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Monday, 11 Jul 2011
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Solar - increasingly competitve than
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Azure Solar Power Project, Punjab


“IFC has invested in emerging market-based manufacturers of solar photovoltaic and components that have the potential to reduce costs and build scale across the solar supply chain”.



India produces less than 1 per cent of its total energy through the solar route, while the same figure for some developed nations is as high as 15-20 per cent. What should be the investment in the sector to boost solar energy production?


India is privileged to receive roundthe year solar radiation. According to Ernst and Young's renewable country attractive index, India is the second most attractive market on the solar index after the US. In India, the sector has seen important and much needed interest in recent years. While the country is currently taking baby steps, these are promising steps as the potential for solar in India is enormous.


The Indian government has set an ambitious target of 20 Giga Watts solar power by 2020. To meet this target an investment in excess of $60 billion is needed. As the overall cost of solar energy achieves grid parity in the next few years, we see growing opportunity in solar energy in India.


What are IFC's initiatives in helping generating solar energy?


IFC invests in both upstream and downstream sub-sectors of solar energy viz. manufacturing of solar components and financing of grid tied solar farms and off grid solar applications.


IFC has invested in emerging marketbased manufacturers of solar photovoltaic and components that have the potential to reduce costs and build scale across the solar supply chain. By supporting these fledgling private sector enterprises, IFC is helping the industry bring economies of scale in markets with suitable regulatory support or where solar is sufficiently cost competitive. In India and Thailand, IFC has invested in several companies who are developing grid scale solar farms at competitive prices and expected to drive down solar costs in future as well. IFC is also investing in off grid solar applications where solar replaces diesel and kerosene with respect to which it is already quite competitive and provides a clean source of generation.


IFC is also supporting the solar generation through its advisory interventions. It has supported the establishment of a 5 MW utility scale thin film PV in India and will be disseminating the lessons learnt to the market. It is also supporting a PPP transaction for rooftop solar generation, and large-scale adoption of the solar solution for telecom towers. We are also working on leading programs to expand usage of small solar appliances and facilitate a greater private sector role in this sector.


What would be IFC's investments in the sector for the fiscal year and in future?


IFC already has five solar projects in its existing portfolio and is in discussions for two investments currently. Besides this, IFC will support its existing portfolio companies to fulfil their new capital needs through both long-term debt and equity financing.


Tell us about Market for solar components in India?


The solar components market in India is still in a fledgling stage with only a few players with solar cell and module manufacturing capacities of more than 100 MW.


Exports continue to be a focus area for sales and component manufacturers are looking at downstream integration into EPC contracts and solar farm development to add value to the business chain. The domestic components market is expected to pick up speed as solar power production in India scales up and the domestic cell and module manufacturers benefit from the indigenous content requirements of the National Solar Mission.


According to you, what are the major steps towards projecting India as a leading market for solar energy and allied manufacturing industries in South Asia?


India has done reasonably well in evolving new tariff regimes for the solar market both at the central and state government level. The key is to sustain these policy frameworks and avoid policy shocks in future. There is also a need to continually evolve the regulatory and legal framework of the contracts being awarded to make them bankable for lenders, which will propel growth of this sector. A vibrant and growing downstream solar sector will automatically help the growth of the allied manufacturing industry along with India's inherent cost competitiveness.


What should be the role played by Public-Private Partnerships?


Public Private Partnership support the government's agenda to achieve long-term economic growth and better living standards by harnessing the potential of the private sector to increase access, enhance quality, and improve the efficiency of public services.


The role of private sector is crucial here. IFC is already supporting PPP projects that demonstrate the key role private sector can play. Our work on solar rooftops in Gandhinagar in Gujarat will help explore such opportunities and evolve solutions, including replicating solar rooftop projects in cities like Bhuj and Rajkot, exploiting Gujarat's geothermal potential and sharing knowledge on ways to encourage private investment in solar projects and explore public-private partnership opportunities to harness solar energy in other states as well.


