Investor Uday Khemka: “Total collapse” of solar costs in India signals its shift to “a core energy”

4 December 2015

Uday Khemka, Vice-Chairman of SUN Group

PARIS: Solar power in India is seeing a fundamental shift from "alternative to core energy" due to the “total collapse” of costs in recent years, according to Uday Khemka, Vice-Chairman of SUN Group, a leading emerging markets investor.

In an exclusive interview released at COP21 with Climate TV, The Climate Group’s digital channel, Uday Khemka shares "India’s evolving view" on the dual impacts and opportunities of climate change.

“10 years ago we were seeing it at as fundamentally a North-South issue. Today we’re seeing it as an issue that can threaten our own trajectory of development – as well as that the mitigation response to it can offer us opportunities," he says in the video interview.

Particularly threatening issues he stressed include ice melt on Bangladesh’s large coastal-based population due to sea level rise, water security in India and China, and the agricultural impacts of runaway climate change in the Indian states of Rajasthan and Punjab, where his family are from. “If the monsoon moves by 1 degree, Punjab could end up being like Rajasthan, and you could lose food security for 1.2 billion people.”

Aside from avoiding the human costs, the investor also outlines the clear economic case for acting on climate change. “To mitigate climate change with new technology offers tremendous opportunities that this government and even the previous government had been increasingly aware of and ambitious about, and that offers employment, innovation and business opportunities for our country.”

India’s current Prime Minister Modi is particularly supportive of renewable energy, “personally and structurally”, according to the Indian business leader. India's over-reliance on imported oil and gas is another reason Uday Khemka applauds Modi's support: “Hydrocarbons are not only polluting from a carbon standpoint but they have also caused tremendous problems for our fiscal position. From all these points of view they represent a dependency of the Indian economy on global commodity prices.”

SOLAR GROWTH

This case coupled with the fact India has “one of the greatest potentials for solar power on the planet” with “energy that falls from the heavens every day” and dramatically dropping costs, the move to clean energy is clearly “where good economic and energy security fit together”, he states in the video interview.

Evidence of Modi's support for solar power is in the country's rapidly rising investment as well as Gujarat’s history, the state he ruled before becoming Prime Minister. Uday Khemka explains: “Of the 3.5 odd GW of solar put up in the previous generation in India, almost half was in Gujarat.”

That commitment has apparently not waned with his new leadership. “When Modi first came to power in the new government of last year he raised targets of the last government from 20 GW of power to 50 GW. Then within another few weeks from 50 GW to 100 GW and added another 75 GW of other renewable power sources.”

In fact, the investor says India’s solar drive is “one of the most ambitious renewables programs of any country in the developing world and I think that the developed world has ever seen.”

SUN Group has heavily felt this “fundamental shift” from renewables as "alternative to core energy" in India, he says. Investments the company made in solar plants a few years ago were around US$300 million a MW, yet today “you could invest and create the same plant at US$950,000 a MW,” something Uday Khemka calls a “total collapse in the cost of solar”.

“As a result of this we have managed to cross the microeconomic point of grid parity in many sectors in many countries,” he says. But while the trajectory is strong, more investment is needed in solar around the world.

Uday Khemka suggests taking the institutional finance view, which is to organize structures within which pension funds and insurance companies can “taste investing in the green infrastructure of emerging markets and developing countries with very limited risk.” Wise words from one of the emerging markets' most successful investors.

Text by Clare Saxon Ghauri, video by Ilario D'Amato

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