By Hugh Finlay
The Indian government is planning to invest $100 billion in its solar industry in the next 5 years, and this is attracting the attention of pension funds, which are always looking for a lucrative markets to invest in. The Indian solar market will provide pension funds with a growing, and long term market, and solar power has the advantage of being a green technology, a popular area for investment nowadays. The potential of the electricity market in India is enormous, with electricity demand set to increase 4 times over the next 20 years. At the same time the Indian government, like most governments, are under pressure to curb pollution. So solar power is the obvious way to go. Furthermore, as solar technology has developed, the cost of solar power materials has dropped, making solar power a more attractive investment. There are 2 areas of the electric industry which will need to be developed: generation of power, and transmission of the power. The pension funds are primarily interested in investing in the generation of solar power, in other words, large solar parks.
The pension fund companies investing in this area include the large company, Caisse de depot et placement du Quebec (CDPQ), which is investing with an American solar company operating in India.
Another large company APG Asset Management, has agreed, with India's Primal Enterprises, to invest $132 million in solar power in India. Like CDPQ, APG is looking for more investments in the Indian solar industry.
Kotak Investment Banking executive director, Alok Verma, said that most of the solar power to be added in India in the near future, will be financed by overseas companies.
Other pension fund companies investing in the development of Indian solar power, are Canada's Brookfield Asset Management, JPMorgan and Morgan Stanley, and EDF, Engie and Enel. Canada's largest pension fund, CPPIB, is another company that is investing in India's growing solar industry.
SoftBank from Japan, in conjunction with other companies (Bharti Enterprises and Foxconn Technology Group), is planning to invest $20 billion in the development of Indian solar power.
Thanks to a government drive for more solar power, the Indian solar power output has increased 3 times in the last 3 years. India now has 4% of its electricity coming from solar power. (China which, is the biggest generator of solar power at the moment, doubled its solar generating power in the past year.)
Asked about the development of Indian solar output for the future, Mercom CEO, Raj Prabhu, said: "Based on current market conditions and policies, I see a path to 65-70 GW (solar capacity) by 2022, but not more. To reach 100 GW by 2022, distribution company finances need to improve drastically, power demand has to increase quickly, and transmission infrastructure needs to keep up."