Why foreign investors are bullish on Solar India

Why foreign investors are bullish on Solar India

India has laid down a very aggressive road map for solar power in the country, with an overall target being 100GW by 2022 - nearly five times from current levels. Co-founder of Rays Power, a pioneer in the field of solar power generation in the country, gives his view on achieving this goal.

There is a very huge requirement for equity capital investment in the Indian solar sector and a lot of that capital will come from foreign markets. London, as one of the financial centres of the world, has shown a growing interest in solar in India as a promising story. Our company, Rays Power, in the span of less than five years has become the third largest solar power project developer in India. It boasts of a track record of 300MW across technologies, geographies and project size. It reflects the kind of potential there is in the market. Act rather than react Solar is a sector with very tight timelines, so it is important to foresee any bottlenecks and solve them upfront, rather than waiting for them to arise and then take action. SunEdison India's woes, for example, were due to being over-leveraged. The most important challenges and risks to bear in mind while developing new projects in India are:

  • Land risk: Availability of the land and legal title correctness of the land are some issues that need attention.
  • Off-take risk: The power needs to be sold at all times and you need to be paid for that. That is one aspect which solar developers have to take on board.
As a company we have dedicated teams to deal with all these aspects. It is important to have an understanding of the regulations and then go step by step.
World View
One thing is clear that all investors, be it from the US or the UK, are looking at the Indian solar sector in a very positive manner. At the same time, they are also looking for the right global partners. Nobody wants to go it alone and face all the challenges solo. That is where various structures and models come in. By the end of this year, India will be the third largest solar market in the world, after China and the US. With the US gradually saturating, very soon India is set to become the second-largest market. So no investor wants to ignore the market. The Indian government's steps in the last couple of years have been very positive. They have opened the doors for the foreign capital to come in and there is a lot of relaxation in the rules. The flexibility is there in the sector for all these players. Foreign investors also palpably feel more comfortable investing in India under the new regime.
Green Bonds
All the commissioned projects, will ultimately go the Green Bond route because this is ultimately the lowest cost funding and capital which is available. There is enough appetite in the market to buy these bonds. Solar tariffs have gone down and grid parity has already been achieved, which is a big advantage. Solar no longer requires subsidy because it is self-sustainable and will attract people voluntarily towards itself. We are very bullish on the residential solar market and are developing various projects to suit the requirements of different kinds of consumers. Our own internal target is to own up to 2GW of rooftop projects in the next five years, from around 2.5MW right now. We also have a model where the initial investment is taken care of by the company and the consumer pays on a per unit or per month basis. This means zero investment and savings from the word go, so this has proved an attractive model. Community centres, schools, hospitals, apartment blocks and petrol pumps are some of the utility side areas where companies like Rays Power also makes a difference. There is a lot of awareness among the common man with the government's drive. It is a very appealing new concept for everyone. As more and more people are installing it, the awareness is spreading like fire. It makes environmental sense, social sense as well as commercial sense because solar power now is cheaper than the grid.
Goals & Challenges
Rays Power is a pan-India company, which at the moment operates in eight different states. We have commissioned more than 320MW of renewable projects. This year alone we plan to do 250MW. The growth has been exponential. This is a time when an external equity investor has to come in to take the company to the next level and there has been a lot of global interest. We plan to close our first round of capital raising by September this year. The most keen investment in this sector is coming from the US, which has some very big players. After that it is from London and Singapore. The government's solar target is divided between 60GW of ground-mounted and 40GW of rooftop. The former is undoubtedly achievable, even before time. On the rooftop side, some challenges remain. This is an industry which drives you every day. You are doing something new, something also for the society. We are in the process of supplying solar lighting systems to all the villages in a particular state, which means they will now have power for life without the need for transmission lines and grids. The name of the state will also be revealed soon. In a country where almost 50 per cent of the population is without power, this is the best way to reach them - cleanest, safest and easiest. And, the best part is that India is a sunny country with more than 300 days of sunlight in most parts of the country.
Ketan Mehta is Co-founder of Rays Power Infra, a leading Indian integrated solar power company with presence across the entire solar value chain. Mehta is the visionary strategist behind the organisation and takes care of the company's strategy and planning, finance, investments and operations.

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