Increasing power requirements, attractive Govt. incentives, Campaign like Re-Invest have given a boost to Indian solar industry and attracted many foreigners investment. The new government led by Prime Minister Modi has so far been quite successful in attracting foreign investors in Indian Electronic & Solar industry but If we talk specifically about Solar, in spite of its weaknesses, India is slowly and steadily making the right moves in tapping its vast potential in the solar sector. The exclusive survey by EM Team brings out to you an overall view of Indian Solar Industry and investment scenario.
Foreign investors could be the key to helping India achieve its ambitious goal of installing 100 GW of solar by 2022. The main target for international investors is likely to be projects of more than 10 MW. These are being promoted by a battery of measures brought in by the solar-friendly government of Indian Prime Minister Narendra Modi. Currently, for example, there are plans to amend the country’s electricity act to include an increased renewable purchase obligation of 10.5%, along with the introduction of a renewable generation obligation and penalties for non-compliance. At state level, meanwhile, a major initiative is the creation of solar parks, a plug-and-play development model where the government takes care of land rights and evacuation issues. Aside from large projects, the Indian government is also making moves to foster 40 GW of rooftop solar as part of its 100 GW target. Even though this market is relatively early-stage, with 350 MW installed so far, the fundamentals for rooftop solar are very strong in India.
India’s still modest solar PV capacity indicates how ambitious the 2022 target is. The country expanded its cumulative solar PV installed capacity from a mere 35.15 MW in March 2011 to 3.74 GW in March 2015. According to Indian government calculations, the country would need to invest US$110 billion between 2015 and 2022 to achieve the target of 100 GW solar power capacities. While obtaining such funding seems like a challenging task, it seems India has it all sorted out. At RE-Invest 2015 (a renewable energy global investment promotion conference held in New Delhi in February 2015), Piyush Goyal, minister of state for coal, power, and renewable energy, managed to get commitments worth US$200 billion from Indian companies as well as foreign investors. Furthermore, government managed to get commitment to build 166 GW solar installations from the solar developers. Government is in talks with leading multilateral funding and lending agencies, such as the Asian Development Bank, World Bank, Germany-based KfW, Japan International Cooperation Agency, and Japan Bank for International Cooperation, to raise US$3 billion for solar power projects. In 2014, India received a funding of US$1 billion from US Exim Bank for solar power projects in the country. Announcement of 100 GW solar targets has also caught attention of several private equity firms such as Goldman Sachs, Morgan Stanley, IFC, and Standard Chartered. All of these efforts to secure funding for solar projects allow hoping that the 100 GW target by 2022 is achievable.
The new Modi government has set a favorable path for Indian Solar industry with its announcement of an ambitious target to install 100 GW of solar power capacity by 2022. But considering that India had an installed solar PV capacity of only 3.74 GW as of March 2015, achieving this target seems to be a phenomenal task.
Opportunities for International Investors
Global solar companies eye India as an emerging market opportunity
As Indian policy makers announce big-ticket projects and set huge targets for solar power capacity addition, global investors smell a huge opportunity. Indian government offers favorable policy framework for foreign investment in solar sector. 100% foreign direct investment is allowed under the automatic route, without any approval from the government of India. Further, no approval is required for up to 74% foreign equity participation in a joint venture. Additionally, 100% foreign investment as equity is permissible with the approval of Foreign Investment Promotion Board. Investors are also allowed to set up a liaison office in India. Apart from this favorable framework, global companies are attracted to Indian market thanks to the promising returns on investments. Bridge to India concluded in 2015 that global utility companies could expect 13-15% return on equity invested in solar projects in India, while return for global solar developers could be expected to be in the range of 15-17%. India is seen as an upcoming solar investment hotspot. Given the conductive business environment and attractive returns, many global solar firms have announced investment plans in Indian solar market. These include leading global solar developers and utilities such as Acme (joint venture between France-based EDF Energies Nouvelles, Luxembourg-based EREN, and India-based ACME Clean-tech Solutions), US-based SunEdison, US-based First Solar, France-based Solairedirect, to name a few. US-based Morgan Stanley is likely to make a big investment in the solar space soon, likely in a +100-Mw project. So are other institutional investors such as IFC and Standard Chartered. Besides, Goldman Sachs, which invested about $375 million in Sumant Sinha-promoted Re-New Power, is looking to make more such investments in noted or upcoming companies in the clean energy space. US Exim Bank, during Prime Minister Narendra Modi’s recent visit to the US, extended a funding of $1 billion for solar power programs in India. Similarly, ADB and German state-owned KfW are also on board for providing funding to the solar programs to be announced by the government. Insufficient domestic solar PV cells and modules production capacity will pave way for global suppliers to capitalize on emerging Indian solar market. Minister Piyush Goyal stated in 2014 that domestic manufacturing capacity of photovoltaic cells (PVCs), which accounts for 60% of the cost of a solar module, is 700-800 MW, which is not sufficient to meet country’s solar ambitions. Indian PVCs manufacturers have also been unable to compete with cheaper Chinese and Taiwanese imports. In 2014, the Ministry of Commerce in India proposed anti-dumping duties of between US$0.11-0.81 on PVCs/modules imported from China, USA, Malaysia, and Taiwan (accounting for about 80% of modules used in Indian solar projects). Indian government rejected the proposal to impose anti-dumping duties on import of solar PVCs and modules, explaining that as the domestic solar PVCs and modules production capacity was inadequate to meet the demands of country’s envisaged solar plans, the proposed anti-dumping duties would result in higher costs for solar projects and eventually hinder the growth of solar market in the country. With no protective measures in place to support the indigenous PVC manufacturing industry, India’s dependence on imports of solar PVCs and modules is likely to increase with expansion of solar PV market, creating manifold opportunities for global solar PVCs and module suppliers.
