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The magnitude of “commitments” made by the 200-odd companies for setting up 266,000 MW of solar and wind power projects in the next five years has evoked calls for caution. Industry experts point out that given the issues such as financing, land acquisition and grid, expectations have to be tempered.
“Given the base we are at, of around 30,000 MW (of installed capacity), 266,000 MW in five years looks high,” says Santosh Kamath, Partner and Head-Renewables, KPMG. 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 Arunabha Ghosh, CEO 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 Ghosh.
Other challenges are transmission and distribution of power, the two elements of which are grid infrastructure and financial health of distribution companies.
Ashwin Gambhir of Prayas Energy Group, points to: financial viability of the distribution sector, ensuring project development and land use, and issues relating to grid. “All this would require effective and innovative mechanisms,” he says. Ghosh speaks of the need for overall credit guarantee and payment security. Many solar developers that BusinessLine talked to said that while the commitments reflect the rise of renewable energy, unrealistic targets lead to a bad name.
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