New Hampshire, USA — As India prepares to enter Phase II of its National Solar Mission (NSM), one of the world’s more promising solar markets finds itself at a critical juncture. Much uncertainty lingers in this young market: financing is still challenging, a trade dispute looms, and policy decisions now being hashed out at both national and state levels could swell the country’s market to its lofty goals — or just as easily undercut that momentum, according to a report from Mercom Capital Group’s Raj Prabhu.
India installed just shy of 1 gigawatts (GW) of solar capacity in 2012 (vs. 190 MW in 2011 and just 35 MW in 2010), slightly lower than Mercom had predicted, but Prabhu forecasts another 1.3-1.4 GW for 2013.
A word frequently used in Prabhu’s report to describe the Indian solar market is “uncertain,” with a number of contributing factors. Chief among them is an antidumping investigation against China, Malaysia, Taiwan, and the U.S. over imported solar cells, and subsequent pushback to the WTO about India’s own domestic content requirements. That’s making investors even more skittish than they already are. “It is surprising that a country with approximately 300-400 million people without power, about 9 percent power deficit and about 10 percent peak power shortage, has decided to go this route instead of an ‘all of the above policy’ to meet the power requirement goals,” he notes.
A draft Phase II policy would target 3-9 GW of solar power, with an “aggressive approach” to supporting domestic manufacturing and content requirements. Another new proposal, the Viability Gap Funding, could apply to many projects, which would cover the “gap” in funding (perhaps up to 40 percent of a project’s cost) between what developers estimate as their capital costs to set up a project and the necessary debt and equity.
“With borrowing costs in India in the 13-14 percent range and no technical requirement (anybody can bid) in India; banks consider most of these projects too risky to finance,” Prabhu explains. “The government now sees JNNSM as a public-private partnership. If the policy goes in this direction, solar in India will soon start to resemble other infrastructure/conventional energy projects that haven’t been so successful thus far.”
IN THE NEWS
Japan’s Quarterly Domestic Solar Shipments More Than Double: Japan’s domestic shipments of solar cells and modules more than doubled to 1 GW in the three months to December 31, according to the Japan Photovoltaic Energy Association. Imports more than tripled year/year to 342 MW; exports fell 66 percent to 111 MW.
Suntech Talking with Wuxi on Receiving Support: Chinese solar panel maker Suntech Power Holdings Co. — which has $541 million in convertible bonds coming due next month — is talking with the government of Wuxi about the possibility of financial support. It’s indicative of the government’s eagerness to keep supporting its domestic solar manufacturing sector, or at least those it sees as the most critical players.
Lanco Seeks Investors to Boost Solar Capacity: Lanco Infratech Ltd. (LANCI), India’s second-biggest non-state power generator, is seeking private-equity investors to help fund its plans of adding 500 megawatts annually of solar capacity in three years, a fivefold increase. A plan announced last year by the Lanco group to raise $750 million selling stake in its conventional power unit to private-equity funds has stalled amid losses.
More Offshore Wind Projects in Japan: Japan will begin operating two offshore wind turbines this year, off Choshi in Chiba prefecture and Kitakyushu on the southern island of Kyushu, as it tries to diversify its energy mix and develop turbine technologies better suited for deeper waters. Japan could install as much as 7.5 GW of fixed offshore and 17.5 GW of floating offshore capacity by 2051, according to the Japan Wind Power Association.
International Court Sides for Indian Hydroelectric Plant: The Permanent Court of Arbitration (PCA) has upheld India’s right to divert water from a Neelum River tributary for its 330-MW Kishanganga hydropower project, which Indian’s National Hydroelectric Power Corporation (NHPC) started developing in 2006 and awarded construction contracts in 2009. Pakistan, which has its own plans for a 969-MW hydropower plant to be located downstream from the Kishanganga on the same river system, had asked the neutral PCA to resolve the conflict.
