ReNew Power Ventures Pvt., a company backed by Goldman
Sachs Group Inc., the Tata group, whose businesses span software
to automobiles, and First Solar Inc. (FSLR), the biggest U.S. maker of
solar panels, are among 68 bidders vying for projects as India
seeks clean alternatives to fossil fuels. The winners for the
750 megawatts of capacity will be announced by the end of this
India plans a sixfold increase in solar capacity that may
draw $11.7 billion of investment by 2017 as the technology sheds
perceptions that risks are high. In contrast, banks are slowing
lending to coal and gas-fired projects hamstrung by a fuel
squeeze. Rising demand for equipment is also prompting panel
makers to seek a bigger share of the trade as the U.S. lodged a
complaint with the World Trade Organization this week against
“The advantage of renewables is that you know that the
cost is going to be forever,” said Sumant Sinha, chief
executive officer of ReNew Power, which is backed by a $385
million investment from Goldman Sachs. “You lock in the price
today. You’re not impacted by the rupee’s depreciation. There’s
no fuel risk.”
Three years ago, India’s first national solar auction drew
skepticism with record-low bids from a woolen yarn maker and
animation company. Tata Power Co. shunned that tender, saying
banks wouldn’t loan to projects deemed too risky.
The current tender received bids for more than double the
capacity available. The offers include 100 megawatts by ReNew,
150 megawatts by a unit of India’s Infrastructure Leasing
Financial Services Ltd. and 40 megawatts by Tata Power.
The growth of the industry has boosted inbound shipment of
photovoltaic gear, with the value of the purchases reaching $2.4
billion since 2010 when India started its solar program,
according to data from the Ministry of Commerce.
In order to help local makers of solar modules including
Moser Baer India Ltd. (MBI), India is requiring half of the capacity
being auctioned to be built with locally made equipment. That’s
375 megawatts or about 10 percent of the total capacity India
has offered in the past year. The U.S. said this rule unlawfully
restricts access to American manufacturers such as First Solar.
India said it will dispute the complaint lodged by the U.S.
with the WTO against the “unfair barrier to U.S. exports.”
India is offering as much as 18.75 billion rupees ($302
million) in grants for the first time to solar developers to
offset project costs. That will enable the plants to reduce the
electricity tariff to 5.5 rupees a kilowatt-hour, equal to the
cost of grid power.
That eliminates one of the main investment hurdles the
industry faced: the risk that cash-strapped state utilities
buying the power would default, leaving plants unable to sell
their output elsewhere. At 5.5 rupees, the plants could find
alternate buyers, including industrial and commercial consumers
who pay the highest rates for power.
“Renewables are attracting a different class of investors
who want stable yields,” said Sunil Wadhwa, chief executive of
ILFS Energy Development Co., a developer of gas, coal and
clean-energy projects. “These are stable cash flows. For the
investor, the costs are highest in the beginning, but it’s more
Clean energy projects in Europe are luring institutional
cash as retirement and insurance funds, including Allianz SE,
Aviva Plc (AV/) and PensionDanmark A/S seek stable returns to match
their long-term liabilities. Copenhagen-based PensionDanmark has
invested about $1.8 billion in renewable energy, while Allianz
Capital Partners, a unit of Europe’s largest insurer, invested
more than 400 million euros ($545 million) last year.
In India, investors from Goldman to Morgan Stanley (MS) have led
about $2 billion of private-equity buyouts, project and company
acquisitions in the renewable industry since 2010, according to
Bloomberg New Energy Finance. In the past year, the Government
of Singapore Investment Corp. invested 100 million pounds ($166
million) in Greenko Group Plc (GKO), a developer of Indian wind farms.
GE Energy Financial Services invested 2.57 billion rupees in a
hydropower plant in northern Sikkim state under development by
Gati Infrastructure Pvt.
Photovoltaic plants in India are likely to earn a 16
percent return, according to calculations by the central
electricity regulator to set tariffs. That compares with a yield
of 8.78 percent offered by India’s benchmark 10-year bond.
Foreign direct investment in India’s thermal power sector
has collapsed to less than one-third its level two years ago as
fuel risks, regulatory uncertainties and environmental delays
hold up projects, according to government data.
More than 60 percent of power stations owned by NTPC Ltd.,
the nation’s biggest generator, are running below capacity due
to a lack of coal supply, NTPC Director A.K. Jha said this week.
India plans to raise local gas prices by as much as 90 percent
to $8 per million British thermal units, a level that will be
unviable for power plants, Oil Secretary Vivek Rae said on Jan.
With coal and gas prices rising and an increasing share to
be imported, a clean-energy project may already be able to
supply electricity about 3 percent cheaper over the long term,
said Wadhwa of ILFS Energy, which is building a 750-megawatt
gas power plant and is India’s second-biggest owner of wind
Indonesia, the biggest coal supplier to India, banned
exports of raw ores last month. “Tomorrow it might be coal,”
said Wadhwa. “In thermal, you’re never sure.”
To contact the reporter on this story:
Natalie Obiko Pearson in New Delhi at
To contact the editor responsible for this story:
Reed Landberg at