The central government is now actively focusing on shrinking delays in acquiring permits for construction, simplifying taxation process, and increasing skill development infrastructure, to support solar growth, more focus on raising funds is needed and would certainly help.
he Indian solar power sector has shown incredible progress in the recent years and has become a Rs 30,000 crore industry. With the government’s support, the country became the world’s third-biggest solar market overthrowing Japan in 2017. Investor interest in the industry has also risen but is the current level of fund generation capable of supporting renewable energy goals? This question begs in-depth assessment.
Current Scenario
It is important to note that India will need at least $125 billion to fund the 175 GW renewablemission, of which 100 GW is supposed to come from solar. Foreign private equityinvestors like Goldman Sachs, Morgan Stanley, JPMorgan and European utilities like EDF have shown interest in investing into the Indian solar sector while development banks like World Bank are offering financial support. Foreign direct investment in India has increased to over $25 billion with the country focusing on industrial reforms and strengthening lucrative sectors (such as solar) recently.
However, it is important to highlight that most of the financing for renewable energydevelopment in the country comes from domestic banks. And recent surveys indicating 65 per cent fall in corporate funding within the solar industry from Q4 2017 to Q1 2018 may indicate constraints for solar growth. Currently, there is confusion in the domesticindustry regarding Anti-dumping duties, fall of solar tariff, and delays in tender auctioning. In such a situation, lack of proper funding may emerge as an additional constraint. This could reduce solar capacity addition in the current financial year, which would definitely deal a blow to the growing industry.
With consistent growth, India is estimated to become fifth-largest manufacturing country inthe world by the end of 2020. And since solar power has proven to be the most lucrative sector now, it is understandable that manufacturing solar would help India improve itsindustrial infrastructure, solve its energy crisis, create jobs and bring on socio-economicreform.
The Ministry of New and Renewable Energy (MNRE) is planning to award 100 GW of contracts in 2018, of which 77 GW will be solar power projects. Additionally, there are plans for 5-10 GW of floating solar power projects to be auctioned in 2018. This indicates India’s strong intention towards solarizing the country. However, without enough funding, the growth prediction will not result into reality.
Issues with funding
India’s first renewable energy conference was held in 2015 where private companies committed to invest nearly $200 billion into green energy. The centre has accepted and upheld 100 per cent foreign direct investment under the automatic route and 74 per cent foreign equity participation in a joint venture (without any approval). This has created the path to bring huge investment in Indian solar sector. India’s position in International Solar Alliance (ISA) has also made the country’s access to $1 trillion in low-cost financing for solar energy projects by 2030 possible.
Around 293 global and domestic companies have committed to invest approximately US$ 310–350 billion to set up a cumulative capacity of 266 GW in (solar, wind, mini-hydel and biomass-based power) within 5–10 years. And between April 2000 and September 2017, the industry attracted $12.3 billion in Foreign Direct Investment (FDI). So, it is easy to infer that the Indian solar industry has become a lucrative market to attract funding. However, what is lacking is a sustainable funding mechanism that can continue to invoke interest in foreign investors.
Currently, the confusion within the industry regarding anti-dumping dutyimposition on foreign modules, GST, falling solar tariff, failure in meeting Renewablepurchase obligation (RPO) in most states, instances of PPA renegotiations etc are scaring investors. Blanket Safeguard Duty (recently withdrawn) had also stirred the domesticindustry by imposing duties on SEZ-based domestic modules manufacturers as well. It was alaudable decision by the government to remove the blanket safeguard duty.However, the government still needs to take care of the other above mentioned issues as they are delaying projects, and in some cases, making them unviable, impacting investors’ interest.
Indian solar power sector has the opportunity and attention of the world to become an investment magnet. This requires prioritizing the solar industry and solving its issues that increase investor confidence.
Way Forward
Not only increasing foreign investor confidence, India needs to increase its domestic fundingfor solar as well. The recent news reports regarding National Clean Energy Fund being turned into GST compensation fund showcases a totally opposite step than those that reflect building and supporting green energy reliance.
Although the central government is now actively focusing on shrinking delays in acquiring permits for construction, simplifying taxation process, and increasing skill developmentinfrastructure, to support solar growth, more focus on raising funds is needed and wouldcertainly help.
DISCLAIMER: The views expressed are solely of the author and ETEnergyworld.com does not necessarily subscribe to it. ETEnergyworld.com shall not be responsible for any damage caused to any person/organisation directly or indirectly.
About Gyanesh Chaudhary
Gyanesh Chaudhary is the Managing Director & CEO of Vikram Solar. He is also a member of the CII and Federation of India Export Organisation (FIEO). Chaudhary is a Business Graduate from University of Wales and holds a Diploma in Marketing and International Trade from University of Boston and in International Business from Harvard Business School, USA.
Source: energy.economictimes.indiatimes
