1 BRIDGE TO INDIA, 2014

INDIA
SOLAR
COMPASS
April 2014

Quarterly update
on the Indian
solar market
BRIDGE TO INDIA, 2014
Illustration by tiffinbox
BRIDGE TO INDIA, 2014
Disclaimer
2014 BRIDGE TO INDIA Energy Pvt. Ltd.
All rights reserved
April 2014, New Delhi
All reports are owned by BRIDGE TO INDIA and are protected by Indian
copyright and international copyright/intellectual property laws under
applicable treaties and/or conventions. The user agrees not to export any
report into a country that does not have copyright/intellectual property laws
that will protect BRIDGE TO INDIAs rights therein.
BRIDGE TO INDIA hereby grants the user a personal, non-exclusive, non-
refundable, non-transferable license to use the report for research purposes
only pursuant to the terms and conditions of this agreement. BRIDGE TO
INDIA retains exclusive and sole ownership of each report disseminated
under this agreement. The user cannot engage in any unauthorized use,
reproduction, distribution, publication or electronic transmission of this report
or the information/forecasts therein without the express written permission of
BRIDGE TO INDIA.
No part of this report may be used or reproduced in any manner or in any form
or by any means without mentioning its original source.
BRIDGE TO INDIA is not herein engaged in rendering professional advice and
services to you. BRIDGE TO INDIA makes no warranties, expressed or implied,
as to the ownership, accuracy, or adequacy of the content of this product.
BRIDGE TO INDIA shall not be liable for any indirect, incidental, consequential,
or punitive damages or for lost revenues or prots, whether or not advised of
the possibility of such damages or losses and regardless of the theory
of liability.
For further enquiries,
please contact:
info@bridgetoindia.com
BRIDGE TO INDIA Pvt. Ltd.
N-117, Panchsheel Park
New Delhi 110017
India
www.bridgetoindia.com
3 BRIDGE TO INDIA, 2014
Glossary
AD Accelerated Depreciation
APPC Average Pooled Purchase Cost
CAPEX Capital Expenditure
CSP Concentrated Solar Power
DCR Domestic Content Requirement
EPC Engineering, Procurement and Construction
GBI Generation Based Incentive
IPP Independent Power Producer
LOI Letter of Intent
NSM Jawaharlal Nehru National Solar Mission
NTPC National Thermal Power Corporation
OPEX Operational expenditure
PPA Power Purchase Agreement
PV Photovoltaic
REC Renewable Energy Certicate
RPO Renewable Purchase Obligation
SECI Solar Energy Corporation of India
TANGEDCO Tamil Nadu Generation and Distribution Corporation
TNERC Tamil Nadu Electricity Regulatory Commission
VGF Viability Gap Funding
4 BRIDGE TO INDIA, 2014
5 BRIDGE TO INDIA, 2014
1 Executive Summary
a tepid start to 2014
The Indian solar market continues to rely heavily on policy driven projects
to meet capacity targets. Distributed generation market, constituting more
than 50% of total solar capacity in most countries around the world, has not
yet taken off in India primarily because of complex/ unviable open access
regulations, resistance from utilities and direct/indirect subsidies provided to
conventional power supply. Policy initiatives are (slowly) moving in the right
direction but to turn solar power into a true game changer, we need an urgent
overhaul of policy framework and transparent pricing of grid power.
Project Allocations
The highlight of the last quarter (January 2014 March 2014) was allocation
of solar PV projects under batch one, phase two of National Solar Mission
(NSM). ACME, Azure Power and SunEdison emerged as the big winners with
100 MW each. Prominent players who missed out included Green Infra, Tata
Power, Mahindra Solar, Welspun (except for 5 MW), Renew Power and First
Solar amongst others. The bid levels were broadly as expected although quite
aggressive in our view. Our key takeaways and observations are as follows:
Domestic Content Requirement (DCR) has been a failure costing in
excess of M10 million/MW as local manufacturing has not gained anything
meaningful for the long-term. For the manufacturing sector to thrive,
we need investment in infrastructure, R&D, tax/labor reform and bigger
volumes.
Extremely competitive bidding means there will be too much pressure
on costs ie poor project quality. Although the Viability Gap Funding (VGF)
mechanism has been a relative success, a more performance focused
regime such as Generation Based Incentive (GBI) is far more favorable in
our view.
Considerable interest shown by foreign project developers and
Independent Power Producers (IPPs) is very welcome as it brings more
credibility to the market and hopefully, will result in much needed
international expertise in project execution and deliverability.
