Energy

India's Blackout Could Slow Green Energy Progress


India's Blackout Could Slow Green Energy Progress

Photograph by Ajit Solanki/AP Photo

If there’s any country where solar power should be an easy sell, it’s India. Two-thirds of the country’s power supply comes from fossil fuels, and power producers can’t get enough coal to fire their plants or enough pipeline space to distribute natural gas. In late July, blackouts over two days left much of northern India in the dark, at one point cutting power to more than 640 million people. Even at the best of times the network fails to serve much of India. The July blackouts lasted “only for a couple of days but 400 million Indians have never had electricity,” says H Harish Hande, managing director of Selco Solar, a Bangalore-based company that focuses on expanding solar power use among the rural poor.

India gets only about 1 gigawatt of power from solar, 0.5 percent of its power consumption. Hande says solar may end up taking a back seat as the government tries to reassure business leaders and investors that it will quickly solve the country’s chronic power woes. “I am a little scared this is not going to be looked at as an opportunity,” he says. The crisis “is going to be used as a pretext to push for coal and nuclear.”

India’s government has made some progress. This year, solar capacity has jumped almost fourfold from just 270 megawatts at the end of 2011. In the five years that ended in March, India added 14.3 gigawatts of renewable capacity, exceeding its planned target. Investment in clean energy grew 62 percent in 2011 to $12.2 billion. To encourage state utilities to buy more green power, the government has set up a system for companies to trade renewable-energy credits.

Investors in green power have to contend with a weak currency, which makes it hard to import needed equipment. In March, the government let expire incentives that allowed accelerated depreciation of wind-power turbines; that change could lead to a 20 percent drop in installations this year, according to Bloomberg New Energy Finance.

Solar and wind producers usually have no choice but to sell their power to state-owned distribution companies, but many of these have their own financial difficulties, suffering from combined losses of about $15 billion, says Ashish Sethia, head of India research for Bloomberg New Energy Finance. That makes financing projects difficult. “If I am a wind-power generator setting up a 200 megawatt project and I want to sell to a counter-party that is almost bankrupt, banks will struggle to fund that project,” he says.

The bottom line: Despite $12.2 billion of investment in green energy last year, India remains dependent on coal and natural gas.

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Einhorn is Asia regional editor in Bloomberg Businessweek’s Hong Kong bureau. Follow him on Twitter @BruceEinhorn.

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