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Stalled Indian thermal power and steel plants look to solar power for success

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The Indian industry has seen solar power emerge as the fastest growing sunrise sector, with the government pushing through billions of dollars in tender this year. Every major Indian business group is getting involved in developing solar projects, with scores of foreign investors getting into the game as well. This has led to a huge buzz in the solar industry, even as the overall power and infrastructure remains enmeshed in slow growth and debt issues. The Chinese slowdown has led to global overcapacity in a number of industrial sectors and falling prices. Many steel, coal, power and mining firms have been disproportionately hurt from the falling prices globally. Projects are also getting stalled as investment returns are not making sense any more in an overcapacity world. As the overall industrial growth slows down, there is also less requirement for electric power. Coal India which has managed to increase production by almost 10% this year is finding it tough to sell coal, as power plants do not have enough customers.


Now infrastructure players who have their projects stalled are looking to set up solar power plants as an alternative. Due to the huge impetus given by governments, many of these companies think that the land they might have got for developing factories and plants may be better utilized by setting up solar power plants, which also require quite a lot of land. Arcelor Mittal which is the world’s biggest steel company wants to set up a solar power plant at its 1000 hectare site in the southern state of Karnataka. The company wanted to originally build a 5-6 million ton steel plant. But with most steel players reporting huge losses due to Chinese overcapacity, this plant does not look like it will see the light of the day. Karnataka is already building a large 750 MW solar power park with the help of the central government.

Read more about Power Companies in India here.

Rattan India which has recently won a Rajasthan solar tender at the absurdly low price of INR 4.36/kWh (~6 cents/kWh), plans to use a 340 hectare land in Punjab for another solar power plant. The company says that it has not been able to get coal for this thermal power plant, which it now wants to use for solar. Every Tom, Dick and Harry wants to build a solar power plant without expertise or experience or even without knowing whom they will sell the end product ie. power. It reminds me of the 2008 period when everyone wanted to build a thermal power plant. The reason then was there is a huge growing need for power in India and selling in the open market would lead to massive returns using the then merchant power price, which could give 50% plus gross margins. Thermal power stocks used to have a P/E of 30-40x, as everyone rushed to build a thermal power station. Nowadays most of these stocks are in distress as there has been huge project delays, lack of fuel and fall in merchant power prices.

Solar power seems to be going through a similar cycle with the difference that the economics do not make sense even now, forget the future. Without a government given price and guaranteed offtake, developing solar power projects is mostly a fool’s endeavor.


Sneha Shah

I am Sneha, the Editor-in-chief for the Blog. We would be glad to receive suggestions, inputs & comments on GWI from you guys to keep it going! You can contact me for consultancy/trade inquires by writing an email to

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