On the state policy front, 482 MW of new power purchase agreements
(PPAs) have been signed across four states in the last quarter - 42 MW in
Andhra Pradesh (against a target of 150 MW), 80 MW in Karnataka (after a
delay of six months), 110 MW in Uttar Pradesh (towards the tail end of the
preceding quarter) and 250 MW in Punjab. These projects are evenly split
between experienced and rst time developers. A signicant number of these
experienced players have in-house EPC capabilities, leaving lesser room for
pure-play EPC companies, which continue to struggle.
Another 300 MW of projects are expected to be allocated in UP after the
general elections in May. Madhya Pradesh expects to sign PPAs for 100 MW
solar PV projects in the ensuing quarter.
482 MW of PPAs
have been signed across
state policies and 750 MW
under the NSM in the
last quarter
6 BRIDGE TO INDIA, 2014
Capacity Addition
In the rst quarter of 2014, India added just 89 MW of new capacity - the lowest
since Q3 2012. Out of this, 55 MW has come from three state level projects with
the balance 34 MW being primarily driven by captive or third party sale projects
relying on accelerated depreciation (AD) and Renewable Energy Certicate
(REC) incentives.
Rajasthan: 20 MW project by Essel Mining (commissioned on time)
Madhya Pradesh: 25 MW project by EDF backed ACME
Andhra Pradesh: 10 MW renewable purchase obligation (RPO) project
by NTPC
As the REC market has failed to take off (around 6% of RECs managed to nd
buyers on the Indian Energy Exchange in the rst quarter of 2014), project
developers have moved away from selling power to local utilities at APPC
(typically M2.50-3.00/ kWh, $0.04-0.05/kWh) to nding private consumers with
tariffs in the range of M6 9/ kWh ($0.1-0.15/kWh). As an example, a 6 MW
project has been set up by a textile company for captive use and SunEdison
has set up an 18 MW solar park in Tamil Nadu. We expect this market to grow
rapidly as election fever subsides (reducing political pressure to keep tariff
increases low) and grid parity is attained across more states.
Distributed Generation
The rooftop market is slowly gaining momentum
1
with Delhi and Kerala
(following on from Andhra Pradesh, Tamil Nadu) announcing net metering
policies in the last quarter (Delhi policy is still in draft stage). Keralas plan
of setting up 10,000 off-grid rooftop solar power plants by December 2014
appears to be well on track with around 6,000 sites already commissioned
2
.
At the central level, SECI continues to provide capital subsidies for rooftop
projects - it has allocated 25 MW till date and aims for a further 50 MW during
the year.
The policy support to the rooftop segment needs to be much bolder, especially
considering its future potential. Based on a study carried out by BRIDGE TO
INDIA for Greenpeace, Delhi alone has a rooftop solar potential for 2 GW
3
.
----------
1
BRIDGE TO INDIA, along with Prayas, is working on a report on grid-connectivity issues for
distributed generation projects. This report is likely to be released in April 2014.
2
BRIDGE TO INDIA blog on the Kerala rooftop scheme, http://bit.ly/OzhHoS
3
Read our report: Rooftop Revolution: Unleashing Delhis Solar Potential
In the rst quarter
of 2014, India added just
89 MW of new capacity
7 BRIDGE TO INDIA, 2014
2 Trends
2.1 Module Prices
In the last quarter (January 2014 March 2014), module prices have increased
2-3% in India (c-Si, Chinese). This increase has been driven by a rise in global
demand (especially in China). This development follows a 7-9% increase in
module prices in the last year that was driven mostly by the depreciation in the
Indian rupee. Since the second quarter of 2013, prices for thin lm modules
have remained constant in dollar terms but have risen in Indian rupee terms.
Figure 2.1: Chinese C-Si and thin lm module prices over
the last four quarters
4
2.2 Inverter Prices
In 2013, the initial decline in the inverter market was triggered by the strategic
pricing by international players such as Hitachi. This decline in central inverter
prices continued in the rst quarter of 2014 as well. Many companies, which
were previously holding on to their higher prices, have joined the bandwagon
and have reduced their prices to compete in the market. Going forward, the
prices are not expected to go down further signicantly until and unless the
size of the order exceeds 100 MW. With orders of this size, industry players
believe that the prices can go down to levels as low as M3.0/Wp ($0.05/ Wp).
