De-risking International Investments in Indian Solar Energy Sector

A Multi-stakeholder Workshop titled ”De-risking International Investments in Indian Solar Energy Sector” was organised in Intersolar, Bengaluru on 13th December, 2018 by TERI, Germanwatch, CANSA and Vasudha Foundation. The event was attended by solar industry representatives, Civil Society organisations and Ex-Chairman, Karnataka State Electricity Regulatory Commission.

Highlights from the event

  • Derisking of finance from domestic sources is as important as investment from overseas or funding sources.
  • Roof top solar has great potential in Karnataka and rest of India. Example: Large scale retail investment in solar water heater by households in Bengaluru city. It indicates roof top solar could be successful in decentralised solar energy generation and consumption provided utilities cooperate.
  • Though foreign investment are inclined towards mega projects, retail investment from individual households could be a game changer in India as it is devoid of issues of land acquisition, upkeeping, repairing and maintenance.
  • The tapering profit margin due to the existing reverse bidding process has been highlighted by the investors/project developers. However, there is a grey area on profitability as the bidding price per kWh quoted by project developers/investors varies drastically from year to year.
  • The risk return analysis of Indian renewable energy sector is encouraging. It is in the segment of low to medium in the risk reward spectrum and the returns are in the high grade levels. So it is an attractive sector for foreign investment in India.
  • Illiquidity, energy regulation, policies at sub national level in the context of policies at centre, rating mismatch are some of the few barriers of investment in India.

Ways to derisk investments in Solar

  • A mechanism to aggregate renewable energy and investment from individual houses, both rural and urban is a necessity to improve solar energy generation in the country.
  • Aggregation of renewable energy is the way forward as initiated by Solar Energy Corporation of India. It is a method of derisking investment in solar energy by removing few deficiencies in the centralised power systems. It does not have to deal with discoms as a generator and has prompt mechanism to collect timely payment from consumers.
  • The power aggregator company could tie up with institutions such as large hospitals, IT parks, education institutions, community centres and sign PPAs as a major to derisk their investment.
  • Establishing green banks, green bonds and dedicated institutions capable of mobilising finance (domestic as well as international) and assisting developers to projects is another way of derisking investment in solar.