Bridge India

CEO survey shows huge optimism in the sector but also a reminder of key challenges

BRIDGE TO INDIA has just released results from its first ever survey of the most influential private sector decision makers in the industry as part of the Indian Solar Handbook 2016 report (download your free copy here). Most of the 27 participating CEOs said that they expect their businesses to grow by an average of 3-5x by 2020 with 37% of them believing that their business will grow by more than 10x by 2020. This optimism is based on the expectation that the market will also grow at an impressive compounded annual growth rate (CAGR) of 45% per annum until 2022.

  • The industry is most concerned about transmission connectivity/ grid failure, debt financing and INR depreciation risk
  • The industry has also rated central government’s policies for the sector as ‘Good/ Very Good’
  • Most CEOs are positive about the prospects of domestic manufacturing

Even though the market is expected to grow at a very impressive pace, the capacity addition numbers may seem lacklustre in comparison to India’s very ambitious targets. A majority of the participants expect India to add 40-60 GW of solar capacity until 2022, against the government target of 100 GW. Most of this capacity is expected to be set up for policy based utility scale projects. The rooftop solar target of 40 GW until 2022 seems most unrealistic under the current policy environment as almost half of the CEOs don’t expect the market to cross the 10 GW mark for cumulative capacity addition until 2022. Prospects for growth of the open access market also seem limited as 85% of the respondents don’t think that the market will cross the 10 GW mark by 2022.

The anonymised survey reveals that the industry is most concerned about transmission connectivity, grid failures, debt financing and INR depreciation risk in that order.

Most survey questions related to challenges indicated that grid and transmission related issues have become a key concern for the industry. BRIDGE TO INDIA also believes that the future risk of curtailment of power due to grid congestion and grid’s ability to absorb intermittent sources of power, especially in high renewable penetration areas, can upset project cash flows and already squeezed return expectations.

On the macro front, the industry is largely optimistic about the UDAY reform for DISCOM finances and think that it will help improve the DISCOM bankability issues. However, there is still some scepticism, which is not surprising given the failure of previous moves to restructure DISCOM finances.

Lauding the efforts of the current government, 74% of the survey participants give the central government a rating of ‘Good/Very Good’ on overall policy framework. The industry is also generally positive about the prospects of domestic manufacturing and believe that India is expected to have an annual cell-module manufacturing capacity of 5 GW by 2022.

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