Chris Aylott: Although financing photovoltaic solar projects in India continues to pose challenges, industry experts say it will soon become much easier to obtain investment.
“Solar is a logical market to invest in, but in India it is still complex because there is less experience,” says Edwin Koot, CEO of Solarplaza, a photovoltaic industry group. Financial solutions will be a crucial theme at the Solar Future: India II conference, which is organized by Solarplaza and will be held in Jaipur on February 29.
Jaipur is the capital of the Indian state of Rajasthan, a “gold mine” for Indian solar power.
“Banks here are cautious to invest in solar projects, as they are only starting to get an idea of how reliable the technology is, that it assures a good output and hence cash-flow,” Koot says.
Ravindra Raina, President of India operations for Astonfield, says that the government could do more to address the issue of bankability. “The interest rates for finance are as high as 12%. Even if you borrow abroad against 3% to 4%, the hedging costs will be high. The government would be able to take this hedging risk.”
Raina suggests that Indian banks could be directed to invest a certain percentage in renewable energy. ”This kind of support is necessary,” he says, “at least until the first 10GW solar capacity is built in India. After that, market forces will take over.”
Edwin Koot agrees: “We are now in the stage of smelling, tasting and learning. This takes time, but once investors are used to it, developments can take off rapidly and I expect that by 2014, the Indian solar market is unstoppable.”
Investors looking to profit from Indian solar power should look first to Chinese and U.S. manufacturers, such as First Solar (NASDAQ:FSLR) and Suntech Power (NYSE:STP), which supply panels to the Indian market. The Guggenheim Solar ETF (NYSEArca:TAN) also carries a broad spectrum of Chinese solar technology companies. [Related: Trina Solar (NYSE:TSL), Yingli Green Energy (NYSE:YGE), JA Solar Holdings (NASDAQ:JASO)]
Emerging Money provides insightful and timely information about the increasingly important world of Emerging Market investments. CNBC Emerging Markets Contributor Tim Seymour leads the team of Emerging Money to bring you cutting edge global news and analysis.