In just one year, investment in solar energy has come down to 67%. According to Bloomberg New Energy Finance, investment in the solar energy sector grew by 90% in 2010 to reach $5.2 billion in 2011, but it came down drastically to $1.7 billion in 2012. Solar business comprising both power production and equipment manufacturing is suffering due to poor policy enforcement.
The government aims for a capacity addition of 10,000 mw of solar power by 2017 under the ambitious Jawaharlal Nehru National Solar Mission. But currently, the capacity stands at mere 1,200 mw. The government hopes to sell solar power at the same rate at which conventional power is sold in 4 years from now. The first phase of the solar mission was quite successful, but the second phase is under clouds even before its commencement.
The newly introduced viability gap funding scheme hasn’t gone too well with the industry. Then there are trade wars going on among domestic and foreign manufactures of solar equipment. Also, the US has slapped a case in WTO against India’s domestic procurement clause in the solar mission. Market analysts also feel that trade dispute such as this one would add unwanted uncertainty to the young Indian market where financing is already a challenge.
“For a solar market still in its infancy, starting a trade war could become a costly distraction when the focus should be to encourage new technologies, competition and free markets
With the delay in solar mission and funding related issues, the investment sentiment isn’t that upbeat.
“With a high borrowing cost in the 13-14% range and no technical requirement for bidding in India; banks consider most of these projects too risky to finance,Second phase of solar mission is supposed to start this year,” says Ashish Sethia, country manager-India, Bloomberg New Energy Finance.