Credit risk modelling, creditworthiness and solar power


Peacock Solar is a household solar installation company based in Gurugram, Haryana. It provides hassle free installation of solar power. In an era of rising demand for renewable energy, solar power is seen as a future of energy. The markets are becoming more competitive as better technologies increase the efficiency and lower the cost of solar power. In India, solar power is in its nascent stage of development and being price sensitive markets, cost remains the bottom line of competition. The present study is an attempt to showcase the strategy adopted by Peacock solar to enhance its sales by making solar available on finance.” The objective of this research paper is come up with a model that anticipates the probability associated with default for homeowner who avails solar on finance. The next objective is to develop a scorecard that represents this probability of default in form of credit score for enhanced understanding and decision making. By making solar available on finance, the company aims to overcome its price related hindrances. The methodology used for development of credit risk model is Logistic Regression as it is one of the best techniques for predicting a binary outcome (will default or will not default). This is followed by a technique for scorecard development. It can then be concluded that credit risk can be reduced to a considerable extent if correct analytical methodologies are put in place which will bring down the default rates on credit.