While the sun’s energy is free, constructing a MW level solar plant is costly. One of the most difficult challenges for MW solar plant investors is finding financing choices. It’s crucial to pick a solar financing option that works for your company. The average cost of constructing a plant is about 6 crores per megawatt.

Equity will cover 30% of the cost, while debt will cover the remainder. Equity is just a fancy term for trying to finance your solar finance project with your own money or other investors’ help. Debt funding is typically available with recourse, which means that the lender would be required to put up collateral as insurance for the loan they plan to take out.

It is very expensive to build a solar plant; you can still find subsidies and solar loans from the government or banks.

Financing from inside the country (mostly from banks): Indian banks are lending at interest rates between 11 and 13 percent as of 2015, though NBFCs could lend slightly higher rates. IREDA (India’s green energy lending arm) offers lower interest rates (10.2-11.4 percent ). The amount of collateral needed for eligibility could range from 20% for organizations like IREDA to 100% for many banks. Domestic solar loans are usually for 7-10 years, but many Indian banks are now willing to lend for up to 15 years.
Foreign financing: After all expenses, including the expense of hedging for currency risks, the final interest rate for loans from international sources is normally between 8-10 percent. However, the loan application process would take a long time, about nine months, which might delay the project’s start date. While foreign funding usually has lower interest rates, it is important to factor in the cost of currency hedging. Foreign debt may be purchased for a period of 16 to 18 years.