By Brien Southward
India's state-run lender to utility companies, Power Finance Corp., has more than doubled funding for renewable energy projects within a year to $305 million, some 4 percent of its total loan outlays, up from 1.2 percent in the year previous. Regarding coal-fired plants an increasingly risky investment, Power Finance Corp. is especially interested in approving loans for solar and wind projects.
Much of the increased interest in renewable energy has been due to the steady increase in fuel prices in recent years, which has eroded the profit margins of utility companies and made traditional sources of energy seem less appealing. "Given that fossil fuel costs have gone up, investments in wind and solar are surging," said Satnam Singh, Chairman of Power Finance Corp., "We’re not afraid to go at renewable in a big way where lending happens much faster, within six months." Power Finance even started a subsidiary in July, known as Power Finance Green Energy Ltd., to increase its involvement in renewables.
Leaders of other major Indian financial companies have echoed Satnam Singh's views. Praveen Kadle, managing director for Tata Capital Ltd., a non-banking financial company and wholly-owned subsidiary of Tata Sons, said that "Purely from an investment perspective, a clean energy project in India is a lot more attractive than a coal-based project, right now." For the time being, however, "Solar and wind can’t possibly replace the capacities of conventional projects, but the risk involved in coal certainly has institutions looking for alternatives."
Expansion of investment in renewable energy projects is far from the end of India's attempts to expand its energy infrastructure to meet the demands of such a large and rapidly industrializing nation. In addition to the increase in funding for renewable energy, Prime Minister Manmohan Singh plans to spend more than $300 billion to expand the nation's electricity infrastructure, hoping his investment will lead to 9 percent economic growth by 2017.