What should be the Government policy, incentive packages, support for infrastructure needs to achieve the same?


A key problem being faced in India with regard to infrastructure today is the absence of bankable projects. Developing bankable PPPs in close partnership with government agencies at the central and state levels can help create model arrangements in newer sub-sectors and increase access to much needed infrastructure services.


Many state governments are already looking at new and flexible arrangements to promote PPPs towards this larger goal. As more state governments come forward and adopt a flexible approach, we will see greater confidence in the market.


What would be the role played by private sector in developing countries like India?


Let's take power for instance. The 11th Plan recommends generation planning based on an estimated 9.5per cent growth in required energy each year. As a result, a capacity addition of 78,577 MW is recommended in the 11th Plan. Without robust private participation, this ambitious target would be difficult to achieve. That is where private participation becomes crucial.


The private sector can drive innovation and efficiency in infrastructure development. The private sector is also the main source of tax revenues, contributing to public funding for health, education, and other services. It also provides more than 90 percent of jobs, creating opportunities for people to improve their lives. These contributions are more important than ever in the wake of the crisis, when governments face even greater constraints in serving their societies. The resources needed to alleviate poverty and advance development are too vast for governments to provide on their own.


World Bank estimates the international financing needs of developing countries at $1.1 trillion in 2010 -- most of which is likely to be sourced from private investors. In addition, more than 80 percent of the investment needed for climate-change mitigation and adaptation is expected to come from private sources.


Today, most developing countries recognize the critical role of the private sector in development and poverty reduction. Developing countries account for a growing share of the global economy. They have a vital interest in getting private sector development right.


IFC has led many innovative renewable energy investments in South Asia in recent years. Could you please tell us about your various projects and investments?


Some recent innovative renewable energy investments by IFC in South Asia include Bhilwara Energy (medium to large hydro projects), Gamesa (wind turbine development), Applied Solar (solar power to off-grid telecom towers), Azure Power (India's largest private sector grid tied solar power company) etc.


IFC has also partnered with several financial institutions like PTC India Financial Services and IDFC to expand the availability of long term credit lines for renewable energy financing. In addition to the above, IFC recently launched €150 million Post 2012 global carbon facility to purchase carbon credits from developing countries including India, helping to reduce greenhouse gas emissions.


As a member of World Bank group what are the services and support provided by IFC to Solar Component Manufacturing Hubs promoting Solar Power production? Please discuss IFC's work with state governments, policy makers, regulators, and power utilities to help establish solar energy leadership in India?


Solar energy is the largest renewable resource available and solar photovoltaic is the fastest growing energy source in the world. Solar photovoltaic is particularly well suited to off-grid applications, making it ideal for rural electrification. Currently, solar PV installations total 20 GW globally.


Significant recent investments across the supply chain have been made in recent months. Rising fossil fuel costs and a drop in solar photovoltaic installation costs are making solar increasingly more competitive than traditional sources of electricity.


IFC is working closely with state and central governments in developing bankable project schemes and policies that are likely to attract investments in both upstream manufacturing and downstream solar development.


IFC and Rajasthan state government recently co-hosted a conference titled, 'Rajasthan as a Solar Component Manufacturing Hub', that bought together policy makers, sector experts, international investors, and global and local solar manufacturing companies to share the latest insights on solar manufacturing opportunities in the state. The focus was to create an enabling environment for investments to flow into the solar manufacturing sector in Rajasthan.



Shalabh Tandon_IFC Asia Head for Power & Renewables_ProjectsToday

Shalabh Tandon,
IFC Asia Head for Power & Renewables

Shalabh Tandon, IFC Asia Head for Power and Renewables, IFC, World Bank Group joined the company as an Investment Officer in New Delhi office in 1997 and has extensive experience in new business as well as portfolio across both Infrastructure and Manufacturing. He has played a key role in building a strong brand in Power in South Asia, and has led several landmark transactions and more recently built an equity portfolio in renewables.




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