Uncertainty over funding for solar projects

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India’s ambitious Jawaharlal Nehru National Solar Mission (JNNSM), which envisages investments of about Rs 3000 billion by 2022, has been in serious jeopardy following bankers’ reluctance to lend to solar projects. Public sector banks and financial institutions dedicated to the power sector conveyed that they have no way to assess the commercial viability of these projects and would tread warily. There has been widespread concern that the lack of funding might derail the programme.

The cost of setting up solar power projects in India works out to Rs 170 million per MW, four times that of conventional projects. Bankers are also unsure about the performance of these plants and the way the model power purchase agreement (PPA) has been structured. Bankers want to know who will compensate for the shortfall if these plants fail to achieve the minimum load factor of 20 per cent as mentioned in the PPA.

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