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INDIA SOLAR COMPASS April 2013 Edition Market Dashboard A snapshot of the market’s fundamentals Latest
INDIA SOLAR COMPASS April 2013 Edition Market Dashboard A snapshot of the market’s fundamentals Latest
INDIA SOLAR COMPASS April 2013 Edition Market Dashboard A snapshot of the market’s fundamentals Latest

INDIA

SOLAR

COMPASS

April 2013 Edition

Market Dashboard A snapshot of the market’s fundamentals

Latest Market In-sights An analysis of the policies, projects, industry and finance

A Key Question Answered Is distributed solar PV ready to take off in India?

Outlook Quarterly projections for the Indian solar PV market

© BRIDGE TO INDIA, 2013

© BRIDGE TO INDIA, 2013 Illustration by Kavya Bagga

1

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CONTENTS 1 Overview 01 2 Market Dashboard 02 2.1 Market Compass 02 2.2 Indian Solar
CONTENTS 1 Overview 01 2 Market Dashboard 02 2.1 Market Compass 02 2.2 Indian Solar

CONTENTS

1 Overview

01

2 Market Dashboard

02

2.1 Market Compass

02

2.2 Indian Solar Market Prices

02

2.3 Installed Capacity in India

03

3 Key Findings

04

4 Policies

07

4.1 National Solar Mission

07

4.2 Tamil Nadu Solar Policy

08

4.3 Andhra Pradesh solar policy

09

4.4 Kerala Solar Policy (Draft)

09

4.5 Punjab Solar Policy

10

4.6 Uttar Pradesh Solar Policy

11

5 Projects

13

5.1 New Installations (grid connected)

13

5.2 Status of on-going projects (PV)

14

6 Financing

17

7 Upstream Industry Analysis

19

7.1

Inverter supply in India

19

8 Key Question: Is distributed solar PV ready to take off in India?

22

8.1 Background

22

8.2 Market fundamentals

22

8.3 Bottlenecks to adoption of distributed solar power

25

8.4 Case for parity driven adoption of rooftop solar

26

8.5 Way forward

30

9 Outlook

31

9.1 Current quarter

31

9.2 Long-term outlook

31

10 Expert’s view

31

10.1 Power-One’s newly launched ULTRA series tries to provide the best inverter solution for the Indian market

33

10.2 Socomec: Why large central inverters are not an ideal solution for the Indian market

34

11 Annexure

35

© BRIDGE TO INDIA, 2013

LIST OF FIGURES Figure 4-1: Schedule for participation in the Punjab Solar Policy Figure 4-2:
LIST OF FIGURES Figure 4-1: Schedule for participation in the Punjab Solar Policy Figure 4-2:

LIST OF FIGURES

Figure 4-1:

Schedule for participation in the Punjab Solar Policy

Figure 4-2:

Schedule for participation in the Uttar Pradesh Solar Policy

Figure 5-1:

Grid connected solar projects installed in the previous quarter – January 1st to March 20th 2012

Figure 5-2:

List of projects accredited under the REC Mechanism

Figure 7-1:

Central inverter market share by commissioned projects of inverter companies as of February 2013

Figure 8-1:

Module prices have fallen by 58% in 3 years

Figure 8-2:

India’s widening energy deficit

Figure 8-3:

State-wise net internal revenues (` million) for 2009-10

Figure 8-4:

Power costs in India are rising at an average of 6% p.a.

Figure 8-5:

State-wise commercial tariff vs. LCOE1 of solar power (100kWp system without battery)

Figure 8-6:

For 2016, state-wise commercial tariff vs. LCOE1 of solar power (100kWp system without battery)

Figure 8-7:

State-wise industrial tariff vs. LCOE1 of solar power (100kWp system without battery

Figure 8-8:

For 2016, state-wise industrial tariff vs. LCOE1 of solar power (100kWp system without battery)

Figure 8-9:

State-wise residential tariff vs. LCOE1 of solar power (3kWp system without battery)

Figure 8-10: For 2016, state-wise residential tariff vs. LCOE1 of solar power (3kWp system without battery)

© BRIDGE TO INDIA, 2013

11

12

13

16

19

23

23

24

25

27

28

28

29

30

31

1. OVERVIEW Allocations under the NSM are unlikely to be as oversubscribed as they have

1. OVERVIEW

Allocations under the NSM are unlikely to be as oversubscribed as they have been in phase one.

India is slowly evolving into a manufacturing destination for solar inverters.

into a manufacturing destination for solar inverters. In the previous quarter (January to March 2013), allocations

In the previous quarter (January to March 2013), allocations in states such as Tamil Nadu and Andhra Pradesh have captured the industry’s attention. Towards the end of the quarter, Uttar Pradesh and Punjab announced their first project allocations and Karnataka has announced its second. A capacity allocation of 750 MW under phase two of the NSM is also expected soon. These new projects are expected to account for around 2 GW of demand in the second half of 2013 and a blockbuster year for capacity additions in 2014.

There is a clear trend emerging from the recent biddings and a flurry of announcements: the competition for projects (and the aggressive bidding) is reducing. While some developers bid aggressively in Andhra Pradesh, we have seen L1 bids for certain locations in the state go as high as ` 8.89 (€ 0.14/$ 0.18)/kWh. In Tamil Nadu too, while some bids were aggressive, the average bid was in the range of ` 8/kWh (€ 0.12/$ 0.16)/kWh. We can expect a similar trend to continue in Uttar Pradesh and Punjab. Allocations under the NSM are unlikely to be as oversubscribed as they have been in the past. This is primarily due to two reasons: excess capacity available in the market for allocation through various state policies and due to the

introduction of Viability Gap Funding (VGF) which is expected to re-open issues related to the bankability of the new off-takers.

In the last quarter we have seen an accreditation of 57.25 MW of planned capacity based on the REC mechanism. This is the highest accreditation for any quarter until now. Going forward, we expect this upward trend of accreditations to fade out as the new projects are expected to continue facing hurdles with obtaining debt financing.

Even without any government support in the form of domestic content requirements or subsidies, India is slowly evolving into a manufacturing destination for solar inverters. Companies like ABB, AEG and Schneider are already manufacturing in India and Bonfiglioli and SMA are known to have plans to do the same. Such companies are focussing on the central inverter market. Refusol, has recently announced the operationalization of its manufacturing unit that will focus on producing string inverters. Most of these new manufacturing facilities in India have been planned to serve some other international markets as well.

© BRIDGE TO INDIA, 2013

© BRIDGE TO INDIA, 2013 2. MARKET DASHBOARD 2.1 MARKET COMPASS A S N C E

2. MARKET DASHBOARD

© BRIDGE TO INDIA, 2013 2. MARKET DASHBOARD 2.1 MARKET COMPASS A S N C E

2.1 MARKET COMPASS

A S N C E N T N G I W O R G Key
A
S
N
C
E
N
T
N
G
I
W
O
R
G
Key drivers
for the direction of the market
E
R
E
U
M
T
E
A
R
M
G
I
N
G
© BRIDGE TO INDIA, 2013

Regulatory Environment Execution Challenges Financing Viability

Source: BRIDGE TO INDIA

2.2 INDIAN SOLAR MARKET PRICES

PV

Lowest FiT

` 6.45/kWh 6.45/kWh

Interst Rate

13%Interst Rate

Average Capex

` 68 /W 68 /W

c-Si modules (China, Taiwan)

$ 0.63/W*c-Si modules (China, Taiwan)

Thin Film modules (US and Malaysia)

$ 0.57/W*Thin Film modules (US and Malaysia)

c-Si modules (Japan, Europe)

$ 0.70/W*c-Si modules (Japan, Europe)

Thin Film modules (Japan)

$ 0.65/W*Thin Film modules (Japan)

*$ rate has been used to avoid effect of currency fluctuations All prices are for a reference 10MW project All prices are without duties and taxes

Source: BRIDGE TO INDIA

PV

7.8MW

PV

5 MW

PV

2 MW

PV

2 MW

PV

16 MW

PV

4 MW

PV

7.25 MW

PV 7.8MW PV 5 MW PV 2 MW PV 2 MW PV 16 MW PV 4

2.3

INSTALLED CAPACITY IN INDIA

ALL INDIA

36%

RAJASTHAN

2%

2%

8%

9%

9%

PV

441 MW

CSP

2.5 MW

25%

23%

PUNJAB

PV

8 MW

75%

HARYANA

CSP

3 MW

UTTARAKHAND

DELHI

58%

22%

PV

12 MW

UTTAR

PRADESH

PV

1,416.8 MW

6%

3%

9%

15%

42%

1% 2%

2% 3% 45% CSP 5.5 MW 55%
2%
3%
45%
CSP
5.5 MW
55%

46%

1%

WEST

BENGAL

PV

824.09 MW

61%

GUJARAT

12%

38%

21%

21%

PV

24.2 MW

46%

58%

PV

12 MW

CHHATTISGARH

72%

JHARKHAND

42%

ODISHA

28%

MAHARASHTRA

64%

PV

14 MW

36%

47%

44%

PV

22.5 MW

MADHYA PRADESH

33%

KARNATAKA

ANDHRA

PRADESH

PV

15 MW

9%

Note: Circle sizes are only indicative and do not represent the actual difference in installed capacity.

TAMIL

NADU

33%

33%

 

© BRIDGE TO INDIA, 2013

KEY

Source: BRIDGE TO INDIA

Gujarat Solar Policy Phase 1

Gujarat Solar Policy Phase 1 Migration Direct RPO Project

Migration

Gujarat Solar Policy Phase 1 Migration Direct RPO Project

Direct RPO Project

Gujarat Solar Policy Phase 2

Gujarat Solar Policy Phase 2 NSM Batch 1, Phase 1

NSM Batch 1, Phase 1

Generation Based Incentive

Demo Project

RPSSGP

RPO Project Gujarat Solar Policy Phase 2 NSM Batch 1, Phase 1 Generation Based Incentive Demo
RPO Project Gujarat Solar Policy Phase 2 NSM Batch 1, Phase 1 Generation Based Incentive Demo

NSM Batch 2, Phase 1

REC Mechanism

3. KEY FINDINGS 3.1 POLICY 1. Due to the unavailability of unbundled power, the Ministry

3. KEY FINDINGS

3. KEY FINDINGS 3.1 POLICY 1. Due to the unavailability of unbundled power, the Ministry of
3.1 POLICY 1. Due to the unavailability of unbundled power, the Ministry of New and
3.1
POLICY
1. Due to the unavailability of
unbundled power, the Ministry
of New and Renewable Energy
(MNRE) has decided to go ahead
only with the allocations for 750
MW based on Viability Gap Funding
(VGF).
2. Even though funds for the NSM
allocation process have been
approved, like all other ministries,
the MNRE also faces other
budgetary cuts.
3. It is likely that most off-grid
projects that apply for capital
subsidy in the new financial year
will be put on hold until the end of
the financial year (March 2014).
4. In the wake of US taking India
to the WTO against domestic
content requirements (DCR), India
continues to support the DCR and
argues that it is legal.
5. For the 1,000 MW tender, Tamil
Nadu received 92 applications for
104 projects, totalling a capacity of
only 499 MW.
6. The state has decided to provide a
‘workable tariff’ of ` 6.48/kWh (at
an annual escalation of 5% for the
first 10 years of the 20 year PPA).
7. In Tamil Nadu, a capacity of 226
MW has been allocated for and
the projects are expected to be
commissioned by January 2013.
8. Andhra Pradesh’s solar project
tender was oversubscribed. Bids
were received from 184 applicants
who bid for a total capacity of 1,340
MW.
9. The lowest bid (L1) in Andhra
Pradesh was ` 6.58 (€ 0.10/$ 0.13) /
kWh. At some substations the L1 is
as high as
` 8.89 (€ 0.14/$ 0.18)/kWh.
10. Kerala released a draft solar policy
and has set itself a target of an
installed capacity of 500 MW by
2017 and 1,500 MW by 2030.
11. Unlike the off-grid capital subsidy
scheme under the NSM, the state
will incentivize distributed solar
through Feed-in-Tariffs (FiTs).

12. Like Tamil Nadu, Kerala has also tried to pass on the financial burden of Renewable Purchase Obligations (RPOs) from the state- owned distribution companies to large power consumers. Solar Procurement Obligations (SPOs) will be mandated for commercial and industrial consumers.

13. Punjab has released a request for proposal (RfP) document for allocation of 300 MW of solar PV in the first phase of its state solar policy.

14. In Punjab, the bid has been divided into two categories, 50 MW for new developers and 250 MW for experienced developers.

15. The benchmark tariffs for the Punjab bidding process have been fixed at ` 8.75/kWh for companies not availing accelerated depreciation and ` 7.87/kWh for companies availing accelerated depreciation.

16. Uttar Pradesh has updated and finalized its solar policy and it is now called ‘Uttar Pradesh Solar Policy

2013’.

17. Uttar Pradesh has announced bidding for 200 MW of capacity on March 15 th 2013.

3.2 PROJECTS (PV)

1. In the last quarter (January to March 2013) 226.5 MW of solar PV capacity has been added.

2. Under batch two of phase one of the NSM, projects by developers such as Welspun, Mahindra, Kiran Energy, Azure, Gas Authority of India Limited (GAIL), Saibaba Green Power, SunEdison, Green Infra and Fonroche Group have been commissioned.

3. For batch two projects, a significant delay has been reported in the project being developed by Essel Infraprojects.

4. Essel has also won projects in Andhra Pradesh, Rajasthan and Karnataka. It has, in fact, quoted the lowest tariffs in Rajasthan and Andhra Pradesh.

