Bridge To India - India Solar Compass April 2013

INDIA SOLAR COMPASS
April 2013 Edition

Market Dashboard A snapshot of the markets fundamentals Latest Market In-sights An analysis of the policies, projects, industry and nance 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
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CONTENTS
1 Overview 2 Market Dashboard
2.1 Market Compass 2.2 Indian Solar Market Prices 2.3 Installed Capacity in India 01 02 02 02 03 04 07 07 08 09 09 10 11 13 13 14 17 19 19
3 Key Findings 4 Policies

4.1 National Solar Mission 4.2 Tamil Nadu Solar Policy 4.3 Andhra Pradesh solar policy 4.4 Kerala Solar Policy (Draft) 4.5 Punjab Solar Policy 4.6 Uttar Pradesh Solar Policy
5 Projects
5.1 New Installations (grid connected) 5.2 Status of on-going projects (PV)
6 Financing 7 Upstream Industry Analysis

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

8.1 Background 8.2 Market fundamentals 8.3 Bottlenecks to adoption of distributed solar power 8.4 Case for parity driven adoption of rooftop solar 8.5 Way forward
22 22 22 25 26 30 31 31 31 31 33 34
9 Outlook
9.1 Current quarter 9.2 Long-term outlook
10 Experts view
10.1 Power-Ones newly launched ULTRA series tries to provide the best inverter solution for the Indian market for the Indian market 10.2 Socomec: Why large central inverters are not an ideal solution
11 Annexure
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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: Indias widening energy decit 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) 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 been in phase one.
In the previous quarter (January to March 2013), allocations in states such as Tamil Nadu and Andhra Pradesh have captured the industrys attention. Towards the end of the quarter, Uttar Pradesh and Punjab announced their rst 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 urry 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 nancing. 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 Bonglioli 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.
India is slowly evolving into a manufacturing destination for solar inverters.
01
2. MARKET DASHBOARD 2.1 MARKET COMPASS

E UR
NA S
NT CE
MA T
Key drivers for the direction of the market

Regulatory Environment Execution Challenges Financing Viability Source: BRIDGE TO INDIA
2.2 INDIAN SOLAR MARKET PRICES

PV Lowest FiT Interst Rate Average Capex c-Si modules (China, Taiwan) Thin Film modules (US and Malaysia) c-Si modules (Japan, Europe) Thin Film modules (Japan) *$ rate has been used to avoid effect of currency uctuations All prices are for a reference 10MW project All prices are without duties and taxes
Source: BRIDGE TO INDIA
` 6.45/kWh ` 68 /W $ 0.63/W* $ 0.57/W* $ 0.70/W* $ 0.65/W*

