India losing a green energy subsidy race against US, others

When U.S. solar-manufacturing startupCubicPV was looking for a place to locate its first factory a couple of years ago, India seemed a good choice

- Phred Dvorak

The country had ambitious plans to expand renewable power and was offering juicy subsidies to solar-component makers to set up plants there. CubicPV scouted for a location and began talking to government officials about applying for the incentives, says Chief Executive Frank van Mierlo.

Then in August 2022, the U.S. passed the Inflation Reduction Act, which authorized its own much-larger subsidies for clean-energy manufacturers. Within three weeks, CubicPV's managers had decided to start the factory in the U.S. instead.

For would-be solar manufacturers, India "was the best deal going the on planet until the IRA came," says Van Mierlo.

Huge green subsidies from the U.S. and other wealthy countries are aimed at tackling climate change by speeding their move to clean energy from fossil fuels. Some energy watchers worry that they could also slow climate progress for nations such as India, one of the world's biggest carbon emitters, by drawing away badly needed money and resources.

In 2020 and 2021, before the huge subsidy boost from the Inflation Reduction Act, the U.S. allocated an amount equivalent to nearly $500 per person in public spending for clean energy-more than 16 times India's spending, according to a Wall Street Journal analysis of data collected by Energy PolicyTracker.org.

After the passage of the U.S. legislation, government tax credits for solar and battery manufacturing could total $190 billion over the next decade, while support for hydrogen could hit nearly $50 billion, depending on how many companies apply for the incentives, Goldman Sachs estimates.

In India, the government is offering a maximum of around $5 billion in subsidies for solar and some battery production.