Q&A: James Abraham, CEO, Sunborne Energy

Sunborne Energy to invest $6 bn in 3-4 years

Gurgaon-based Sunborne Energy plans to invest over $6 billion in India in the next three-four years. In an interview with Sudheer Pal Singh, Chief Executive Officer James Abraham says availability of low-cost technologies and intelligent bidding guidelines are key to the success of National Solar Mission. Edited excerpts:

What is the reason behind getting into high-cost solar power generation business?
Sometime solar is going to be as affordable as other sources of energy. It should be a major contributor to the Indian energy mix. The vision is to see solar as an economic part of the energy mix. We realised that India would be the first place where it would become low cost and start competing with other sources of energy because India has the ability to take any system and drive the cost down. Take for example, solar thermal. The cheapest plant ever built around the world has cost $4 million per megawatt (Mw). And our starting base in India is $3.3 million per Mw. This is because a large part of this, about 40 per cent, is labour cost, which is much cheaper in India. But over the next several years, we plan to put in a lot of engineering effort into bringing the cost down. The second part of the strategy is to set up as much number of megawatts as possible.

For photovoltaic (PV), we are signing agreements with technology suppliers around the world. We are deploying 50 Mw solar PV project in Gujarat. We are also applying for projects under the country’s National Solar Mission.

What are the drawbacks, if any, in the project bidding process devised by the ministry?
We are concerned about how the bidding will happen. The process for selection of companies attracts speculators. We have been telling the ministry that technology is important. But if you look at the way the process has been laid out, technology has not been made a criterion to apply for projects. Financial backing has been set as the first criteria, and if you are a big corporate house, this is easy to get. The second criterion is bank guarantee, which again is easy for big players. After the bidding is done, a company has to show technical qualifications. The entire process works quite backwards. The ministry’s view is that closing technical tie-ups is difficult for people. So, one can apply for projects and afterwards show his technical qualification. This is going to attract speculators.

What kind of capacity addition the company is planning?
In India, we should be able add around 1,000 Mw in the next three-four years, and if the state programmes pick up, may be we would cross 2,000 Mw. The stated goal is to have 50:50 capacity in thermal and PV. I think it will be between 400 Mw and 500 Mw in thermal and the rest will be PV.

How much investment would this require and where would it come from?
Going by the $3-million per Mw norm, we would be investing roughly $6 Billion in three-four years in India. This would work on a 70:30 debt and equity ratio. Banks are ready to deploy money. Our problem is that we cannot find enough good projects. What banks tell us is that they have been sanctioning money, but people are just not doing the projects they have sanctioned. In PV, it is easy to get financing if you choose the right technology and the right partner. In thermal, nobody knows how it is going to function, as thermal projects are set up on a large scale for the first time in India. We have designed our technology and teams, based on whether banks will back up the projects. I have already got a bank, which has given me an in principle approval for debt. But this is going to very tricky. The banks will pick and choose which projects to support.

The new solar power guidelines state that after 2013, no company would be allowed to import equipment. Is this a matter of concern?
It is a bad idea from technology perspective. For solar, it is not a big issue, as most components are off-the-shelf. But there will be issues with PV, where a developer has to buy a technology. And this technology keeps changing every year. The new technology is not going to be developed in India first. It will be done in US, China or Europe. Now, with 100 per cent localisation norm, we will never get low-cost technology. Solar PV cost will always be higher than anywhere else in the world. Local manufacturing will always be one generation behind in India in technology. The ministry’s view is that they are using public money to subsidise solar power. So, why should we be sending this money outside? I think it is hard to build a local manufacturing chain. Some of the parts you will always have to import.

Are you also contemplating bidding for projects outside solar mission?
We are trying to bid in a way so that we can still show some returns. If there are unexpected bids then we will not participate and see what we can do at the state level projects. One of the advantages with solar thermal is that you get a lot of steam along with electricity. So you could go to private companies and offer this. But the other issue with India is that the industrial belt is not where the sun is. There is hardly any industry in the deserts of Rajasthan. There is a mismatch. There are some states offering projects of small capacities. These are possibilities. Also, we are looking at opportunities in projects combining thermal and gas.

What is the kind of corporate participation you expect in the solar mission?
In PV, the government has to give out 150 Mw of capacity and they have received applications for 1,500 Mw. In solar thermal the government has projects of 500 Mw of capacity to give out. And they have received applications of 3,100 applications.