Solar power in India is about to see a massive scale-up of 100,000 Mw. MNRE has got the mandate from the prime minister to achieve this goal by 2019. If the plan of adding 100,000 Mw of solar power hits the ground, India would need investment to the tune of around $110 billion, including transmission capacity, according to government calculations. On the manufacturing and power production side, at least 10 big Chinese solar companies are looking to set up joint ventures in India. Senior officials in the Madhya Pradesh government said talks with a Chinese solar cell manufacturer to set up a facility in the state were in the last stage. From the US, First Solar and SunEdison already have a presence in the country; both participated in bidding for state and central projects. The others in line are mostly European power utility companies — EDF, Fonoroche and Solairedirect from France and B Electric from Germany. Solairedirect group created history in the first phase of the Jawaharlal Nehru National Solar Mission by bidding the lowest tariff of Rs 7.9 a unit for a five-Mw project. First Solar has an installed capacity of more than eight GW across the globe. In the solar cell markets, First Solar currently controls around 20 per cent of the market; it is planning to increase this to 25 per cent.
According to the International Monetary Fund, India’s growth rate is set to surpass China’s by this year, with a jump from 7.2 in 2014 to 7.5 in 2015. These figures reaffirm that the Indian economy is growing faster than expected and global investors believe in the country’s growth potential. Moreover, the new Indian government’s efforts to improve the country’s business climate and policy reforms are showing results. With the current spate of big investments in renewable, India is well positioned to be the next global solar hub.
“The pendulum is swinging in favor of international investors,” “Indian corporate was the early movers in the market. International developers were on the sidelines. What has really happened over the last one or two years is that the cost of financing and ability to raise cheaper capital outside of India has become a key success factor for developing and investing into solar projects in India. Interest on loans in India is between 11.5% and 12%. And although most of the debt for solar projects in India still comes from Indian banks, the government desperately wants to change this, getting international investments into the country. Something that is needed is more appetite for international debt.” said Jasmeet Khurana, head of market intelligence at the analyst firm BRIDGE TO INDIA.
“The Indian solar market is a big space to play around and we will not only look at solar cells market but utility-scale projects as well,” said Sujoy Ghosh, country head, First Solar India. The company recently won 40-Mw solar power plants in Andhra Pradesh at a bid of Rs 5.35 a unit, the lowest in current times.
Japan’s SoftBank Corp, together with Bharti Enterprises and Taiwan’s Foxconn, will invest about $20 billion in solar projects in India, in one of the biggest investment pledges to date in the country’s renewable energy sector. SoftBank, which previously said it would invest $10 billion in India over time, said on Monday the companies had agreed a minimum commitment of generating 20 gig watts of energy. SoftBank will have majority control in the newly formed company, SBG Clean-tech, with Bharti and Foxconn as minority stakeholders. “India has two times the sunshine (of) Japan,” Softbank Chief Executive Masayoshi Son said. “The cost of construction of the solar park is half of Japan. Twice the sunshine, half the cost that means four times the efficiency.” Son said the timeline for investments would depend on state and central governments and on acquiring land needed for the plants.
WAAREE Energies Limited
Mr. Hitesh Doshi, Chairman and Managing Director
Waaree Energies is a leading solar energy company in India. It is a flagship company of the 25 year old Waaree Group. Waaree Energies started as a solar PV module manufacturer in 2007 primarily focusing on the export market. Within the short 8 years of its existence Waaree Energies has grown by leaps and bounds. From the modest beginning of a 30 MW manufacturing line, the company has now ventured into the entire value chain of solar market.