----------
4
Source: BRIDGE TO INDIA analysis and industry interviews, PVinsights.com
8 BRIDGE TO INDIA, 2014
Figure 2.2: PV central inverter prices over the last four quarters
5
2.3 Tariffs
The only new additions in tariffs bid for were under the Madhya Pradesh state
policy and the NSM. The tariffs in the Madhya Pradesh policy, although on
the lower side, are higher compared to the Karnataka phase II bidding even
though Madhya Pradesh has a better irradiation compared to Karnataka. The
average VGF bid for in the NSM, if seen in terms of tariff increase, translates to
an additional M1.05/kWh ($0.018/kWh) and M2.05/kWh ($0.034/kWh) under the
open and DCR categories respectively
6
.
Figure 2.3: Average tariffs across state policies in the last four quarters
7 8
----------
5
Source: BRIDGE TO INDIA analysis and industry interviews
6
Assumptions:
Cost of power plant under open category INR 65 million/MW (USD 1.1 million/MW)
Cost of power plant under DCR category INR 75 million/MW (USD 1.3 million/MW)
Analysis done for projects not availing AD benet
7
Source: State policies
8
Levelized tariff offered in Tamil Nadu has been calculated considering 5% escalation for
10 years. Discount rate of 15% has been assumed. Average tariff offered under various policies
are not weighted averages
9 BRIDGE TO INDIA, 2014
2.4 Capacity Addition
The capacity addition has been quite dismal, with just 89 MW added in the
previous quarter. Cumulative, India added 586 MW in the last four quarters.
In comparison, for the nancial year of 2012-13 (April 2012 to March 2013),
India had installed a cumulative 994 MW. This was largely fuelled by the
capacity addition of 500 MW in Gujarat. However, what is encouraging is that
the non-policy market accounted for more than one third of the capacity added
in the last four quarters. It is commendable that a capacity of 214 MW has
been commissioned without any policy support. As the fundamentals for this
segment continue to improve, this segment cannot go anywhere but up.
Figure 2.4: Quarterly installations in the last four quarters
9
----------
9
Source: BRIDGE TO INDIA project database
10 BRIDGE TO INDIA, 2014
2.5 Installed Capacity In India
Figure 2.5
11 BRIDGE TO INDIA, 2014
3 Policy Outlook
Table 3.1: Projects delayed beyond original deadlines
Policy name Karnataka Phase I Madhya Pradesh Rajasthan SECI phase I
Allocation date Apr-12 May-12 Mar-13 Apr-13
Allocated capacity 60 MW 225 MW 75 MW 5.5 MW
Delayed projects 42 MW 25 MW 55 MW ~1 MW
Scheduled date of
commissioning
Oct-13 Jun-13 Mar-14 Apr-14
Expected
commissioning
date
Q2 and Q3 of 2014 Q2 of 2014 Q3 of 2014 Q3 of 2014
Remarks No penalties are being
levied on delayed
projects
No projects have been
commissioned in the Q1
of 2014
Projects are delayed by
upto a year
Penalties to be levied
only in cases where
the developer is not
able to justify the time
extension
A 25 MW project by
Moserbaer is still
pending completion
A 25 MW project by MK
solar energy has been
cancelled
Most of the projects are
behind schedule
Only a 20 MW project by
ESSEL Mining has been
commissioned in time
While 1 MW
projects have been
commissioned,
3.5 MW are expected
to be commissioned by
April 2014
Project developers are
nding it increasingly
difcult to procure
projects under the OPEX
model
* All details are based on information received from state authorities or project developers.
12 BRIDGE TO INDIA, 2014
Table 3.2: Ongoing Allocations
Policy name Tamil Nadu Andhra Pradesh Madhya Pradesh
phase II
NSM
Allocation date Jun 2013 Jun 2013 Feb 2014 Feb 2014
LOIs signed 708 MW 600 MW 100 MW 750 MW
PPAs signed as on
March 2014
0 180 MW
(138 MW in Q4 2013 and
42 MW in Q1 2014)
0 750 MW
PPAs expected to be
signed in the next
quarter
No clarity 100 MW 100 MW 0
Remarks 226 MW PPAs are
awaiting approval
Quarter over quarter
there is no clarity on
what is happening
under the Tamil Nadu
solar policy
PPAs were signed at
a tariff of M6.48/kWh
($0.11/kWh)
The Tamil Nadu
Electricity Regulatory
Commission (TNERC)
has proposed a tariff
revision to M5.78/kWh
($0.1/kWh)
Tamil Nadu Generation
and Distribution
Corporation
(TANGEDCO) is still
awaiting the approval
for the tariff of M6.48/
kWh ($0.11.kWh) by
the TNERC
The PPA signing
process has been quite
slow compared to what
the ofcials had earlier
forecasted for Q1 2014
(42 MW as against
150 MW)
19 companies had
participated in the bid
Himgiri Energy
Ventures quoted
the lowest tariff of