5. The financial bids for the allocation of 100 MW of solar PV projects in
5. The financial bids for the allocation of 100 MW of solar PV projects in

5. The financial bids for the allocation of 100 MW of solar PV projects in Rajasthan were opened on February 11 th 2013.

6. The bidding process in Rajasthan does not consider separate tariffs for projects that avail accelerated depreciation.

7. Unlike other states, the PPA signing entity for Rajasthan is the Rajasthan Renewable Energy Corporation Limited and not the power distribution companies.

8. In Madhya Pradesh, Welspun’s 130 MW project in Neemuch district of Madhya Pradesh has arranged for financing and has selected its equipment suppliers.

9. Projects allocated in Karnataka last year are nearing financial closure and are in discussions for vendor selection.

10. In the last quarter, we have seen an accreditation of 57.25 MW of planned capacity based on the REC mechanism. The total proposed capacity of accredited projects now stands 78.16 MW.

11. Giriraj Enterprises, a group company of the Malpani Group from Maharashtra has emerged as the largest player betting on the REC market in India. The company is accredited to set up 40.65 MW of REC based solar projects.

12. The company has gone ahead and constructed 36 MW in Rajasthan.

3.3

FINANCING

1. In the last quarter (January – March 2013), financial closures have being achieved for multiple projects in Madhya Pradesh and Karnataka.

2. It is likely that developers in both Tamil Nadu and Andhra Pradesh will opt for construction/bridge financing to complete their projects on time.

3. Many project developers are now looking at the third-party PPA market. Some PPAs have already emerged from this commercial parity driven market segment but

it is not clear how the lenders will react to such projects.

3.4

ANALYSIS

1. There are up to 18 prominent inverter suppliers that are present in the Indian market. However, just six companies, i.e., SMA, Bonfiglioli, Schneider, ABB, AEG and Power-One make up for 87% of the current inverter market share in India.

2. From these six companies, power solution companies such as AEG, ABB and Schneider are already manufacturing solar inverters in India.

3. Refusol has also begun the manufacturing of its string inverters in India.

4. As of January 2013, central inverters account for 95% of the installed capacity in the country.

5. Inverter suppliers such as ABB and Power-One plan to launch new central inverter models with the capacity of 1 MW and 1.4 MW respectively.

6. Many of the larger inverter suppliers by market share categorically state that they are not the cheapest and it is not their intention to be the cheapest suppliers in the market.

7. Central inverters being supplied in India can broadly be categorized into three types: monolithic-indoor inverters, modular-indoor inverters and outdoor inverters (IP65 without the requirement of additional casing).

8. Many inverter companies that manufacture indoor inverters can also provide the enclosure for outdoor placement.

9. Currently, central inverter prices in India range between ` 4.2 (€ 0.06/$ 0.08)/kWp (output) and ` 7.8 (€ 0.11/$ 0.14)/kWp (output), depending on the type and brand of the inverter.

INDUSTRY

3.5 KEY QUESTION: IS DISTRIBUTED SOLAR PV READY TO TAKE OFF IN INDIA? 1. Demand
3.5 KEY QUESTION: IS DISTRIBUTED SOLAR PV READY TO TAKE OFF IN INDIA? 1. Demand

3.5 KEY QUESTION:

IS DISTRIBUTED SOLAR PV READY TO TAKE OFF IN INDIA?

1. Demand creation for distributed power generation through market fundamentals is more predictable and truly scalable.

2. Plant costs for solar projects have fallen by 58% in the last three years.

3. India had a peak power deficit of

9.3% during the five years ending in

2012.

4. A key cause of India's power deficit is a shortage of coal, which fuels 57% of the country's power plants.

5. The distribution utilities’ cumulative losses rose to ` 1.9 tr (€ 29 bn/$ 38 bn) in FY-2011 from ` 1.22 tr (€ 18 bn/$ 24 bn) in F.Y-

2010.

6. States like Tamil Nadu, Odisha, Jharkhand, Kerala and Delhi have already raised tariffs by as much as 15-30% in the past year.

7. The power situation in most parts of India is unreliable and consumers use multiple backup solutions to have power during frequent grid outages.

8. Captive diesel power generation, kerosene-based power generation and battery-based backup are some of the common options.

9. In India, the power tariffs vary by state and also the type of

consumer. Hence, there is no single frame of reference for grid parity.

10. Commercial consumers in India will be the first to adopt solar power as parity for them will be reached the earliest.

11. Solar power is already cheaper than grid power for commercial

consumers in Maharashtra, Delhi and Kerala even without any subsidy.

12. Commercial consumers in other states like Andhra Pradesh, Odisha, Tamil Nadu, Gujarat, Karnataka, West Bengal, Uttar Pradesh, Rajasthan and Madhya Pradesh can also reduce their energy costs if they go through the subsidy route.

13. Industrial tariffs are typically 10- 15% lower than commercial tariffs. Due to this reason, the industrial segment might scale up later than the commercial segment.

14. States like Delhi, Maharashtra, Odisha, Gujarat and West Bengal are fairly close to being viable destinations for the use of solar power by industrial consumers without any subsidies.

15. In 2016, industrial consumers in Maharashtra, Delhi, Kerala, Andhra Pradesh, Tamil Nadu, Gujarat and Karnataka will achieve unsubsidized grid parity.

16. The residential solar market in India is the largest segment and its opening promises a change of the entire landscape in India. However, as the tariffs for residential consumers are up to 20% lower than the industrial tariffs, an unsubsidized residential solar market will become truly scalable only at a later stage.

17. Unsubsidized solar power is already feasible in some parts of the country. As prices for grid power are expected to increase and cost for solar power is expected to fall, more and more states and customer segments will find investing in solar a lucrative option.

4. POLICIES The MoP has been unwilling to provide any more unallocated power for the

4. POLICIES

The MoP has been unwilling to provide any more unallocated power for the NSM. Due to this, the MNRE has now decided to go ahead only with the allocations for 750 MW based on Viability Gap Funding (VGF).

The US filed a complaint with the World Trade Organization (WTO) over the Domestic Content Requirement (DCR) under India’s National Solar Mission (NSM), which it said discriminates against foreign solar products, including the ones made in the US.

foreign solar products, including the ones made in the US. 4.1 SOLAR MISSION The draft guidelines

4.1

SOLAR MISSION

The draft guidelines for phase two of the National Solar Mission (NSM) were published by the Ministry of New and Renewable Energy (MNRE) on December 3 rd 2012 1 . Comments and recommendations on the draft were accepted until December 15 th 2012. According to the draft policy, MNRE had planned to allocate 800 MW through a bundling of power mechanism (as in phase one of the NSM) and 750 MW through a Viability Gap Funding (VGF) 2 mechanism. For a large part of the last quarter (January to March 2013), the MNRE has been trying to arrange for unallocated power from the Ministry of Power (MoP) to use for bundling for projects based on reverse bidding 3 . However, there is only a limited amount of unbundled power available and all states demand access to this power. The MoP has been unwilling to provide any more unallocated power for the NSM. Due to this, the MNRE has now decided to go ahead only with the allocations for 750 MW based on Viability Gap Funding (VGF).

NATIONAL

already many pending applications with the MNRE for subsidy approval. Considering that these pending projects will be given preference, it is likely that most projects that apply for subsidy in the new financial year will be put on hold until the end of the financial year (March 2014).

In order to promote domestic manufacturing of solar cells and modules, India has mandated the procurement of c-Si cells and modules from within the country for projects under the NSM. For the second phase, the government is considering an extension of the Domestic Content Requirement (DCR) to thin-film modules as well. This will pose a risk for sales by US based thin-film manufacturers. To protest against such a measure, on February 6 th 2013, the US filed a complaint with the World Trade Organization (WTO) over DCR under India’s National Solar Mission (NSM), which it said discriminates against foreign solar products, including the ones made in the US.

The MNRE has always justified the DCR by arguing that since it is financially incentivizing the use of solar power through subsidies and feed-in-tariffs (FiTs), it has the right to impose conditions. Also, it is the stated goal of the Indian government to create a domestic solar manufacturing industry. However, cases challenging local content rules have received a boost since the WTO ruled against Canada’s domestic requirements for a green energy plan in Ontario province.

The WTO allows domestic sourcing conditions only for government purposes. These are exempt from agreements on most favored nation, market access and national treatment (articles II, XVI and XVII).The Indian argument states that a government backed entity is buying the solar power and hence it should be permissible.The

Earlier, allocations were supposed to begin in December 2012 and be completed by March 2013. This has been delayed because funds from the National Clean Energy Fund (NCEF) have not been released until recently. We expect that the allocation process to begin in May-June 2013. The unavailability of funds is due to the fact that the Indian government is trying to cut back the ballooning fiscal deficit in the country 4 . Even though the funds for the allocation process have been approved, like all other ministries, the MNRE also faces other budgetary cuts. According to unconfirmed reports, the MNRE has been provided only a small fraction of the requested budget for its off-grid capital subsidy scheme for the next financial year. There are

----------------------

Tamil Nadu received 92 applications for 104 projects, totalling a capacity of only 499 MW.

Tamil Nadu received 92 applications for 104 projects, totalling a capacity of only 499 MW. This was the first time a public tender for FiT based allocation was under-subscribed in India.

Tamil Nadu plans to release another tender for 774 MW to achieve the planned allocation capacity of 1,000MW. In all probability, this tender will also be undersubscribed as the basic issue of bankability is not likely to be resolved.

the basic issue of bankability is not likely to be resolved. US argues that ultimately the

US argues that ultimately the power is sold to private consumers and is therefore not limited to government use and hence a domestic content requirement is in breach of WTO rules.

The Ministry of Commerce and Industry will take the lead in defending the Indian stand at the WTO. It is expected that the MNRE and the Ministry of Commerce will negotiate an agreement with the US during the 60 day consultation period and will resolve the issue outside of formal WTO proceedings.

4.2 TAMIL NADU SOLAR POLICY

The south Indian state of Tamil Nadu announced its solar energy policy in October 2012 and released a tender for 1,000 MW on December 5 th 2012. The results for ‘Expression of Interest’ were announced on January 4 th 2013 and the state received 92 applications for 104 projects, totalling a capacity of only 499 MW. This was the first time a public tender for FiT based allocation was under-subscribed in India. The key reasons are: poor bankability of Tamil Nadu Generation and Distribution Corporation (TANGEDCO) as an off- taker 5 , absence of a comprehensive payment security fund to back the PPA, absence of the PPA’s approval from the Tamil Nadu Electricity Regulatory Commission (TNERC), complicated L1 based tariff determination process (where everyone was expected to meet the lowest bid to get the project) and the hasty allocation process pursued by the state that did not provide adequate time for the developers to plan ahead (refer to BRIDGE TO INDIA’s blogs on Tamil Nadu to understand each of these issues in detail) 6 .

The lowest bid was ` 5.97(€ 0.09/ $0.12)/kWh (at an annual escalation of 5% for the first 10 years of the 20 year PPA). This rendered the L1 process ineffective as, in an under-subscribed

bid, developers refused to meet this tariff, deemed unrealistic by most market participants.

After consideration, the state decided to provide a ‘workable tariff’ of ` 6.48 (€ 0.10/ $ 0.13)/kWh (at an annual escalation of 5% for the first 10 years of the 20 year PPA) at which developers would be comfortable singing a PPA. No explanation was given as to how the state arrived at this tariff. At this tariff, 29 developers have expressed interest for a total capacity of 226 MW and they will be issued Letters of Intent (LoI) for signing PPAs. Welspun Energy (30 MW), Chennai-based jewellers GRT (15 MW) and SunEdison (10 MW) are among those who have agreed to the new tariff. Most other developers who have agreed to sign PPAs are first time developers, planning to develop 1-5 MW capacities.These projects are expected to be commissioned by January 2014.

The state plans to release another tender for 774 MW to achieve the planned allocation capacity of 1,000 MW. In all probability, this tender will also be undersubscribed as the basic issue of bankability is not likely to be resolved.

The state is facing a power crisis. Power cuts can last up to 16 hours a day for households. Industrial consumers face power cuts of up seven hours during the day and another couple of hours at night. Further, industries are not allowed to draw power between 6 pm and 10 pm, the peak period, to ensure availability for domestic consumers. A capacity of 4,005 MW of conventional power was scheduled to be commissioned in the F.Y. 2012-13 but only 664 MW has been commissioned. Expensive solar power can offer quick access to power in the state. At the same time the fundamentals for solar power in Tamil Nadu remain particularly strong.

----------------------

The power deficit in the southern grid in India has gone up from 3% in

The power deficit in the southern grid in India has gone up from 3% in 2011 to 16% in January

2013.

Kerala has set itself a target of an installed capacity of 500 MW by 2017 and 1,500 MW by

2030.

installed capacity of 500 MW by 2017 and 1,500 MW by 2030. 4.3 ANDHRA PRADESH SOLAR
4.3 ANDHRA PRADESH SOLAR POLICY: REQUEST FOR SELECTION FOR 1,000 MW The power deficit in
4.3
ANDHRA
PRADESH SOLAR
POLICY: REQUEST
FOR SELECTION FOR
1,000 MW
The power deficit in the southern grid
in India has gone up from 3% in 2011 to
16% in January 2013. Like Tamil Nadu,
Andhra Pradesh also needs access
to more power as soon as possible.
The state released its solar power
policy on September 26 th 2012 and had
released a request for selection for
1,000 MW thereafter. Like Tamil Nadu,
Andhra Pradesh has also planned
an L1 process for the final tariff
determination but in Andhra Pradesh’s
case, the lowest bid is to be considered
at the substation level as compared to
the state wise L1 in Tamil Nadu (this
takes into account different land costs
and irradiation levels across the state).
Andhra Pradesh learnt from the
mistakes committed by Tamil Nadu
and increased the time durations
for financial closure to 210 from the
earlier planned 60 days and extended
the plant commissioning deadline to
12 months from signing of the PPA
instead of the original six months
deadline.
To be able to get this power as soon
as possible, Andhra Pradesh has
decided to incentivize developers to
commission the projects before time.
Projects completed in 9-10 months
from PPA signing date will receive an
incentive of ` 300,000 (€4,600/$ 6,000)
per MW. Similarly, if the projects are
commissioned in 10-11 months, they
will receive an incentive of `200,000 (€
3,080/$ 4,000) per MW and developers
that are able to commission their
projects in 11-12 months will receive
an incentive of ` 100,000 (€ 1,540/
$ 2,000) per MW.
Andhra Pradesh power distribution
companies are in some financial
duress, owing to the state’s deficit
----------------------
7 Kerala Solar Policy Draft
8 Kerala’s 10,000 solar rooftop programme

of power and high procurement costs in the short term power supply market. However, Andhra Pradesh power distribution companies have traditionally had a strong balance sheet as the state has a history of raising consumer tariffs regularly. This inspired more confidence from the project development community and Andhra Pradesh’s solar project tender was oversubscribed,with bids were received from 184 applicants who bid for a total capacity of 1,340 MW. The lowest bid (L1) in the whole of Andhra Pradesh was at ` 6.58 (€ 0.10/$ 0.13)/ kWh. At some substations the L1 is as high as ` 8.89 (€ 0.14/$ 0.18)/kWh.

