Indian Solar Industry Wary About Us Clean Energy Funding

Desert-based Solar Generation

IN BRIEF

The Indian solar industry is circumspect about the competitiveness of funds to finance renewable energy (RE) projects promised by US President Barack Obama during his recent visit to New Delhi. Also, the US-manufactured solar equipment including photovoltaic (PV) cells and modules is costlier compared with that procured from China and south-east Asia, say some experts in the sector, including Indian Renewable Energy Development Agency (IREDA), which is supposed to facilitate US private sector investment in Indian clean energy projects.

IN DEPTH

President Obama on 26 January committed US2 billion by the US Trade and Development Agency (USTDA) for developing clean energy projects in India. This commitment is in addition to a US1 billion guaranteed loan from Export-Import (EXIM) Bank of the US, which was announced in November last year to finance the export of US-made components to India. However, industry is likely to import very little, even with the cheaper financing.

Though the US government provides long-term project financing for their equipment at low cost, after adding up the hedging costs, diligence costs and strict compliance scheme costs of US EXIM, which is 8-9%, the overall rate of interest is comparable with what Indian institutions give, said Ketan Mehta, director, Rays Power Infra. Over and above this, there is a higher equipment cost without any significant increase in output.

India has substantially revised its solar energy target of achieving 20 GWe of capacity by 2022 to 100 GWe. It plans to install 60 GWe of wind power capacity by then. Both goals would require around US150 billion of investment from domestic as well as foreign sources. The government plans to float five funds of US5 billion so that they can promote the clean energy projects at an interest rate of less than 10%.

India currently imports most of its solar devices, including PV cells and modules, from China and Malaysia due to their competitive pricing. US-based SunEdison announced this month its plans to build a US4 billion solar PV manufacturing facility in Gujarat in a JV with Adani Enterprises. Also, First Solar, which builds large solar parks mainly for utilities, is exploring an opportunity to set up manufacturing operations in India. In the case of wind power, the domestic industry is self-reliant in terms of technology and manufacturing capacities.

Chinese manufacturers have a strong presence in India's solar energy market and offer similar funds for their supplies. However, for some specific technologies like thin-film, US suppliers have been able to capture a substantial share in market and the cost is also competitive. Therefore, American suppliers need to become competitive in terms of total delivered cost compared with Chinese equipment manufacturers to boost uptake in the Indian solar energy market, say industry experts.

Meanwhile, the US embassy said that the details of the financing for clean energy projects announced during the President Obama's visit still have to be worked out, but are confident that they will make world-class US technology attractive and competitive for the Indian market. At a time when capital is likely to be a constraint for scaling up the solar power to 100 GWe, the announcement from the US to make over US4 billion investments in clean energy projects has been widely welcomed.

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