Investment Scenario in Indian Solar Sector: Driving Growth

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Indian solar sector reaching 10 GW milestone recently has made the 100 GW by 2022 goal more tangible than ever. The growth rate is quite commendable, considering India had only 2.6 GW solar capacity in May 26, 2014. Granted that soaring global solar acceptance and support from Indian Government has played a major role in creating this scenario. However, it is investment that gave Indian solar sector a much-required boost to venture ahead into energy transition without having a strong industrial infrastructure.

Government Initiatives to Increase Investment

100% foreign direct investment under the automatic route and 74% foreign equity participation in a joint venture (without any approval) accepted and upheld by Indian Government paved the path to bring investments in the Indian solar sector. Such policy framework has provided the opportunity to generate 13-15% return on equity invested by the utility companies. Initiating ‘Power for all’ program and illuminating 18,452 un-electrified villages (12, 583 villages already electrified), has also brought foreign investment. Supporting Viability gap funding policy for rooftop projects has made Indian rooftop solar market lucrative for investors. And participating in International Solar Alliance (ISA) has also brought India’s growing solar industry exposure and financial support.

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Current Scenario of Investment

India has 14 gigawatt of solar projects under development and more than 6 GW capacity projects are about to be auctioned. Investment is obviously needed to support this incredible growth. India’s potential of generating solar energy is expected to attract $100 billion investment eventually. Currently, around 293 global and domestic companies have committed to invest approximately US$ 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. From 2000 to 2016, India has attracted about US$ 10.48 billion in foreign investment. An agreement is signed by State Bank of India (SBI) with The World Bank for INR 4,200 crore (US$ 626.3 million) credit facility, to present a better financing model for Grid Connected Rooftop Solar Photovoltaic (GRPV) projects in India. US$ 1 billion is also committed by The World Bank Group to support development and future of Indian solar industry. An agreement committing INR 300 crore (US$ 44.7 million) was also signed by The Ministry of New and Renewable Energy (MNRE) with Germany-based KfW Development Bank to improve floating solar projects in Maharashtra, Kerala and other potential states.

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Challenges Exist

Investment is needed to bridge the energy generation deficit (which is suspected to stand at 5.2% during next 10 years), and to reach 100 GW capacity installation target. Although investment is pouring in, continued fall in solar energy tariff can present the project profitability question and drive away the potential investors. Additionally, there are issues like- power evacuation challenges, lack of land availability, confusion in policy, delays in awarding projects, lack of skilled labour, and O&M facilities are making it hard for the investors to put their money in Indian solar sector.

This is indeed the right time for growth, global acceptance towards solar is on the rise. If India starts to focus on fixing the existing issues, the country can ultimately lead the world by example, and claim a pole position as an energy rich country.

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  1. […] India desperately needs, is coming through mutual efforts of Government and private solar companies (click here for information on Indian solar investment scenario). But challenges are real and they need to be […]

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