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Foreign direct investment buzz grows in renewable energy

India’s renewable energy sector is sure drawing international attention. The government is stepping up efforts to convert that into serious dollars of investment.

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*On January 6, Japan signed a memorandum of understanding, wanting to be a part of one of the 34 solar cities being planned in India in the Eleventh Plan.

* An Indian delegation is currently on a visit to Japan to explore further cooperation in the renewable energy sector.

*Governments of, and private sector companies in, countries such as Spain, Australia and United States are showing interest in making investments as well.

*Then of course, there is the Clinton Foundation.

India’s renewable energy sector is sure drawing international attention. The government is stepping up efforts to convert that into serious dollars of investment. Sources familiar with the development said India’s government machinery is already in advanced talks with counterparts in many countries to woo capital investments.

According to conservative estimates, they said, over $200 million can be expected to flow into India by 2010-11 as foreign direct investment (FDI) in renewable energy. Such investments have risen at a compounded annual growth rate of over 200% in the last three years.

On January 18, the Clinton Foundation, promoted by former US president Bill Clinton, signed a memorandum of understanding with the Rajasthan government to provide assistance to establish solar energy parks in the state.

These parks would have a capacity to produce 3,000-5,000 mw; land for the project has been identified at two places.

The Clinton Foundation has been involved in the Indian renewable energy sector for over a year now.

Before the Copenhagen meet on climate change, Steven Chu, secretary, department of energy, US, had said that the biomass gassifier technology offers enormous potential to meet the energy requirement in rural areas.

The two sides agreed to intensify their R&D collaboration to develop small biomass gassifiers, which can be available for rapid deployment to meet the power needs in rural areas in India and US. “Many countries are looking towards India to get associated with our National Solar Mission not only from an investment point of view but also to learn from its experience. The response so far has been tremendous. There is no doubt that the FDI in the sector will keep rising,” said Farooq Abdullah, Union minister for renewable energy said.

Earlier this month, India launched an ambitious solar mission that targets production of 20,000 mw of solar energy in by 2022. The solar mission itself requires an investment of Rs 160,000 crore, of which a large chunk is expected to come from the foreign countries to promote the manufacturing of solar panels.

In the wind energy sector, the government recently announced a generation based incentive scheme for grid connected wind power projects with the objective of broadening the investors’ base by attracting the FDI and independent power producers. The incentive is about 50 paise per kw.

“Investment in the renewable energy sector will depend on the subsidy support provided by the government, at least in the initial years. While the scheme of pooling solar power with conventional energy is going to boost the solar energy sector, the incentive provided to the wind energy sector is also very promising. If innovative schemes are introduced in other renewable energy sectors as well, huge amount of FDI will come into India,” said Kuljit Singh, Partner-infrastructure practice, Ernst & Young.

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