The need for energy efficiency is presently a global hot topic, and so the inaugural National Energy Investment Summit being held next month, is both a timely and significant platform for the region.
The event is taking place on July 21st – 22nd 2011 at The Grand in New Delhi, and is seen as pivotal in the country’s quest to achieve its 2022 agenda.
It is supported by a number of Government and industry associations, including the Ministry of New and Renewable Energy, The Energy Resource Institute, World Institute of Sustainable Energy, Indian Wind Energy Association, Solar Energy Society of India, Indian Private Equity & Venture Capital Association, All India Association of Industries and Centre for Wind Energy Technology (C WET), Renewable Energy & Energy Efficiency Partnership and Independent Power Producers Association of India.
Up to 150 investors, Government officials and renewable energy solution providers are attending. Investors are expected to travel from the Middle East, Europe, China and Australia – as well as India.
This initiative provides an ideal arena for all parties to discuss projects geared towards transforming the country’s energy industry. Key issues such as emission reduction, carbon emission trading and Clean Development Mechanism are also being debated.
The two days are organised and hosted by business information group naseba. “We are proud to host this summit and grateful for the support of the Ministry of New and Renewable Energy in India. This is the first capital raising platform for renewable energy projects of its kind in the region, and up to US$ 7.5 billion in expected to be invested.” commented naseba General Manager (INDIA) , Mohammed Saleem
India‘s federal cabinet Thursday approved the allocation of 4.86 billion rupees ($108 million) toward a scheme to guarantee payments for electricity bought from solar power producers, as part of the government’s efforts to encourage development of renewable energy.
The funds will be used as guarantee in case state-run power utilities and distribution companies default on payments for solar power, which currently costs much more than coal-based electricity.
The payment security scheme aims to help solar power producers arrange finances for their projects, the government said in a statement issued after a cabinet meeting.
The scheme will help the federal government meet targets under its National Solar Mission, which aims to build 1,000 megawatt of solar power capacity by 2013 in the first phase. India aims to add 20,000 MW of solar power by 2022 under the solar mission.
The scheme will be implemented by the Ministry of New and Renewable Energy and NTPC Vidyut Vyapar Nigam Ltd. will be able to draw funds from the account as per the scheme’s provisions, the statement said.
NTPC Vidyut, a unit of India’s largest power generator NTPC Ltd., buys solar power from the producers and sells it to utilities bundled with coal-based power.
But most state-run distribution companies are cash-strapped with weak finances. This has elevated the risk of solar power producers not being paid for the electricity produced. That has affected solar companies building these new plants as lenders aren’t willing to give loans to projects where returns are risky.
Solar companies that have been awarded projects under the mission’s first phase in particular are facing hurdles in arranging finances. For the projects awarded so far, companies have to raise funds by the end of June.
India currently has 20,000 MW of renewable energy capacity, constituting more than 11% of the country’s total power generation capacity of around 174 gigawatts.
While India’s solar mission to generate at least 1,100 megawatt of power by 2013 is on track now, private players feel the government needs to accelerate the pace of growth in the coming years to meet the eventual goal of generating 7% of the nation’s power needs.
Amit Dave/ReutersWorkers clean solar concentrator panels at a solar food processing unit in Gujarat.
India’s Ministry of New and Renewable Energy launched the Jawaharlal Nehru National Solar Mission in January 2010 with a stated goal of developing 20,000 megawatt of solar energy in three phases by 2022 and to reach cost parity so that generating solar power costs the same as conventional power by that time.
Farooq Abdullah, India’s Minister of State for New and Renewable Energy, said he’s satisfied with the progress so far on its various projects. In the first phase of the mission, the government hopes to build capacity to generate 1,100 MW by 2013.
However, “this is not the main objective because 1,000 MW is nothing as far as India is concerned,” said Santosh Kamath, executive director of advisory firm KPMG. “Ultimately, the objective is to make solar energy a very significant contributor to India’s power and energy needs.”
The government held a transparent bidding process to allocate projects to developers and sign agreements for about 70% of the capacity it aims to achieve in the first phase. These projects are at the development stage, working on securing financing to starting construction, before they become operational. The Ministry noted that the bidding process itself has helped reduce the cost of solar power by almost 30%, as competition in the bidding process lowered prices.
“What is really good about what has happened so far is that it has kick-started an eco-system in the country,” Mr. Kamath said.
The federal government’s involvement and active interest in projects has spurred the start of new companies, expansion of existing operations, and addition of labor and new technology.
Each state also has an obligation buy a minimum level of solar power and they can substitute this with renewable energy certificates if they are short of the required amount. Gujarat, Rajasthan and a few other states also have their own separate initiatives to develop solar power.
“Our policies in the first phase have facilitated a declining trend in costs and induction of various technology options in the first phase of the Mission,” Minister Mr. Abdullah said.
“I am confident that project developers will be able to commission their solar plants well in time and that we will be able to move ahead for a scale expansion in the next phase of the Mission,” he said.
Last week, a KPMG report predicted that India’s solar energy sector needs up to $110 billion in capital over the next 10 years to meet its energy goals. However, the last three years the sector has seen only eight investments worth $100 million.
Many of the projects are small without a proven track record making it difficult for investors to put their money. It makes it even more risky when India’s banks themselves are hesitant to take on these projects. The KPMG report recommends that the fund, set up with fees levied on imported fossil fuel, be used to promote new solar projects.
Some solar energy start-ups like SuRe Energy Systems Pvt. Ltd. have resorted to raising money from friends.
Also, the KPMG study found that the state electricity boards, which are expected to buy power from renewable energy sources, doesn’t have the financial capacity to do so, and suggests that the government sponsor this as well.
KPMG recommends another focal change in the way power is consumed. Instead of power from a grid, the firm recommends that users can generate and use their own power and advocates decentralizing of solar power, especially when it comes to uses such as rural lighting systems, agricultural pumps, and telecom towers. The government is expected to spend 2 billion rupees on subsidies to such off-grid projects annually.