Pradesh, providing a clear pointer to the future course of renewable energy. The levellised tariff - factoring in a small annual increase for a given period of time - for the 750 MW Rewa project over a 25-year period is ?3.29, which is less than half the rate at which some State governments signed contracts in recent years. The progress of this clean source of energy must be deepened with policy incentives, for several reasons. Arguably, the most important is the need to connect millions of people without access to electricity. A rapid scaling-up of solar capacity is vital also to meet the national goal of installing 100 gigawatts by 2022, a target that is being internationally monitored as part of the country's pledges under the Paris Agreement on climate change. It will also be transformational for the environment, since pollution from large new coal-based power plants can be avoided. There is everything to gain by accelerating the pace of growth that essentially began in 2010, with the Jawaharlal Nehru National Solar Mission. Yet, performance has not matched intent and the target of installing 12 GW solar capacity in 2016-17 is far from attainable, since it fell short by almost 10 GW as of December.

A glaring lacuna in the national policy on renewables is the failure to tap the investment potential of the middle class. While grid-connected large-scale installations have received maximum attention, there is slow progress on rooftop solar. Clearly, adding capacity of the order of more than 10 GW annually over the next six years towards the 100 GW target will require active participation and investment by the buildings sector, both residential and commercial. This process can be kick-started using mass participation by citizens, with State electricity utilities being given mandatory time frames to introduce net-metering systems with a feed-in tariff that is designed to encourage the average consumer to invest in PV modules, taking grid electricity prices into account. The experience of Germany, where robust solar expansion has been taking place over the years, illustrates the benefits of policy guarantees for rooftop installations and feed-in tariffs lasting 20 years. SPV costs are expected to continue to fall, and tariffs paid both for large plants and smaller installations require periodic review. At some point, significant subsidies may no longer be necessary. That scenario, however, is for the future. Currently, India needs a lot more good quality power, which renewables provide. Solar power is an emissions-free driver of the economy, generating growth in both direct and indirect employment. A lot of sunlight remains to be tapped.



One China check for Donald Trump

President Donald Trump's stated commitment to honour the One China policy signals a softening of his administration's approach towards Beijing. Earlier, Mr. Trump had given enough indications that he would pursue a radically different policy towards Beijing by reviewing the One China policy, a cornerstone of Sino-U.S. relations. First, he accepted a congratulatory call from the Taiwanese President, breaking 37 years of American practice and thereby infuriating Beijing. Later, in an interview, he declined to endorse the One China policy unless he saw progress from Beijing in its trade and currency policies, triggering speculation that he would improve ties with Taiwan and use the policy as a bargaining chip. Such speculation was effectively killed last week when Mr. Trump took a 180-degree turn on China in his first telephone conversation with Chinese President Xi Jinping. It is not clear what made Mr. Trump change his mind. Some reports suggest that ever since he accepted the call from the Taiwanese leader, Beijing drew a One China red line for further cooperation on key issues between the two countries. It took three weeks for the Trump-Xi conversation to take place after the former took office, a relatively long time given the importance of bilateral ties between the world's largest economies. Mr. Trump had talked to at least 30 world leaders before he got Mr. Xi on the line. The administration had taken clear measures to ease tensions with Beijing, largely caused by Mr. Trump's remarks. The White House first sent belated Chinese new year greetings to Mr. Xi and released the letter to the public. Only then did both leaders speak.

This could well be a reality check for Mr. Trump in his future engagement with China. For Beijing, the One China policy is the bedrock of its engagement with the world. Picking a fight with China over an issue it deems most sensitive in its security parlance in the initial days of his presidency shows bad diplomatic judgment on the part of Mr. Trump. It would unnecessarily escalate tensions between the two countries. This doesn't mean the U.S. should accept Chinese terms on all global issues. There are areas where both can cooperate, such as in dealing with global conflicts; areas where they compete, such as in trade and investment; and areas where they disagree, such as the South China Sea dispute. The challenge before Mr. Trump is to address these issues with Beijing without disrupting the existing equilibrium in Sino-U.S. ties.



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