The stark difference between allocations in Tamil Nadu and Andhra Pradesh goes to show the kind of impact bankability and process management can have on developer interest.

4.4 KERALA SOLAR

POLICY (DRAFT)

The south Indian state of Kerala has published a draft solar policy 7 on February 27 th 2013. This makes it the ninth Indian state to release a solar specific policy document. Under the draft policy, Kerala has set itself a target of an installed capacity of 500 MW by 2017 and 1,500 MW by 2030. Earlier, the state had initiated a 10,000 rooftop solar power programme 8 .

Until now, all state and central solar policies have emphasized utility scale projects. Kerala’s new policy is unique in its focus largely on distributed power generation. Unlike the off-grid capital subsidy scheme under the NSM, the state will incentivize distributed solar through FiTs. Net-metering and a focus on grid interaction protocols will helptackle the grid stability issues (especially community grids that would be integrated with the state’s ‘no load-shedding’-campaign). This policy is a first step in the right direction and is expected to lead

Given the poor financial health of most Indian state Discoms, passing on RPO requirements as

Given the poor financial health of most Indian state Discoms, passing on RPO requirements as SPOs directly to consumers seems to be the most viable option for implementing the RPO mechanism.

The north Indian state of Punjab has released a request for proposal (RfP) document for allocation of 300 MW of solar PV in the first phase of its state solar policy.

MW of solar PV in the first phase of its state solar policy. a significant development

a significant development in India towards the implementation of net- metering and community grids. If properly implemented, this holds the potential to unlock the immense distributedgeneration potential of India. (See also the net-metering initiative under the Tamil Nadu policy 9 .)

Like Tamil Nadu, Kerala has also tried to pass on the financial burden of Renewable Purchase Obligations (RPOs) from the state-owned distribution companies to large power consumers. Solar Procurement Obligations (SPOs) will be mandated for commercial consumers with a connected load of more than 20 kVA and industrial consumers with more than 50 kVA on the low tension (LT) transmission network (up to 415 V). Also, SPOs will be applicable to all consumers connected to the high tension (HT) transmission network (up to 11 kV) and Extra High Tension (EHT) transmission network (up to 66 kV). All HT and EHT consumers have to procure 3% of their power from solar until March 2014 and 6% from April 2014 onwards. In future, the SPO requirement will also be applicable for high consuming domestic constomers, i.e., those with more than 500 kWh per month. Open access, wheeling and transmission and distribution charges for captive consumers have been waived off in the state. An exemption on electricity duty and conditional banking of power is also provided.

implementable and in most cases, more bankable, if the obligations are directly enforced on the end user. If more states implement such an SPO mechanism, it can revitalize the Renewable Energy Certificate (REC) market that is currently written off by many stakeholders due the lack of RPO implementation.

4.5 PUNJAB SOLAR

POLICY

The north Indian state of Punjab has released a request for proposal (RfP) document 11 for allocation of 300 MW of solar PV in the first phase of its state solar policy. Punjab had earlier set a target of 1 GW of new solar capacity by 2022 in its ‘New and Renewable Sources of Energy Policy – 2012 12 , which was released in December 2012.

Project developers are given various incentives such as exemption from Value Added Tax (VAT) on equipment, exemption from entry tax for equipment supplies, exemption from payment of fee and stamp duty for registration / lease deed charges for the project’s land requirement and exemption from change of land use (CLU) charges. There is no DCR under the policy. Punjab is the first state to allow the use of agricultural land for setting up the projects. This is especially relevant as almost the entire state is made of up cultivable land as opposed to Rajasthan and Gujarat where large tracts of desert wasteland can be used for setting up solar projects.

The project allocation has been divided into two categories:

1. A total of 50 MW is to be allotted for newly incorporated or existing companies that have no experience in setting up and operating solar projects. The minimum capacity of the project has been set at 1 MW and the maximum capacity at 4 MW.

Given the poor financial health of most Indian state Discoms 10 , passing on RPO requirements as SPOs directly to consumers seems to be the most viable option for implementing the RPO mechanism and encouraging solar without burdening public funds. In India, roughly 70% of all RPOs have to be met by Discoms that are in bad financial health. Ultimately, the Discoms will have to pass on the RPO burden on the consumers anyway. The mechanism can be made more

----------------------

© BRIDGE TO INDIA, 2013

© BRIDGE TO INDIA, 2013 The Punjab policy is expected to attract higher tariffs than other

The Punjab policy is expected to attract higher tariffs than other states like Rajasthan, Tamil Nadu and Odisha. This is primarily due to the high cost of land, which can be up to at least 5-10 times more than in Rajasthan.

The Uttar Pradesh policy aims to achieve an installed capacity of 500 MW till March 31 st 2017. In the first phase of the policy based allocations, the state has announced a bidding process for a 200 MW capacity on March 15th 2013.

a bidding process for a 200 MW capacity on March 15th 2013. The allotment of project

The allotment of project capacities in this category will be in the multiples of 1 MW.

2. A total of 250 MW is to be allotted to experienced companies that have installed and commissioned at least one project with a capacity of 5 MW or higher anywhere in the world which is in operation for at least one year before the last date of submission of e-bid anywhere in the world. The minimum capacity of the project can be 5 MW and the maximum capacity allowed for a single developer is 30 MW. The allotment of project capacities in this category will be in the multiples of 5 MW.

The benchmark tariffs for the bidding process have been fixed at ` 8.75 (€ 0.13/$ 0.18)/kWh for companies not availing accelerated depreciation and ` 7.87 (€ 0.12/$ 0.16)/kWh for companies availing accelerated depreciation. The RfP allows a period of six months for achieving a financial closure and 13 months for commissioning from the date of signing the PPA. The developers have to submit bank guarantees worth ` 4m (€ 615,000/$ 800,000)/MW. Developers face a fine of 30% of this guarantee in case the project is delayed up to one month and the entire guaranty will be en-cashed for a delay of two months.

The Punjab policy is expected to attract higher tariffs than other states like

Rajasthan, Tamil Nadu and Odisha. This is primarily due to the high cost of land, which can be up to at least 5-10 times more than in Rajasthan, and a lower irradiation, which can be up to 20% lower than in Rajasthan.

The proposed timeline for the bidding process is highlighted in Figure 4-1.

4.6

UTTAR

PRADESH SOLAR POLICY

Uttar Pradesh has updated and finalized its solar policy and it is now called ‘Uttar Pradesh Solar Policy 2013 13 . The policy aims to achieve an installed capacity of 500 MW till March 31 st 2017. In the first phase of the policy based allocations, the state has announced a bidding process for a 200 MW capacity on March 15 th 2013.

A

unique aspect about this allocation

is

that the PPA will only be signed

for a period of 10 years. This period covers a typical debt repayment period and lenders should not have issues with regards to the PPA timeframe. Moreover, assuming that a project signs a PPA at a tariff of around ` 7 (€ 0.11)/$ 0.14)/kWh, it will be able to sell power at a tariff greater than the current tariff in 2023. As per BRIDGE TO INDIA, a smaller time period for the PPA can actually be beneficial for the developer.

Figure 4-1: Schedule for participation in the Punjab Solar Policy

Event

Schedule

Date of uploading / publishing of e- NIT (RfS)

11th March, 2013 at 10.00 AM

Last Date for submission of pre-bid query / clarifications to be submitted online.

26th March, 2013

Pre-bid meeting at PEDA office

3rd April, 2013 at 11.30 AM

Last date & time for submission of processing fee (non-refundable), earnest money deposit (EMD), formats and technical bid and financial bid though e-bid

25th April, 2013 at 12.00 noon

Date and time of opening of techno commercial e-bid

25th April, 2013 at 12.30 PM

Date of opening of price bid

To be conveyed separately

Source: BRIDGE TO INDIA

----------------------

© BRIDGE TO INDIA, 2013

© BRIDGE TO INDIA, 2013 Like in Tamil Nadu ( refer ), power distribution companies (discoms)
© BRIDGE TO INDIA, 2013 Like in Tamil Nadu ( refer ), power distribution companies (discoms)

Like in Tamil Nadu (refer), power distribution companies (discoms) in Uttar Pradesh are also making heavy losses. According to recent estimates, the losses have reached INR 310 bn. Recently, the Indian Credit Ratings Agency (ICRA) and CARE Ratings have compared 39 utilities from 20 states in a grading exercise conducted by the Ministry of Power and the Power Finance Corporation (refer). Four

discoms from Uttar Pradesh were at the bottom of the ranking and along with eight other utilities were awarded the “C” grade. As the allocation capacity is limited to just 200 MW, we expect it to be completely subscribed but the competition in terms of tariff to be fairly low.

The proposed timeline for the bidding process is highlighted below:

Figure 4-2: Schedule for participation in the Uttar Pradesh Solar Policy

Event

Schedule

Date

Date of issue of RfP

Zero Date

15/03/2013

Submission of written clarification / amendments if any, on the RfP / RfP documents by the bidders.

Zero date + 10 days

25/03/2013

Pre-bid meeting

Zero date + 20 days

04/04/2013

Revision of RfP and RfP documents (if required) and issuance of revised RfP and RfP documents

Zero date + 26 days

10/04/2013

Bid submission and opening of non-financial bid

Zero date + 41 days

25/04/2013

Financial bid opening

Zero date + 56 days

10/05/2013

Approval of bids and issue of LoI to Successful bidder(s)

Zero date + 87 days

10/06/2013

Signing of PPA

Zero date + 105 days

Exact date will be communicated to successful bidders.

Completion of the following tasks:

Zero date + 315days

a. Financial closure of the project.

b. Land allotment/ purchase.

c. Grant for grid connectivity approval.

Commissioning of solar PV power Plant

Signing of PPA + 13 months

Source: BRIDGE TO INDIA

Source: BRIDGE TO INDIA

© BRIDGE TO INDIA, 2013

Source: BRIDGE TO INDIA © BRIDGE TO INDIA, 2013 5 . P R O J E

5. PROJECTS

5.1

CONNECTED)

Figure 5-1: New Grid connected solar projects installed in the previous quarter – January1 st to March 20 th 2012

NEW INSTALLATIONS (GRID

RAJASTHAN Size - 2.5 MW Technology - PV Off-take - REC Mechanism Developer - Kanoria
RAJASTHAN
Size - 2.5 MW
Technology - PV
Off-take - REC Mechanism
Developer - Kanoria Chemicals
Ltd.
Size - 10 MW
Technology - PV
Off-take - NSM Phase 1, Batch 2
Developer - Mahindra
Suryaprakash Pvt. Ltd.
Size - 20 MW
Technology - PV
Off-take - NSM Phase 1, Batch 2
Developer - Azure Power India
Ltd.
Size - 20 MW
Technology - PV
Off-take - NSM Phase 1, Batch 2
Developer - SEI Solar Power
Size - 15 MW
Technology - PV
Off-take - NSM Phase 1, Batch 2
Developer - Azure Power India
Ltd.
Size - 15 MW
Technology - PV
Off-take - NSM Phase 1, Batch 2
Developer - Fonroche Rajhans
Energy Pvt. Ltd.
Size - 20 MW
Technology - PV
Off-take - NSM Phase 1, Batch 2
Developer - Welspun Solar AP
Size - 5 MW
Technology - PV
Off-take - NSM Phase 1, Batch 2
Developer - GAIL
Size - 15 MW
Technology - PV
Off-take - NSM Phase 1, Batch 2
Developer - Welspun Solar AP
Size - 8 MW
Technology - PV
Off-take - NSM Phase 1, Batch 2
Developer - Green Infra Solar
Projects Ltd
Size - 15 MW
Technology - PV
Off-take - NSM Phase 1, Batch 2
Developer - Welspun Solar AP
Size - 20 MW
Technology - PV
Off-take - NSM Phase 1, Batch 2
Developer - Mahindra
Suryaprakash Pvt. Ltd.
Size - 36 MW
Technology - PV
Off-take - REC Mechanism
Developer - Malpani Group
- PV Off-take - REC Mechanism Developer - Malpani Group MAHARASHTRA Size - 5 MW Technology

MAHARASHTRA

Size - 5 MW Technology - PV Off-take - NSM Phase 1, Batch 2 Developer - Shree Saibaba Green Power

GUJARAT

1, Batch 2 Developer - Shree Saibaba Green Power GUJARAT Size - 5 MW Technology -

Size - 5 MW Technology - PV Off-take - Gujarat Phase 2 Developer - Aatash Power Pvt. Ltd.

