The Indian solar market is growing at a breathtaking speed: This year alone, by more than 300%, next year perhaps by 150%. Competition is as intense as the market is enthusiastic. Is this a recipe for an investment bubble? Projects are being won at record low tariffs – tariffs that many observers doubt will leave investors with acceptable returns. Will these projects be “stranded solar assets”? Is there a bubble in the making? Richard Martin has recently asked this question in the MIT Technology Review (refer). My answer is a clear “no”. Here is why.
- Some investors will be disappointed with returns as competition remains stiff
- Power demand in India is high and growing – it is a solid business opportunity
- In future, as financial engineering becomes more complex, there might be more room for speculation