BRIDGE TO INDIA, 2013 02
13%
IN
R E M
GI
NG
GR
OW
2.3 INSTALLED CAPACITY IN INDIA

7.8MW
ALL INDIA
36%
PV
HARYANA
CSP
6%
25%
PUNJAB
75% PV 8 MW
3 MW
UTTARAKHAND
PV
PV 1,416.8 MW
22%
3% 9%
5 MW
15%
RAJASTHAN 9% 9% 2% 2%
8%
2.5 MW
CSP
DELHI
PV
58%
1% 2% 3% 2%
PV 12 MW
45%
42%
2 MW
PV 441 MW
55%
CSP 5.5 MW
23%
UTTAR PRADESH
46%
1%
2 MW
PV
WEST BENGAL
PV 824.09 MW
61%
38%
58%
16 MW
PV
GUJARAT
12% 46%
PV
PV 12 MW
JHARKHAND
42%
ODISHA
21%
PV 24.2 MW
4 MW
21%
CHHATTISGARH
36%
7.25 MW
PV
28%
72%
MAHARASHTRA
64%
MADHYA PRADESH
47% 44%
PV 14 MW
33%
PV 22.5 MW ANDHRA PRADESH
KARNATAKA
33%
PV 15 MW
33%
TAMIL NADU
9%
Note: Circle sizes are only indicative and do not represent the actual difference in installed capacity.
KEY
Gujarat Solar Policy Phase 1 Migration Gujarat Solar Policy Phase 2 NSM Batch 1, Phase 1
Generation Based Incentive NSM Batch 2, Phase 1 Demo Project RPSSGP REC Mechanism
Direct RPO Project
03
3. KEY FINDINGS
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 nancial year will be put on hold until the end of the nancial 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 rst 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 Pradeshs 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 nancial burden of Renewable Purchase Obligations (RPOs) from the stateowned 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 rst 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 xed 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 nalized 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 15th 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 signicant 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.
04
5. The nancial bids for the allocation of 100 MW of solar PV projects in Rajasthan were opened on February 11th 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, Welspuns 130 MW project in Neemuch district of Madhya Pradesh has arranged for nancing and has selected its equipment suppliers. 9. Projects allocated in Karnataka last year are nearing nancial 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.
it is not clear how the lenders will react to such projects.
3.4 INDUSTRY ANALYSIS
1. There are up to 18 prominent inverter suppliers that are present in the Indian market. However, just six companies, i.e., SMA, Bonglioli, 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 1. In the last quarter (January and outdoor inverters (IP65 without March 2013), nancial closures the requirement of additional have being achieved for multiple casing). projects in Madhya Pradesh and 8. Many inverter companies that Karnataka. manufacture indoor inverters can 2. It is likely that developers in both also provide the enclosure for Tamil Nadu and Andhra Pradesh outdoor placement. will opt for construction/bridge 9. Currently, central inverter prices nancing to complete their projects in India range between ` 4.2 ( on time. 0.06/$ 0.08)/kWp (output) and ` 3. Many project developers are now 7.8 ( 0.11/$ 0.14)/kWp (output), looking at the third-party PPA depending on the type and brand of market. Some PPAs have already the inverter. emerged from this commercial parity driven market segment but
3.3 FINANCING
05
3.5 KEY QUESTION: IS DISTRIBUTED SOLAR PV READY TO TAKE OFF IN INDIA?
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, 1. Demand creation for distributed Rajasthan and Madhya Pradesh can power generation through market also reduce their energy costs if fundamentals is more predictable they go through the subsidy route. and truly scalable. 13. Industrial tariffs are typically 102. Plant costs for solar projects have 15% lower than commercial tariffs. fallen by 58% in the last three Due to this reason, the industrial years. segment might scale up later than 3. India had a peak power decit of the commercial segment. 9.3% during the ve years ending in 14. States like Delhi, Maharashtra, 2012. Odisha, Gujarat and West Bengal 4. A key cause of India's power decit are fairly close to being viable is a shortage of coal, which fuels destinations for the use of solar 57% of the country's power plants. power by industrial consumers 5. The distribution utilities without any subsidies. cumulative losses rose to ` 1.9 tr 15. In 2016, industrial consumers ( 29 bn/$ 38 bn) in FY-2011 from in Maharashtra, Delhi, Kerala, ` 1.22 tr ( 18 bn/$ 24 bn) in F.YAndhra Pradesh, Tamil Nadu, 2010. Gujarat and Karnataka will achieve 6. States like Tamil Nadu, Odisha, unsubsidized grid parity. Jharkhand, Kerala and Delhi have already raised tariffs by as much as 16. The residential solar market in India is the largest segment and its 15-30% in the past year. opening promises a change of the 7. The power situation in most entire landscape in India. However, parts of India is unreliable and as the tariffs for residential consumers use multiple backup consumers are up to 20% lower solutions to have power during than the industrial tariffs, an frequent grid outages. unsubsidized residential solar 8. Captive diesel power generation, market will become truly scalable kerosene-based power generation only at a later stage. and battery-based backup are 17. Unsubsidized solar power is some of the common options. already feasible in some parts 9. In India, the power tariffs vary of the country. As prices for grid by state and also the type of power are expected to increase and consumer. Hence, there is no single cost for solar power is expected frame of reference for grid parity. to fall, more and more states 10. Commercial consumers in India and customer segments will nd will be the rst to adopt solar investing in solar a lucrative option. power as parity for them will be reached the earliest. 11. Solar power is already cheaper than grid power for commercial
06
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).
4.1 NATIONAL 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 3rd 20121. Comments and recommendations on the draft were accepted until December 15th 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 bidding3. 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). 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 scal decit in the country4. Even though the funds for the allocation process have been approved, like all other ministries, the MNRE also faces other budgetary cuts. According to unconrmed reports, the MNRE has been provided only a small fraction of the requested budget for its off-grid capital subsidy scheme for the next nancial year. There are
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 nancial year will be put on hold until the end of the nancial 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-lm modules as well. This will pose a risk for sales by US based thin-lm manufacturers. To protest against such a measure, on February 6th 2013, the US led a complaint with the World Trade Organization (WTO) over DCR under Indias National Solar Mission (NSM), which it said discriminates against foreign solar products, including the ones made in the US. The MNRE has always justied the DCR by arguing that since it is nancially 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 Canadas 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
The US led a complaint with the World Trade Organization (WTO) over the Domestic Content Requirement (DCR) under Indias National Solar Mission (NSM), which it said discriminates against foreign solar products, including the ones made in the US.
---------------------1 Draft policy document: Phase two of the National Solar Mission (NSM) 2 Refer to the October 2012 edition of the India Solar Compass to read more. 3 Refer to the January 2013 edition of the India Solar Compass 4 Refer to the weekly update - Scaling back of government subsidies set to shake up the Indian solar market
Tamil Nadu received 92 applications for 104 projects, totalling a capacity of only 499 MW. This was the rst time a public tender for FiT based allocation was under-subscribed in India.
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.
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 rst 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 rst 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.
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 5th 2012. The results for Expression of Interest were announced on January 4th 2013 and the state received 92 applications for 104 projects, totalling a capacity of only 499 MW. This was the rst 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 offtaker5, absence of a comprehensive payment security fund to back the PPA, absence of the PPAs 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 INDIAs blogs on Tamil Nadu to understand each of these issues in detail)6. The lowest bid was ` 5.97( 0.09/ $0.12)/kWh (at an annual escalation of 5% for the rst 10 years of the 20 year PPA). This rendered the L1 process ineffective as, in an under-subscribed
Tamil Nadu plans to release another tender for 774 MW to achieve the planned allocation capacity of 1,000MW. In all probability, this tender will also be undersubscribed as the basic issue of bankability is not likely to be resolved.
---------------------5 Refer to BRIDGE TO INDIAs Tamil Nadu Policy Brief 6 Posts on Tamil Nadu on the BRIDGE TO INDIA blog
4.3 ANDHRA PRADESH SOLAR POLICY: REQUEST FOR SELECTION FOR The power decit in the 1,000 MW
southern grid in India has gone up from 3% in 2011 to 16% in January 2013.
of power and high procurement costs in the short term power supply market. However, Andhra Pradesh power distribution companies have traditionally had a strong balance sheet as the state has a history of raising consumer tariffs regularly. This inspired more condence from the The power decit in the southern grid project development community and in India has gone up from 3% in 2011 to Andhra Pradeshs solar project tender 16% in January 2013. Like Tamil Nadu, was oversubscribed,with bids were Andhra Pradesh also needs access received from 184 applicants who bid to more power as soon as possible. for a total capacity of 1,340 MW. The The state released its solar power lowest bid (L1) in the whole of Andhra policy on September 26th 2012 and had Pradesh was at ` 6.58 ( 0.10/$ 0.13)/ released a request for selection for kWh. At some substations the L1 is as 1,000 MW thereafter. Like Tamil Nadu, high as ` 8.89 ( 0.14/$ 0.18)/kWh. Andhra Pradesh has also planned an L1 process for the nal tariff The stark difference between determination but in Andhra Pradeshs allocations in Tamil Nadu and Andhra case, the lowest bid is to be considered Pradesh goes to show the kind of at the substation level as compared to impact bankability and process the state wise L1 in Tamil Nadu (this management can have on developer takes into account different land costs interest. and irradiation levels across the state). Andhra Pradesh learnt from the mistakes committed by Tamil Nadu and increased the time durations for nancial 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 nancial duress, owing to the states decit
---------------------7 Kerala Solar Policy Draft 8 Keralas 10,000 solar rooftop programme
4.4 KERALA SOLAR POLICY (DRAFT)