- Gujarat Phase 2 Developer - Aatash Power Pvt. Ltd. Size - 2 MW Technology -

Size - 2 MW Technology - PV Off-take - Gujarat Phase 2 Developer - Claris LifeScience Ltd

- Gujarat Phase 2 Developer - Claris LifeScience Ltd Size - 15 MW Technology - PV

Size - 15 MW Technology - PV Off-take - Gujarat Phase 1 Developer - Driesatz My Solar

Off-take - Gujarat Phase 1 Developer - Driesatz My Solar Size - 15 MW Technology -

Size - 15 MW Technology - PV Off-take - Gujarat Phase 1 Developer - Mi My Solar

- PV Off-take - Gujarat Phase 1 Developer - Mi My Solar Size - 25 MW

Size - 25 MW Technology - PV Off-take - Gujarat Phase 2 Developer - Responsive Sutip Limited

- Gujarat Phase 2 Developer - Responsive Sutip Limited Size - 5 MW Technology - PV

Size - 5 MW Technology - PV Off-take - Gujarat Phase 2 Developer - Yantra eSolarIndia Private Limited

Phase 2 Developer - Yantra eSolarIndia Private Limited Size - 5 MW Technology - PV Off-take

Size - 5 MW Technology - PV Off-take - Gujarat Phase 2 Developer - Euro Solar Power Private Limited

Phase 2 Developer - Euro Solar Power Private Limited Size - 2 5 MW Technology -

Size - 25 MW Technology - PV Off-take - Gujarat Phase 2 Developer - Chattel Construc- tions Private Limited

Note: Projects in Gujarat were commissioned in the last quarter, but were not covered in the previous edition of the INDIA SOLAR COMPASS.

Project sizes in Gujarat have been updated to two decimal places. As the actual installation figures are not the same as allocated capacity in many cases, there has been a downward adjustment in our overall numbers. Ourprevious figures had overestimated the capacity by 3.19MW, we have adjusted this to correct the total capacity depicted.

In the last quarter (January to March 2013) 226.5 MW of solar PV capacity has

In the last quarter (January to March 2013) 226.5 MW of solar PV capacity has been added. The largest capacity addition of 221.5 MW was achieved in Rajasthan.

Tariffs in Rajasthan could only make financial sense if the developer is making full use of accelerated depreciation benefits.

is making full use of accelerated depreciation benefits. In the last quarter (January to March 2013)

In the last quarter (January to March 2013) 226.5 MW of solar PV capacity has been added. The largest capacity addition of 221.5 MW was achieved in Rajasthan, of which 183 MW is under batch two of phase one of the NSM and 38.5 MW is under the REC mechanism. The remaining capacity of 5 MW has been added by a project under batch two of phase one of the NSM in Maharashtra.

5.2 STATUS OF ON-

GOING PROJECTS (PV)

National Solar Mission

As of April 8 th 2013, a total of 330 MW has been commissioned under the batch two of phase one of the NSM. Fonroche Group with Mahindra as its Engineering, Procurement, Construction (EPC) partner and Green Infra with Juwi as their EPC partner, commissioned a part of their capacity in the last quarter (refer to the January 2013 edition of the India Solar Compass). This quarter, projects by developers such as Welspun, Mahindra, Kiran Energy, Azure, Gas Authority of India Limited (GAIL), Saibaba Green Power, SunEdison, Pokaran Solaire Energy Pvt. Ltd, Sai Mathili Power Co. Pvt. Ltd. and NVR Infra amongst others have been completed and the remaining capacity from Green Infra and Fonroche Group has been also been commissioned*.

no responsibility or liability rests withBelectric for the project. Essel has also won projects in Andhra Pradesh, Rajasthan and Karnataka. It has quoted the lowest tariffs in Rajasthan and Andhra Pradesh.

Rajasthan

The financial bids for the allocation of 100 MW of solar PV projects in Rajasthan were opened on February 11 th 2013. A total of 25 bids worth over 200 MW have been received. Developers could bid for either a 5 MW project or a 10 MW project. The lowest bid has been submitted at ` 6.45 (€ 0.10/$ 0.13)/kWh by Essel Mining and Industries Ltd. This is currently the lowest valid solar bid in India. It has no escalation. The ` 5.97 (€ 0.09/$ 0.12)/ kWh bid for a 10 MW project in Tamil Nadu by Mohan Breweries has now been offered a tariff of ` 6.48 (€ 0.10/$ 0.12)/kWh with an escalation of 5% per annum for the first 10 years. This effectively is a tariff of over ` 7/kWh in levelized terms.

According to the project allocation process under the Rajasthan policy, in order to obtain a project, other developers will now be asked to meet this lowest tariff (referred to as L1). Assuming that the current capital cost of setting up a project is at least ` 70m (€ 1.08m/$ 1.4m), this tariff could only make financial sense if the developer is making full use of accelerated depreciation benefits. Unlike the NSM and the Gujarat solar policy, the request for proposal (RfP) document for the bidding process in Rajasthan does not consider separate tariffs for projects that avail accelerated depreciation. For the Rajasthan bids, project development companies that are not backed by an Indian corporate (e.g. Azure Power) as well

In the January 2013 edition of the India Solar Compass, we had mentioned that Belectric was involved in the EPC consortium. However, Belectric had clarified to us that the Memorandum of Understanding (MOU) signed by the consortium EPC partner with Belectric was not honored and hence

----------------------

*Correction: We had previously mentioned in this report that 210 MW has been commissioned under batch two of phase one of the NSM. Since the completion of the writing of the previous version of this report on March 20 th 2013, the MNRE has published an updated list of commissioned projects. In addition, we have had a chance to interact with some company representatives and market stakeholders and would like to clarify that the capacpity commissioned is in fact higher at 330 MW. The new MNRE list can be accessed at http://mnre.gov.in/file-manager/UserFiles/commissioning_ status_spv_phaseI_batchII.pdf.

Welspun’s 130 MW project in Neemuch district of Madhya Pradesh has arranged for financing and

Welspun’s 130 MW project in Neemuch district of Madhya Pradesh has arranged for financing and has selected its equipment suppliers.

Atria Power became India’s first company to get REC accreditation for a CSP project. This project is to have a capacity of 3 MW.

a CSP project. This project is to have a capacity of 3 MW. as international project

as international project development companies that do not have prior businesses in India (e.g. SolaireDirect) face a disadvantage in competing for the allocations as they would not be able to avail the accelerated depreciation benefit.

For the Rajasthan bidding process, companies that are backed by Indian businesses with multiple interests such as Essel Mining, Emami Cement, OCL Indian and Jindal Power will stand to benefit as they will be able to make best use of such accelerated depreciation benefits. Apart from that, these companies will also be able to avail recourse-based debt finance for the projects. Non-recourse financing in Rajasthan will be extremely difficult given the poor long term payment security for the PPA signing entity, Rajasthan Renewable Energy Corporation Limited (RRECL).

Madhya Pradesh

A capacity of 225 MW had been allocated in Madhya Pradesh in May/ June 2012. Projects were awarded to Acme Telepower (25 MW), Alpha Infra

Properties (20 MW), MK Solar (25 MW), Moser Baer (25 MW) and Welspun (25 MW and 105 MW). The projects with capacities up to 25 MW have to be commissioned by June 2013 and the 105 MW project by Welspun by June

2014.

Welspun’s 130 MW project in Neemuch district of Madhya Pradesh has arranged for financing and has selected its equipment suppliers. Some delays can be expected for projects such as Alpha Infra Properties and MK Solar as there is no report on ground work having been started for any of them.

Karnataka

Karnataka had allocated 60 MW of solar PV capacity in April 2012. The projects were allocated to Essel Infrastructure (10 MW), GKC Projects (10 MW), Helena Power (10 MW), Jindal Aluminium(10 MW),SaiSudhir Energy

(10 MW), United Telecom (3 MW) and Welspun (7 MW). The last date for commissioning of these projects is in October 2013. Welspun, Essel Infrastructure and SaiSudhir Energy are also developing projects under the NSM. It is expected that these projects are nearing financial closure and are in discussions for vendor selection. Developers like Welspun, SaiSudhir and Essel Infrastructure have the capability to carry out their own EPC and are not likely to involve an external EPC for vendor selection and construction.

REC projects

In the last quarter we have seen an accreditation of 57.25 MW of planned capacity based on the REC mechanism. This is the highest accreditation for any quarter until now. In fact, the total capacity of accredited projects in India till the end of year 2012 was just 20.91 MW. Now, this capacity stands at 78.16 MW (refer to Figure 5-2).

Only two projects (>1MW) by M&B Switchgear and Kanoria Chemicals were commissioned under the REC mechanism in India until the last quarter. Giriraj Enterprises, a group company of the Malpani Group from Maharashtra has emerged as the largest player betting on the REC market in India. The company is accredited to set up 40.65 MW of REC based solar projects. Of this 33 MW is located in Rajasthan and 6.65 MW is located in Maharashtra. Instead of the planned 33 MW, the company has gone ahead and constructed 36 MW in Rajasthan. The EPC contract for this project had been awarded to Sterling & Wilson. According to industry sources, this project is completely equity backed.

Atria Power became India’s first company to get REC accreditation for a CSP project. This project is to have a capacity of 3 MW. Atria Power is also developing a 10 MW CSP project under the Karnataka Solar Policy.

© BRIDGE TO INDIA, 2013

© BRIDGE TO INDIA, 2013 Figure 5-2: List of projects 1 4 accredited under the REC
© BRIDGE TO INDIA, 2013 Figure 5-2: List of projects 1 4 accredited under the REC

Figure 5-2: List of projects 14 accredited under the REC mechanism

State

RE Generator

Capacity

Date of Ac- creditation

Commis-

 

(MW)

sioned

Chhattisgarh

Amvensys Technologies Pvt. Ltd.

2

29-01-13

Madhya

AgarwalJewellers

0.5

16-02-13

Pradesh

 

KRBL Ltd.

2.5

16-02-13

 

Saboo Sodium Chloro Ltd.

1

31-01-13

 

Tuhina Enterprises

1

30-01-13

 

Saboo Industries

0.5

30-01-13

 

Deepak Spinners Ltd.

1

04-12-12

 

Star Delta Transformers Ltd.

0.5

04-12-12

 

M/s Gupta Sons

0.5

09-05-12

 

Omega Rank Bearings Pvt. LTD

0.105

09-05-12

ü

 

M AND B Switchgears Ltd.

2

03-02-12

ü

Maharashtra

Giriraj Enterprises

6.65

16-03-13

 

Enrich Energy Pvt. Ltd

1

12-06-12

 

Jaibalaji Business

1

06-06-12

Corporation Pvt

Ltd.

 

Jain Irrigation Systems Ltd.,

8.5

20-10-11

Odisha

MBPS Control & Power system Ltd.

1

16-03-13

 

OCL India Ltd.

2.5

28-01-13

Rajasthan

Hasya Enterprises Pvt. Ltd.

0.1

08-03-13

 

BMD Pvt. LTD

5

06-03-13

 

Giriraj Enterprises

11

05-03-13

ü

 

Giriraj Enterprises

3

05-03-13

ü

 

Giriraj Enterprises

19

05-03-13

ü

 

Impact Solar Power Pvt. Ltd.

1.5

04-02-13

 

R. H. Prasad & Company Pvt. Ltd.

0.25

31-08-12

 

Kanoria Chemicals & Industries Ltd.

5

28-03-12

ü

Tamil Nadu

Swelect Energy Systems Ltd.

1.055

20-02-12

Source: BRIDGE TO INDIA

BRIDGE TO INDIA expects that many of the other newly accredited projects will not be able to come online as securing

debt finance will be extremely difficult for most of them 15 .

----------------------

6. FINANCING In Andhra Pradesh, less than 20 out of close to 175 bidding companies

6. FINANCING

In Andhra Pradesh, less than 20 out of close to 175 bidding companies have prior project development experience.

The developer needs to be in possession of land and a Letter of Intent (LoI) from the EPC companyto be considered for bridge financing by an institution.

be considered for bridge financing by an institution. In the last quarter (January – March 2013),

In the last quarter (January – March 2013), financial closures have being achieved for projects in Madhya Pradesh and Karnataka. According to reports, Welspun has achieved financial closure for its 130 MW project in Madhya Pradesh, through syndication of debt from multiple lenders with Central Bank of India 16 being the lead lender and facilitator. Projects with a capacity of 60 MW

(solar PV) in Karnataka are expected to be commissioned by October 2013 and Welspun’s project in Madhya Pradesh is expected to be commissioned by May

2013.

` 200,000 (€ 3,077/$ 4,000)/MW and for projects that are commissioned within 11-12 months from the date of signing the PPA, a developer will be awarded ` 100,000 (€ 1,538/$ 2,000)/ MW. This will incentivize developers to achieve an early financial closure and perhaps look for better terms of re-financing only at a later stage. It is likely that developers in both Tamil Nadu and Andhra Pradesh will opt for construction/bridge financing to complete their projects on time.

Bridge financing can be sourced by using the following means 18 :

In the last quarter, new projects were allocated in Tamil Nadu and Andhra Pradesh (refer to the policy section of this report to read about the bankability of the respective off- takes). In the upcoming quarter, these will be seeking finance. Due to the poor financial health of the off-taker in Tamil Nadu, it is unlikely that any developer will be able to achieve non- recourse financing. In Andhra Pradesh, less than 20 out of close to 175 bidding companies have prior project development experience. We expect many of the new project developers to also face issues in achieving financial closure.

1. Equity - A developer may put in equity to meet the requirement of funds.This is the quickest and easiest option. However, not all the developers have sufficient cash and even those who do, might prefer using a short-term debt instrument.

