Obtaining funding for solar projects in India may become tough - report

(ADPnews) - Nov 4, 2010 - Solar-power plant developers in India could find it hard to take loans to complete their projects, as the stations proposed in the government's plan are too small, and tariffs may come too low, news agency Bloomberg writes today, citing an official from the Asian Development Bank (ADB).

India is struggling to bolster grid-connected solar capacity from current 12 MW capacity to 1,000 MW by 2013, and 20,000 MW by 2022, as it seeks to help overcome a power deficit that may threaten the country's economic development. The government is now waiting for revised bids for the first round of projects for 470 MW of solar thermal facilities and 150 MW of solar photovoltaic (PV) plants. It has set a minimum project size of 5 MW.

According to Don Purka, senior investment specialist at ADB, certain changes should be done in the power purchase agreements for such projects so that they attract lenders, as banks are generally reluctant to fund solar developments in India. Lenders doubt that the state distribution firms, to which the produced solar power will be sold, will be able to pay, said Jotdeep Singh, head of Asia renewable energy and infrastructure finance at Rabobank. Payment defaults are expected because of the poor financial state of a lot of power distributors in India. According to Singh, lenders would provide financing if the state guarantees payments for the full lifetime of the solar projects. This guarantee can be trimmed or eliminated when the projects kick off.

By 2013, ADB intends to provide guarantee or lend funds for 3,000 MW of solar power in Thailand, India, China, Philippines and Uzbekistan.

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