Deutsche Bank sees solar winning coal in India by 2019-20

Investments in India’s solar industry will exceed those in coal by the year 2019-20. Also, solar power generation will result in reducing coal consumption by 70 million tonnes, saving $ 17 billion (Rs 1.08 lakh crore), says a recent report of Deutsche Bank.

“Global majors have committed $ 35 billion (Rs 2.25 lakh crore) to the Indian solar sector. By 2020, annual solar power capacity additions and investments could surpass those in coal power projects,” Abhishek Puri, Research Analyst at the German bank, says in his report.

The bank expects solar power capacity in India to touch 34 GW by 2020. This is on the back of strong commissioning (4.5GW), even stronger pipeline -- under construction (about 5.1 GW), and new projects (15 GW).

By 2020, renewables could account for a significant 20 per cent of power capacities in India, the report says. (Today, it is about 13 per cent.) “Private sector interest is decisively moving towards solar from coal power, and we foresee numerous opportunities of fund-raising, yieldco structuring and M&A activity,” says the report.

The report also estimates that solar project will yield a 19 per cent return on equity over the lifetime of the project. “We caution however that data/financials from operators/developers are limited. Nonetheless, data from the first round of solar installations are encouraging and provide around 20 per cent plant load factors.”

Given the momentum in solar power capacity addition and slowing new coal project additions, the bank expects solar capex to overtake that of coal by 2019-20, and capacity addition to overtake coal in 2020-21, if not earlier.

The report notes that the domestic players are “unlikely to see much benefit as the majority of PV cells are likely to be imported, given the small scale of domestic PV manufacturers (only 1.2 GW/pa, with the largest, IndoSolar, at 450MW/pa), and therefore, lack of cost competitiveness.”

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