In a major, and much-needed, boost for the Indian rooftop solar power market, a US-based private equity firm will invest $100 million in one of the leading rooftop solar developers in India.
CleanMax Solar recently announced that it will receive $100 million in investment from the private equity firm Warburg Pincus. These funds will be used by CleanMax to further expand its presence in the Indian solar power market and explore expansion opportunities in select international markets.
An investment by Warburg Pincus in the rooftop solar power market in India possibly indicates where the investor comfort lies. The utility-scale solar power market in India is extremely competitive. Earlier this year we saw tariff bids falling by 26% in large-scale solar power auctions held between February and May. Margins are really tight in the utility-scale business due to low tariffs, and are highly dependent on availability of low-cost debt and support from regulatory bodies.
The rooftop solar power market, on the other hand, is yet to take off. There are several options available for project developers, including competitive auctions. Developers can directly approach industries and commercial establishments to set up rooftop solar power systems to replace grid supply. With the fall in solar module prices, several private sector institutions and organizations have opted to switch to rooftop solar replacing a part of their grid import.
Similarly, the Opex or Resco model is also available to rooftop project developers, which offers significant potential for profits. This is the model used for setting up rooftop solar power systems at Chennai Metro, an urban rail system.
The Opex or Resco model wherein Chennai Metro will not have to make any upfront investment. CleanMax Solar will make the entire capital investment to set up the power systems. CleanMax and Chennai Metro would enter a long-term power purchase agreement.
After recovering the capital investment in a few years, the revenue from the sale of electricity to Chennai Metro will be profit for CleanMax Solar. Chennai Metro, too, expects to save around Rs 1.5 crore (over $230,000) every year, and Rs 37.5 crore ($5.8 million) over a 25-year period.
This investment by Warburg Pincus is a major milestone in India’s rooftop solar power market. This could hopefully spur additional investment in the sector helping India increase the rooftop solar power capacity to 40 gigawatts by March 2022, as has been targeted by the government.