India’s Power Finance Cuts Lending Rate for Renewable Projects: Power Finance Corp., India’s largest state lender to electricity utilities, has trimmed interest rates for all power projects by 25 basis points — and by 50 basis points for renewable energy power plants. The company has approved 23.13 billion rupees ($430 million) for 611 megawatts of renewable capacity in the fiscal year ending in March, and has lent a total of 53.73 billion rupees to wind, solar, and hydro projects.
JinkoSolar To Supply Western China Solar Projects: JinkoSolar has entered into a strategic cooperation agreement with China Three Gorges New Energy Corp. (“CTGNE”) to deliver 600 megawatts (MW) of its high-efficiency solar panels over 2013-2015 to China Three Gorges New Energy Corp., to be installed in projects in western China. The two companies signed a 50-MW deal in October 2012.
Is Australia’s Solar PV Party Over?: Nearly 1 GW of solar installations were achieved in 2012 in Australia, but Climate Spectator offers three reasons why 2013 will be a tough year for Solar Down Under: Declining prices and diminishing returns, electricity prices returning from the stratosphere, and reductions in government support.
Financial Firms In Japan Promoting Solar Power Output: Big financial institutions in Japan are turning to solar power generation as a new earnings source amid an economic slump that is putting off borrowers. Tokio Marine Asset Management and Mizuho Corporate Bank are rushing to set up multi-billion-yen investment funds by the end of the current fiscal year in March, and Bank of Mitsubishi-Tokyo UFJ is partnering with Mitsubishi UFJ Lease & Finance Co.
Consortium Pursues Philippine Biomass Power Projects: San Carlos BioPower is putting up four biomass power plants with a combined capacity of 100 megawatts at a cost of $500 million. The first project in Iloilo has been given a green light from government agencies; the other three are still in the permitting process. Overall timeline is within the next four years. At the same time, an official in the Department of Energy’s Renewable Energy Management Bureau points to a lack of technology, financing, and feedstock supply as hurdles facing domestic developers of biomass and biogas.
ON THE HORIZON
India Prepping Massive Solar Spending: India’s government says it is committed to spending up to 700 billion rupees (US $13 billion), including 60 billion rupees ($1.1 billion) in subsidies, to add more than 10 GW by early 2017. Guidelines for the next phase of the nation’s solar program are being finalized; the next round of bidding could be launched in the next 2-3 months.
Big Wind Farm Plans in Fujian: China’s Fujian Province has announced a plan for constructing nearly 200 onshore wind farms with roughly 8 GW capacity/year as a major part of its energy development strategy through 2020. Thanks to the monsoon and the Taiwan Straits effect, Fujian’s coastal area has plenty of wind resources, mainly along the north Minjiang River Estuary, southern Fuzhou, and cities. Fujian currently depends upon thermal power for more than two-thirds of its power consumption and just two percent from wind, notes the China Daily, but the region forecasts wind power will greatly serve its rapidly increased electricity needs.
A DEEPER LOOK
China: A Global New Energy Scavenger: New reports that major car maker Dongfeng Motor is bidding to buy struggling U.S. hybrid carmaker Fisker Automotive spotlight China’s emerging role as scavenger for global new energy companies struggling to stay in business — and its growing appetite for western new energy firms is likely to accelerate.
Are Expensive Loans Dimming India’s Renewable Energy Hopes?: India pays up to 32 percent more for electricity from solar and wind than the U.S. or Europe because projects are so expensive to finance, according to a joint study by the Climate Policy Initiative and the Indian School of Business. One recommendation: India should look at Brazil, another rapidly growing country with a decentralized government and vast renewable energy promise, as an example of how to use low-cost and long-term debt financing.
Is China Now the ‘New’ Germany of PV Demand?: China has been the dominant producer of solar PV components for several years, but in the second half of 2012 it also cemented its rise as a major force downstream in global PV demand, says Solarbuzz analyst Michael Barker. With trade disputes still swirling, a possible bifurcation of PV demand could leave China as the largest — and for some, the only — market for domestic supply.
IN CASE YOU MISSED IT
Lead image: Green India highway sign, via Shutterstock