The south Indian state of Kerala has published a draft solar policy7 on February 27th 2013. This makes it the ninth Indian state to release a solar specic 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 programme8. Until now, all state and central solar policies have emphasized utility scale projects. Keralas 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 states no load-shedding-campaign). This policy is a rst step in the right direction and is expected to lead
Kerala has set itself a target of an installed capacity of 500 MW by 2017 and 1,500 MW by 2030.
Given the poor nancial 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.
a signicant development in India towards the implementation of netmetering 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 policy9.) Like Tamil Nadu, Kerala has also tried to pass on the nancial 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. Given the poor nancial health of most Indian state Discoms10, 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 nancial health. Ultimately, the Discoms will have to pass on the RPO burden on the consumers anyway. The mechanism can be made more
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 Certicate (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) document11 for allocation of 300 MW of solar PV in the rst 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 201212 , 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 projects land requirement and exemption from change of land use (CLU) charges. There is no DCR under the policy. Punjab is the rst 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.
The north Indian state of Punjab has released a request for proposal (RfP) document for allocation of 300 MW of solar PV in the rst phase of its state solar policy.
---------------------9 Refer to BRIDGE TO INDIAs Tamil Nadu Solar Policy Brief 10 Refer to BRIDGE TO INDIAs decision brief, Bankability and debt nancing for solar projects in India 11 Refer to the RfP document. 12 Refer to the Punjabs renewable energy policy document.
The allotment of project capacities in this category will be in the multiples of 1 MW.
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.
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.
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
The Uttar Pradesh policy aims to achieve an installed capacity of 500 MW till March 31st 2017. In the rst phase of the policy based allocations, the state has announced a bidding process for a 200 MW capacity on March 15th 2013.
Uttar Pradesh has updated and nalized its solar policy and it is now called Uttar Pradesh Solar Policy 201313. The policy aims to achieve an installed capacity of 500 MW till March The benchmark tariffs for the bidding 31st 2017. In the rst phase of the process have been xed at ` 8.75 ( policy based allocations, the state has 0.13/$ 0.18)/kWh for companies not availing accelerated depreciation and ` announced a bidding process for a 200 7.87 ( 0.12/$ 0.16)/kWh for companies MW capacity on March 15th 2013. availing accelerated depreciation. A unique aspect about this allocation The RfP allows a period of six months is that the PPA will only be signed for achieving a nancial closure for a period of 10 years. This period and 13 months for commissioning covers a typical debt repayment period from the date of signing the PPA. and lenders should not have issues The developers have to submit bank with regards to the PPA timeframe. guarantees worth ` 4m ( 615,000/$ Moreover, assuming that a project 800,000)/MW. Developers face a ne signs a PPA at a tariff of around ` 7 of 30% of this guarantee in case the project is delayed up to one month and ( 0.11)/$ 0.14)/kWh, it will be able to sell power at a tariff greater than the the entire guaranty will be en-cashed current tariff in 2023. As per BRIDGE for a delay of two months. TO INDIA, a smaller time period for the The Punjab policy is expected to attract PPA can actually be benecial for the developer. higher tariffs than other states like
Figure 4-1: Schedule for participation in the Punjab Solar Policy

Event Date of uploading / publishing of e- NIT (RfS) Last Date for submission of pre-bid query / clarications to be submitted online. Pre-bid meeting at PEDA ofce Schedule 11th March, 2013 at 10.00 AM 26th March, 2013 3rd April, 2013 at 11.30 AM
Last date & time for submission of processing 25th April, 2013 at 12.00 noon fee (non-refundable), earnest money deposit (EMD), formats and technical bid and nancial bid though e-bid Date and time of opening of techno commercial e-bid Date of opening of price bid
Source: BRIDGE TO INDIA ---------------------13 Refer to the Uttar Pradesh solar policy document.
25th April, 2013 at 12.30 PM To be conveyed separately
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 Date of issue of RfP Schedule Zero Date Date 15/03/2013 25/03/2013
Submission of written Zero date + 10 days clarication / amendments if any, on the RfP / RfP documents by the bidders. Pre-bid meeting Revision of RfP and RfP documents (if required) and issuance of revised RfP and RfP documents Bid submission and opening of non-nancial bid Financial bid opening Zero date + 20 days Zero date + 26 days
04/04/2013 10/04/2013
Zero date + 41 days Zero date + 56 days
25/04/2013 10/05/2013 10/06/2013 Exact date will be communicated to successful bidders.
Approval of bids and issue of LoI Zero date + 87 days to Successful bidder(s) Signing of PPA Zero date + 105 days
Commissioning of solar PV power Plant

Signing of PPA + 13 months
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Completion of the following tasks: a. Financial closure of the project. b. Land allotment/ purchase. c. Grant for grid connectivity approval.
Zero date + 315days
5. PROJECTS 5.1 NEW INSTALLATIONS (GRID

