With a target to provide 24/7 electricity across India by 2019, prime minister Narendra Modi and his energy minister Piyush Goyal have put energy on top of the agenda for the subcontinent. While this requires a vast increase in coal-fired power production, it comes with the enormous ambition of installing 100GW of solar by 2022, up from just 4GW today. Commentators recently praised India for its INDC, submitted ahead of the COP21 Climate Conference in Paris, aiming to hit 40% of its energy from alternative sources by 2030, but this is by no means an outright domestic task. Government movements make it clear that foreign investment and expertise is a critical part of the strategy.
UK companies planning to enter India need to know that there are unique issues in the Indian solar market, such as notoriously difficult land acquisitions and foreign exchange risks with the Indian rupee depreciating against the dollar.
Steve Toogood, director of the UK India Business Council (UKIBC), which helps connect UK businesses and investors with partners within India, says it is a “complex market” with the high cost of procurement and the standard cost of electricity coming down, however, the new Indian government is rapidly deregulating and opening up access for foreign investment.
Toogood, who will be speaking at the Solar Energy UK 2015 event next week, adds: “You have to make relationships and look to invest for the long-term in India. You also need to understand the path of old regulations.”
On a positive note, he said legislation currently going through parliament is set to ease the problems of land acquisition and the platform for British connections in India is very strong. Meanwhile, Modi’s 'Make in India' campaign is seeking to address the deficit of manufacturing capabilities in India, as it accounts for only 15% of GDP.
Toogood says: “They are looking to facilitate joint enterprise and sharing of technology and there is an opportunity there with the right partners.”
Vikas Dawra, managing director, Sustainable Investment Banking at Yes Bank, India, who will also be speaking at Solar Energy UK 2015, says that demand is very high for trained and skilled man power in the solar sector and he forecasts that the Rupee will depreciate against the US Dollar by 3-4% each year in the near future. However, he adds that UK companies faced with the difficulties of entering the Indian market will simply go through a learning curve over a couple of years before being able to function efficiently in the system.
Dawra adds that there is always the opportunity for investment in existing players who have already achieved some scale of PV development within India.
Furthermore he says: “This entire 100GW will require US$100 billion of which $30 billion would be equity, $70 billion would be debt. India does not have that kind of capital for solar so the government is removing all barriers and they are being very encouraging as far as foreign investment in solar is concerned.”
While the country cannot quite inspire 100% in foreign investors, because of the unstable history of its regulatory regime, Dawra says, India’s political risk is low at present.
Furthermore, as Toogood points out, 100% foreign direct investment (FDI) is allowable on renewables so there is no restriction on investments. Meanwhile import duties have been reduced and some Indian states have various financing packages on offer.
Toogood adds: “India has opened its doors in terms of foreign investment. It is needed in terms of bringing new technologies in – helping projects move forward. The scale of the investments required is huge.”
While the call for 60GW of utility-scale solar has seen a plethora of multinational companies such as SoftBank, Trina Solar and Welspun putting stakes into the market, Toogood highlights the opportunity for UK companies to focus on off-grid opportunities, innovative technologies and transmission elements, especially with the large amount of remote rural communities in India. He cites local transmission networks, small power units and intelligent grid systems as areas where UK businesses can offer their expertise.
These technologies can be combined with the work of the larger corporate companies already on the ground in India or for micro-grids.
Dawra, on the other hand, cites rooftop solar as the key area where UK companies can enter the market, given that rooftop accounts for 40GW of the overall 100GW target and the current installed capacity is almost negligible. India’s Ministry of New and Renewable Energy has even set a goal of reaching 4.8GW of solar during 2016/17 up from just 200MW in 2015/16.
Dawra adds that while in the utility-scale sector the only real advantage that a UK company can bring is access to finance, in the rooftop sector the UK companies will have greater experience in net-metering arrangements and dealing with utilities. Most Indian states are set to introduce net-metering incentives for rooftop solar in the coming months, with the state of Maharashtra bringing this policy in last month.
Dawra also explained the various ways UK companies can invest in, or help develop solar in the utility-scale sector in a news article published on Solar Power Portal earlier this week.
The UK government has made moves to help companies transition over to the subcontinent by setting up business centres in cooperation with UKIBC in New Delhi, Bangalore and Mumbai. Meanwhile India’s YES Bank raised US$170 million in the country’s first ever green bonds in February, solely to target renewable energy projects.
It is very apparent from Indian Government policy that it needs more foreign investment and for one of the world’s most promising emerging markets for PV, now is clearly an opportune moment to get a foot in the door.