India Solar Goal's Secret Weapon: Rooftops of Small Business

(Bloomberg) -- Rakshith Kunder is adding more solar panels to the roofs of his warehouses. He isn't seeking to save the planet, it's pure economics.

“Solar power costs us just a third of grid power and has also reduced our diesel backup cost,” Kunder, 33, said by phone from the city of Kota, in the southern state of Karnataka. His 3 billion rupee ($46 million) fish-meal and oil-products business requires two megawatts of power and he plans to fulfill half of that through solar installations.

Businesses like Kunder's are the next target for Prime Minister Narendra Modi's government as it seeks to achieve 100 gigawatts of solar installations by 2022. Of that, 40 gigawatts is expected to come from rooftop installations. Small businesses, which contribute about a third to India's $2 trillion economy, suffer from high power tariffs and erratic supply causing them to fall back on expensive and polluting diesel generators to keep the lights on.

Rooftop solar is the fastest growing segment in renewable energy in India, driven by large customers, according to Bloomberg New Energy Finance research. The contribution of small- and medium-sized companies was limited until recently, said Shantanu Jaiswal, the New Delhi-based research head for BNEF India.

“These companies were constrained by their understanding of technology and the ability to arrange upfront capital but now both these issues are being addressed,” he said.

One company easing the path of small businesses toward a solar future is Bengaluru-based Orb Energy Pvt. It raised $10 million in debt from Overseas Private Investment Corp. in January to provide finance facilities to small businesses seeking to buy a rooftop solar system.

Larger Systems

Two-thirds of Orb's annual sales are to small and medium enterprises, which are buying larger systems, said Chief Executive Officer Damian Miller. The average size of the installations the company is fixing is 200 kilowatts in the year ending March 31, double from only a year ago, according to Miller.

“Small businesses are getting comfortable with the idea that solar is cheaper than the grid,” he said.

It helps that the price for solar power in India has fallen to 2.44 rupees a kilowatt-hour (3.7 cents), among the lowest in the world. The cost of rooftop solar in India for residential and commercial customers is comparable to some of the sunniest parts in Australia and U.S., as per BNEF.

The World Bank is also stepping in with a $625 million loan to support India's solar rooftop program. The funds will be used to provide loans and guarantees to small businesses, Simon Stolp, lead energy specialist at the World Bank said in an email.

Of the 533 megawatts of projects under this line of credit, several have been sanctioned to small businesses, hospitals and educational institutions, Stolp said.

To contact the reporter on this story: Anindya Upadhyay in New Delhi at aupadhyay22@bloomberg.net.

To contact the editors responsible for this story: Ramsey Al-Rikabi at ralrikabi@bloomberg.net, Abhay Singh, Alpana Sarma

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