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Front Page | June 2012

3000 MW solar projects; Rs 25,000 crore PE boost

 Our Mumbai Bureau

There is good news for green energy projects under implementation or proposed to be set up in India. Private equity investors are planning to invest over Rs 25,000 crore in green energy projects.

According to industry sources, over 10,000 MW of renewal energy projects with investment to the tune of Rs 60,000 crore are likely to be set up in the next three years. The solar energy projects alone would account for Rs 13,000 crore for 1 GW. The governments of Gujarat, Rajasthan and Karnataka are in the process of finalizing norms in order to promote green energy projects in respective states.

It may be noted that, barring large private sector players, most of the power projects are primarily funded through private equity or IPO and over 50 per cent of the funding for new projects is likely to be through PE funds. IDFC, for example, has funded renewable and clean technology projects worth over Rs 5,000 crore.

Private equity investors find green projects attractive investment propositions because of the predictability of returns on investment, incentives based on generation and expectations of a bull run in the renewable energy certificate (REC) market. This is in sharp contrast to the delays on account of environmental issues and government approvals plaguing other power projects.

That apart, the emphasis laid by the government on solar energy projects and the excess solar cell production capacity in other countries have led to a sharp fall in solar power project costs. The capital cost for one MW of solar power has decreased drastically from Rs 15 crore in 2011 to Rs 9 crore in 2012. Tariffs have also dropped dramatically from around Rs 18 per unit to Rs 9.40 per unit. This has also led to more demand for solar power, thereby making it an attractive investment avenue for PE funds.

In a related development, Government of India has decided to launch 3,000 MW of solar power projects under the second phase of the National Solar Mission. A press statement from Federation of Indian Chambers of Commerce and Industry (FICCI) quotes Tarun Kapoor, Joint Secretary, Ministry of New & Renewable Energy (MNRE) saying “The government has plans to set up four solar thermal power projects through the Solar Energy Corporation of India. The government would work on putting up 6,000 MW through solar Renewable Energy Certificates (REC) scheme which is expected to catch on from next year.”

Kapoor was speaking on ‘Destination India: Investment Opportunities for Solar Energy’ organized by FICCI during Intersolar Europe 2012 conference in Germany.

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