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Business News/ Industry / Energy/  US firms keen to invest in India’s renewable energy sector

US firms keen to invest in India’s renewable energy sector

Fall in prices of solar panels and modules in global markets increased investor appetite in the sector

Photo: BloombergPremium
Photo: Bloomberg

New Delhi: With India looking to enhance the share of renewable sources to 40% of its energy mix by 2030, up from 13% now, US businesses are making a beeline to capture a slice of the market.

Fred P. Hochberg, chairman and president of the Export Import Bank of the US said the financial institution is working with a number of renewable energy companies in the US which are looking to increase their business in India.

“We respect the Make in India campaign but at the same time India needs a balance between local manufacturing and the best available technology," he said, adding that a number of US firms had approached the bank, evincing interest in the Indian renewables market.

India’s commitment to cut carbon emissions by 35% by 2030, as part of its Intended Nationally Determined Contribution, over 2005 levels offers global producers of solar panels and other equipment a major business opportunity.

The all-inclusive interest cost for Exim Bank of US-guaranteed loans, treated as external commercial borrowing under Indian rules, is in the region of 4-6%.

“We provide guarantees to financial institutions which make the decision on lending. Generally, the interest rate varies between 4-6% inclusive of all charges, but that is a very general figure. The actual rate would depend on a lot of factors," said Hochberg.

The fall in prices of solar panels and modules in global markets along with a firm policy push to install 100 gigawatt (GW) of solar power capacity by 2022—the largest renewable energy capacity expansion in the world—has increased investor appetite in the sector. The country needs 6 trillion to scale up solar power generation capacity to 100 GW from 5,100 MW at present.

In the latest auction of solar power projects in Rajasthan, 420 MW of solar projects have been bid out to companies that promised to deliver power at 4.34-4.36 a unit, a historic low. Fortum Finnsurya, a unit of Finland’s state-controlled Fortum Oyj, was the lowest bidder.

The drop in cost of solar power has invited a lot of investor interest. However, the unpredictable nature of solar and wind power makes it imperative to supplement it with hydroelectric and natural gas-based power projects.

At present, about 70% of India’s 284 GW power capacity is supplied by fossil fuels such as coal, gas and oil. Large hydroelectric projects account for 15%, while renewable sources account for about 13% and nuclear power about 2%.

On US firms such General Electric Co. and Westinghouse Electric Co. LLC setting up nuclear power plants in India, Hochberg said, “There is real progress being made in terms of the liability issue so I think we are moving well on that path that will open up India to not only the US but to other countries as well."

India concluded a civil nuclear energy agreement with the US in 2008 but Parliament in 2010 passed a civil liability law that placed a heavy liability on suppliers of nuclear power plants and equipment rather than the plant operators in the event of an accident.

However, last year, the Indian government after talks with the US, clarified that in the event of a nuclear accident, the operator of the nuclear power plant, in this case the Nuclear Power Corporation of India Ltd, will bear the brunt of liability.

The statement also said that operators will have the option to act against a supplier if they find an intent to cause damage and that India would create an “India Nuclear Insurance Pool" to enable the suppliers to seek insurance to cover the risk of invocation of recourse against them “through a market-based mechanism to compensate third parties for nuclear damage".

Despite these clarifications, the interest of foreign companies in the Indian nuclear energy market seems limited.

Jeffrey Immelt, chief executive officer, General Electric Co., in September said his company will not risk building a nuclear power plant in India given that India’s law was inconsistent with the global approach of putting the liability of nuclear accidents on operators rather than suppliers.

Hochberg on Friday said there were “still a number of steps to go (before US nuclear power companies enter India)... but there is a sense of moving quickly."

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Published: 29 Jan 2016, 11:44 PM IST
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