Shares of SunEdison Inc. SUNE gained nearly 3% yesterday after the company announced the completion of a 1 MW canal top solar power plant in Karnataka, India. The solar power plant has been built for Krishna Bhagya Jala Nigam Ltd., a Karnataka government agency responsible for Krishna River and Dam.
The power plant is built with a tested technology invented by SunEdison in 2012 for the Narmada Canal Top Project in Gujarat. As the name suggests, the canal top solar power plants are built over the water canals which according to the company “operate at cooler temperatures than conventional land based systems and generate more energy as a result”.
Moreover, it saves water by shading the canal and reducing evaporation. Additionally, as this is built over the canal, the surrounding land can be used for other purposes.
The company believes that this innovative use of solar technology will help other state governments to meet the energy demand in a more cost effective way. Moreover, since no land acquisition is required, the projects can be completed easily and quickly.
Since the beginning of 2015, SunEdison has been aggressively investing in India to capitalize on the growing opportunity in the country’s renewable energy space.
Taking a giant step toward accelerating solar photovoltaic (PV) installations, Prime Minister Narendra Modi led Indian government recently raised the country’s solar target to 100 GW to be achieved by 2022, a five-fold increase over the earlier target of 20 GW.
For the current fiscal year — 2015-16 — the government has planned to install nearly 4.5 GW capacity of renewable energy.
The Indian government, given its eagerness to achieve its solar objectives, has made it easier for global solar players to operate in the country. The government has announced small capital subsidies to speed up adoption in the early phases. It is also planning to attract foreign players with dollar denominated supply contracts to offset the impact of currency fluctuations.
There is a huge demand/supply gap in the country’s power sector that provides significant opportunities for global solar players. Prime Minister Modi’s ambitious “Make in India” strategy will further fuel demand.
A cheaper manufacturing destination like India will facilitate foreign players to achieve cost effectiveness once mass production starts. This will gradually neutralize the cost advantages enjoyed by Chinese manufacturers.
Additionally, being very near to the equator, India has one of the most suitable solar climates in the world.
These projections have put India on the radar of various U.S.-based solar power companies such as SunEdison and First Solar, Inc. FSLR which have already started channeling funds to the region.
In fact, in early June, SunEdison announced its intention to expand its Indian base by investing approximately $15 billion through 2022. The company plans to develop 15 GW solar and wind projects in the country.
It is worth mentioning that in January, the world’s leading renewable energy developer entered into a strategic alliance with the Indian conglomerate, Adani Enterprises, to expand its base in India. Under the agreement, the companies will invest approximately $4 billion to develop solar PV projects in Gujarat.
The partnership would help SunEdison to produce solar panels that will produce electricity at lower cost and reduce electricity loss during transmission.
Conclusion
It is evident that the demand for renewable energy is strengthening at a rapid pace. Moreover, the gradual widening of the solar markets will bode well for all global players and instill investors’ confidence in the industry over the long term.
Considering the ambitious targets set by India along with the added advantages, we believe that the companies which make an early foray in the country will be able to capture a larger market share with greater cost advantages.
Currently, SunEdison has a Zacks Rank #3 (Hold).
Better-ranked stocks in the technology sector are Cirrus Logic Inc. CRUS and eMagin Corp. EMAN, both sporting a Zacks Rank #1 (Strong Buy).
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