September 22 (SeeNews) – Trina Solar (NYSE:TSL) and Welspun Energy Ltd have selected the Special Economic Zone (SEZ) at Atchutapuram in India's Andhra Pradesh state for a joint photovoltaics (PV) factory.

Trina Solar Is Building 2 GW Solar Manufacturing Capacity In India
Trina Solar Is Building 2 GW Solar Manufacturing Capacity In India

District collector N Yuvaraj said Tuesday representatives of the two companies have visited the site and discussed the process of obtaining land for the project. Chinese solar major Trina and its Indian partner will be ready to kick off works in about a month after land is allocated.

The companies are planning to invest INR 30 billion (USD 457m/EUR 409m) in the manufacturing plant for solar equipment at SEZ. In June, a Trina official told Bloomberg the company had plans to export solar products to the US and even to Europe from a 2-GW PV plant in India. Producing PV panels in India will allow Trina to escape the anti-dumping and anti-subsidy duties on Chinese imports.

(INR 100 = USD 1.524/EUR 1.362)

Photovoltaic Modules

Trina Solar, the world's largest solar panel manufacturer, has announced collaboration with India's Welspun Energy to build a 2 GW solar manufacturing facility in India.

The 1 GW PV cell manufacturing facility and a 1GW module manufacturing plant will cost about $500 million, with construction planned in two phases over a period of 18 months. As per news reports, the plant will be developed either in the western state of Gujarat or the southern state of Andhra Pradesh.

The announcement is seen as Trina's efforts to diversify its manufacturing base overseas. Earlier this year, Trina Solar announced plans for a 700 MW PV cell manufacturing facility and a 500 MW module production line in Thailand, at an investment of $160 million. With India based manufacturing, Trina will be looking to score twice with one shot (note no birds harmed). Firstly, to circumvent US and European Union sanctions on solar shipments from China, and secondly to make strategic inroads into the Indian solar market.

Earlier this year, the US International Trade Commission approved the imposition of final duties on Chinese and Taiwanese photovoltaic imports. Trina faces anti-dumping duty of 26.71% and a countervailing duty (anti-subsidy duties) of 49.79%.

In December 2013, The Council of the European Union announced an average duty of 47.7%, consisting of both anti-dumping and anti-subsidy duties to solar imports from China. However, the European Commission later accepted a price undertaking from Chinese solar panel manufacturers to comply with a minimum import price. As a result, net sales from Europe dropped to 9.6% of Trina's net sales in 2014, compared to 30.9% 2013.

By sourcing panels from India, Trina could become more competitive in the US and the European Union. Manufacturing in India could also help to lower Trina's production costs, considering the country's lower labour costs, potential policy incentives, and its geographic proximity to China, which is the biggest source of photovoltaic raw materials. However, solar equipment manufacturing is still in its infancy in India, and Trina maybe faced with a uphill task to develop a supply chain in India.

The second part to the story is the Indian solar market itself.

Given India's high insolation levels, unmet electricity demand, and growing concerns about greenhouse gas emissions, this could possibly be the best time to position oneself for the long term. India recently reached a milestone of 4 GW solar capacity installation and is likely to break into the top five global solar markets by adding 2.7 GW capacity in 2015, after ranking 10th in 2014.

Last week, the Modi government increased India's solar installation target fivefold, aiming to install 100 GW of capacity by 2022. This is expected to entail an investment of $100 billion, and if the plans announced over last year are any sign, a part of the solar pie will be reserved for domestically manufactured plans (Make In India). This could put Trina at an advantage compared to its Chinese peers who don't have manufacturing operations in India.

In an interview with Bloomberg, Zhiguo Zhu, senior vice president of Trina Solar, shared that Next year, India will become our third-largest market. In future, it could become our biggest (market) after China". Trina expects demand of as much as 600 megawatts in India this year.

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