2. Pre-financing by EPC companies – Pre-financing by EPC companies is prevalent in Europe and the US, but has hardly been used in India. Even in these regions, construction finance is provided only by certain EPCs that are large in size and for certain customers where the risk is considered low. In India, it is extremely rare for an EPC to provide pre-financing for construction. This is primarily due to the low margins for EPCs in India and the perceived construction risk.

3. Bridge financing from a financial institution – Bridge financing is usually available from most lenders at a higher interest rate. The differential is usually of about 100 basis points.Disbursement is much quicker. The developer needs to be in possession of land and a Letter of Intent (LoI) from the EPC companyto be considered for bridge financing by an institution. In such a situation, the EPC needs to

The deadline for commissioning in Tamil Nadu is January 2014. Due to the bankability issues in Tamil Nadu 17 , lenders are expected to be hesitant in lending to projects in the state. The deadline for projects under the Andhra Pradesh allocation is expected to be May 2014 and the state will financially reward projects for early commissioning. For projects that are commissioned within ten months from the date of signing of the PPA, a developer will be awarded ` 300,000 (€ 4,615/$ 6,000)/MW, for project commissioned within 10-11 months from the date of signing the PPA, a developer will be rewarded

----------------------

Due to the oversupply of modules in the market, some form of suppliers‘credit has been

Due to the oversupply of modules in the market, some form of suppliers‘credit has been made available by almost all module suppliers in India. Such a credit is usually come at an interest rate of around 8%, backed by a letter of credit.

an interest rate of around 8%, backed by a letter of credit. take an additional risk

take an additional risk of spending resources on design and planning, before they know that the project debt has been closed.

4. Suppliers‘ credit – Suppliers‘ credit is not a debt instrument but is used to ease the cash flow strains during the construction period. It is usually given by module manufacturers whose components are worth around 40% of the total project cost. As suppliers’ credit is treated as a short term debt,it is usually used to lower the upfront equity requirement of the project. Due to the oversupply of modules in the market, some form of suppliers‘credit has been made available by almost all module suppliers in India. Such a credit is usually come at an interest rate of around 8%, backed by a letter of credit (LoC).

In the past, bridge financing for the construction period has proved to be a key tool to keep a large number of Indian projects on track with regards to timelines.

Many project developers are now looking at the third-party PPA market. Until now, typically, capital subsidy, REC mechanism, accelerated depreciation, SPO or Corporate Social Responsibility (CSR) helps provide the additional fillip required for a go- ahead to such parity-driven projects. Some PPAs have already emerged from this commercial parity driven market segment but it is not clear how the lenders will react to such projects. According to BRIDGE TO INDIA, if third-party PPAs are signed with bankable power consumers, they can actually be less risky for the lender than policy-backed PPAs. They follow a sound commercial logic where power consumers can save by buying solar power. However, issues such as rooftop lease and access or change of building ownership during the project lifetime need to be addressed to make the lenders comfortable. Developers can also club multiple such projects to create a portfolio and thereby reduce the risk for the lender.

© BRIDGE TO INDIA, 2013

© BRIDGE TO INDIA, 2013 7. UPSTREAM INDUSTRY ANALYSIS Just six companies, i.e., SMA, Bonfiglioli, Schneider,

7. UPSTREAM INDUSTRY ANALYSIS

Just six companies, i.e., SMA, Bonfiglioli, Schneider, ABB, AEG and Power-One make up for 87% of the current inverter market share in India.

As of January 2013, central inverters accounted for 95% of the installed capacity in the country.

accounted for 95% of the installed capacity in the country. 7.1 INVERTER SUPPLY IN INDIA While

7.1 INVERTER SUPPLY IN INDIA

While both Indian and international module suppliers are grappling with uncertainty over the future of DCR and anti-dumping duties, a small group of inverter suppliers are rapidly building market share and in some cases even manufacturing in India.

There are up to 18 prominent inverter suppliers that are present in the Indian market 19 . However, just six companies, i.e., SMA, Bonfiglioli, Schneider, ABB, AEG and Power-One make up for 87% of the current inverter market share in India 20 . From these six companies, power solution companies such as AEG, ABB and Schneider are already manufacturing solar inverters in India. SMA and Bonfiglioli have also announced plans to do so. Local manufacturing can reduce costs and highlights a company’s commitment to the Indian market in terms of long term presence, after sales support and availability of spare parts.

As of January 2013, central inverters accounted for 95% of the installed capacity in the country. The primary reason for dominance of central inverters in India is the large size of projects in India and the price difference between central and string inverters. String inverters can cost up to 80% higher than central inverters in USD/kVA (output) terms.

Other benefits of central inverters include a lower installation area, less installation effort, easier maintenance and an easier AC-side distribution of power. On the other hand, Balance of System (BoS) costs, especially with regards to wiring and junction boxes can be significantly reduced by using string inverters. Unlike central inverters, string inverters do not have a single point of failure. Today, almost all the major inverter suppliers in the Indian market are focusing on central inverters and this is primarily because of the price advantage. Inverter suppliers such as ABB and Power-One plan to launch new central

Figure 7-1: Central inverter market share by commissioned projects of inverter companies as of February 2013 (A capacity of 1,185 MW has been considered)

2.5% 1.8% 4.0% 23.6% 4.2% 7.8% 8.0% 8.4% 18.6%
2.5% 1.8% 4.0%
23.6%
4.2%
7.8%
8.0%
8.4%
18.6%

Source: BRIDGE TO INDIA

21.9%

SMA4.2% 7.8% 8.0% 8.4% 18.6% Source: BRIDGE TO INDIA 21.9% PowerOne Schneider Electric ABB AEG Refusol

7.8% 8.0% 8.4% 18.6% Source: BRIDGE TO INDIA 21.9% SMA PowerOne Schneider Electric ABB AEG Refusol

PowerOne7.8% 8.0% 8.4% 18.6% Source: BRIDGE TO INDIA 21.9% SMA Schneider Electric ABB AEG Refusol Siemens

Schneider Electric8.0% 8.4% 18.6% Source: BRIDGE TO INDIA 21.9% SMA PowerOne ABB AEG Refusol Siemens Electronica Santerno

ABBBRIDGE TO INDIA 21.9% SMA PowerOne Schneider Electric AEG Refusol Siemens Electronica Santerno Others

BRIDGE TO INDIA 21.9% SMA PowerOne Schneider Electric ABB AEG Refusol Siemens Electronica Santerno Others

AEG

RefusolTO INDIA 21.9% SMA PowerOne Schneider Electric ABB AEG Siemens Electronica Santerno Others ---------------------- 1

SiemensINDIA 21.9% SMA PowerOne Schneider Electric ABB AEG Refusol Electronica Santerno Others ---------------------- 1 9

Electronica SanternoSMA PowerOne Schneider Electric ABB AEG Refusol Siemens Others ---------------------- 1 9 BRIDGE TO INDIA tried

OthersElectric ABB AEG Refusol Siemens Electronica Santerno ---------------------- 1 9 BRIDGE TO INDIA tried to

----------------------

19 BRIDGE TO INDIA tried to reach out to all the inverter companies operating in India but only Bonfiglioli, ABB, AEG, Delta, Ingeteam and Santerno have confirmed their sales numbers. All other numbers are based on our project database and market research. 20 The market share has been calculated based commissioned projects as of January 2013. A total capacity of 1,185MW has been considered for the calculation.

Many of the larger suppliers by market share categorically state that they are not the

Many of the larger suppliers by market share categorically state that they are not the cheapest and it is not their intention to be the cheapest suppliers in the market.

None of the inverter companies have announced any plans to launch India-specific product designs. This may in part be due to a concern that an India-specific inverter might be considered a low price, low quality product.

might be considered a low price, low quality product. inverter models with the capacity of 1

inverter models with the capacity of 1 MW and 1.4 MW respectively. These new models are to be released within the next few months, ready for sales to projects in Andhra Pradesh, Tamil Nadu and the upcoming batch one of phase two of the NSM.

Many of the larger suppliers by market share categorically state that they are not the cheapest and it is not their intention to be the cheapest suppliers in the market. Their key sales argument revolves around life time, reliability and Total Cost of Ownership (TCO). However, price is still important and suppliers are under pressure to offer lower prices. SMA has traditionally been able to charge a premium for its product differentiation, global brand perception and local track record, Other prominent suppliers such as Bonfiglioli, ABB, AEG and Schneider 21 compete with each other on quality at a competitive price. Based on the available details on the current sales pipeline of these suppliers, Bonfiglioli and ABB are gaining market share aggressively and if SMA wants to maintain its market share, it will also have to start competing with them on price.

Central inverters being supplied in India can broadly be categorized into three types: monolithic-indoor inverters, modular-indoor inverters and outdoor inverters (IP65 without the requirement of additional casing). Modular and monolithic differ on product design. As the names suggest, modular inverters are made up of separate modules that help avoid a single point of failure and provide more flexibility in terms of number and type of DC inputs. For example, Bonfiglioli’s 1 MW inverter is made up of five modules of 200 kW each. Outdoor inverters, as compared to indoor inverters can be set up at plant location without an extra civil

structure and without air-conditioning. This helps reduce the cost incurred for auxiliary power. Many inverter companies that manufacture indoor inverters can also provide the enclosure for outdoor placement of these inverters but such inverters usually still require air-conditioning. SMA, which has the largest market share so far, offers robust, outdoor inverters and Bonfiglioli, which has the second largest market share so far, offers modular inverters. This goes to show that most developers and EPC companies understand the benefits of quality. Against popular belief, they are not driven primarily by the equipment cost. Currently, central inverter prices in India range between ` 4.2 (€ 0.06/$ 0.08)/kWp (output) and ` 7.8 (€ 0.11/$ 0.14)/kWp (output), depending on the type and brand of the inverter.

Given the high temperature conditions and issues related to grid stability, there might be a need for an India specific inverter design. All the inverters that are being used in the Indian market are global products. Till date, none of the inverter companies have announced any plans to launch India-specific product designs. This may in part be due to a concern that an India-specific inverter might be considered a low price, low quality product. Some companies like ABB, AEG and Bonfiglioli offer inverters that have high operating temperatures and are also open to making some software and hardware changes to ensure that the inverters are compatible with the dynamic reactive power requirements of the Indian grid. Some companies manufacturing in India also allow for the customization of their standard products in terms of cabinets, display panels, fuse ratings, DC side inputs, etc. This is mostly done as per the customer’s technical requirements but sometimes also for minor reduction in equipment cost.

----------------------

21 Correction from January 2013 edition of the India Solar Compass – We mentioned that SunBorne

has procured inverters from SMA and Lexicon Vanijya had procured inverters from AEG. However, we would like to make a correction as both these companies have procured inverters from Schneider Electric. We always strive to publish the correct information and if you observe any misrepresentation of facts in our reports, please bring it to our notice.

International companies have successfully supplied to India through local manufacturing and are now looking to

International companies have successfully supplied to India through local manufacturing and are now looking to use their Indian facilities to supply to international markets.

their Indian facilities to supply to international markets. Almost all the inverter suppliers offer standard services

Almost all the inverter suppliers offer standard services such as negative/ positive grounding of modules that helps prevent potential induced degradation (PID) 22 . As an additional value proposition, ABB also offers other services and solutions such as Electrical-EPC (E-EPC), BOS contracts, SCADA solutions and even full EPC. AEG is open to proving E-EPC. This might allow a developer to use the technical capabilities of the inverter

supplier and hire a civil EPC company instead of a specialist solar EPC company, thereby, cutting costs.

International companies have successfully supplied to India through local manufacturing. They are now looking to use their India manufacturing facilities to supply to international markets.

----------------------

22 Utility Scale PV Power Plants operate at high system voltages ranging from 500 Vdc to 1000 Vdc. It has been observed that this high potential can lead to or accelerate module degradation. This may result in conditions such as potential induced degradation, polarization, electrolytic corrosion, and electrochemical corrosion. These factors are prevalent in wet or damp environments, such as morning dew or rain, as well as in those subject to module soiling with conductive, acidic, caustic, or ionic materials. When field installed, crystalline silicon modules may degrade in positive as well as negative polarity which is dependent on cell construction, module production processes and materials and overall design. – Source - Underwriters Laboratories (UL)

8. KEY QUESTION: IS DISTRIBUTED SOLAR PV READY TO TAKE OFF IN INDIA? Commercial power

8. KEY QUESTION: IS DISTRIBUTED SOLAR PV READY TO TAKE OFF IN INDIA?

Commercial power consumers, i.e., consumers such as malls, office spaces and retail outlets paying a commercial tariff as high as ` 11 (€ 0.17/$ 0.22)/kWh in certain locations.

At the beginning of 2011, the cost for setting up a ground based project in India was around ` 140m ($ 2.6m/€ 2.2m) and now is at almost half that price at around ` 70m ($ 1.3m/€ 1.1m).

almost half that price at around ` 70m ($ 1.3m/€ 1.1m). 8.1 BACKGROUND NSM is looking

8.1

BACKGROUND

NSM is looking at providing incentives for the development of solar parks in more states. In Madhya Pradesh and Maharashtra, we have seen single project plants exceeding 100 MW. Even the size for off-grid projects to be set up under the NSM’s capital subsidy scheme is proposed to be increased from 100 kW to 500 kW. All these developments show that the policy trend is still moving towards larger projects and leaving distributed generation by the wayside. The only expectations being the 10,000 rooftop programme (totaling 10 MW) in Kerala and Tamil Nadu’s plan for 350 MW rooftop capacity by 2015.

For the policy makers, large projects are easier to monitor and allow for achieving of the policy targets in time. This is the reason why most policies are in favor of larger projects. However, the demand creation through this route can be sporadic and based on policy announcements.

