India to offer solar subsidies

India yesterday confirmed it will become the latest nation to offer substantial incentives to the solar power sector as it seeks to ramp up its renewable energy capacity.

Speaking in a press conference, renewable energy minister Vilas Muttemwar said that the Indian government would provide financial assistance amounting to 12 rupees (30 cents) per kilowatt-hour in case of solar photovoltaic and 10 rupees per kilowatt-hour in case of solar thermal power fed to the electricity grid.

The scheme will be run by the Indian Renewable Energy Development Agency (IREDA), and solar farm developers will be able to access the subsidy by selling their energy to state-run utilities under the new tariff.

Muttemwar said that he expected the private sector to invest about 10 billion rupees (about $250m) in solar plants as a result of the scheme in the five years to 2012. The incentives are scheduled to run for 10 years and will be paid in addition to any subsidies offered by India's 28 state governments.

However, the ministry has imposed a limit for the incentives of 50 megawatts in total, a cap of 10 megawatts (MW) within any one state and a maxiumum of five megawatts per developer. Capital investors will also be barred from the scheme.

The scheme is likely to be welcomed by solar firms that have failed to gain a significant foothold in a market where they have to compete with low cost coal and a well established wind energy sector.