According to reports, high entry-barriers for foreign investors and the rising cost of financing have led to the country slipping to a low eighth position on the renewable energy country attractive index in the first quarter of 2013, says an Ernst & Young survey.
According to the report ‘Renewable Energy Country Attractiveness Index’, India’s ranking slipped from fourth position to eighth this period, due to several challenges, including high cost of finance, entry-barriers for external investors, among others.
“A high barrier to entry for external investors causes India to score lower than most of its top 10 rivals. Also, bankability is jeopardised by the high cost of financing and significant infrastructure barriers here,” E&Y India partner and national leader for clean-tech, Sanjay Chakrabarti said.
However, the index sees the country gaining the ‘hot spot’ as the market with increased focus on the role of renewable energy driving new levels of power sector investment and aiming to nearly double the amount it generates from renewable sources.
“While the country’s rating may have slipped, there are significant positives. India is only behind Belgium in the priority the renewable sector receives,” he said.
At the operational level, E&Y said, “Withdrawal of accelerated depreciation, caused the overnight disappearance of the wind retail market. However, this has also brought to the fore the independent power producers, mostly backed by large PEs. The wind sector’s size has therefore shrunk, but it has also arguably resulted in a stronger market, with IPPs committed to setting up quality assets”.
On the solar energy front too, there has been active interest in the bids across states, the phase-II of the national mission is eagerly awaited, Chakrabarti said.
Chakrabarti, however, said the country is embroiled in trade wars that are sweeping through the global solar market.
In February, the US lodged a complaint with the WTO that domestic content requirements attached to the National Solar Mission allegedly discriminate against US solar equipment imports.
“India is currently in talks with the US over the complaint, but the government insists that more than 70 percent of the 551 mw solar capacity installed since the start of the mission has been built using imported modules. Last November, the country began its own anti-dumping investigation for solar cells from the US, mainland China, Taiwan and Malaysia,” Chakrabarti said.
The index includes a revised methodology to reflect the shifts in investment drivers and the maturing of the sector.
The ranking is made based on increased focus on the role renewable energy plays in country’s energy mix, energy supply and demand, the cost competitiveness of renewable energy, the importance of de-carbonisation and an increased emphasis on the economic and political stability of each particular market.