RE-NEW-ENERGY.. Rs. 5 lakh crore!!!!

CHENNAI, FEBRUARY 16:  

The “commitments” made by a couple of hundred renewable energy companies for setting up 266,000 MW of solar and wind power projects over the next five years has created a wave of derisive sniggers in the industry.

Many industry insiders as well as observers feel that too much hype and unrealistic ambitions can only harm the industry.

“Given the base we are at today, of around 30,000 MW (of installed capacity of renewable energy), 266,000 MW in five years looks high,” says Santosh Kamath, Partner and Head-Renewables, KPMG. However, even if 50 per cent of it is achieved, it will be a game-changer for India, he says.

Today, at a conservative estimate, 1 MW of solar would call for Rs. 7 crore, and 1 MW of wind about Rs. 6.5 crore. Even assuming a still lower estimate of Rs. 6 crore a MW, 266,000 MW would require Rs. 16 lakh crore. At a debt-equity divide of 70:30, equity required would be close to Rs. 5 lakh crore, or roughly $ 80 billion—over the next five years.

“Against 266 GW of commitments, banks have offered funding commitments of only 78 GW,” says Dr Arunabha Ghosh, Chief Executive Officer of the Council on Energy, Environment and Water, a Delhi-based think-tank.

Even the 100 GW solar target of the Ministry of New and Renewable Energy would call for $ 160 billion, says Dr Ghosh.

According to Mercom Capital, which tracks funding for the renewable energy industry, the announced large-scale project funding in 2014 globally was $ 20 billion.

The message distilled from the various numbers is the commitments are too ambitions even only from financing perspective. And then there are other challenges.

Ashwin Gambhir of another think-tank, Prayas Energy Group of Pune, points to three key challenges: financial viability of the entire distribution sector, ensuring project development and land use, and issues relating to grid. “All this would require effective and innovative implementation mechanisms,” he says. Arunabha Ghosh speaks of the need for over all credit guarantee and payment security as key issues.

Many solar developers that Business Line talked (though none of them was willing to be quoted) said that while the commitments totalling 266 GW reflect the rise of renewable energy, unrealistic targets build up high expectations leading on to a bad name for the industry.

(This article was published on February 16, 2015)

http://www.thehindubusinessline.com/economy/renewable-energy-hype-unviable-

promises-not-good-for-the-industry/article6902306.ece