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Viability of solar projects is tight: V Saibaba, CEO, Lanco Solar

In recent years, while the demand for solar power has multiplied many fold, the prices for solar products (like solar cells) have crashed to unviable levels, making manufacturing a tough option. This has been due to over supply from Chinese manufacturers who are backed by their local government and have flooded the market with low costs solar cells. ET talks to V Saibaba, CEO, Lanco Solar which is setting up solar projects in India to discuss the prospects of solar business. Edited excerpts:

How has the market for solar products (solar PV cells and solar generating units) changed?

Till 2003-04 the total global market was 200 MW per year. Now it is 23-24 GW of solar installations per year. In China the installed base is under 1,000 MW. The global market is 25,000 MW. Nearly, 70% of the output (for solar cells) is being supplied by China and there are more than 200 makers of solar units in China. Suntech is the largest. Top 10 Chinese solar products makers have captured 45-50% of the global market. These include Suntech, Yingli Solar, Trina Solar, LDK, GCL, Hunwa.

Spain, Italy, Germany – the major markets for solar, gave the platform for the industry to grow. Now other markets have also opened up and that includes US, South Africa and Australia. The good part is that the cost of solar power generation has come down. In five years it has dropped from Rs 40 per unit to Rs 8 per unit.

What about efficiency of solar cells? How has that changed?

The efficiency of the cells has improved. In 2005 the efficiency was 12.5% to 13%, now it is 17-18%. There is a 40-50% increase in efficiency. Going forward there will be further cost reduction in the next 3-4 years and increase in efficiency by about 17-20%.

What is Lanco’s strategy? Will you be making solar cells?

Lanco is into Engineering Planning & Construction (EPC) that is, setting up solar power units. We build solar power plants. We don’t have manufacturing but a small module plant of 75 MW. We are building a manufacturing unit in polysilicon and we plan to do 500 MW for EPC per year.

We will not be making solar cells but modules.

From Rs 17 per unit couple of years back, now companies are bidding for solar projects at Rs 8 per unit. Is it viable at that cost?

Companies who have quoted less than Rs 8 per unit may find it tough to deliver. Any price less than Rs 8.50 per unit is difficult to do. Interest rates in India are high, at 12.5% to 13% for project finance. Viability of projects is really tight.

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