6. Life of the project is expected to be 12 years, since the technology will become obsolete after that time period
7. The cost of equity is assumed to be 15% with 50% weight age. The cost of debt is taken to be 11.5% (as per IREDA norms) with 50% weight age. Hence, the cost of capital is calculated to be 13.25%.
18. The Sector is highly driven by Government support, hence any Scenario where Government reduces or minimizes the incentives proves to be destructive to return & risk profile of the project. However, possibility of such a development is expected to be low.
19. Reducing Poly-silicon prices, increasing efficiency and economies of scale are expected to drive down the Initial outlay of project and hence increase the return. Thus considering the supply-demand gap in India energy market and reducing cost of PV, Solar power plants are expected to be lucrative in long term. We thus recommend Global players to invest with some delay of about 3-4 years with improved technology and reduced cost.
20. Further to reduce cost in India, players should focus on manufacturing poly-silicon wafers indigenously, developing technology tailored for Indian conditions, and joint venture with technology providers to improve efficiency. Backward and forward integration will also help to increase the margins for the firms.
21. Going by example of Germany, world leader in PV technology, we expect PPA offered in India to decrease to about Rs 10.7 by 2015 and Rs. 7.8 by 2019, with reducing cost structure of PV power. As per data available we expect PV power to reach grid parity by 2020. Hence after 2020 we expect PV power to compete with other sources of energy without any Government support, and contribute about 7% of energy demand of the nation. Appendix 1<br />Appendix 2<br />