E-Paper
Turning a global policy shift into a clean energy advantage
This article is authored by Upendra Tripathy and Jagjeet Sareen.
Donald Trump’s return to the White House has sent an unambiguous signal to global energy markets: America is stepping back from clean energy leadership. Federal renewable energy incentives are being dismantled. Regulatory foundations of US climate policy are being repealed. And in February, the US imposed preliminary countervailing duties of 126% on solar cells manufactured in India, a measure that sent Indian solar stocks down by as much as 18%.
The market reaction was premature. The duties apply only to cells manufactured in India; modules assembled from non-Indian cells, including Chinese cells, which dominate global supply, are unaffected. India’s solar exports to the US had grown ninefold since 2022, reaching nearly $793 million, but most major exporters source cells from outside India for US-bound shipments and have confirmed the tariff does not materially affect their earnings. The real story is not the narrow scope of this order. It is the direction of US policy overall.
The US EPA’s endangerment finding, the legal basis of federal climate regulation since 2009, has been repealed. Earlier tax changes had already weakened clean energy incentives that drove rapid growth in solar and wind. And the recent US–India trade agreement, while lowering general tariffs, left solar out.
For India, this should be a gift. Nearly $2 trillion flows into renewable energy investments globally each year. That capital does not disappear when Washington changes course; it looks for new destinations with scale, stable policy frameworks, and growing electricity demand. India fits that description better than almost anywhere else.
Over the past three years, our manufacturers have become heavily reliant on a single export market. That dependence was always fragile. The direction of US policy is clear enough: it is a prompt to strengthen domestic demand, move faster on European market access, and address regulatory bottlenecks at home.
India’s solar module manufacturing capacity now exceeds 160 Gigawatts (GW). Annual domestic demand is roughly 45-50 GW. The gap is large. With the US policy environment now uncertain, that surplus must find other destinations.
Europe is the most immediate option. The India–EFTA agreement, in force since October 2025, includes a $100 billion investment commitment over fifteen years, with clean technology among the priority areas. The India–UK trade deal reduces tariffs on renewable energy equipment. The India–EU Free Trade Agreement (FTA), concluded in January 2026, opens access to a vast market and includes specific provisions for green goods and industrial decarbonisation. But exports are only part of the story. The bigger issue is domestic policy.
Manufacturers redirecting capacity will need a strong home market. Yet parts of our regulatory framework still treat renewable energy as if it must behave like coal. The Draft National Electricity Policy proposes parity between renewable and conventional sources in scheduling and deviation, in effect, penalising wind and solar generators for the variability that is simply inherent to the technology. Ask a thermal plant to increase generation, and it can burn more fuel within minutes. A solar farm on a cloudy afternoon has no equivalent lever. At the same time, deviation bands for wind and solar have been tightened.
Developers are already paying significant deviation charges, which reduce margins in a capital-intensive sector. No penalty structure can eliminate variability in sunlight or wind. Other countries have addressed this by investing in grid flexibility rather than by increasing penalties.
Denmark now generates close to 90% of its electricity from renewables, supported by cross-border connections and ancillary services markets. Texas has rapidly expanded battery storage and managed high solar penetration without major reliability events. Both grids are adapted to accommodate variable generation rather than trying to force renewables into roles they cannot play.
Global competition is intense. China installed 357 GW of wind and solar in 2024 alone. Worldwide energy transition investment reached $2.4 trillion last year.
India has strong fundamentals. We added 29.5 GW of renewable capacity in one financial year and reached 50% non-fossil installed capacity five years ahead of our Paris target. Renewable energy FDI has grown sharply, from $1.6 billion in Financial Year (FY) 2022 to $3.7 billion in FY24, with cumulative inflows of over $23 billion since 2000. But investors who have committed capital are growing cautious about deploying more. Curtailment is a live concern. The proposed revisions to the Deviation Settlement Mechanism are adding to the unease.
But investors look beyond capacity numbers. They look at payment discipline, regulatory consistency, and market design. As of March 2025, distribution companies owed more than ₹66,000 crore to renewable generators. Tightening penalties on generators while payment delays persist does not inspire confidence.
The Union Budget’s decision to allow solar manufacturers in Special Economic Zones to sell domestically at concessional duty rates was a sensible move. The broader task is more specific: Instead of penalising renewables for deviation during periods when the wind doesn’t blow, create ancillary services markets where batteries and flexible generation can earn revenue by providing the grid services renewables cannot. Instead of treating intermittency as a failure requiring punishment, treat it as a known characteristic that requires infrastructure investment, the kind that global capital is actively looking to fund.
India helped found the International Solar Alliance on the belief that solar-rich countries could create stable, investment-friendly ecosystems. That belief still holds. What has changed is the global landscape. India has the market size, the manufacturing base, and the stated ambition.
This article is authored by Upendra Tripathy, former secretary, ministry of new and renewable energy and founding director general, International Solar Alliance and Jagjeet Sareen, India head, Dalberg Advisors.