8.2

FUNDAMENTALS

MARKET

Demand creation through market fundamentals is more predictable and truly scalable. The irradiation in many parts of India is almost the double that of many parts in Germany. Apart from high irradiation, a combination of several market factors makes India one of the most attractive solar markets in the world. These factors are as follows:

Reduced costs of solar

Solar power costs have seen a sharp decline in the past two years. At the beginning of 2011, the cost for setting up a ground based project in India was around ` 140m ($ 2.6m/€ 2.2m) 23 and now is at almost half that price at around ` 70m ($ 1.3m/€ 1.1m). This has largely been fuelled by a drop in module prices that fell from $ 1.00 (€ 0.77)/Wp in 2011 to $ 0.65 (€ 0.50)/Wp today.

The distributed generation market in India can broadly be categorized into four segments:

i) Commercial power consumers, i.e., consumers such as malls, office spaces and retail outlets paying a commercial tariff as high as ` 11 (€ 0.17/$ 0.22)/kWh in certain locations (the highest amongst all segments)

ii) Industrial power consumers, i.e., manufacturing facilities, that are charged the industrial tariff, which is usually the second highest and can be over to ` 8 (€ 0.12/$ 0.16)/ kWh in certain locations

iii) Residential power consumers are usually charged less than industrial and commercial consumers and the tariffs can be as high as ` 7 (€ 0.11/$ 0.14)/kWh in certain locations

iv) Agricultural power consumers usually receive subsidized tariffs. These are amongst the lowest in all segments and in some locations power is even free.

BRIDGE TO INDIA’s market model projects a capacity addition of 2.3 GW until 2016 through just the commercial parity driven demand. From the point of view of solar, this is the most promising segment in the next few years. However, the capacity added in the commercial segment so far is insignificant. Most government policies

today are still focusing on utility scale power projects. For example, the limit for project allocations per developer under the NSM has gone up from 5 MW in batch one to 50 MW in batch two. Gujarat has successfully developed

a solar park which allows multiple

utility scale projects to be set up in a single location and can accommodate

a total capacity of 600 MW (214 MW

already commissioned). Rajasthan and Karnataka have also planned to set up solar parks and phase two of the

----------------------

23 The values are at today’s exchange rate. Indian currency has depreciated by up to 15% since 2011.

No previous plan period in India has seen a capacity addition equal to or greater

No previous plan period in India has seen a capacity addition equal to or greater than what was planned.

A key cause of India’s power deficit is a shortage of coal, which fuels 57% of the country’s power plants.

of coal, which fuels 57% of the country’s power plants. Figure 8-1: Module prices have fallen

Figure 8-1: Module prices have fallen by 58% in last three years

3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 USD/Wp 04/2011 07/2011 10/2011 01/2012 04/2012 07/2012
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
USD/Wp
04/2011
07/2011
10/2011
01/2012
04/2012
07/2012
10/2012
01/2013
04/2013
© BRIDGE TO INDIA, 2013

Power deficit

India had a peak power shortage of 9.3% during the five years ending in 2012 when over 50,000 MW new generation capacity was commissioned 24 . The capacity addition target during the 12 th plan period (2012—17) is estimated at 88,537 MW comprising of 26,182 MW that is backed by the central government, 15,530 MW that is backed by thevarious state governments and 46,825 MW that is expected from the private sector. However, no previous plan period in India has seen a capacity addition equal to or greater than what was planned. Most experts therefore expect less to be actually achieved.

Source: BRIDGE TO INDIA

A key cause of India’s power deficit is

a shortage of coal, which fuels 57% of

the country’s power plants. The deficit

is driven by in part by inefficiencies in

India’s coal mining and transportation sector. Importing coal is also getting more difficult Indonesia, South Africa and Australia who are the key exporters to India, are becoming more protectionist about their resources. Taxes on exports from these countries have been increased, making import of coal more expensive.Increasing domestic mining of coal usually runs into environmental and land acquisition hurdles causing significant delays and financial losses. India’s

power deficit continues to increase.

Figure 8-2- India’s widening energy deficit

1600 1400 13% 1200 1000 800 Demand 600 Supply 400 200 0 Billion units 2005
1600
1400
13%
1200
1000
800
Demand
600
Supply
400
200
0
Billion units
2005
2006
2007
2008
2009
2010
2011
2012
2013
E
2014
E
2015
E
2016
E
2017
E
© BRIDGE TO INDIA, 2013

----------------------

24 Economic survey of India

Source: BRIDGE TO INDIA

© BRIDGE TO INDIA, 2013

© BRIDGE TO INDIA, 2013 Rising power prices States like Tamil Nadu, Odisha, Jharkhand, Kerala and
Rising power prices States like Tamil Nadu, Odisha, Jharkhand, Kerala and Delhi have already raised
Rising power prices
States like Tamil Nadu,
Odisha, Jharkhand,
Kerala and Delhi have
already raised tariffs
by as much as 15-30%
in the past year.
Most of the state power distribution
companies are making large losses.
The majority of the State Electricity
Boards (SEBs) have negative net
internal revenues and the situation is
becoming worse as energy costs rise.
The distribution utilities’ cumulative
losses rose to ` 1.9 tr (€ 29bn/$ 38bn)
in FY-2011 from ` 1.22 tr (€ 18bn/$ 24
bn) in F.Y-2010 25 .
The current losses pose a huge
risk for lenders exposed to these
distribution companies through
PPAs and on the Indian power sector
in general. Taking note of this, the
central government of India has
come out with a debt restructuring
plan for SEBs. This allows states to
restructure their debt through central
funds under thecondition to reform
power distribution to improve their
Figure 8-3: State-wise net internal revenues for 2009-10 (in ` Million)
11,260
Net internal revenue
(` million) - Positive
9,180
Net internal revenue (`
million)
- Negative
8,060
7,240
1,900
730
660
-10
-260
-330
-790
-1,060
-1,130
-1,160
-1,210
-1,320
-1,980
- 4,850
-6,990
-8,340
-11,400
-13,820
- 17,170
-22,880
-32,420
-32,530
-80,900
-112,090
----------------------

financial health. The easiest way for SEBsto improve their financial health is to raise tariffs to a level that truly reflects their generation, transmission and distribution costs. States like Tamil Nadu, Odisha, Jharkhand, Kerala and Delhi have already raised tariffs by as much as 15-30% in the past year. With costs rising and the financial health of distribution companies deteriorating, further increases of tariffs across the country are expected.

Tariff increases are usually not equal for all consumer groups. Due to political preferences,the agricultural sector faces the lowest hikes in percentage terms, while industrial and commercial consumers end up paying more than the others. Since the year 2000, we have seen an average compounded tariff increase rate of 6% per annum.

Andhra Pradesh West Bengal Gujarat Maharashtra Goa Meghalaya Chhatishgarh Tripura Pondicherry Arunachal Pradesh Manipur Assam Nagaland Kerala Uttarakhand Sikkim Mizoram Himachal P radesh Bihar Uttar Pradesh Karnataka Punjab Jharkhand Jammu & Kashmir Haryana Madhya Pradesh Tamil Nadu Rajasthan

Source: Annual Report 2011-12 on The Working of State Power Utilities & Electricity Departments – Planning Commission of India

In an operating expense (OPEX) model, a third party project developer raises investment to build

In an operating expense (OPEX) model, a third party project developer raises investment to build the plant and then sells the power to the consumer.

The calculation to determine a levelized cost of energy (LCOE) for solar should include the return on investment expectation of at least 8.75%.

the return on investment expectation of at least 8.75%. Figure 8-4: Cost of commercial power in

Figure 8-4: Cost of commercial power in India has been rising at a CAGR of 6% per annum

12 10 8 6 4 2 0 2000 2003 2006 2009 2012 2015 2018 `/kWh
12
10
8
6
4
2
0
2000
2003
2006
2009
2012
2015
2018
`/kWh
© BRIDGE TO INDIA, 2013

Source: BRIDGE TO INDIA

Year

8.3 BOTTLENECKS TO ADOPTION OF DISTRIBUTED SOLAR POWER

Lack of access to liquidity

Solar power requires large upfront investments. Though over the lifetime of the plant operating cost are very less as no fuel has to be purchased. Power consumers may not have liquidity to allow them to invest into a solar project.

In an operating expense (OPEX) model,

a third party project developer raises

investment to build the plant and thensells the power to the consumer. Companies like Solar City and Sun Run in the US are following this model for the residential market. The key concern in this model is the bankability of the power consumer.

Better investment opportunities

As an avenue for capital investment, solar power has to compete with other investment options as well. Solar power can be considered to be

a safe investment and is recognized as such in most mature markets

such as Germany where the lenders are willing to provide 100% non- recourse debt. It can be compared to other safe investment avenues such as fixed deposits (with an expected return of 8.75%) and mutual funds (with an expected return of 11-12%). Therefore, the savings through solar should ideally be higher than the investor’s expectation of return on a safe investment. Only then it will make sense for them to invest in solar.

When considering the financial viability of investing in solar, savings in energy cost, i.e., the difference between grid power cost and the cost of solar power should be calculated after taking all the expenses for the maintenance and interest payment to the bankinto consideration. Also, the calculation to determine a levelized cost of energy (LCOE) for solar should include the return on investment expectation of at least 8.75% (returns on fixed deposit).

Underutilization of power generated

For solar power that is installed on a consumer’s rooftop, there will be times when the power production will be more than the consumption. For example, on public holidays,

Storage technology is still very expensive and a battery backup can increase the system cost

Storage technology is still very expensive and a battery backup can increase the system cost significantly. For an off-grid system, the increase in system costs due to the use of batteries can be as high as 80%.

Solar power is already cheaper than grid power for commercial consumers in Maharashtra, Delhi and Kerala even without the subsidy.

in Maharashtra, Delhi and Kerala even without the subsidy. consumption for commercial buildings will be significantly

consumption for commercial buildings will be significantly lower than other days. Similarly, a residential consumer might go on a vacation and the power consumption would drop significantly. This causes a wastage of power generated, decreasing the financial viability of such projects.

This issue can be solved by either using storage or allowing for excess power to be fed back into the grid using net-metering. However, storage technology is still very expensive and a battery backup can increase the system cost significantly. For an off- grid system, the increase in system costs due to the use of batteries can be as high as 80%. Net-metering is still not available in India but states like Tamil Nadu and Kerala are working to bring in net-metering. The most viable option as this stage is to install a solar capacity that is lower than or equal to the base-load, i.e., the minimum load that will continue to operate at the consumer’s end at any given time. Another alternative is to combine it with a normal inverter based battery backup. This will help utilize solar power even during a grid outage by off- setting LCOE of inverter, which can be up to 40% higher than grid tariff.

8.4 CASE FOR

PARITY DRIVEN ADOPTION OF ROOFTOP SOLAR

The power situation in most parts of India is unreliable and consumers use multiple backup solutions to have power during frequent grid outages. Captive diesel power generation, kerosene-based power generation and battery-based backup are some of the common options. These backup sources increase the LCOE for the consumers. However, the use of these sources is sporadic and can vary significantly from one consumer to another.

For the purpose of this analysis, we will compare solar power to just the grid power in terms of parity.

In parity terms, use of the backup options can only improve the case for solar power. By definition, grid parity occurs when LCOE for solar power generation is less than or equal to the price of purchasing power from the grid. However, there can be a lot of ambiguity in defining the price of purchasing power from the grid. In India, for example, the power tariffs vary by state and also the type of consumer. Hence, there is no single frame of reference for grid parity. For the purpose of this analysis, we will look at parity based on the customer segments.

The case for commercial consumers

Commercial consumers in India will be the first to adopt solar power as parity for them will be reached the earliest. Based on BRIDGE TO INDIA’s analysis (refer to the graph below), solar power is already cheaper than grid power for commercial consumers in Maharashtra, Delhi and Kerala even without the subsidy. Consumers that are not investing in solar power or are not looking to buy solar power

through third-party PPAs are already losing out on an opportunity. For such consumers, solar power not only helps reduce their energy bills, it can also help in providing a hedge against rising cost of power while providing energy security if the power is being generated at the source of consumption. If a capital subsidy of 30% can be availed, the value proposition will increase in the same proportion.

Commercial consumers in other states like Andhra Pradesh, Odisha, Tamil Nadu, Gujarat, Karnataka, West Bengal, Uttar Pradesh, Rajasthan and Madhya Pradesh can also reduce their energy costs if they go through the subsidy route.

For this analysis, we have used the tariff data available from respective State Electricity Regulatory Commissions (SERCs) and compared

(`)

cial tariffCommer

Uttaranchal Bihar Goa Tripura Arunachal Pradesh Mizoram Manipur Assam Jharkhand Meghalaya Nagaland Jammu & Kashmir Himachal Pradesh Chhattisgarh

Maharashtra (MSEDCL) Delhi Kerala Andhra Pradesh Odisha Tamil Nadu Gujarat (PGVCL/DGVCL) Karnataka West Bengal (Kolkata CESC) Uttar Pradesh Rajasthan Madhya Pradesh Punjab Haryana (except Gurgaon) Sikkim

© BRIDGE TO INDIA, 2013

Haryana (except Gurgaon) Sikkim © BRIDGE TO INDIA, 2013 Figure 8-5: Case for commercial parity across

Figure 8-5: Case for commercial parity across different states in India

16.0

14.0

12.0

10.0

8.0

6.0

4.0

2.0

0.0

states in India 16.0 14.0 12.0 10.0 8.0 6.0 4.0 2.0 0.0   Parity without subsidy
  Parity without subsidy Parity with subsidy No parity Solar LCOE without subsidy Solar LCOE
 

Parity without subsidy 

Parity with  Parity without subsidy subsidy No parity Solar LCOE without subsidy Solar LCOE with subsidy

subsidy
subsidy

subsidy

No parity  Parity without subsidy Parity with subsidy Solar LCOE without subsidy Solar LCOE with subsidy

Solar LCOE without subsidy Solar LCOE with subsidy

Solar LCOE without subsidySolar LCOE with subsidy

Solar LCOE with subsidySolar LCOE without subsidy

LCOE for diesel gen-setSolar LCOE without subsidy Solar LCOE with subsidy For consideration of LCOE calculation, it has been

For consideration of LCOE calculation, it has been assumed the investment in solar would be compared against any other investment that would yield a equity IRR of 13+%.

in power cuts as it would off-set the operating load of the diesel gen-set, which is a significantly more expensive source of power.