CONNECTED)
Figure 5-1: New Grid connected solar projects installed in the previous quarter January1st to March 20th 2012
RAJASTHAN
Size - 2.5 MW Technology - PV Off-take - REC Mechanism Developer - Kanoria Chemicals Ltd. Size - 20 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 - Azure Power India Ltd. Size - 15 MW Technology - PV Off-take - NSM Phase 1, Batch 2 Developer - Fonroche Rajhans Energy Pvt. Ltd. Size - 5 MW Technology - PV Off-take - NSM Phase 1, Batch 2 Developer - GAIL Size - 8 MW Technology - PV Off-take - NSM Phase 1, Batch 2 Developer - Green Infra Solar Projects Ltd Size - 20 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 - Welspun Solar AP Size - 15 MW Technology - PV Off-take - NSM Phase 1, Batch 2 Developer - Welspun Solar AP Size - 15 MW Technology - PV Off-take - NSM Phase 1, Batch 2 Developer - Welspun Solar AP Size - 36 MW Technology - PV Off-take - REC Mechanism Developer - Malpani Group 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 - SEI Solar Power
GUJARAT
Size - 5 MW Technology - PV Off-take - Gujarat Phase 2 Developer - Aatash Power Pvt. Ltd. Size - 2 MW Technology - PV Off-take - Gujarat Phase 2 Developer - Claris LifeScience Ltd Size - 15 MW Technology - PV Off-take - Gujarat Phase 1 Developer - Driesatz My Solar Size - 15 MW Technology - PV Off-take - Gujarat Phase 1 Developer - Mi My Solar Size - 25 MW Technology - PV Off-take - Gujarat Phase 2 Developer - Responsive Sutip Limited Size - 5 MW Technology - PV Off-take - Gujarat Phase 2 Developer - Yantra eSolarIndia Private Limited Size - 5 MW Technology - PV Off-take - Gujarat Phase 2 Developer - Euro Solar Power Private Limited Size - 25 MW Technology - PV Off-take - Gujarat Phase 2 Developer - Chattel Constructions Private Limited
MAHARASHTRA
Size - 5 MW Technology - PV Off-take - NSM Phase 1, Batch 2 Developer - Shree Saibaba Green Power
Project sizes in Gujarat have been updated to two decimal places. As the actual installation gures are not the same as allocated capacity in many cases, there has been a downward adjustment in our overall numbers. Ourprevious gures had overestimated the capacity by 3.19MW, we have adjusted this to correct the total capacity depicted.
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Note: Projects in Gujarat were commissioned in the last quarter, but were not covered in the previous edition of the INDIA SOLAR COMPASS.
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.
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.
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 nancial bids for the allocation of 100 MW of solar PV projects in Rajasthan were opened on February 11th 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 rst 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 nancial sense if the developer is making full use of accelerated depreciation benets. 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
5.2 STATUS OF ONGOING PROJECTS (PV)

National Solar Mission
As of April 8th 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*. In the January 2013 edition of the India Solar Compass, we had mentioned that Belectric was involved in the EPC consortium. However, Belectric had claried to us that the Memorandum of Understanding (MOU) signed by the consortium EPC partner with Belectric was not honored and hence
Tariffs in Rajasthan could only make nancial sense if the developer is making full use of accelerated depreciation benets.
---------------------*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 20th 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/le-manager/UserFiles/commissioning_ status_spv_phaseI_batchII.pdf. Click here for more information on this correction.
Welspuns 130 MW project in Neemuch district of Madhya Pradesh has arranged for nancing and has selected its equipment suppliers.
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 benet. 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 benet as they will be able to make best use of such accelerated depreciation benets. Apart from that, these companies will also be able to avail recourse-based debt nance for the projects. Non-recourse nancing in Rajasthan will be extremely difcult given the poor long term payment security for the PPA signing entity, Rajasthan Renewable Energy Corporation Limited (RRECL).
(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 nancial 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).
Madhya Pradesh Atria Power became Indias rst company to get REC accreditation for a CSP project. This project is to have a capacity of 3 MW.
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.
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 Welspuns 130 MW project in is located in Rajasthan and 6.65 MW Neemuch district of Madhya Pradesh is located in Maharashtra. Instead of has arranged for nancing and has the planned 33 MW, the company has selected its equipment suppliers. gone ahead and constructed 36 MW in Some delays can be expected for Rajasthan. The EPC contract for this projects such as Alpha Infra Properties project had been awarded to Sterling & and MK Solar as there is no report on Wilson. According to industry sources, ground work having been started for this project is completely equity any of them. backed.
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
Atria Power became Indias rst 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.
15
Figure 5-2: List of projects14 accredited under the REC mechanism

State RE Generator Capacity (MW) 2 0.5 2.5 1 1 0.5 1 0.5 0.5 0.105 2 6.65 1 1 8.5 1 2.5 0.1 5 11 3 19 1.5 0.25 5 1.055 Date of Accreditation 29-01-13 16-02-13 16-02-13 31-01-13 30-01-13 30-01-13 04-12-12 04-12-12 09-05-12 09-05-12 03-02-12 16-03-13 12-06-12 06-06-12 20-10-11 16-03-13 28-01-13 08-03-13 06-03-13 05-03-13 05-03-13 05-03-13 04-02-13 31-08-12 28-03-12 20-02-12 Commissioned
Chhattisgarh Amvensys Technologies Pvt. Ltd. Madhya Pradesh AgarwalJewellers KRBL Ltd. Saboo Sodium Chloro Ltd. Tuhina Enterprises Saboo Industries Deepak Spinners Ltd. Star Delta Transformers Ltd. M/s Gupta Sons Omega Rank Bearings Pvt. LTD M AND B Switchgears Ltd. Maharashtra Giriraj Enterprises Enrich Energy Pvt. Ltd Jaibalaji Business Corporation Pvt.. Ltd. Jain Irrigation Systems Ltd., Odisha MBPS Control & Power system Ltd. OCL India Ltd. Rajasthan Hasya Enterprises Pvt. Ltd. BMD Pvt. LTD Giriraj Enterprises Giriraj Enterprises Giriraj Enterprises Impact Solar Power Pvt. Ltd. R. H. Prasad & Company Pvt. Ltd. Kanoria Chemicals & Industries Ltd. Tamil Nadu Swelect Energy Systems Ltd.

