India’s solar industry, hailed not-so-long-ago as the shining sunrise industry, is all set to see a shakeout, weighed down by a lack of bank financing and fierce competitive bidding pushing down tariffs to ultra low levels, industry sources said.

Reflecting the gloomy industry outlook, the bidding held recently by the Solar Energy Corporation of India for its proposed 1200 MW ‘hybrid’ renewable projects drew a blank, forcing the state-run agency to extend the bidding deadline for a fifth time.

Hybrid projects are where both solar and wind power projects could be set up at the same site. The 1200 MW project bidding failure was the second renewable project auction which have flopped in a month’s time.

“The solar energy industry is most likely to follow what happened to the thermal power industry in India in mid 1990s when implementation of several mega power projects ran into a dead-end when promoters started abandoning them,” Pranav Mehta, chairman, National Solar Energy Federation of India (NSEFI), told Arabian Business.

"This followed after the initial round of euphoria which saw practically every corporate group in India and many overseas companies vying with each other to make an entry in to the newly opened power sector."

Attempts by promoters of some of the existing solar power projects to seek investors is seen as a precursor to the expected shakeout in the industry.

The Delhi-based Hero Group is the latest one making a move for a partial stake sale in its renewable energy venture Hero Future Energies, for which the Abu Dhabi-based Masdar Clean Energy is said to be one of the suitors in the fray.

Earlier, the Hyderabad-based Greenko acquired Orange Renewable from Singapore’s AT Capital Group in a deal valued at $1 billion, while the Delhi-NCR-based ReNew Power has lapped up Ostro Energy for about $1.5 billion, the largest M&A deal in India in the renewable energy sector.

Abu Dhabi Investment Authority (ADIA) is a major investor in both Greenko and ReNew Power, holding significant minority stakes.

Arabian Business reported in October that the two Indian renewable energy majors are in talks with ADIA for tying up additional funding to finance their respective pipeline projects in the solar power sector.