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Interaction | August 2015

India is set to break into the global top five solar producers in 2015

claims Vineet Mittal, Vice Chairman, Welspun Renewables, who points out that India´s RE market has grown to 13 per cent and touched record capacity of over 35 GW by the end of the last financial year.

Could you talk about the growth in the renewable sector over the last two years?
Renewable energy is set to change India´s energy and climate future. In the last two years, we have seen a clear transition from RE playing a complimentary role in the energy mix to becoming a vital part of it. India recorded an unprecedented increase in power generation this year and a substantial part of it has come from RE sources. India´s RE market has grown at close to 13 per cent and touched a record capacity of over 35 GW by the end of the last financial year. This RE capacity is growing faster than coal, gas and hydro and India is set to break into the global top five solar producers in 2015. It is a rare moment because all three leading sub-sectors - wind, solar and biomass ´ overachieved on the allocated targets. In the last three years, we have seen rapid decline in cost of RE generation, particularly for solar, which has dramatically come down from Rs 20 per unit a few years ago to Rs 5.5 per unit. This suggests that RE is poised to attain grid parity.

How much would initiatives and policies implemented by the government push this sector?
The current government´s push to the RE sector has been remarkable. I believe the 175 GW target is doable and would not be surprised if it is achieved by 2019. If you look at what has happened in the last six months, it seems achievable. Various states have already tendered out over 6 GW installation capacities. Karnataka has already awarded 500 MW, Bihar has awarded 200 MW, Andhra Pradesh has rewarded 1,500 MW, Telengana and Tamil Nadu have each awarded 2000 MW. The Centre is coming up with a 3,000 MW capacity addition plan. Suddenly, there is a lot of interest and immense opportunities emerging.

Have you witnessed any significant improvement?
In some states we have seen visible improvements in pricing and bankability of PPAs. Some weaker states have taken steps to revive the financial conditions of discoms and there is further scope for improvements. Due to enormous support from the Centre and state governments, several new power producers and vendors have entered the sector. RE is expanding like never before. We have also witnessed breakthrough technological innovations, especially in battery technology, which is poised to play a crucial role in the future of India´s renewable power infrastructure.

The RE Invest summit saw huge amounts being pledged towards of solar and wind power in India. How many will be realised?
At RE Invest, 30 banks and financial institutions made a commitment of US$57 billion to the RE sector. I believe if the projects have necessary clearances in place and are bankable, then the target can be easily realised within deadline. MNRE and the industry have also been in talks with foreign investors for low cost capital. Foreign investors have shown huge interest in funding clean energy projects.

We at Welspun Renewables, were the first power producer to receive funding from General Electric Energy Financial Services and Asian Development Bank for our largest solar power project.

What is a realistic target that can be fundable for 2022, as opposed to the GoIG´s RE target of 176 GW?
There is strong and growing appetite among both banks and foreign investors to fund RE projects. Looking at the growth of the market in India in the last two years, I believe the projects are definitely fundable. In our discussions with various stakeholders including banks, investors and government agencies, it appears that funding will cease to remain a key challenge for the sector.

What financial options are available for funding of RE projects in India?
We are seeing an unprecedented appetite among investors´ who are keen to fund RE projects and foresee substantial inflow of funds in the coming years into the sector. Investor sentiment has changed for the better and the outlook for the country seems optimistic. Based on our interactions with various stakeholders, negativism about the country´s growth and reluctance towards financing RE projects has significantly gone down. Some banks that never used to look at clean energy projects are now doing so. Banks expect the projects to have PPAs, evacuation agreements, land and EPC contracts awarded. I believe if all these regulatory approvals are in place, then financing is not a challenge anymore. We at Welspun Renewables, are not facing the challenge of availability of loans. Banks have funded us in record time and we have also been able to get oversubscription on the projects from them.

Banks have also pledged support to RE projects, how many of this current are actually bankable?
Banks and international investors have expressed considerable interest in funding clean energy projects in India.

At Re Invest earlier this year, banks and financial institutions committed an immediate cumulative investment of US $1 billion. But bankability of these projects also depends on whether regulatory approvals are in place, whether they honour renewable purchase obligations, and is the issue of land acquisition and transmission resolved.

Where do you see the future of renewables in India developing over the next 3-4 years?
I am very confident and excited to see renewable energy becoming the next big contributor in India´s energy future. In line with Prime Minister Narendra Modi´s 175 GW renewable vision, we clearly see a transition from solar playing a complimentary role in the energy mix to becoming a vital part of it. Solar and wind power plants in India have one of the highest Capacity Utilization Factors (CUF) and are extremely efficient. We are at the cusp of a huge technological innovation in the energy sector.

We believe that within the next decade, current major sources of energy will be overtaken by battery storage, smart meters, cognitive computing and other clean energy technologies.

What measures/policies would you suggest need to be adopted/implemented for India to meet or exceed these expectations?
The Multilateral Investment Guarantee Agency (MIGA) is currently not available to insure Indian companies´ projects in India. Credit enhancement, payment security for state utilities´ PPAs through MIGA, Swiss Re and other institutions are needed so that PPAs of weaker states also become bankable. The government should also give tax incentives for investors, as for the infrastructure and irrigation sectors. Infrastructure Investment Trust or INVIT should be enabled by providing for tax exemptions and incentives under the INVIT structure. Also, clean energy should be out of the power sector as power sector lending limits are already reached. Alternatively, RE should get priority sector lending tag.

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