Positioning Solar as an Asset Class for Investors in India

Solar in India is a booming story, but how do we productise Solar as an Investment stream to optimise the Consumer’s take up?

One would be for own consumption where the user – a house or a small commercial establishment that installs an off-grid rooftop. The positioning of such a product would deal with the financial return or savings, as compared with conventional grid-sourced energy. An individual consumer would be moved by the financial return above all else. The thought of sustainable investing has still not matured in the mind of the Indian investor, and therefore, this might not be yet used as a lead proposition in selling the solar story in India.

Also read our recent story on Solar Rooftop in India.

A solar installation would be cheaper than traditional energy for the micro-consumer (household or small commercial establishment) in the long run, around 6-7 years after installation. If we were to take in to consideration aspects such as life of the solar installation (beyond say 15 years), potential income from Feed-In Tariffs (which is not yet active in India), storage and tax breaks (possibly lowering the capex down further) and a possible increase in grid prices. These variables might being the point of parity even earlier than this pay-back period, therefore making solar, with or without loan, cheaper than traditional energy. At c.INR 7-8/unit prevalent in Delhi, for 500 kWh units of power consumed in a typical month, the average monthly energy bill would be c.INR 3,500 – which would total to INR 40,000 for the year and cumulative at the constant price thereon. Further, for a 3 kWp solar installation, the market estimates the capex at INR 2.2 lakhs on average.

The other would be corporate investment in to solar projects. Such investments would classify as alternate investments and can be positioned in the market through the financial return/savings or even CSR route. So, a large company might direct its CSR fund in investing in to an array of captive solar plants on rooftops of houses at the company’s cost. The home owner, upon agreement, get the installation free of the individual’s capital cost, pay interest to the corporate, generate the electricity and when the FITs are in place, feed excess back in to grid and share a revenue with the corporate investor.

Alternatively, apart from solar as an investment class for an individual for own consumption, corporate entities can also leverage their CSR spending (via the recent 2% law), to lease out solar installations to the micro-consumer. This would result in the corporates essentially earning the interest off their investment, as well as the possible FIT income and the consumer not having to incur the capex whilst accessing energy.

Positioning both these products to the stakeholders (consumers and corporates) would be purely based on the financial return in the long run, possibly with building a “green marketing and sustainability reporting” case on the second product that corporates would warm up to.

This article is written by Arjun Mehta, an Indian based in the UK. Arjun is passionate about sustainability and the solar story in India. Like Greenworldinvestor, Arjun too feels that Rooftop Solar is going to explode in India, given the right “productisation”. The above are his thoughts on commercializing solar rooftop in India and to attract more investor interest to solar rooftops as an asset class. Please share your thoughts with us in the comments section to help this young man revolutionize the rooftop market in India.