Japan’s foreign aid arm plans to finance India solar power parks
Other institutions such as Germany-based KfW Bankengruppe and World Bank also want to invest in solar parks
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New Delhi: Japan’s foreign aid arm Japan International Cooperation Agency (Jica) plans to fund solar power parks in the country, giving a fillip to India’s green energy plan.
To start with, Jica is ready to invest $500 million in the proposed solar parks. Other institutions such as Germany-based KfW Bankengruppe and World Bank also want to invest in solar parks.
Of the total 100,000 megawatts (MW) of solar power capacity planned by 2022, 20,000MW will come from solar parks and 40,000MW each from roof-top and distributed generation projects.
The government plans to set up 25 solar power parks.
“Apart from providing funds to our solar programmes such as roof-top projects, multilateral financial institutions such as KfW, World Bank and Jica are very keen on funding solar parks. We will be raising $500 million from Jica for the same," said a senior Indian government official requesting anonymity.
KfW is already involved in India’s clean energy sector through its commitment to lend €1 billion for green energy transmission corridors. Jica disbursed 162.2 billion yen in official development assistance loans to India in 2014-15. The amount disbursed is the highest among countries where Jica extends such assistance.
Mint reported on 30 March about the National Democratic Alliance (NDA) government in talks with the Asian Development Bank (ADB) for two loans of $500 million each for solar parks and roof-top projects.
Explaining the rationale behind such overseas institutions’ interest in financing solar parks, the government official quoted above said, “The largest solar park in the world is of 550MW. In comparison, some of our parks are in the range of 1,500MW. Look at the scale. We are looking, at the least, at five such parks of 1,000MW each."
Foreign loans are cheaper than those offered by local banks and financial institutions. However, even though the interest costs of foreign loans are lower, project developers have to hedge their foreign currency exposure.
Analysts believe that India’s green energy plans have found global traction. “The government has identified 13 solar parks in 15 states," Deutsche Bank AG wrote in a 19 July report adding, “Annual investments in solar could surpass investment in coal by 2019-20, with $35 billion committed by global players."
The NDA government has pushed renewable energy to the top of its energy security agenda, in a bid to cut India’s dependence on coal-fuelled electricity. An earlier target of installing 20,000MW of solar energy capacity by 2022 has been raised fivefold to 100,000MW.
India needs as much as $200 billion to meet its target of installing 100,000MW of solar power capacity and about 60,000MW of wind power capacity by 2022. The government aims to provide green power at less than ₹ 4.50 a unit.
Experts believe the prices are going down. “Solar power is likely to become cheaper than or equivalent to conventional thermal energy prices over the next two to three years and reach ₹ 4-4.5/kWh by FY18," India Ratings and Research said in a 22 July report.
Queries emailed to the spokespersons of the ministries of finance and new and renewable energy remained unanswered.
“KfW plans to provide further loans for projects in other regions and with different partners, and respective projects are under preparation," said KfW spokesperson in an email response.
Queries emailed to the spokesperson of Jica remained unanswered.
A World Bank spokesperson in an email response said, “We haven’t received any request from the Department of Economic Affairs yet. So (we are) unable to provide you with any updates."
Concerns have also been expressed about green energy capacity addition plans given the perilous state of the finances of state discoms.
“For renewables there are a lot of hurdles in store. We are particularly worried by the weak financials of state discoms, the key buyers of electricity, who are finding reasons to support cheaper conventional power. Since the cost of renewable power is currently higher, SEBs may be reluctant to turn to renewable energy," the Deutsche Bank report said.
Renewable energy, at present, accounts for only 35,777MW of India’s total power generation capacity of 272,503MW. In an indication of the growing appetite for electricity in India, the country’s per capita electricity consumption has reached 1,010 kilowatt-hour (kWh) in 2014-15, compared with 957 kWh in 2013-14 and 914.41 kWh in 2012-13, according to the Central Electricity Authority, India’s apex power sector planning body.
India’s per capita power consumption is among the lowest in the world.
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