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Solar power tariffs coming down to near grid parity make for great headlines. But behind it is a growing fear that domestic developers could be left out of the solar energy story in India. According to industry estimates 14,000 MW of solar power projects are in the pipeline; they are yet to be commissioned but have been allocated, or are in the process of being allocated. A majority of these projects are of international developers such as SunEdison, Trina Solar and SkyPower who are outbidding their domestic counterparts by big margins. And the key factor helping them bid aggressively is their access to cheap finance.
It is accepted within the industry that to bring down solar power tariffs, either the equipment cost needs to go down or financing needs to be cheaper. With the global cost of solar power panels now having bottomed out after two years of drastic reductions, finance is only cost aspect left to play with. It is here that international developers are crowding out domestic players. With AAA-rated agencies such as NTPC and Solar Energy Corporation of India turning into power procurers, domestic institutions are keen to lend to solar power projects. However, the cost of domestically sourced finance still hovers around 11.5 per cent. This is after the series of rate cuts announced by the RBI. International developers have access to finance at an average rate of 7-8 per cent; in some cases, even lower.
The aggressive bids have also meant that some of the big names looking to enter the market are still waiting on the sidelines after signing MoUs as they hope for competition to ease. As a result, smaller domestic developers who have waited for years for the market to open up are being increasingly shunted from ground-based solar power projects and forced to look at rooftop projects. With talks of an upcoming rooftop solar policy, the domestic industry now hopes for mandatory rooftop solar installation for buildings to provide them some certainty about the business model.
Principal Correspondent
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