We have only considered the current energy cost of consumers and have put in the LCOE for diesel based generation separately for reference, based on the current diesel prices in various states.

Considering an annual tariff increase of 6% p.a. and solar LCOE drop at the rate of 5% p.a. we have calculated the shift in parity scenario in 2016. As per BRIDGE TO INDIA’s analysis, Andhra Pradesh, Odisha, Tamil Nadu, Gujarat, Karnataka, West Bengal, Uttar Pradesh, Rajasthan, Punjab and Madhya Pradesh will also reach commercial parity without subsidy. Uttaranchal, Bihar Goa and Tripura, Mizoram, Manipur and Jharkhand will become viable if capital subsidy is still available.

Source: BRIDGE TO INDIA

it with the LCOE for solar power. We have assumed the capital cost of a 100 kWp rooftop project to be ` 8.5m ($ 170,000/€ 130,000), the project lifespan to be 20 years, equity participation to be 30%, interest rate for debt to be 12.5% and the internal rate of return (IRR) expectation on equity to be 13%. A key variable for LCOE across different states is the irradiation level. While the irradiation for many locations in Rajasthan and Gujarat is more than 2,000 kWh/m 2 /year, it can be as low as 1,200 kWh/m 2 /year for states like Sikkim and Arunachal Pradesh. Thereby, considerably increasing the LCOE for solar at these location.

For locations where power cuts are frequent, diesel-based generation is a common alternative. The diesel consumption for a diesel based gen-set decreases/increases almost proportionally to the operating power load. Therefore, the viability of using solar power increases with an increase

By 2016, Andhra Pradesh, Odisha, Tamil Nadu, Gujarat, Karnataka, West Bengal, Uttar Pradesh, Rajasthan, Punjab and Madhya Pradesh will also reach commercial parity without subsidy.

Rajasthan, Punjab and Madhya Pradesh will also reach commercial parity without subsidy. © BRIDGE TO INDIA,

Industrial tariff (`)

© BRIDGE TO INDIA, 2013

Industrial tariff ( ` ) © BRIDGE TO INDIA, 2013 Industrial tariffs are typically 10-15% lower

Industrial tariffs are typically 10-15% lower than commercial tariffs. Due to this reason, the industrial segment might scale up later than the commercial segment.

States like Delhi, Maharashtra, Odisha, Gujarat and West Bengal are fairly close to being viable destinations for use of solar power by industrial consumers without the subsidies

of solar power by industrial consumers without the subsidies Figure 8-6: The case for commercial tariff

Figure 8-6: The case for commercial tariff parity in 2016

20.0 Parity without subsidy 18.0 16.0 Parity with subsidy 14.0 No parity 12.0 10.0 Solar
20.0
Parity without
subsidy
18.0
16.0
Parity with
subsidy
14.0
No parity
12.0
10.0
Solar LCOE
without subsidy
8.0
6.0
Solar LCOE with
subsidy
4.0
LCOE for diesel
gen-set
2.0
0.0
Source: BRIDGE TO INDIA
Commer cial tariff in 2016 (`)
Maharashtra (MSEDCL)
Delhi (BSES)
Kerala
Andhra Pradesh
Odisha
Tamil Nadu
Gujarat (PGVCL/DGVCL)
Karnataka
West Bengal (Kolkata CESC)
Uttar Pradesh
Rajasthan
Madhya Pradesh
Punjab
Haryana (except Gurgaon)
Uttaranchal
Bihar
Goa
Tripura
Mizoram
Manipur
Jharkhand
Sikkim
Arunachal Pradesh
Assam
Meghalaya
Nagaland
Jammu & Kashmir
Himachal Pradesh
Chhattisgarh
© BRIDGE TO INDIA, 2013

The case for industrial consumers

Industrial tariffs are typically 10- 15% lower than commercial tariffs. Due to this reason, the industrial segment might scale up later than the commercial segment. However, as most mid-sized industries are located outside city limits and not necessarily in designated industrial areas, power failures are frequent; increasing the viability of using solar power. Also, industrial complexes often have a high

load requirement and ample rooftop space, making them good sites for solar power.

As per BRIDGE TO INDIA’s analysis (refer to the graph below), states like Delhi, Maharashtra, Odisha, Gujarat and West Bengal are fairly close to being viable destinations for the use of solar power by industrial consumers without the subsidies and it already makes sense to use solar power with subsidies in these locations.

Figure 8-7: Case for industrial parity across different states in India

16.0 14.0 12.0 Parity with 10.0 subsidy 8.0 No parity 6.0 Solar LCOE without subsidy
16.0
14.0
12.0
Parity with
10.0
subsidy
8.0
No parity
6.0
Solar LCOE
without subsidy
4.0
2.0
Solar LCOE with
subsidy
0.0
LCOE for diesel
gen-set
Delhi
Maharashtra (MSEDCL)
Odisha
Gujarat (PGVCL/DGVCL)
West Bengal (Kolkata CESC)
Uttar Pradesh
Punjab
Andhra Pradesh
Tamil Nadu
Karnataka
Haryana (except Gurgaon)
Bihar
Madhya Pradesh
Rajasthan
Uttaranchal
Goa
Meghalaya
Sikkim
Manipur
Kerala
Mizoram
Tripura
Arunachal Pradesh
Assam
Jharkhand
Jammu & Kashmir
Nagaland
Himachal Pradesh
Chhattisgarh

Source: BRIDGE TO INDIA

Industrial tariff in 2 016 (`)

© BRIDGE TO INDIA, 2013

Assam Jharkhand Meghalaya Nagaland Jammu & Kashmir Himachal Pradesh

Manipur

Bihar

Uttaranchal

Uttar Pradesh Punjab Madhya Pradesh Haryana (except Gurgaon)

Rajasthan

Karnataka

Goa

Sikkim

Kerala

Tripura

Mizoram

Odisha

Chhattisgarh

Arunachal Pradesh

Andhra Pradesh

Tamil Nadu

Maharashtra (MSEDCL)

Delhi (BSES)

CESC)

Gujarat (PGVCL/DGVCL)

West Bengal (Kolkata

Residential t ariff (`)

Maharashtra (MSEDCL) Delhi Gujarat (PGVCL/DGVCL) West Bengal (Kolkata CESC) Kerala Uttar Pradesh Punjab Tamil Nadu Karnataka Andhra Pradesh Haryana (except Gurgaon) Madhya Pradesh Rajasthan Bihar Goa Odisha Sikkim Assam Manipur Tripura Arunachal Pradesh Chhattisgarh Nagaland Uttaranchal Jammu & Kashmir Mizoram Himachal Pradesh Jharkhand Meghalaya

& Kashmir Mizoram Himachal Pradesh Jharkhand Meghalaya By 2016, industrial consumers in Maharashtra, Delhi, Kerala,

By 2016, industrial consumers in Maharashtra, Delhi, Kerala, Andhra Pradesh, Tamil Nadu, Gujarat and Karnataka will achieve unsubsidized grid parity.

The tariffs for residential consumers are up to 20% lower than the industrial tariffs, an unsubsidized residential solar market will become truly scalable only at a later stage.

market will become truly scalable only at a later stage. Figure 8-8: The case for industrial

Figure 8-8: The case for industrial parity in 2016

20.0

18.0

16.0

14.0

12.0

10.0

8.0

6.0

4.0

2.0

0.0

in 2016 20.0 18.0 16.0 14.0 12.0 10.0 8.0 6.0 4.0 2.0 0.0 Parity without subsidy
in 2016 20.0 18.0 16.0 14.0 12.0 10.0 8.0 6.0 4.0 2.0 0.0 Parity without subsidy

Parity without subsidy Parity with subsidy

No parity6.0 4.0 2.0 0.0 Parity without subsidy Parity with subsidy Solar LCOE without subsidy Solar LCOE

Solar LCOE without subsidy2.0 0.0 Parity without subsidy Parity with subsidy No parity Solar LCOE with subsidy LCOE for

Solar LCOE with subsidyParity with subsidy No parity Solar LCOE without subsidy LCOE for diesel gen-set Source: BRIDGE TO

LCOE for diesel gen-setNo parity Solar LCOE without subsidy Solar LCOE with subsidy Source: BRIDGE TO INDIA The assumptions

Source: BRIDGE TO INDIA

The assumptions for the industrial parity analysis are the same as the analysis for commercial consumers. By 2016, industrial consumers in Maharashtra, Delhi, Kerala, Andhra Pradesh, Tamil Nadu, Gujarat and Karnataka will achieve unsubsidized grid parity. Apart from that, industrial consumers in states like West Bengal, Uttar Pradesh, Rajasthan, Madhya Pradesh, Haryana, Bihar and Goa will achieve a subsidy driven grid parity (if subsidy is available in 2016).

The case for residential consumers

The residential solar market in India is the largest segment and its take-off promises a change of the entire power

Figure 8-9: Case for residential parity across different states in India

landscape in India. However, as the tariffs for residential consumers are up to 20% lower than the industrial tariffs, an unsubsidized residential solar market will become truly scalable only at a later stage. Even with subsidy, factors like access to uninterrupted power in locations where the grid is unreliable will remain the key growth drivers for this segment.

As per BRIDGE TO INDIA’s analysis, the LCOE of solar power is not yet comparable to the price for residential grid power. This means that, until now, demand for solar power in the residential segment is limited to cases where access to uninterrupted power in locations where the grid is unstable.

16

14

12

10

8

6

4

2

0

No parity Solar LCOE without subsidy Solar LCOE with subsidy LCOE for household inverter with
No parity
Solar LCOE
without subsidy
Solar LCOE with
subsidy
LCOE for
household inverter
with battery bank
© BRIDGE TO INDIA, 2013

Source: BRIDGE TO INDIA

Residential t ariff in 2016 (`)

Residential t ariff in 2016 ( ` ) In 2016, the residential market will reach parity

In 2016, the residential market will reach parity based on the capital subsidy mechanism in states such as Maharashtra, Delhi, Gujarat and West Bengal.

Unsubsidized solar power is already feasible in some parts of the country. As prices for grid power are expected to increase and cost for solar power is expected to fall, solar will become competitive in more and more locations across India.

become competitive in more and more locations across India. Figure 8-10: Case for residential parity in

Figure 8-10: Case for residential parity in 2016

14

12

10

8

6

4

2

0

Parity with subsidy No parity Solar LCOE without subsidy Solar LCOE with subsidy LCOE for
Parity with
subsidy
No parity
Solar LCOE
without subsidy
Solar LCOE with
subsidy
LCOE for diesel
gen-set
Maharashtra (MSEDCL)
Delhi
Gujarat (PGVCL/DGVCL)
West Bengal (Kolkata CESC)
Tamil Nadu
Kerala
Uttar Pradesh
Punjab
Karnataka
Andhra Pradesh
Haryana (except Gurgaon)
Madhya Pradesh
Rajasthan
Bihar
Goa
Odisha
Sikkim
Assam
Manipur
Tripura
Arunachal Pradesh
Chhattisgarh
Nagaland
Uttaranchal
Jammu & Kashmir
Mizoram
Himachal Pradesh
Jharkhand
Meghalaya
© BRIDGE TO INDIA, 2013

Source: BRIDGE TO INDIA

For the residential segment, we have assumed a smaller system size of 3 kWp as compared to the 100 kWp system assumed for the industrial and commercial segment. The cost for this 3 kWp system is assumed to be ` 300,000 ($ 6,000/€ 4,600). A large number of these residential consumers use a battery and inverter- based backup for power cuts. The LCOE calculation of battery-backed inverter assumes its efficiency to be

60%.

In 2016, the residential market will reach parity based on the capital subsidy mechanism in states such as Maharashtra, Delhi, Gujarat and West Bengal.

It is important to note that in the coming years, parity will not be the key driving factor for the residential market. Residential consumers face the highest hours of power cuts after agricultural consumers and supply security will be the key driver for solar in the residential market.

8.5 WAY FORWARD

Unsubsidized solar power is already feasible in some parts of the country.

As prices for grid power are expected to increase and cost for solar power is expected to fall, solar will become competitive in more and more locations across India. This means that more and more states and customer segments will find investing in solar a lucrative option.

We expect that the parity-based demand for the commercial segment with enablers such as capital subsidy from the MNRE, REC mechanism 26 , accelerated depreciation and corporate social responsibility. Developers face difficulties with availing the subsidy benefits, encounter regulatory hurdles with the REC mechanism or might be unable to avail accelerated depreciation due to the financial structuring of the investment. They will increasingly begin to look beyond these enablers and start setting up projects on purely unsubsidized basis. We can expect up to 100 MW unsubsidized projects to come up this year and the trend is expected continue to increase thereafter. This will open up the market for companies that can arrange the upfront investment and have a business model that allows them to sell power to the consumers directly.

----------------------

26 Refer to BRIDGE TO INDIA’s decision brief, ‘REC mechanism – viability of solar projects in India’

Quarterly installations (MW)

Quarterly installations (MW) 9. OUTLOOK The coming quarter is expected to see up to 190 MW

9. OUTLOOK

The coming quarter is expected to see up to 190 MW of projects being commissioned.

Close to 1.5 GW is currently under development in India.

