A risky bid on Indian sunshine

Asia's largest solar power station, the Gujarat Solar Park, in Gujarat, India
Global Risk Insights

This story was originally reported by Krishna N. Das at Reuters

Indian Prime Minister Narendra Modi‘s goal to increase production of energy from renewable sources is threatened, now that SunEdison Inc‘s project in India faces a failure. The construction of 32 “ultra mega” complexes is probably going to be delayed. Last November, the company won a project for building a 500 megawatt powerplant in India, yet the construction is not under way. Other projects are still waiting for the right bidder.

The US based company chose the tactic of bidding extremely low in order to secure the contract from the Indian Government. The offered 7 U.S. cents per kilowatt-hour was such a low price, that it is now hard to believe any other firm will be interested in obtaining the contract. However, even SunEdison had known that their offer was entirely unrealistic. As a result, India is expected to tighten the auction rules for the “ultra mega” projects, to prevent such underhanded tactics from happening again.

Eliminating certain bidders would bring less competition and slower advance in the project, which is vital for India. Prime Minister’s goal is to have solar power plants capable of generating 100 gigawatts of energy by the year 2020. Bidding on 300 days of sunshine, in order to avoid emission cuts – another way of adhering to the international talks on climate change – might seem risky, but Upendra Tripathy, secretary at the Ministry of New and Renewable Energy, sees it as a predicted bump on the road.

Regardless of the issues with SunEdison, India’s gigantic $100 billion solar energy program attracted notable investors (SoftBank Corp. (Japan), Foxconn (Taiwan), Bharti Enterprise (India), etc.). Multiple major solar technology firms are expressing their interest in India’s project. It is now expected that a mandatory check will be put in place, requiring a firm to have an assurance from a bank before it enters the auction.

The sunshine mining is far from over in India, and it is doubtful that this setback will destroy the big plan. India wants to become a solar superpower, and it appears to be ready to commit to that. Involvement of the scientific community is vital in the question of efficiency and effectiveness. Boosting either of these inherently brings a prettier price-tag for a sun-powered kilowatt-hour.