Around €30 billion investment is needed to develop 20,000 MW of grid
connected solar power capacity in India by 2022, said Tarun Kapoor,
Joint Secretary, Ministry of Environment and Forests, Government of
India, at the Solar Project Financing at Intersolar Europe conference, the
world's largest solar market forum, held in Munich, Germany, recently. This
will require about €21 billion to meet 70 per cent of debt and about €5-6 billion
for infrastructure development in these projects. Kapoor also mentioned
that the Indian policies were welcoming and invited international
banks and financial institutions to India.
The conference, organised by FICCI, GIZ and KfW, brought out the German
experience in solar project financing and created awareness on the factors
that need to be addressed to channel finance into solar projects in India,
putting stress on the need for non-recourse funding. In the context of India,
banks fund solar projects primarily on full recourse basis (balance sheet
funding). Banks feel lack of radiation and performance data makes it risky
for them to consider projects on non-recourse route.
Industry and bankers needed to handhold each other for solar power projects.
Finance was the vitamin E for the solar industry, said K. Subramanya, Chairman,
FICCI Solar Energy Task Force, while addressing the conference.
Interest rate was a very important factor for solar projects, as developers
had to pay 13-14 per cent interest rate, which was very high as against the
3 per cent they could borrow internationally, he added.
No inflation index was attached to the discounted tariffs for solar projects
in India, tariffs that are set for period of 25 years without factoring in inflation
rate. This could be very risky for projects, said Boris Westphal from Suntrace
GmbH, a German solar project developer.
For attracting finance, reliability of revenue stream, reliability of EPC contractor,
and quality of the project are key factors. The conference also highlighted
the various forms of insurance cover provided to solar projects in Germany.
Insurance cost forms around 0.1 per cent of total project cost in Germany.