Indian solar energy - clouds loom As Indian reforms go, solar energy appears to be a rare bright spot. Helped by the national solar mission, installed capacity has grown from almost zero to 1 gigawatt in the past two years. This is not equating to big profits for India's panel manufacturers, though. Hence plans announced this week by Surana Ventures, one of the smaller makers, to double its output this year to 30 megawatts make little sense. The case for Indian solar is there. The sun shines, while blackouts show how sporadic the supply of thermal coal power is. Coal power is also relatively expensive because challenges with domestic mining mean imports are necessary. That has prompted the government to target 20GW in installed solar generation by 2022. Yet new rules to replace back-up diesel generators for India's 350,000 (and growing rapidly) telecom towers with solar power, electricity rollout to the countryside, and off-grid solar applications mean India is likely to surpass that target. That depends on foreign financing, however. The auction process for solar producers has ramped up competition, pushing bids by solar power producers to as low as Rs7.5 per kilowatt hour. Based on these prices, the internal rate of return is just 10 per cent - unattractive when the cost of capital in India is about 12 per cent, reckons UBS. Foreign financing rates can be half those in India, but carry exchange rate risk. Hence the need for cheaper panels. Too bad that even the world's biggest panel makers such as First Solar can barely eke out a profit. That does not bode well for Surana. India's biggest panel maker, Moser Baer, just a sixth of the likes of First Solar and Suntech by revenues, extended its second-quarter losses by a third. And domestic panel sourcing agreements can be circumvented or are not implemented at the state level. Clouds still loom over India's panel makers.