As the euphoria around US President Barack Obama’s visit ebbs, the fine print of the investment announcements reveal a financial boost for American solar energy companies to increase their exports to India.
Of the investments announced by the US federal agencies in the clean energy space, most are institutional loan for US solar companies, aimed at increasing their export to the growing renewable energy (RE) market India, especially solar power.
“The push has been given to US solar companies already selling or planning to sell in India to expand their presence through either exports or manufacturing,” said a senior official.
Currently, only Sun Edison and First Solar are the two major American companies with operations in India.
The cost of solar cells globally has been on a decline owing to over-capacity in the developed markets and demand from Asian countries including India.
A loan offered by the US Exim, along with Ireda, would fall in the same bracket of 10-12 per cent as offered by other domestic lending institutions.
“US Exim offers a loan at four per cent but the hedging cost is as high as eight per cent. Ireda would charge an additional two per cent. It’s at par with Indian agencies funding to RE projects. Unlike German state bank KfW or Asian Development Bank and World Bank, the US agencies do not fund projects. In short, this is an impetus to US solar business in India,” said a senior executive tracking the US-India energy deals.
While the country aims to add around 4,500 Mw of solar power capacity during the current financial year, the manufacturing capacity is only 1,500 Mw. The central government has recently revised targets for solar and wind energy capacity addition.
“This is a great business opportunity for solar companies from world over. The US solar industry would also like to be part of the growth story,” said Vinay Rustogi, managing director, Bridge to India, a leading consultancy firm monitoring foreign investment in Indian renewable energy space.
The Indian solar projects are primarily based on Chinese equipment. According to industry reports, of the 3,000 Mw of installed solar power capacity, about 50 per cent of it has sourced solar cells from China, 10 per cent from the US and the balance is based on domestic content.
And the US Trade and Development Agency has decided to leverage a $2-billion loan for RE projects. US Overseas Private Investment Corporation will lend $1 billion for clean energy projects in India.
While these are not preferential loans aimed at boosting US manufacturing but would be used for development incentives.
Bridge to India in its recently released report said the announcements made the US President would take the proposed overseas funding commitments for Indian solar projects and green energy corridors to above $8 billion including other similar (mostly in-principle) commitments made by the World Bank, IFC, kfW, ADB and US-Exim.
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