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Financing of Solar Power Projects in India

Solar Power Projects in IndiaIntroduction

Solar power plays a crucial part in the renewable energy basket of India. Solar power projects are capital intensive; require large land area, high scale technology. India has high growth linked to economic growth of the country where demand for power remains unsatisfied, with examples like the black-outs in north India. The Central Government is supporting renewables, and with the RPO (Renewable Purchase Obligations) being made mandatory, solar is a rich resource.

This paper, authored by Vidhi Raj and Ketan Mehta, deals with the solar power projects in India, the financing of such projects, the cost components, the SWOT and risk analyses of the projects. This paper is written by the authors for ThinktoSustain.com as part of Media/Knowledge Partnership with the event Solar Conclave 2012 held at School of Petroleum Management (SPM), Pandit Deendayal Petroleum University (PDPU), Gujarat, on October 12, 2012.

As the nation’s solar policies take shape, India is finally on the world’s solar funding map. Most investors that participate in Indian large-scale solar projects are export banks, government- or state-owned banks. For India’s solar industry to truly thrive, there needs to be a conducive environment to attract more robust participation from private financial institutions.

In the paper, the authors have taken a sample project of 10 MW of the solar power in the Gujarat Patan region. All the figures of maintenance, insurance, tariffs are considered according to the GERC (Gujarat Electricity Regulatory Commission) Order January 2012.

The Indian Scenario

India unveiled its $19 bn Jawaharlal Nehru National Solar Mission (JNNSM) that seeks to achieve 20 GW of solar power capacity by 2022 in three phases:

  • create favourable conditions for PV and solar thermal manufacturing capability and fiscal incentives for local manufacturers;
  • achieve 15 million sqm solar thermal collector area by 2017 and 20 million by 2022; and
  • deploy 20 million off-grid solar lighting systems for rural areas by 2022.

It contains a Renewables Purchase Obligation (RPO) that mandates all utilities and states to progressively increase their share of solar power from 0.25% in the Phase I (2009-12) and to go up to 3% by 2022.

Structure of the Solar Power Project Structure of Solar Power Project
Case Study

Let us assume a company Solar Technology Ltd., a start-up firm in solar business registered in Ahmedabad, Gujarat. The company wants to set up a solar PV based power plant of 10 MW capacity at Patan.

The estimated project cost is 150 crores and the company has planned to raise the financing through debt and equity mix of 70 and 30. The debt part is being serviced by Export-Import Bank USA and HDFC Bank, and the interest rates are 11% y-o-y. The equity part is being serviced by promoters (20%) and rest by five venture capitalists.




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