M6.475/kWh ($0.11/
kWh), followed by
Today homes and
infrastructure M6.48/
kWh($0.11/kWh)
Renew Power managed
to secure a 30 MW
project at a tariff of
M6.97/kWh ($0.12/kWh)
Leading project
developers that did not
win any projects include
Azure, Acme, IL&FS,
Sunedison, Essel
infraprojects, Welspun
and Solairedirect
A total of 122 bids
totaling 2,170 MW were
received
Prominent developers
which were allotted
projects include Acme
(100 MW), Welspun (5
MW), Azure (100 MW),
Sunedison (100 MW),
Solairedirect(20 MW),
IL&FS (40 MW)
More than half of the
projects chose their
location as Rajasthan
(~360 MW). Surprisingly
the second most
preferred location was
Madhya Pradesh ( ~200
MW) instead of Gujarat
(~50 MW)
The average bid under
the open category
was M10.1 million/
MW ($0.17 million/
MW) and DCR category
was M20.1 million /MW
($0.33 million/MW)
TATA power rejected a
partial allocation under
the DCR category (had
bid for 40 MW but was
offered part allocation
of 25 MW)
13 BRIDGE TO INDIA, 2014
Table 3.3: Projects under scheduled deployment (utility scale)
Policy name Punjab Uttar Pradesh Karnataka Andhra Pradesh
Allocation date Jun-13 Jun-13 Jul-13 Jun-13
PPAs signed as
on March 2014
250 MW 110 MW 80 MW 180 MW
Expected date
of procurement
for projects
Q4 of 2014 and
Q1 of 2015
Q4 of 2014 and
Q1 of 2015
Q1 of 2015 Q4 of 2014 and
Q1 of 2015
Expected date
of procurement
for projects
April September
2014
March - August 2014 April September
2014
Ongoing
Remarks In case of delays there
are penalties in place
There are two types of
grace periods:
1
st
grace period
-December 2015
(Bank guarantees
will not be returned
by Punjab Energy
Development Agency);
2
nd
grace - March 2015
(Liquidation damages
taken by the state
utility)
Most of the projects
are owned by project
developers that do
their own EPC. This
might lead to earlier
commissioning of
projects and relatively
better returns.
100 MW project by
National Hydro Power
Corporation is in the
concluding stages of
nalizing shareholder
agreements
Out of the 130 MW
allocation, PPAs have
only been signed for
80 MW.
There was a delay
in PPA signing due
to confusion in the
lowest bids received
(please refer to
India Solar Compass
October
2013 edition)
10
42 MW PPAs signed
in the current quarter.
Out of the 180 MW, a
70 MW project is by a
JV between Premier
Solar and New
Generation Power
(USA)
----------
10
India Solar Compass October 2013 edition http://bit.ly/1hLVfRD
14 BRIDGE TO INDIA, 2014
Table 3.4: Projects under scheduled deployment (rooftop)
Policy name SECI phase II SECI phase III
Allocation date Jul-13 Dec-13
PPAs signed as
on March 2014
11.3 MW 8.75 MW
Expected date
of procurement
for projects
Q3 and Q4 of 2014 Q1 of 2015
Expected date
of procurement
for projects
Ongoing April October 2014
Remarks As several projects under SECI
phase I have been delayed, timely
completion of the phase II is also
unlikely
Allocations in new cities such as
Noida, Bhubhaneshwarand Raipur.
Projects located in Coimbatore,
Chennai and Delhi
New project developers include
Ravano Green Energy, Waaree
Energies, Mahindra EPC and Enrich
Energies
First deadline to submit DPRs
was March 11
th
, this deadline has
been missed by most of the project
developers. An extension of one
month has been given by SECI.
Table 3.5: Expected Future Allocations
Policy name Uttar Pradesh Karnataka
phase III
SECI phase IV Haryana Uttarakhand
Expected allocation
date
Q3 of 2014 Q3 of 2014 2014 2014 2014
Expected allocation
capacity
300 MW 50 MW 50 MW 50 MW 50 MW
Expected PPA
signing date
Q1 of 2015 Q1 of 2015 Not known Not known Not known
Expected
commissioning date
Q2 of 2016 Q2 and Q3 of 2016 Not known Not known Not known
15 BRIDGE TO INDIA, 2014
4 Projects Outlook
Projected quarterly PV installations in India (in MW)
16 BRIDGE TO INDIA, 2014
5 Things we got wrong in
the last four quarters
5.1 Our projections across previous editions
of Solar Compass compared to actual market
performance over the last four quarters
Despite our best efforts, the solar PV landscape in India is usually difcult
to forecast due to policy uncertainties. In the gure, we have depicted our
quarterly projections over various editions benchmarked against actual
capacity additions. In certain quarters our projections have been close, while
on certain occasions, we have been wrong with signicant margins. The
rationale behind the misjudged predictions has been mentioned in the table.
