Solar

DECLARATION
I, Yashobanta Naik, Roll No. 1120812298, MBA (Power Management), Batch

10th (2011-13) of the National Power Training Institute, Faridabad, hereby declare
that the summer training report entitled Assessment of JNNSM phase I
Batch II to provide corrective measures of phase II and Financial

Modeling of solar PV plant is an original work and the same has not been
submitted to any other institute for the award of any other degree.
A seminar presentation of the training report was made on August __, 2011 and the
suggestions as approved by the faculty members were duly incorporated.
Presentation In-charge
Yashobanta Naik
(Faculty)
(Signature of the Candidate)
Counter Signed
Director / Principal of the institute
ACKNOWLEDGEMENT
I take immense pleasure in thanking Mr. A.N Srivastava, Director(NSM) for having permitted
me to carry out this project work. I would also like to acknowledge Chopra mam for his valuable
support and guidance throughout this project.
Special thanks go to all the staff members of MINISTRY OF NEW AND RENEWABLE
ENERGY Without their insights and helpful thoughts, I would not have gained as much
information as I have. Their help has sparked my interest even more! Thanks!
I wish to express my deep sense of gratitude to my Internal Guide, Mrs. Manju Mam (Dy.
Director), NPTI for her able guidance and useful suggestions, which helped me in completing
the project work, in time. I also thank Mr. J. S. S. Rao, Principal Director (CAMPS), NPTI,
Mr. S.K. Choudhary, Director (MBA), NPTI, Mrs. Indu Maheshwari (Dy. Director) &
Mr. K.P.S. Parmar, Asst. Director, NPTI and Miss Farida Khan, Asst. Director, NPTI for
providing constant support and assistance whenever required.
Finally, yet importantly, I would like to express my heartfelt thanks to my beloved parents for
their blessings, my friends/classmates for their help and wishes for the successful completion
of this project.
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EXECUTIVE SUMMARY
India, with abundant sunlight, unutilized manufacturing potential, readily available labor and
significant demand for power, is one of the most promising markets for solar energy. The
country is currently the seventh largest producer of solar photovoltaic (PV) cells and the ninth
largest producer of solar thermal energy.
Most of the country receives 4-7 kWh of solar radiation per square meter per day. There are
250-300 clear sunny days in a year. This puts the countrys solar potential at around 600TW per
year.
Still, solar energy is not the most popular source of renewable energy in India.
The Government of India started focusing on the solar energy segment when the Ministry of
New and Renewable Energy (MNRE) launched a countrywide solar PV programme as a part
of its renewable energy programme. India has since transformed into a low-cost hub for
manufacturing solar PV cells and module, a proportion of which is exported to other
countries.
Till date, the union government has made various concessions for solar energy development
in India. The MNRE, in an effort to promote large-sized grid-interactive solar power
generation projects, introduced a generation based incentive (GBI).
In India various new schemes are coming very fast to promote solar power generation. These
schemes are to support various aspects of the solar generation like Financial- incentives, tax
benefits, Custom duty free, etc and Technological aspects of generation, grid connectivity
and metering, etc.
In the world various countries with lower solar irradiation and more problems have higher
installed capacity of the solar power generation. The policies used in these countries have
proved to be successful and can be implemented in India. Some of these have been covered
in this report.
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LIST OF FIGURES
Figure 1.1: Sector wise break up off installed capacity.1

