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Is India’s Solar Market Running On Fumes?

Consultancy firm Bridge to India has raised concerns over the future of India’s solar market, and whether the funds necessary to build the massive GW-targets will be accessible.

In a recent piece published on its website, Bridge to India posited that the question of whether the India solar market is “running on fumes.” Specifically, the Indian renewable energy consulting and knowledge services provider believes that “many developers seem to be bidding for project first and planning to raise capital later.”

“The question is: will they be able to raise capital at the current tariff levels and in time to meet the stringent deadlines?”

India has repeatedly been seen committing to huge GW targets, and awarding massive solar projects to developers that are making India, on the face of it, one of the most attractive places to invest in renewable energy development. Just this week, India’s Ministry of New and Renewable Energy has reaffirmed its commitment to year targets intended to meet the country’s overall goal of delivering 100 GW of grid-connected solar PV by 2022.

However, Bridge to India raises three big concerns that it believes spells trouble for the country’s industry as a whole:

  • The market is in uncharted territory as none of the sub-INR 5.00/kWh (US 7.50 cents/kWh) projects have closed financing yet
  • Developers are hoping for a reduction in equipment cost but there is a possibility of prices firming up at least in the 6-9 month horizon; implementation of GST also poses a risk to these projects
  • Over the next one year, we believe that a significant number of projects are likely to get delayed or cancelled and tariffs may either stabilize or even rise marginally from current levels

Not only are companies such as SkyPower and SunEdison seemingly having trouble raising the capital they need, Bridge to India sees banks as being “extremely reluctant to commit debit for the recent aggressive” tariff bids. With prices possibly firming up in the next few months, and the possible impact the implementation of a GST will have on these projects, Bridge to India sees “genuine concerns about many developers’ ability to raise financing and build projects on time.”

“Overall, BRIDGE TO INDIA is of the opinion that while annual capacity addition in the Indian solar sector will continue to go up over the next few years, actual capacity added will be much smaller than MNRE estimates of 12 GW and 15 GW for FY17 and FY18 respectively. We also expect tariffs to stabilize or even rise marginally from current levels to attract sufficient interest from the financing community.”

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