Sunday, March 15, 2009

Municipal Financing for Renewable Energy in Homes - A Model for India

With solar water heaters becoming mandatory for new apartment complexes in Bangalore and parts of Karnataka State in India and similar laws on the horizon in several states (though nothing is really likely to happen until the General Elections are over in May) there is certain to be an explosion in the demand for some attempts at solving India's chronic power shortage problem. I have been a big supporter of the Karnataka law and have also been vocal about the immense potential that this opens up for entrepreneurs who wish to come up with useful solutions that address this problem and the new regulations.

Today's New York Times has this entry on a very interesting Municipal Financing solution being offered by cities in California, the USA's most indebted state and one which has major infrastructure and other problems - just like Karnataka State where Bangalore is the capital has in India: The concept of offering municipal financing by allowing deductions in property taxes over a period of time to offset the cost of installing renewable energy systems is an excellent one. India already has laws which allow businesses to write off the cost of renewable systems to the extent of 100% depreciation in just one year and both the Central Government and several state governments waive sales taxes on these products. If an incentive in reduced property taxes were offered, this would certainly prompt existing multi-storey apartment building societies to consider installing solar heaters and reduce the amount of power consumed in the country. Entrepreneurs (and there are very few in the renewable energy field in India) would do well to carefully exploit all of these possibilities and convey them to potential clients in a marketing push. And banks could lend money to finance the purchase of these products. There is a huge market waiting to be addressed and there are massive gains for not just entrepreneurs and consumers but also to the rest of the country on reduced energy costs and on the concordant reduction in pollution that is inevitable to follow this implementation.

Hopefully, someone would push for this to be addressed, come June.


N.M.K.D Sarma said...

such laws are there in Andhra Pradesh since a long time.What is interesting in Karnataka is Rs.50paise rebate per unit with a cap of Rs.50 in Electricity Bill if somebody has a solar water heater at his/her residence....Also many state governments like Kalyan Municipal Corporation have made it mandatory to install solar water heater for constructing an apartment

Mehul Kamdar said...

If more states are wither offering or set to offer more tax benefits to users of renewable power, it can only be considered a positive step. India does offer some excellent advantages such as 100% depreciation for renewable energy capital equipment after 1 year of operation. Perhaps, the time has come for Indian companies to work either with the IITs or with foreign companies already in this business and offer more options than are already available to help meet the support that is offered by the respective State governments or municipalities.

I shall be waiting with positive hope that this trend continues to spread through the country. India sends too much money out of the country to the oil producing nations in the Middle East and North Africa. That has to stop both for the sake of saving money and for reducing the already horrendous air pollution in the country.

Thank you very much for your comment.

Roger said...

There needs to be more than regulations, there needs to be a rollout of renewable energy on a monumental scale that surpasses local economics. This is at the point now where this is no longer optional.

Mehul Kamdar said...


Thank you for commenting. Yes, I do agree that money needs to be spend to correct the harm that has been done to the environment. The problem, however, is that we are in a recession. Even in the wealthiest of countries, the USA, there is considerable concern over spending on renewable energy and on environmentally friendly projects at the moment. I am not sure that the poorer nations could afford to go all out and do what even the USA cannot at the moment.

However, there have been several positive initiatives which have proven that renewable energy can be very cost-effective and it is this that I feel could be a strong first step. From there on, as the world's economies come out of the current recession, spending could proportionately increase . . .