Retail Solar Financing
At Greenworldinvestor, we have always thought that the country’s needs would be more served if the government stopped subsidizing the large massive solar farms in favor of small rooftop solar installations. A massive power deficit, affordable solar systems, inadequate transmission makes India ideal for rooftop solar installation. However, the government of India in its infinite wisdom continues to spend money in building large solar farms that are beset with corruption allegations and project delays. India is all set to announce the second set of big bang solar subsidies under JNNSM Phase 2 for 750 MW of solar farms.
Despite the government’s indifference, solar rooftop installations have started mushrooming as some states are giving incentives. Solar electricity becomes affordable thanks to the fast increasing grid electricity prices. I think that the solar rooftop segment in India has reached a tipping point with mainstream financial companies starting to finance the rooftop installations. Bajaj and Shriram are the major NBFCs and they have tied up with Borg Systems to finance solar systems in the southern state for 5-7% interest rate. This is great news for the solar sector in India as high investment cost is the biggest hurdle to solar growth. With cheap loans, it becomes easier for people to buy solar systems and the lower interest cost will reduce the payback period.
Solar energy has no fuel cost and no price escalation unlike electricity bought from the grid. General electricity price has increased by 10-15% each year due to India’s high inflation. Solar systems are very attractive if you can get small subsidies. The prices of solar systems have crashed and it is not unheard of to buy complete utility solar systems for as low as $1.2/watt. Rooftop solar systems cost more but with some subsidies (20-30%), they can compete pretty much on their own.
Google+Borg Energy has teamed up with Shriram City Union Finance and Bajaj Finserv Lending to enable customers to purchase the company’s micro solar power plant under a solar finance scheme.Under the finance scheme offered by Shriram, customers can avail a maximum of five lakh at an interest of 5.5% per annum for a 12 month EMI (equated monthly installment) scheme and an interest of 5.99% per annum for an 18 month EMI scheme. Bajaj Finserv is offering a maximum loan of Rs 4.5 lakh at an interest rate of 6.5% per annum for a 12 month EMI scheme.
He added that difficulty in obtaining finance puts off many customers from buying solar power products. Borg which launched its Astra micro solar power plant earlier this year in the southern markets has so far sold 1,500 units in Tamil Nadu. The company is planning to sell 25,000 units this year.