BRIDGE TO INDIA expects that many of debt nance will be extremely difcult the other newly accredited projects will for most of them15. not be able to come online as securing
---------------------14 Source: REC registry India 15 Refer to BRIDGE TO INDIAs decision brief, The REC Mechanism Viability of Solar Projects in India to read more about the risks surrounding the REC mechanism.
6. FINANCING
In Andhra Pradesh, less than 20 out of close to 175 bidding companies have prior project development experience.
In the last quarter (January March 2013), nancial closures have being achieved for projects in Madhya Pradesh and Karnataka. According to reports, Welspun has achieved nancial closure for its 130 MW project in Madhya Pradesh, through syndication of debt from multiple lenders with Central Bank of India16 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 Welspuns 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 nancial closure and perhaps look for better terms of re-nancing only at a later stage. It is likely that developers in both Tamil Nadu and Andhra Pradesh will opt for construction/bridge nancing to complete their projects on time. Bridge nancing can be sourced by using the following means18:
The developer needs to be in possession of land and a Letter of Intent (LoI) from the EPC companyto be considered for bridge nancing by an institution.
1. Equity - A developer may put in In the last quarter, new projects equity to meet the requirement were allocated in Tamil Nadu and of funds.This is the quickest and Andhra Pradesh (refer to the policy easiest option. However, not all the section of this report to read about developers have sufcient cash the bankability of the respective offand even those who do, might takes). In the upcoming quarter, these prefer using a short-term debt will be seeking nance. Due to the instrument. poor nancial health of the off-taker in Tamil Nadu, it is unlikely that any 2. Pre-nancing by EPC companies developer will be able to achieve non Pre-nancing by EPC companies recourse nancing. In Andhra Pradesh, is prevalent in Europe and the less than 20 out of close to 175 US, but has hardly been used bidding companies have prior project in India. Even in these regions, development experience. We expect construction nance is provided many of the new project developers to only by certain EPCs that are large also face issues in achieving nancial in size and for certain customers closure. where the risk is considered low. In India, it is extremely rare for an The deadline for commissioning in EPC to provide pre-nancing for Tamil Nadu is January 2014. Due construction. This is primarily due to the bankability issues in Tamil to the low margins for EPCs in India Nadu17, lenders are expected to be and the perceived construction risk. hesitant in lending to projects in 3. Bridge nancing from a nancial the state. The deadline for projects institution Bridge nancing under the Andhra Pradesh allocation is usually available from most is expected to be May 2014 and the lenders at a higher interest rate. state will nancially reward projects The differential is usually of about for early commissioning. For projects 100 basis points.Disbursement that are commissioned within ten is much quicker. The developer months from the date of signing of needs to be in possession of land the PPA, a developer will be awarded and a Letter of Intent (LoI) from the ` 300,000 ( 4,615/$ 6,000)/MW, for EPC companyto be considered for project commissioned within 10-11 bridge nancing by an institution. In months from the date of signing the such a situation, the EPC needs to PPA, a developer will be rewarded
---------------------16 Central Bank of India is a commercial bank and should not be mistaken for the Reserve Bank of India 17 Refer to BRIDGE TO INDIAs Tamil Nadu Solar Policy Brief to read more. 18 Refer to BRIDGE TO INDIAs decision brief. Bankability and debt nancing for solar projects in India to read in more detail.
take an additional risk of spending resources on design and planning, before they know that the project debt has been closed.
Due to the oversupply of modules in the market, some form of supplierscredit 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.
4. Suppliers credit Suppliers credit is not a debt instrument but is used to ease the cash ow 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 supplierscredit 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 nancing 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 llip required for a goahead 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.
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7. UPSTREAM INDUSTRY 7.1 INVERTER ANALYSIS SUPPLY IN INDIA

Just six companies, i.e., SMA, Bonglioli, Schneider, ABB, AEG and Power-One make up for 87% of the current inverter market share 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 market19. However, just six companies, i.e., SMA, Bonglioli, Schneider, ABB, AEG and Power-One make up for 87% of the current inverter market share in India20. From these six companies, power solution companies such as AEG, ABB and Schneider are already manufacturing solar inverters in India. SMA and Bonglioli have also announced plans to do so. Local manufacturing can reduce costs and highlights a companys 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 benets 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 signicantly 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
As of January 2013, central inverters accounted for 95% of the installed capacity in the country.
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)
1.8% 4.0% 2.5% 4.2% 7.8% 8.0%
23.6%
SMA PowerOne Schneider Electric ABB Refusol