Speaking on Indian Solar industry scenario Mr. Doshi stated that, Sixty years after Independence 300 million Indians still live without electricity so there is a huge demand waiting to be fulfilled. Indian solar industry is poised to grow for the next few years. The solar energy target has been set at 100 GW by 2022. To achieve the targets India may have to compete with matured markets like China, Europe and USA in annual installations. The initiatives by the Power ministry are in line with the vision of powering the entire nation. There are strategic investments in UMPP’s, Power transmission infrastructure and smart grids etc. The government has urged cash rich PSU’s to invest in solar power and the PSU’s have already started activities on ground. Almost 10 GW of projects have been announced under various schemes by June 2015. 40GW of rooftop installations plans have been laid out to meet the targets. This initiative will upgrade the lifestyle of the people and open up a lot of employment opportunities in the economy. Certainly “Make in India” initiative is more comprehensive and covers entire manufacturing sector, whereas Re-Invest was organized specifically to attract investment in the renewable sector. The response at Re-Invest has been very positive, there was participation across the industry and major deals were announced and signed-off. Such initiatives showcase the opportunities available in the solar market, so that investors are enthused about investing in India. Indian solar industry needs foreign investment of $100 billion for the 100 GW target. It’s a huge opportunity for foreign investments. Investors are always concerned about two things when looking at any investment opportunity, return on investment and the underlying asset. Here the investment is in infrastructure which is based on real demand in the Indian power sector and even the returns are lucrative. Some of the other favorable factors are state of governance in the country and the political will behind this initiative. Fortunately in India it has full support from the PM’s office and the target has been approved by the cabinet. All these factors help build investor confidence in the Indian market. Further Mr. Doshi said, we will see 7-10 GW of installation every year considering the targets set by the government. There is a lot of room for growth and many foreign companies will soon set up manufacturing units in India. The potential is so huge that they cannot afford to miss this. If recently signed PPA’s are any indications to go by, solar power is fast approaching grid parity and we would achieve it by 2017-18. Some of the big international players like Japan’s Softbank have pledged investment worth $20 billion in renewable energy sector. The Russian Petrogas giant Rosneft has also expressed interest in Indian solar sector and has plans to install 10 to 20 GW.
Some of the big international players like Japan’s Softbank have pledged investment worth $20 billion in renewable energy sector. The Russian Petrogas giant Rosneft has also expressed interest in Indian solar sector and has plans to install 10 to 20 GW, says Mr. Hitesh Doshi, Chairman and Managing Director
Anchor Electricals Pvt. Ltd
Mr. Krishnan Rajagopalan, Head – Solar Business Unit
Anchor Electricals is a vital member of the Eco Solutions Company of Panasonic Corporation, Japan, one of the leading manufacturers of Solar PV Modules in the world. As per Mr. Rajagopalan, It has been always a growing market in India. In fact, after the Solar Mission was announced by Govt of India in the year 2009, there has been a steady increase in the capacity addition. With the recent announcement of 100 GW of capacity installation target, Indian domestic market is bound to spin into a large market. We at Panasonic are looking at India as a sustainable solar market. We have launched our high efficiency modules, poly and mono crystalline modules and also complete EPC services. Further he said that, it is a known fact that the Indian manufacturing capacity is limited today. We don’t have large capacity manufacturing to bring economies of scale. Recently, many initiatives and investment commitments have been made by large corporate houses (domestic as well as foreign based) who are looking at investing in India’s Solar Manufacturing Space. The challenge we may face as a country is cheaper financing, poly silicon availability for such large scale (compared with the share of other growing economies) and stable Government policies. We are confident that Indian Solar market will be one of the largest in the world in the coming years. There is a huge prospect of FDI (Foreign Direct Investment) coming into the Indian Solar Industry. Today, we do not have the manufacturing capacity and access to cheaper finance. Both are expected to arrive through the foreign investors. Major US, European and Japanese companies will look at large scale financing and investments in India. Even Chinese companies are aiming at investments to avoid Anti Dumping Duty on the long run and also make India as their manufacturing base to address other growing markets and developed markets. Influencing factors are stable Govt for the next five years, conductive investment environment, and policy support and 100GW market portfolio. Next one year will be very crucial for the Indian Solar Industry to mature and start pushing large scale investments. We look at Roof Top market and Commercial Scale projects growing substantially in the Indian context. It is still early for the Off-Grid solutions to arrive in the current scenario as our Country still has a large population dependent on subsidized electricity. We foresee Smart Grid systems in Urban areas and industrial towns to develop as a big market in India. We expect a minimum of 3 to 4 GW of capacity addition in India every year from 2016.
Conclusion
India could well be the next hotbed for a solar revolution. Plagued by red tape, land acquisition and corruption issues in the past, the new Indian government is all set to tackle these challenges as it sets its sights on increasing investments in the Indian solar sector.
