Solar Power Green Energy Investment – Business of Future

According to a new report from the Institute for Energy Economics and Financial Analysis, investment in renewable energy hit record levels in India in the 2021-22 financial year.
Solar Power Green Energy Investment Business of Future
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Increased awareness and significant adoption of Solar Power Generation Projects can be witnessed across India, since launch of National Solar Mission 2008. Frontrunners are states of Rajasthan, Gujarat, MP, and Maharashtra etc. with improved grid connectivity, land usage policies, domestic manufacturing of equipment’s and levelized tariffs, along with increased awareness among energy consumers to give priority to Green Energy, instead of traditional energy mechanism. Altogether India has become a hot-selling solar market and financial market has generated an innovative avenue for investors in Solar Green Power generation.

“India is devoting great importance to solar energy. Our gains in solar energy ensure: A stronger fight against climate change. A boost to our entrepreneurs. India has also brought the world together through the International Solar Alliance. Work is also underway to connect our hardworking farmers with the solar sector – make our Annadatas (farmers) also Urjadatas.”

Prime Minister Narendra Modi

Emerging India will witness installation of 100 GW Solar Power projects by FY 22-23. The surge in the industrial / consumer power consumption has highlighted the importance of solar and sustainable energy sources. Owing to the Indian government’s promising initiatives, schemes and programs, solar power generation has increased in the recent years, encouraging experienced businessmen, investors and startups to invest in solar energy businesses. Time and again debatable issue in investment is safety, liquidity and scalability; while comparing various formats of investments like Equity, Debt, Bullion, Real-estate etc.

Installed solar PV on 31 March
Year Cumulative Capacity (in MW)
2010 161
2011 461
2012 1,205
2013 2,319
2014 2,632
2015 3,744
2016 6,763
2017 12,289
2018 21,651
2019 28,181
2020 34,627
2021 40,085
2022 56,951

Years of existence of proven technology in Solar power generation projects have established Solar Projects as comparable instrument for investors, with following decision matrix:

  • Investing in solar power may be by various methods; in listed segment, it may be an invest in solar equipment manufacturing companies, invest in solar power generation companies, invest in Solar EPC companies; along with it, investor friendly policies provide direct entry to investors in solar power generation projects. Solar projects are installed with capacity allocation from central / state government
  • Solar projects can be installed minimum 1 MW to 25 MW or 100 MW
  • Solar turnkey per MW cost is approximately Rupees four crores, in current scenario
  • Four acres of non-shadow land is required for installation of one MW solar project
  • Life of Solar Panel is up to 25 years and other equipment’s up to 10 years
  • Solar electricity shall be sold to government, under long term power sale agreement
  • Solar electricity can also be sold to direct private consumers, industries under customized power sale agreement
  • Small size solar plants can also be setup as home rooftop, industry rooftop captive plants etc.
  • Once solar project is setup, its best source of annuity income for plant life of approximately 25 years
  • Yield on investment depends on various factors such as price of land, government policy, tenure of power sale agreement, price of per unit power sale, carbon credits, tax benefits available to applicant, type of funding with mix of equity and debt etc.

Comparing other similar options, IRR of solar project is always on higher side with safe and secured long term monthly income on investments; blending investor and entrepreneur in Single Avenue of investment. The Indian government is enthusiastic about solar energy and is taking a variety of steps to promote it. The central government, along with state governments has implemented a number of policies to help the solar investment grow. The government plans to lower the capital cost of constructing a solar power plant, making it more cost-effective for young and innovative entrepreneurs to invest in the solar industry in India.

Considering its unique features of environment friendly technology, product (electricity) in high demand, modular system of installation, lowest maintenance project, established and reliable technology in domestic manufacturing, customized debt funding options and inbuilt tax benefits; solar power generation investments are called as investment of future.

India invested record amounts in renewables

According to a new report from the Institute for Energy Economics and Financial Analysis, investment in renewable energy hit record levels in India in the 2021-22 financial year. A total of $14.5 billion was invested in renewable energy, up by 125% compared with financial year 2020-21 and 72% higher than in the pre-pandemic period of the 2019-20 financial year.

The report says that India has committed to reaching 175GW of renewable capacity by the end of 2022, and increased its 2030 goal to 450GW.

In 2016, India set a target of teaching 175GW of renewable energy capacity by 2022, comprising 100GW of solar, 60GW of wind, 10GW of biomass power and 5GW of small hydropower. India’s electricity demand fell during COVID, but it rose sharply as industrial activity picked up. High electricity demand will drive the installation of more renewable energy capacity.

Renewable energy prices are falling, and renewables are now a cheaper source of electricity than coal-based power. The Russia-Ukraine war has driven up the prices of imported coal and gas and is adding strain to the dispatchability of high-cost power. Renewable energy combined with energy storage systems such as battery storage and pumped hydro have become a cheaper source of electricity to meet electricity demand round the clock.

Disclaimer: Views expressed above are purely for knowledge sharing, not inviting any investment or business decision.

About the author: CA Yogesh Birla
CA Yogesh Birla
CA Yogesh Birla is Director of Mumbai-based Birla Solar Project Company. A top Ranker Chartered Accountant with an experience of more than 25 years into Investment Banking with expertise into solar power projects and green energy asset management for clients across the world. He is renowned speaker on various industry, trade and government platforms, where his love of sharing knowledge is evident by renowned investors and family investment offices. The views expressed are not any investment advice. The author can be reached at [email protected]

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