21.9%
AEG Siemens Electronica Santerno Others
8.4% 18.6%
---------------------19 BRIDGE TO INDIA tried to reach out to all the inverter companies operating in India but only Bonglioli, ABB, AEG, Delta, Ingeteam and Santerno have conrmed 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 cheapest and it is not their intention to be the cheapest suppliers in the market.
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.
None of the inverter companies have announced any plans to launch India-specic product designs. This may in part be due to a concern that an India-specic inverter might be considered a low price, low quality product.
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. Many of the larger suppliers by SMA, which has the largest market market share categorically state that share so far, offers robust, outdoor they are not the cheapest and it is inverters and Bonglioli, which has the not their intention to be the cheapest second largest market share so far, suppliers in the market. Their key offers modular inverters. This goes to sales argument revolves around life show that most developers and EPC time, reliability and Total Cost of companies understand the benets of Ownership (TCO). However, price is quality. Against popular belief, they are still important and suppliers are under not driven primarily by the equipment pressure to offer lower prices. SMA cost. Currently, central inverter prices has traditionally been able to charge a in India range between ` 4.2 ( 0.06/$ premium for its product differentiation, 0.08)/kWp (output) and ` 7.8 ( 0.11/$ global brand perception and local track 0.14)/kWp (output), depending on the record, Other prominent suppliers type and brand of the inverter. such as Bonglioli, ABB, AEG and Schneider21 compete with each other Given the high temperature conditions on quality at a competitive price. Based and issues related to grid stability, on the available details on the current there might be a need for an India sales pipeline of these suppliers, specic inverter design. All the Bonglioli and ABB are gaining market inverters that are being used in the share aggressively and if SMA wants to Indian market are global products. Till maintain its market share, it will also date, none of the inverter companies have to start competing with them on have announced any plans to launch price. India-specic product designs. This may in part be due to a concern that Central inverters being supplied an India-specic inverter might be in India can broadly be categorized considered a low price, low quality into three types: monolithic-indoor product. Some companies like ABB, inverters, modular-indoor inverters AEG and Bonglioli offer inverters that and outdoor inverters (IP65 without have high operating temperatures and the requirement of additional casing). are also open to making some software Modular and monolithic differ on and hardware changes to ensure that product design. As the names suggest, the inverters are compatible with the modular inverters are made up of dynamic reactive power requirements separate modules that help avoid a of the Indian grid. Some companies single point of failure and provide manufacturing in India also allow for more exibility in terms of number the customization of their standard and type of DC inputs. For example, products in terms of cabinets, display Bongliolis 1 MW inverter is made panels, fuse ratings, DC side inputs, up of ve modules of 200 kW each. etc. This is mostly done as per the Outdoor inverters, as compared to customers technical requirements but indoor inverters can be set up at sometimes also for minor reduction in plant location without an extra civil 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 use their Indian facilities to supply to international markets.
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 eld 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)
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8. KEY QUESTION: IS 8.1 BACKGROUND distributed generation market in DISTRIBUTED The India can broadly be categorized into SOLAR PV four segments: READY TO TAKE i) Commercial power consumers, i.e., such as malls, ofce OFF IN INDIA? consumers spaces and retail outlets paying
Commercial power consumers, i.e., consumers such as malls, ofce spaces and retail outlets paying a commercial tariff as high as ` 11 ( 0.17/$ 0.22)/kWh in certain locations.
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.
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 NSMs 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 Nadus 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 MARKET FUNDAMENTALS

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:
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).
BRIDGE TO INDIAs 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 insignicant. 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
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.
---------------------23 The values are at todays exchange rate. Indian currency has depreciated by up to 15% since 2011.
Figure 8-1: Module prices have fallen by 58% in last three years
3.5
1.5 1.0 0.5 04/2011 07/2011 10/2011 01/2012 04/2012 07/2012 10/2012 01/2013 04/2013 0.0
Power decit
A key cause of Indias power decit is a shortage of coal, which fuels 57% of the countrys power plants.
A key cause of Indias power decit is a shortage of coal, which fuels 57% of India had a peak power shortage the countrys power plants. The decit of 9.3% during the ve years is driven by in part by inefciencies in ending in 2012 when over 50,000 Indias coal mining and transportation MW new generation capacity was sector. Importing coal is also getting commissioned24. The capacity addition more difcult Indonesia, South target during the 12th plan period Africa and Australia who are the key (201217) is estimated at 88,537 exporters to India, are becoming more MW comprising of 26,182 MW that is protectionist about their resources. backed by the central government, Taxes on exports from these countries 15,530 MW that is backed by thevarious have been increased, making import state governments and 46,825 MW that of coal more expensive.Increasing is expected from the private sector. domestic mining of coal usually However, no previous plan period in runs into environmental and land India has seen a capacity addition acquisition hurdles causing signicant equal to or greater than what was delays and nancial losses. Indias planned. Most experts therefore expect power decit continues to increase. less to be actually achieved.
Figure 8-2- Indias widening energy decit

1600 1400 1200 1000 800 600 400 200 2013 E 2014 E 2015 E 2016 E 2017 E 0 2005 2006 2007 2008 2009 2010 2011 2012 Demand Supply
13%
---------------------24 Economic survey of India

Billion units
No previous plan period in India has seen a capacity addition equal to or greater than what was planned.
3.0 2.5
USD/Wp
2.0
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-201025. 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
nancial health. The easiest way for SEBsto improve their nancial health is to raise tariffs to a level that truly reects 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 nancial 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.
Figure 8-3: State-wise net internal revenues for 2009-10 (in ` Million) Net internal revenue (` million) - Positive Net internal revenue (` million) - Negative
11,260 9,180 8,060 7,240 1,900 730 660
-112,090
-80,900
Source: Annual Report 2011-12 on The Working of State Power Utilities & Electricity Departments Planning Commission of India
---------------------25 Article: State power boards seek extension of reform programme deadline - Mint
-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
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
Figure 8-4: Cost of commercial power in India has been rising at a CAGR of 6% per annum
12
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.
10
`/kWh
6 4 2 0 2000 2003 2006 2009 2012 2015 2018
Year
such as Germany where the lenders are willing to provide 100% nonrecourse debt. It can be compared to other safe investment avenues such as xed 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 investors expectation of return on a safe investment. Only then it will make sense for them to invest in solar.
8.3 BOTTLENECKS TO ADOPTION OF DISTRIBUTED SOLAR POWER

Lack of access to liquidity The calculation to determine a levelized cost of energy (LCOE) for solar should include the return on investment expectation of at least 8.75%.
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.
When considering the nancial viability of investing in solar, savings in energy cost, i.e., the difference between grid In an operating expense (OPEX) model, power cost and the cost of solar power should be calculated after taking all a third party project developer raises the expenses for the maintenance investment to build the plant and and interest payment to the bankinto thensells the power to the consumer. consideration. Also, the calculation to Companies like Solar City and Sun Run in the US are following this model determine a levelized cost of energy (LCOE) for solar should include the for the residential market. The key concern in this model is the bankability return on investment expectation of at least 8.75% (returns on xed deposit). 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
Underutilization of power generated