Having learnt from our misjudgments in the past, our endeavor is to do better
in the future.
Historically, we have found that projects for parity with or without
REC benets tend to exceed our expectations, projects under the NSM are
usually on target and projects under various state policies are inevitably
behind schedule even though we have been fairly pessimistic about them to
begin with.
17 BRIDGE TO INDIA, 2014
Policy Rationale for variation
Parity based projects
with or without REC
benets
In the preceding quarters, we witnessed renewed interest in
these projects and forecast another 60 MW capacity to come
through. Typically, revenue from such projects is combined
with AD benets and/or RECs. Over the past quarter, around
29 MW of such projects were commissioned, lower than the 60
MW we forecast in the previous edition of the solar compass.
Projects for about 100 MW continue to be under deployment.
RPO projects In the previous edition of the solar compass, we had forecast
that 40 MW of RPO projects will come up in the rst quarter.
This was based on the presumption that the NTPC would
at least partially commission its 50 MW project in Madhya
Pradesh (EPC contracted to TATA Power Solar) which was due
to be commissioned by the end of March 2014. Only 10 MW
of NTPCs project in Andhra Pradesh has been commissioned
(updated as on 20
th
March 2014).
State Policies No projects were commissioned under the state policy in
Karnataka where we expected 12 MW to come up during the
quarter.
As mentioned previously, under the Karnataka state policy,
deadlines were extended without penalties. Until and unless
the delayed projects are ned with strict time bound penalties,
the delays can be expected to be a regular phenomenon.
BRIDGE TO INDIA, 2014
Our Blogs From The Last Quarter
National-level solar initiatives
Acme, Azure Power and SunEdison get the biggest share of the NSM
How will nancing of NSM projects work?
Indias subsidy scheme for de-centralized solar to stay subdued in 2014
as well
National Solar Mission to miss capacity targets for the year by
a signicant margin
State-level solar initiatives
Keralas rooftop programs - Lessons for other states
Kerala announces a draft net-metering policy
Is solar in Tamil Nadu back?
Tamil Nadu solar market in peril
Jammu & Kashmir signs an agreement for a 7,500 MW solar power plant
Market analysis
As international solar manufacturing companies boom, India gets
left behind
Solar Power Developers Association meets Dr. Farooq Abdullah
Should Indian developers be worried about rising solar costs in 2014?
Restricting open access power purchase- a regressive move?
Thought leadership
Indias energy future BPs thoughts and ours
What are Indias strategic energy options? Part 1: The energy demand
What are Indias strategic energy options? Part 2: Comparisons with the
US, Germany and China
What are Indias strategic energy options? Part 3: Cost trajectories of fossil
and renewable energy
What are Indias strategic energy options? Part 4: A game changing shift
to solar
Build Your Brand
BRIDGE TO INDIA is a key knowledge disseminator on the Indian solar market.
Having tracked the market since 2010, our regularly published analysis
reaches more than 10,000 readers from various segments of the global solar
industry.
Our Reports
Publications For Event Partners
Our Online Presence
Some Of Our Advertising Partners
BRIDGE TO INDIA, 2014
More than
10,000
Average dedicated
readership for
each published
report
More than
12,000
printed copies
of publications
distributed at
events
OUR ONLINE CHANNELS
Follow us on Facebook
www.facebook.com/bridgetoindia
Follow us on Twitter
www.twitter.com/bridgetoindia
Join us in discussion on our
Linkedin group
'India Solar Future'
To know more about advertising
opportunities with BRIDGE TO
INDIA contact:
contact@bridgetoindia.com
The India Solar
Compass
(quarterly)
India Solar
Decision Briefs
(bi-annual)
India Solar
Policy Briefs
India Solar Handbook
Launched at
Intersolar, Mumbai
IndiaSolarMarket.com
India Solar Map
Launched at
Renewable Energy
India Expo,
New Delhi
IndiaSolarHomes.com
India Solar Navigator
Launched at
Intersolar, Mumbai
Weekly Newsletter
BRIDGE TO INDIA, 2014
BRIDGE TO INDIA is a consulting
company with an entrepreneurial
approach based in New Delhi and
Munich. 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 us at:
contact@bridgetoindia.com
www.bridgetoindia.com
Follow us on facebook.com/
bridgetoindia
www.bridgetoindia.com/blog