Banks in India continue to
perceive significant risks in
the solar energy market
and are largely hesitant to
make substantial investments in
solar technologies, according to
a recently released report that
assesses the progress under
phase-I of the Jawaharlal Nehru
National Solar Mission.
Prepared jointly by the Council
on Energy, Environment and
Water and the Natural Resources
Defense Council, the report
titled 'Laying the Foundation for
a Bright Future' reveals that
securing funds poses the biggest
challenge for developers of solar
energy projects in the country.
In 2011, investments in India's
renewable energy markets rose
to approximately
51,000 crore,
of which more than one-third
was directed to solar projects.
Investments are expected to
double for phase-II of JNNSM.
"Even for smaller phase-I projects,
developers struggled to
raise capital from multiple
domestic, international, and
self-financing sources. While
there has been some improvement,
most domestic banks still
perceive significant risks in
solar investments," the report by
CEEW and NRDC says.
The Delhi-based CEEW is an
independent non-profit policy
research institution engaged in
promoting dialogue and common
understanding on energy,
environment, and water issues.
The New York-headquartered
NRDC is an international nonprofit
environmental organisation
with more than 1.3 million
members and online activists.
The report cites lack of data and
statistics on project development,
deployment and performance as
one of the reasons for the low
comfort level of banks with
regard to solar investments. Also,
the irradiance measurements
from local settings are currently
not recorded in the country and
hence not available to banks.
"Financial institutions perceive
solar energy in India as a riskier
investment because it is a fledgling
industry without a proven
track record in meeting commissioning
deadlines, performance
benchmarks, and delivering
power," the report says.
The report points out that international
lenders are less riskaverse
on the technology front
and offer lower interest rates.
However, project completion is a
cause of concern for international
financial institutions.
"International and bilateral
lending institutions that supported
several phase-I projects
remain interested in supporting
additional projects but want
more rigorous project selection
requirements, such as balance
sheets and vetted collateral.
Well-structured Renewable Purchase
Obligations, Renewable
Energy Certificates, and innovative
funding mechanisms are
opportunities for increasing
investments in solar energy," the
report says.
Considering that with major
information gaps and potential
market failures, financial markets
would not automatically
warm up to the solar market, the
report stresses on the need for
strategic interventions to create
a financing ecosystem.
Besides highlighting the hurdles
faced by developers of solar
energy projects in raising capital,
the report by CEEW and
NRDC focuses on the JNNSM's
objectives, targets, and incentives
for grid-connected solar
photovoltaic projects.