For solar power that is installed on a consumers rooftop, there will be times when the power production will be more than the consumption. For example, on public holidays,
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Storage technology is still very expensive and a battery backup can increase the system cost signicantly. For an off-grid system, the increase in system costs due to the use of batteries can be as high as 80%.
consumption for commercial buildings will be signicantly lower than other days. Similarly, a residential consumer might go on a vacation and the power consumption would drop signicantly. This causes a wastage of power generated, decreasing the nancial 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 signicantly. For an offgrid 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 consumers 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 offsetting LCOE of inverter, which can be up to 40% higher than grid tariff.
In parity terms, use of the backup options can only improve the case for solar power. By denition, 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 dening 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 rst to adopt solar power as parity for them will be reached the earliest. Based on BRIDGE TO INDIAs 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
26
Solar power is already cheaper than grid power for commercial consumers in Maharashtra, Delhi and Kerala even without the subsidy.
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 signicantly 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.
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
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 Uttaranchal Bihar Goa Tripura Arunachal Pradesh Mizoram Manipur Assam Jharkhand Meghalaya Nagaland Jammu & Kashmir Himachal Pradesh Chhattisgarh
(`)
0.0
Parity without subsidy Parity with subsidy No parity Solar LCOE without subsidy Solar LCOE with subsidy LCOE for diesel gen-set
Commercial tariff
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 signicantly 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.
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.
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/m2/year, it can be as low as 1,200 kWh/m2/year for states like Sikkim and Arunachal Pradesh. Thereby, considerably increasing the LCOE for solar at these location.
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 INDIAs analysis, Andhra Pradesh, Odisha, Tamil Nadu, Gujarat, Karnataka, West Bengal, For locations where power cuts are Uttar Pradesh, Rajasthan, Punjab frequent, diesel-based generation and Madhya Pradesh will also reach is a common alternative. The diesel commercial parity without subsidy. consumption for a diesel based Uttaranchal, Bihar Goa and Tripura, gen-set decreases/increases almost Mizoram, Manipur and Jharkhand will proportionally to the operating power become viable if capital subsidy is still load. Therefore, the viability of using solar power increases with an increase available.
Figure 8-6: The case for commercial tariff 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
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
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.
The case for industrial consumers

Industrial tariffs are typically 1015% 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 INDIAs 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.
Industrial tariff (`)
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
Figure 8-7: Case for industrial parity across different states in India
16.0 14.0 12.0 10.0 8.0 6.0 4.0 2.0
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 BRIDGE TO INDIA, 2013
Parity with subsidy No parity Solar LCOE without subsidy Solar LCOE with subsidy LCOE for diesel gen-set
0.0
28
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
Industrial tariff in 2 016 (`)
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.
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
16 14
Maharashtra (MSEDCL) Delhi (BSES) Kerala Andhra Pradesh Odisha Tamil Nadu Gujarat (PGVCL/DGVCL) Karnataka Rajasthan West Bengal (Kolkata CESC) Uttar Pradesh Punjab Madhya Pradesh Haryana (except Gurgaon) Bihar Goa Sikkim Uttaranchal Tripura Arunachal Pradesh Mizoram Manipur Assam Jharkhand Meghalaya Nagaland Jammu & Kashmir Himachal Pradesh Chhattisgarh
By 2016, industrial consumers in Maharashtra, Delhi, Kerala, Andhra Pradesh, Tamil Nadu, Gujarat and Karnataka will achieve unsubsidized grid parity.
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 INDIAs 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.
Residential t ariff (`)
12 10 8 6 4 2
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
No parity Solar LCOE without subsidy Solar LCOE with subsidy LCOE for household inverter with battery bank

Figure 8-10: Case for residential parity in 2016

14
Residential t ariff in 2016 (`)
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.
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 inverterbased backup for power cuts. The LCOE calculation of battery-backed inverter assumes its efciency 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.
---------------------26 Refer to BRIDGE TO INDIAs decision brief, REC mechanism viability of solar projects in India
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
In 2016, the residential market will reach parity based on the capital subsidy mechanism in states such as Maharashtra, Delhi, Gujarat and West Bengal.
12
10 8 6 4 2 0
Parity with subsidy No parity Solar LCOE without subsidy Solar LCOE with subsidy LCOE for diesel gen-set
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 nd 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 mechanism26, accelerated depreciation and corporate social responsibility. Developers face difculties with availing the subsidy benets, encounter regulatory hurdles with the REC mechanism or might be unable to avail accelerated depreciation due to the nancial 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.
9. OUTLOOK
The coming quarter is expected to see up to 190 MW of projects being commissioned.
Figure 9-1: Projected quarterly PV installations in India

Quarterly installations (MW) 600 500
400 300 200 100 0

Q1-2013 188 0 0 0 0 0 2.5 190.5 Q2-2013 120 0 0 0 0 0 70 190 Q3-2013 0 0 50 0 0 0 110 160 Q4-2013 0 0 25 40 150 250 10 475 Q1-2014 0 50 125 20 50 300 15 560
NSM Rajasthan Madhya Pradesh Karnataka Tamil Nadu Andhra Pradesh Others Total
9.1 CURRENT QUARTER

