Investment in solar power can lead to a significant improvement in the balance of payments by reducing energy imports as well as, eventually, driving down power tariffs for end-users
Akhil Gupta
Profile: Akhil Gupta is Senior Managing Director at The Blackstone Group and Chairman of Blackstone India. He previously served as CEO-Corporate Development for Reliance Industries (RIL), focusing on developing RIL’s oil & gas, refining, and telecom businesses. He began his career at Hindustan Lever.
The biggest freedom a country can wish for is freedom from external overdependence. With our humongous current account deficit (CAD), which forces us to depend on volatile capital flows to finance our import bills, the rupee has taken a beating, falling 14 percent in a matter of weeks. But a bad CAD affects more than just the value of the rupee; it imports inflation, weakens government finances by raising subsidies, deters foreign investment and prevents the Reserve Bank from lowering interest rates. Basically, a high CAD sucks the economy into a vicious cycle of high inflation and low growth.
The biggest culprit here is energy imports. Consequently, a solution that kills many birds with one stone is for the government to go big on solar power in partnership with the private sector. The government’s role should be to:
The time is ripe for solar power since the prices of equipment (solar panels) have reduced by over 50 percent in the last three years, driving down the cost of solar generation to as low as Rs 8/KWH. India is in a unique position to capitalise on these falling costs. First, most parts of India have very high solar irradiance, with the majority of cities receiving insolation of 2,000–2,500 KWH/sqm/year compared to 1,000–1,500 KWH/sqm/year in European cities. Thus, a 1 MW solar plant generates 72 percent higher energy—1.75 million KWH/year in India versus 1.02 million KWH/year in Germany.
(This story appears in the 23 August, 2013 issue of Forbes India. To visit our Archives, click here.)