Close to 1.5 GW is currently under development in India. Figure 9-1: Projected quarterly PV installations

Figure 9-1: Projected quarterly PV installations in India

600

500

400

300

200

100

0

Q1-2013 Q2-2013 Q3-2013 Q4-2013 Q1-2014 © BRIDGE TO INDIA, 2013
Q1-2013
Q2-2013
Q3-2013
Q4-2013
Q1-2014
© BRIDGE TO INDIA, 2013

NSM

188

120

0

0

0

Rajasthan

0

0

0

0

50

Madhya Pradesh

0

0

50

25

125

Karnataka

0

0

0

40

20

Tamil Nadu

0

0

0

150

50

Andhra Pradesh

0

0

0

250

300

Others

2.5

70

110

10

15

Total

190.5

190

160

475

560

Source: BRIDGE TO INDIA

9.1

QUARTER

The coming quarter is expected to see up to 190 MW of projects being commissioned. A majority of this capacity is expected to come from delayed projects under batch two of phase one of the NSM.

Close to 1.5 GW is currently under development in India. Projects that are now achieving financial closure and are finalizing vendors are mostly from states like Madhya Pradesh and Karnataka. New projects in Tamil Nadu, Rajasthan and Andhra Pradesh are starting the project development process and are looking for debt financing options.

NSM

The deadline for the commissioning of projects under batch two of phase one of the NSM was February/March 2013, based on the date of signing of the PPA. At this stage, it is expected that all projects that have signed a PPA (340 MW), will get commissioned. In the previous edition of the India Solar Compass, we predicted that a

CURRENT

capacity of 280 MW under the NSM will come online by the end of the last quarter. However, only 210 MW has been commissioned in this quarter. Another 70 MW is known to have been constructed and is ready for commissioning soon. Some of these projects may be fined, depending on their dates of commissioning. Close to 60 MW capacity is delayed and is expected to be fined for this delay.

9.1

OUTLOOK

Madhya Pradesh

The deadline for the commissioning of three projects of 25 MW each and one project for 20 MW in Madhya Pradesh is June 2013. Of this, we expect 50 MW to be commissioned in time and another 25 MW is to be commissioned in the fourth quarter of the year. The remaining 20 MW is expected to be commissioned in the first quarter of 2014. Beyond this, a 105 MW project by Welspun has a commissioning deadline of June 2014 but we expect it to finish before time and in the first quarter of 2014.

LONG-TERM

BRIDGE TO INDIA expects a capacity of over 1 GW to be installed in 2013.

BRIDGE TO INDIA expects a capacity of over 1 GW to be installed in 2013.

expects a capacity of over 1 GW to be installed in 2013. Other projects In the

Other projects

In the last quarter, we had predicted that a part of the capacity for the 125 MW Mahagenco project will be completed in the second quarter of 2013. We expect 50 MW of the capacity to be commissioned within the first week of April. The EPC for this part of the project is being done by Megha Engineering. The remaining 75 MW capacity being executed by Lanco is expected to be commissioned in the third quarter of 2013.

BRIDGE TO INDIA expects a capacity of over 1 GW to be installed in 2013. Going forward, there is a lot of momentum building up for capacity additions

in 2014. Projects under the second phase of the NSM and in states like in Tamil Nadu, Andhra Pradesh, Madhya Pradesh, Karnataka, Rajasthan, Punjab and Uttar Pradesh are all expected to be commissioned next year. By our estimates, 2014 will see a capacity addition exceeding 2 GW. Many international companies dropped India from their group of focus-countries in 2012, which was a slow year. They should now consider and take a look at India again. In addition to volumes, we see a convergence towards more sustainable prices in the market, allowing for better margins for all participants.

10. GUEST ARTICLE Power-One is a leading provider of renewable energy and energy- efficient power

10. GUEST ARTICLE

10. GUEST ARTICLE Power-One is a leading provider of renewable energy and energy- efficient power conversion

Power-One is a leading provider of renewable energy and energy- efficient power conversion and power management solutions and is the world’s second largest designer and manufacturer of photovoltaic inverters. Its renewable energy products enable the industry’s highest yielding conversion of power from solar arrays for use by utilities, commercial enterprises and homes. Power-One has a 40 year history as the leader in high efficiency and high density power supply products for a variety of industries including Renewable Energy, Data Storage & Networking, Industrial and Network Power Systems. The company is headquartered in Camarillo, CA and has global sales offices, manufacturing, and R&D operations in Asia, Europe, and the Americas. Power-One is traded on NASDAQ under the ticker symbol PWER. For more information, please visit www.Power-One.com.

Contact

Chanchal Bhatnagar National Manager - Business Development

+91-9004819358

+91-22-28590771-75

chanchal.bhatnagar@power-one.com

www.Power-One.com

chanchal.bhatnagar@power-one.com www.Power-One.com 10.1 POWER-ONE’S NEWLY LAUNCHED ULTRA SERIES COULD BE THE

10.1 POWER-ONE’S NEWLY LAUNCHED ULTRA SERIES COULD BE THE BEST INVERTER SOLUTION FOR THE INDIAN MARKET

Inverters are an integral part of a solar power plant and special attention needs to be paid for their selection. The key criteria of selection should be reliability with an aim to achieve the lowest LCOE. Innovation and a faster turn-around time from R&D to the field will be the key success factors for inverter suppliers in the market. Power-One understands this and has launched a steady stream of innovative products over the years, including the most recent ULTRA series of central inverters that deliver the lowest LCOE in the utility-scale segment.

Central inverters have dominated the Indian market, and Power-One has had a significant market share. Central inverters offer a range of benefits that add up to the lower LCOE. Projects in India are located in high temperature and dusty conditions that can have a negative impact on the performance of some inverters. IP65 rated inverter installations are the need of the hour for projects in India, which require environment-proof enclosures and optimized thermal management. Power-One has a global installed base of 10 GW and installations in multiple geographies with varying temperature conditions. Such products are designed to operate efficiently even in extreme temperature and environmental conditions such as India. The ULTRA series provides IP65 weatherproof construction and thermal management with extra cooling capacity to compensate for solar heat gain. The IP65 architecture allows outdoor placement and helps reduce the project cost as there is no requirement for civil structures for inverter placement. The new range of products have also adopted a new

© BRIDGE TO INDIA, 2013 © BRIDGE TO INDIA,

2013

liquid-cooled modular construction concept with multi MPPT with even grounded PV design thanks to innovative grounding control technology, specifically developed to respond to the most demanding needs of the Utility- Grade market segment.

To be able to get the optimum value for money, Indian clients require products that reduce system cost without impacting system efficiency. Power- One’s ULTRA series incorporates a design for maximum string length and minimum DC current, thus reducing

DC cable and distribution cost while

maintaining system efficiency.

Another key innovation in terms of reduction of the LCOE has been

brought about by migrating from low

AC

voltage conversion (270-350Vac) to

the

industrial standard (690Vac). This

helps in reducing the Low Voltage (LV) distribution cost, cost of AC switches with reduced breaking capacity, reduced size of LV cables and nominal and short-circuit current at the LV/MV transformer, and lower transformer cost by increasing the inverter cluster size which is connected to a larger, standard transformer. This is due to the low common noise introduced by the inverter. Direct conversion to 690Vac while keeping or extending the DC operating voltage window is a major achievement for Power-One’s new proposed power architecture.

Product construction related optimizations can go a long way in creating O&M-oriented power architecture. Power-One’s ULTRA series incorporates a R&D driven

approach to create product architecture suitable to client’s requirements. For Power-One’s products, intimate control of power switches on the same cold plate has helped create a compact power module. Modular construction keeps the product light-weight as it reduces demand for large and bulky heat-sinks and weight of magnetic components. This is extremely beneficial in Indian conditions where

the access to sites is obstructed by

large and bulky equipment.

33

33

SOCOMEC started its operations in India in 1992. Spread across 16 locations and having regional
SOCOMEC started its operations in India in 1992. Spread across 16 locations and having regional

SOCOMEC started its operations in India in 1992. Spread across 16 locations and having regional offices in all metros. The SOCOMEC factory is located near Gurgaon and produces a wide range of load break switches, manual and motorized changeover switches adapted to Indian standards. Our dedicated service specialists are available 24/7 to help to increase the service life and availability of customer’s most critical electrical installations.

Socomec is a specialist for Solar PV installations and has supplied PV switches for almost 300 MW of Solar PV installations. Some of our larger projects include Adani Power, Welspun and Mahagenco (Lanco). Apart from Solar PV switches, other vital solar PV balance of plant components that are manufactured by Socomec, include DC surge protection devices, PV fuses and disconnects and motorized PV switches and PV duty source changeover switches.

Contact

P: +91 44 39215423 F: +91 44 39215450 info.solar.in@socomec.com www.socomec.co.in

+91 44 39215450 info.solar.in@socomec.com www.socomec.co.in 10.2 SOCOMEC: WHY LARGE CENTRAL INVERTERS ARE NOT AN IDEAL

10.2 SOCOMEC:

WHY LARGE CENTRAL INVERTERS ARE NOT AN IDEAL SOLUTION FOR THE INDIAN SOLAR MARKET

The key benefit of a central inverter is cost. The bottom line is that large central inverters would cost less per watt than string or micro inverters. This is the reason why most utility projects in India and also across the world opt for larger central

inverters. It can be argued that having

a single conversion point simplifies

grid management for such large applications. The main disadvantage

of having a central inverter is that

a system is “only as strong as

its weakest link”. There can be a considerable production loss in the event of a breakdown (single point of failure).

Given the risk of a single point of failure for central inverters and

a relatively high cost for string

inverters, Socomec’s SUNSYS PARK inverters are the ideal solution for photovoltaic applications in solar parks. This product range is composed of three independent 33kW hot swap modules (allowing rapid extraction and replacement even in operation), connected in parallel on the output; three modules in one system of 100KW and several system in parallel to reach several MW as installed power. This modular architecture, along with high efficiency inverter topology (the three- level conversion bridge) and the DPC “Dynamic Power Control” function, optimize energy production at all levels of sunlight. This will allow for the price competitiveness of a central inverter and the redundancy related to a string

© BRIDGE TO INDIA,

© BRIDGE TO INDIA, 2013

2013

inverter. Given the average annual sunlight levels, photovoltaic installations mostly operate in conditions of variable brightness. It is therefore essential that the inverter is efficient, despite the unfavorable weather conditions. The modular architecture and Dynamic Power Control (DPC) function allows for the optimization of plant efficiency. Modular architecture provided by Socomec’s SUNSYS PARK inverters optimizes overall efficiency by only using the power modules it requires. Fewer modules are used in partial sunlight conditions which operate with a greater load and consequently, with greater efficiency.

DPC mode activation for these inverters share the power generated by the field between the various inverter modules. If one module is faulty, the remaining modules can sustain the energy production to their maximum capacity, reducing energy loss to a minimum. The system will automatically reconfigure in order to use the remaining modules as best as possible. The system optimizes the efficiency of the installation by turning off modules that are not required, in the event of low levels of sunlight, thereby making the remaining modules work at a higher load level and consequently, with greater efficiency.

Socomec supports the rapidly growing local PV market and an increase in energy demand through a wide range of grid tied and innovative solution (Hybrid and Storage) based on specialized support and organization. Socomec’s other business applications includes Critical Power, Power Control and Safety and Energy efficiency products.

34

34

11. ANNEXURE 11.1 GLOSSARY OF TERMS BOS - Balance of System BREDA – Bihar Renewable

11. ANNEXURE

11. ANNEXURE 11.1 GLOSSARY OF TERMS BOS - Balance of System BREDA – Bihar Renewable Energy

11.1 GLOSSARY OF TERMS

BOS - Balance of System

BREDA – Bihar Renewable Energy Development Agency

CSP - Concentrated Solar Power

CSR – Corporate Social Responsibility

CAGR – Compound Annual Growth Rate

CLU – Change of Land Use

DISCOM – State Distribution Company

DCR – Domestic Content Requirement

EPC - Engineering, Procurement and Construction

EHT – Extra High Tension

EMD – Earnest Money Deposit

E-EPC – Electrical EPC

FiT - Feed-in Tariff

GAIL – Gas Authority of India Limited

IRR - Internal Rate of Return

LCOE – Levelized Cost of Electricity

LT – Low Tension

LoC - Letter of Credit

LoI - Letter of Intent

MNRE - Ministry of New and Renewable Energy

MOU – Memorandum of Understanding

NSM - National Solar Mission

NTPC – National Thermal Power Corporation

NVVN - NTPC Vidyut Vyapar Nigam

NCEF – National Clean Energy Fund

OPEX – Operating Expense

PV – Photovoltaic

PID – Potential Induced Degradation

PPA - Power Purchasing agreement

REC - Renewable Energy Certificate

RPO - Renewable Purchase Obligation

RfP – Request for Proposal

RRECL – Rajasthan Renewable Energy Corporation Limited

SPO - Solar Purchase Obligation DISCOMS - State Distribution companies SEB - State Electricity boards
SPO - Solar Purchase Obligation DISCOMS - State Distribution companies SEB - State Electricity boards

SPO - Solar Purchase Obligation

DISCOMS - State Distribution companies

SEB - State Electricity boards

SERC - State Electricity Regulatory Commission

TANDEGCO - Tamil Nadu Generation and Distribution Corporation

TNERC – Tamil Nadu Electricity Regulatory Commission

TCO – Total Cost of Ownership

VGF - Viability Gap Funding

VAT – Value Added Tax

WTO – World Trade Organization

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A

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BRIDGE TO INDIA is a consulting company with an entrepreneurial approach based in New Delhi, Munich and Hamburg. Founded in 2008, the company focuses on renewable energy technologies in the Indian market. BRIDGE TO INDIA offers market intelligence, strategic consulting and project development services to Indian and international investors, companies and institutions. Through customized solutions for its clients, BRIDGE TO INDIA contributes to a sustainable world by implementing the latest technological and systemic innovations where their impact is the highest.

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