Close to 1.5 GW is currently under development in India.
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 nancial closure and are nalizing 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 nancing options.
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 ned, depending on their dates of commissioning. Close to 60 MW capacity is delayed and is expected to be ned for this delay.
9.1 LONG-TERM 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 rst quarter of 2014. Beyond this, a 105 MW project by Welspun has a commissioning deadline of June 2014 but we expect it to nish before time and in the rst quarter of 2014.
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
31
Other projects BRIDGE TO INDIA expects a capacity of over 1 GW to be installed in 2013.
in 2014. Projects under the second phase of the NSM and in states like in In the last quarter, we had predicted Tamil Nadu, Andhra Pradesh, Madhya that a part of the capacity for the Pradesh, Karnataka, Rajasthan, Punjab 125 MW Mahagenco project will be and Uttar Pradesh are all expected completed in the second quarter of to be commissioned next year. By our 2013. We expect 50 MW of the capacity estimates, 2014 will see a capacity to be commissioned within the rst addition exceeding 2 GW. Many week of April. The EPC for this part international companies dropped India of the project is being done by Megha from their group of focus-countries Engineering. The remaining 75 MW in 2012, which was a slow year. They capacity being executed by Lanco is should now consider and take a look expected to be commissioned in the at India again. In addition to volumes, third quarter of 2013. we see a convergence towards more BRIDGE TO INDIA expects a capacity of sustainable prices in the market, over 1 GW to be installed in 2013. Going allowing for better margins for all participants. forward, there is a lot of momentum building up for capacity additions
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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 eld 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.
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BRIDGE TO INDIA, 2013 BRIDGE TO INDIA, 2013 33
SOCOMEC started its operations in India in 1992. Spread across 16 locations and having regional ofces 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 customers 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.
10.2 SOCOMEC: WHY LARGE CENTRAL INVERTERS ARE NOT AN IDEAL SOLUTION FOR THE INDIAN SOLAR MARKET
The key benet 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 simplies 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, Socomecs 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 efciency inverter topology (the threelevel 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
inverter. Given the average annual sunlight levels, photovoltaic installations mostly operate in conditions of variable brightness. It is therefore essential that the inverter is efcient, despite the unfavorable weather conditions. The modular architecture and Dynamic Power Control (DPC) function allows for the optimization of plant efciency. Modular architecture provided by Socomecs SUNSYS PARK inverters optimizes overall efciency 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 efciency. DPC mode activation for these inverters share the power generated by the eld 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 recongure in order to use the remaining modules as best as possible. The system optimizes the efciency 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 efciency. 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. Socomecs other business applications includes Critical Power, Power Control and Safety and Energy efciency products.
Contact
P: +91 44 39215423 F: +91 44 39215450 info.solar.in@socomec.com www.socomec.co.in
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11. ANNEXURE
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 Certicate 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 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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EARN AND SAVE THROUGH SOLAR
BRIDGE TO INDIA offers an exciting business proposition for commercial and industrial electricity consumers and rooftop owners in the eld of rooftop solar energy. We offer ELECTRICITY CONSUMERS a reduction in your electricity bills and ROOFTOP
OWNERS an additional income from your rooftop all at absolutely ZERO INVESTMENT. We will invest in a solar PV plant on your rooftop and provide you with competitively priced, secure power from it.
OUR PROPOSITION
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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. Contact contact@bridgetoindia.com www.bridgetoindia.com Follow us on facebook.com/ bridgetoindia www.bridgetoindia.com/blog
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INDIA SOLAR COMPASS

April 2013 Edition

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BRIDGE TO INDIA, 2013 Illustration by Kavya Bagga

For further enquiries, please contact: Mr. Jasmeet Khurana jasmeet.khuran@bridgetoindia.com

BRIDGE TO INDIA, 2013

3 Key Findings  4 Policies 

6 Financing  7 Upstream Industry Analysis 

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

BRIDGE TO INDIA, 2013

BRIDGE TO INDIA, 2013

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

BRIDGE TO INDIA, 2013

2. MARKET DASHBOARD 2.1 MARKET COMPASS

Key drivers for the direction of the market

2.2 INDIAN SOLAR MARKET PRICES

` 6.45/kWh ` 68 /W $ 0.63/W* $ 0.57/W* $ 0.70/W* $ 0.65/W*

BRIDGE TO INDIA, 2013

BRIDGE TO INDIA, 2013

2.3 INSTALLED CAPACITY IN INDIA

PV 22.5 MW ANDHRA PRADESH

BRIDGE TO INDIA, 2013

Source: BRIDGE TO INDIA

Direct RPO Project

BRIDGE TO INDIA, 2013

3.2 PROJECTS (PV)

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

3.4 INDUSTRY ANALYSIS

BRIDGE TO INDIA, 2013

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

BRIDGE TO INDIA, 2013

4.1 NATIONAL SOLAR MISSION

4.2 TAMIL NADU SOLAR POLICY

4.4 KERALA SOLAR POLICY (DRAFT)

4.5 PUNJAB SOLAR POLICY

4.6 UTTAR PRADESH SOLAR POLICY

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

25th April, 2013 at 12.30 PM To be conveyed separately

Zero date + 41 days Zero date + 56 days

25/04/2013 10/05/2013 10/06/2013 Exact date will be communicated to successful bidders.

Commissioning of solar PV power Plant

Signing of PPA + 13 months

BRIDGE TO INDIA, 2013

BRIDGE TO INDIA, 2013

Zero date + 315days

5. PROJECTS 5.1 NEW INSTALLATIONS (GRID

BRIDGE TO INDIA, 2013

BRIDGE TO INDIA, 2013

5.2 STATUS OF ONGOING PROJECTS (PV)

Figure 5-2: List of projects14 accredited under the REC mechanism

Source: BRIDGE TO INDIA

BRIDGE TO INDIA, 2013

7. UPSTREAM INDUSTRY 7.1 INVERTER ANALYSIS SUPPLY IN INDIA

SMA PowerOne Schneider Electric ABB Refusol

AEG Siemens Electronica Santerno Others

BRIDGE TO INDIA, 2013

8.2 MARKET FUNDAMENTALS

Reduced costs of solar

Source: BRIDGE TO INDIA

Figure 8-2- Indias widening energy decit

---------------------24 Economic survey of India

Source: BRIDGE TO INDIA

BRIDGE TO INDIA, 2013

3 Key Findings 4 Policies

6 Financing 7 Upstream Industry Analysis

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