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India's first entrepreneur to sell solar power,
commercially
Last updated on: December 09, 2009 11:17 IST
Tags: Wadhwa, Punjab State Electricity Board, Azure Power, India, MNRE

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Inderpreet S Wadhwa has mostly been associated with start-ups and Fortune
500 companies. He also co-founded and sold a software education company in
Silicon Valley a few years back.

And though he's still associated with the word 'silicon', it does not relate to
information technology. Instead, he's now the founder & chief executive officer of
Azure Power, a solar photovoltaic company that he founded two years ago in
India [ Images ].
On December 1, Azure commissioned the first phase (1 Mw) of its 2 Mw solar PV
plant in Awan, Amritsar [ Images ] and has begun to sell solar power to the
Punjab [ Images ] State Electricity Board.

That makes him the first entrepreneur to sell solar power commercially in India.

"I returned to India after 15 years to make a difference, besides making money,"
says Wadhwa. In 2007, he started on his vision to set up India's first private solar
power plant.

"Many small and big companies have entered the fray but none of them have
commissioned any projects yet," he adds.

Commercial and sentimental reasons dictated his choice of Punjab. "I was born
in Amritsar, so I wanted to give something back to this place," he said.

Besides, the Punjab government is offering a peak rate (peak hours are billed at
higher rates) for sale of power from solar projects at Rs 8.93 per Kwh (kilowatt-
hour) from 2011-12, higher than the Rs 3 to 4 per kwH it pays for conventional
energy.

This doesn't quite cover costs (Rs 12-20 per kwh) but because the power
purchase agreement with Punjab is valid for 25 years, Wadhwa reckons he'll
make money at some point since the costs of solar power generation are
expected to decline at 7 to 9 per cent per year by 2020. Hence, Azure Power
gets the benefit of reduced costs over time and it also does not have to look out
for buyers during this period.

After planning to generate 18 Mw power through solar PV power plants, the state
government has started to allocate other such projects. Being environment-
friendly and pollution-free, the Punjab government has stated that these projects
should be eligible forcarbon credits under the Clean Development Mechanism.

Wadhwa claims that his power plant is cost-effective -- the 1 Mw plant costs Rs
17-19 crore (Rs 170-190 million).

Compared to this, public sector Bharat Petroleum Corporation Ltd [ Get Quote ] is
building a 1 Mw PV power plant in Mohali for Rs 25 crore (Rs 250 million).

Wadhwa argues that his costs will fall further once the prices of silicon and PV
modules fall. "Besides, the ministry of new and renewable energy allows for a
further generation-based subsidy (varies in each state) which makes it a viable
proposition," says Wadhwa.

Azure Power received initial venture capital funding from Helion Ventures (an
India-focused venture fund) and Foundation Capital (a global investment fund
which focuses on start-ups).

Wadhwa is also talking to other state governments like Haryana, Gujarat,

Maharashtra [ Images ], West Bengal [ Images ] and Karnataka [ Images ] to set up
solar plants.

All these states offer different peaking rates and assure purchase of solar power
for a given period of time in a bid to encourage renewable energy projects and
reduce carbon emissions.

By September 2010, Wadhwa plans to set up another plant in Punjab to take the
capacity to 4 Mw. He also plans to set up an 8 Mw plant in Gujarat by the end of
financial year 2009-10.

To finance these plants, he has two more investors lined up. One is the
International Finance Corporation, the commercial lending arm of the World
Bank, which is planning to make a quasi-equity investment of $10 million (around
Rs 46 crore -- Rs 460 million) in upcoming solar power projects in Punjab and
Gujarat.

"The debt to equity ratio is 2:1, so we expect to raise a total of around Rs 150
crore (Rs 1.50 billion) in the form of stake sale and bonds," says Wadhwa. He,
however, declines to divulge the name of the other investor.

And how does he plan to raise the rest of the money? "Ongoing costs for these
plants are minimal. Every proposed plant will generate money that can be
ploughed back. Besides, we can always go for an initial public offering (IPO),"
says Wadhwa.

Azure Power's uniqueness lies in the fact that the company designs, finances,
owns and operates solar power plants. The solar PV modules are imported from
countries like China and Wadhwa's team assembles the important modules as
"completely knocked down kits".

"Had the quality been better and cost of modules manufactured in India been
lower, we would have considered buying the solar PV modules from India itself,"
rues Wadhwa.
He explains that the solar PV modules imported from China and the US can
generate more power per cell and hence occupy less land. "This helps us reduce
the cost of setting up plants," says Wadhwa.

"My aim is to be a leading solar power generator in India by offering viable and
socially-responsible alternatives to conventional sources of energy," he says.

The favourable policy of the MNRE and the government's National Solar Mission,
he hopes, will only further his cause.

Image: (Inset) Inderpreet S Wadhwa. A solar powered traffic sign.

Photograph: Daniel Munoz/Reuters
Leslie D''Monte in New Delhi

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