Two sides of Indian Solar Coin

I recently came across two news articles on solar with varying views on the market happenings. Yes there is optimism in the market but still it looks like there are fears due to certain aspects of the policies,  not so easy financing and the learning experience.

News 1

The Gujarat Urja Vikas Nigam Ltd (GUVNL),  the state-run power generation, distribution and transmission company, has recently inked Power Purchase Agreements (PPAs) with as many as 54 solar power generation companies for 537 MW.

We had earlier seen PPAs of nearly 400MW being signed.  With this, Gujarat’s total solar purchase commitment stands at 934 MW. The target is around 1,000 MW solar power capacity by the end of 2012 and 3,000 MW in the next five years.

News 2

Leading entrepreneurs in the field of solar energy criticize aspects of the Jawaharlal Nehru National Solar Mission.

Experts have warned that policies have led to many middle men getting involved and making money on trading licenses and also that the policy provides no long-term visibility to bigger players.

As if this was not enough, banks have not been forthcoming to finance solar energy producers. The low-bidding experienced under NVVN will further assist in killing the industry before it takes off.


Gujarat is clearly the “solar capital” of India and based on my own personal experience, it is much easier to get work done in Gujarat then in any other part of the country.

With the bad experience of NVVN, companies are heading towards Gujarat to sign PPAs and take forward their solar plans.  PPAs from this State are also the most traded ones in the market.

While on the other hand, companies are finding it difficult to achieve financial closure easily. Yes debt from Indian banks can be easy but not so feasible with rates of ~ 10%-14% depending not on the project but on the balance sheet strength. Considering the long payback period in this business; I wonder how CFOs can allow leveraging of balance sheet to such a great extent; clearly effecting the other businesses of the company.

A good learning experience for all as we move along the Indian solar journey from policies, to learning to experimenting to maturity stage in the next few years.


Meanwhile wishing my blog readers a Very Happy 2011. Hopefully we will see the sun (solar) shining in 2011 with actual projects on the ground.

Thank You for your support in 2010 and I hope for similar continuous support in 2011.


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