Active Stocks
Thu Mar 28 2024 13:39:23
  1. Tata Steel share price
  2. 155.45 1.70%
  1. HDFC Bank share price
  2. 1,454.45 0.95%
  1. Power Grid Corporation Of India share price
  2. 277.05 2.21%
  1. ITC share price
  2. 429.05 0.25%
  1. State Bank Of India share price
  2. 755.05 2.86%
Business News/ Politics / Policy/  Government raises solar investment target to $100 billion by 2022
BackBack

Government raises solar investment target to $100 billion by 2022

Solar energy in India costs up to 50% more than power from sources like coal

India gets twice as much sunshine as many European countries that use solar power. Premium
India gets twice as much sunshine as many European countries that use solar power.

New Delhi: Prime Minister Narendra Modi has ramped up his target for solar energy as he bets on renewables to help meet rising power demand and overcome the frequent outages that plague Asia’s third largest economy, a senior official told Reuters.

India gets twice as much sunshine as many European countries that use solar power. But the clean energy source contributes less than 1% to India’s energy mix, while its dependence on erratic coal supplies causes chronic power cuts that idle industry and hurt growth.

“Modi now wants companies from China, Japan, Germany and the United States to lead investments of $100 billion over seven years to boost India’s solar energy capacity by 33 times to 100,000 megawatts (MW)," said Upendra Tripathy, the top official in the ministry of new and renewable energy.

That would raise solar’s share of India’s total energy mix to more than 10%. In Germany, a leader in renewable energy, solar accounted for about 6% of total power generated in 2014.

India had earlier set an investment target of $100 billion for the next five years for all types of renewable energy, with wind taking up two-thirds of the total. In an interview, Tripathy said Modi’s new solar target was ambitious, “but if you do not have a higher goal, you will not achieve anything".

Canadian Solar and China’s JA solar told Reuters they are looking at making cells or modules—used in solar panels—in India. JinkoSolar Holdings said recent announcements have also raised their interest.

US based First Solar and SunEdison Inc have sizeable businesses in India, and together with local firms will invest $6 billion in India for the fiscal year to 31 March. Tripathy expects new and existing companies to invest about $14 billion annually starting next fiscal year through to 2022.

Among First Solar’s top projects are two plants with Kiran Energy Solar Power and Mahindra Solar One totalling 50 MW in Rajasthan. SunEdison is working on a 39 MW project in India and hopes to participate in the solar expansion plan, said regional managing director Pashupathy Gopalan.

Cost Challenge

Solar energy in India costs up to 50% more than power from sources like coal. But the government expects the rising efficiency and falling cost of solar panels, cheaper capital and increasing thermal tariffs to close the gap within three years.

Modi promised on high-profile visits to Japan and the US last year to help solar companies overcome barriers to entering the Indian market.

“Their basic problems are who is the buyer, where is the land and can India have a regime where they can raise low-cost capital?" Tripathy said. “These three issues have to be addressed and we are addressing them."

To create sufficient demand, power distributors will have to raise renewable energy purchases to 8% from 3% by 2020. There is also a plan to require new thermal plants to have a 10% renewable mix, which they can generate or buy from solar companies as credit.

India recently signed a $1 billion agreement with the Export-Import Bank of the US for companies willing to ship equipment from that country. India is also thinking of solar bonds and helping foreign firms raise rupee bonds to cut costs.

Foreign companies say they are enthused by Modi’s personal interest, but red tape is still an issue.

“The policy framework needs to be improved vastly. Documentation is cumbersome. Land acquisition is time-consuming. Securing debt funding in India and financial closures is a tough task," said Canadian Solar’s Vinay Shetty, country manager for the Indian sub-continent.

Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it's all here, just a click away! Login Now!

Catch all the Politics News and Updates on Live Mint. Download The Mint News App to get Daily Market Updates & Live Business News.
More Less
Published: 02 Jan 2015, 04:08 PM IST
Next Story footLogo
Recommended For You
Switch to the Mint app for fast and personalized news - Get App