India’s target of 100GW of solar capacity by 2022 represents a ‘large opportunity’ for UK-based investors and project developers to invest in the Indian solar sector, according to a member of a major Indian bank.
Vikas Dawra, managing director, Sustainable Investment Banking, Yes Bank, India, who will be speaking at the Solar Energy UK 2015 event next week, told Solar Power Portal that there are “three buckets” of opportunities for UK companies in India, including in the 60GW earmarked for grid-connected utility-scale solar, 40GW of rooftop PV and some capacity in off-grid solar.
The main advantage that UK companies will have over domestic companies is their ability to access capital, he said.
Dawra added: “This entire 100GW will require US$100 billion of which US$30 billion would be equity and US$70 billion would be debt. India does not have that kind of capital for solar, so government is removing all barriers and they are being very encouraging as far as foreign investment in solar is concerned.”
Dawra said that despite India being a small market at present, additions are now happening in a “fairly substantive manner”. Of the 2.5GW expected to be installed in 2015, 1.5GW has already come online.
He said UK companies can look at becoming an IPP in India for utility-scale plants. There are also opportunities for platform acquisition of some domestic companies with portfolios of 500-600MW.
He said: “They have been infrastructure players who have gotten into solar so their access to capital is limited.”
Dawra said that as a result some of these companies are looking to exit the market, which presents an opportunity for UK companies to acquire a large platform of utility-scale solar, along with a team with experience in financing, EPC, installation and O&M.
The second opportunity for UK companies is to bid in the upcoming state solar auctions for a specific amount of capacity. Dawra expects projects returns to be around 13%, based on the level of bidding from the last three state auctions in Telangana, Madhya Pradesh and Punjab.
Dawra added: “At those levels they are still fairly attractive projects for a European company or a UK company […] to come and bid directly and there is no barrier to that.”
There is also an opportunity to bid in one of India’s many mega solar power parks, each with more than 500MW capacity. Companies can bid for a section of capacity and then use the pre-built infrastructure within the solar park.
However, Dawra said: “The real story where UK companies can bring in their expertise is rooftop.”
The Government of India is pushing companies and homeowners towards rooftop solar by making it compulsory for certain offices beyond a certain size and for government offices to have rooftop. India has little experience in rooftop solar and this is where UK companies who have experience dealing with utilities and net-metering arrangements can bring in their expertise, Dawra said.
While there are issues with land procurement in India and high demand for skilled workers, Dawra expects UK companies to come through a learning curve period over two years. There is also a foreign exchange risk as the Indian rupee has depreciated nearly 4.5% this year against the US dollar and is expected to depreciate a further 3-4% each year in the near future.
In terms of YES Bank, Dawra added that the bank is uniquely positioned to enable investment from the UK, having already funded more than 500MW of solar projects out of nearly 2GW of renewable energy projects overall.