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India is shining: Why the country is currently one of the most lucrative markets for solar energy in the world

India is shining: Why the country is currently one of the most lucrative markets for solar energy in the world

Ms. Ratnottama Sengupta covers policies as a consultant in the Market Intelligence team at BRIDGE TO INDIA. 

The Indian solar market with close to 1GW of installed PV capacity is the point of focus for prospective investors in solar technology and manufacturers of solar cells and modules. This quarter alone has seen an additional 360MW of solar PV. Large module manufacturing companies from the US such as First Solar have latched on to this potential in the Indian market. First Solar is the largest supplier of the cadmium telluride (CdTe) based thin film technology to India, under the National Solar Mission (NSM) and the various state policies, such as Gujarat.

  • India with its definite move towards solar energy is currently one of the most lucrative emerging markets of the world for investors in the solar industry
  • US based company First Solar is looking at a long term strategy as opposed to a short term stay, as India contributed heavily to its revenue in 2011
  • To adapt successfully to the conditions in the Indian market, module manufacturers and investors have to constantly innovate and adapt

The Indian solar market, with its aim to achieve 20GW of solar power by 2022, high irradiation levels, dwindling sources of conventional fuels, rising prices of electricity and increasing demand for power is one of the most lucrative markets for solar in the world. A manufacturing company offering both EPC (engineering, procurement and construction) and O&M (operation and management) services and with constant on-going research and innovation to adapt to the dustier environment and higher temperatures of India can create a strong hold for itself in the country’s solar market. India is also a lucrative market for investors in solar projects as it is expected to have 12GW of installed solar PV capacity by 2016.[1]

First Solar is one of the primary examples of a company that has plugged into the potential of the Indian solar industry. It made a revenue of $971m (INR43 billion) in 2011 of which 8%, that is $77m (INR3 billion), came from their sales in India.[2] The European markets which were the foremost amongst the buyers of solar technology now have diminishing demand primarily due to the Euro crisis. They have also reached the point at which attributing a larger percentage to solar amongst all the sources of power generation would result in an unstable supply of power. This has led to First Solar thinking up an operation restructuring programme which involves closing down their plant in Germany.[3] With an investment of $60m (INR2.7 billion) made in 2011 they plan to concentrate on the Asian markets with a plant already set up in Malaysia.[4] As part of their long term business plan they specifically want to drive up their share in the Indian market.

The US EXIM bank offers financing support to export driven companies from the US such as First Solar. First Solar is therefore able to position itself better than other module manufacturers, as project developers using their products are able to avail financing from the US EXIM bank. The US EXIM bank offers cheaper financing as compared to Indian banks, as a result of which 30% of the 200MW supplied by First Solar has opted to use its financing.[5] Project developers are keen to use First Solar’s products as it not only brings the option of cheaper financing but also their expertise to optimize plant design and functioning. Several other US based manufacturers such as SolarWorld USA, Mia Solé, DuPont Photovoltaic Solutions are have already successfully supplied to projects in the Indian solar market.

Solar energy is finally taking off in India with various states coming up with policies and other approaches to move towards solar. They are setting up their own plants or using the feed in tariff (FiT) mechanism to allocate solar projects to fulfil their Renewable Power Obligation (RPO) of 3% of solar by 2022. Also the first Renewable Energy Certificate (REC) for solar was issued in May 2012 and this mechanism is now being looked at with interest by several project developers. Investors and module manufactures are all looking to establish themselves in the Indian market, which offers long term prospects for not only established entities but also sizable opportunities for those looking to try and make a fresh mark in the solar industry.

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«  Conversion rate used for INR; $1=INR45


References:

[1] BRIDGE TO INDIA market model.

[2] Renewable Watch, Volume 2, No. 8, June 2012.

[3] Renewable Watch, Volume 2, No. 8, June 2012.

[4] Renewable Watch, Volume 2, No. 8, June 2012.

[5] Source: BRIDGE TO INDIA interviews and analysis

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