Figure 1.2: Indian Power Sector Roadmap..3
Figure 1.3: Research Methodology.4
Figure 1.4: JNNSM framework.14
Figure 1.5: JNNSM and NVVN guideline challenges and Opportunities17
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LIST OF TABLES
TABLE 3.3: Mission road map of JNNSM..19
TABLE 3.4: Phase I Batch I Bidding21
TABLE 3.5: phase I batch II Bidding24
TABLE 3.6: Livelization of tariff under Gujarat solar policy26
TABLE 3.7: Generation based incentives...34
ABBREVIATION
CEA...Central Electricity Authority
CERC..Central Electricity Regulatory Commission
EA 2003.Electricity Act 2003
FOR...Forum of Regulators
MWMega Watt
NEP...National Electricity Policy
OA..Open Access
Rs.Rupees
SERC...State Electricity Regulatory Commission
SLDC....State Load Dispatch Centre
STU...State Transmission Utility
GW...Giga Watt
AT&C...Aggregate technical and Commercial
MNRE..Ministry of New and Renewable Energy
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Table of contents
CHAPTER 1
INTRODUCTION
1.1 INDIA POWER SCENARIO ................................................................................................................. 1
1.2 SOLAR POTENTIAL IN INDIA ........................................................................................................... 2
1.3.OBJECTIVE ........................................................................................................................................... 3
1.4. SCOPE ................................................................................................................................................... 4
1.5. RESEARCH METHODOLOGY:.......................................................................................................... 4
1.6. ORGANISATION PROFILE ................................................................................................................ 5
CHAPTER 2
LITERATURE REVIEW
2.1 Electricity Act 2003- ............................................................................................................................... 8
2.2 National Tariff policy- ............................................................................................................................ 8
CHAPTER 3
JAWAHARLALNEHRU NATIONAL SOLAR MISSION
3.1. INTRODUCTION ............................................................................................................................... 10
3.2. OBJECTIVES AND TARGETS ......................................................................................................... 11
3.3. MISSION ROAD MAP ....................................................................................................................... 12
3.4. FRAME WORK FOR JNNSM ............................................................................................................ 13
3.5 NSM PHASE I BATCH I ..................................................................................................................... 18
3.6. NATIONAL SOLAR MISSION PHASE I BATCH II ....................................................................... 21
3.7. HIGHLIGHT AND COMPARISON OF PHASE I BATCH II BIDDING RESULTS....................... 24
CHAPTER 4
STATE LEVEL INITIATIVES AND DEVELOPMENTS TARGETS
4.1. THE GUJURAT SOLAR POLICY ..................................................................................................... 26
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4.2 THE RAJASTAN SOLAR POLICY .................................................................................................... 28

4.3 THE ODISHA SOLAR POLICY ......................................................................................................... 30
4.4. THE DELHI SOLAR POLICY ........................................................................................................... 31
CHAPTER 5
GENERATION BASED INCENTIVE UNDER RPSSGP SCHEME OF MNRTE
GENERATION BASED INCENTIVE UNDER RPSSGP SCHEME OF MNRE..................................... 32
CHAPTER 6
6.1. INTRODUCTION ............................................................................................................................... 35
6.2. GRID HYBRID ROOFTOPS .............................................................................................................. 38
6.3. AN INSIGHT INTO ROOFTOP PROJECTS ..................................................................................... 39
6.3.1 Delhis first utility-scale solar plant commissioned ....................................................................... 39
6.3.2 OMAX AUTOS LIMITED ............................................................................................................ 41
CHAPTER 7
BANKABILITY AND FINANCING IN INDIAN MARKET
7.1. INTRODUCTION ............................................................................................................................... 42
7.2. TERM AND CONDITION OF FINANCING ..................................................................................... 46
CHAPTER 8
FINANCIAL MODELING OF SOLAR PV POWER PLANT
8.1 INTRODUCTION ................................................................................................................................ 47
8.2. NEED FOR FINANCIAL MODEL .................................................................................................... 48
8.3. ADVANTAGES AND APPLICATIONS ........................................................................................... 48
8.4. FINANCIAL INDICATORS ............................................................................................................... 49
8.4.1. NET PRESENT VALUE(NPV) ................................................................................................... 49
8.4.2. INTERNAL RATE OF RETURN (IRR) ...................................................................................... 50
8.4.3. DEBT SERVICE COVERAGE RATIO (DSCR) ........................................................................ 51
8.4.4 WEIGHTED AVERAGE COST OF CAPITAL (WACC) ............................................................ 51
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8.5. RECOMMENDATIONS for growth and development of solar PV.................................................... 53
CHAPTER 9
CONCLUSION AND RECOMMENDATION
9.1. CONCLUSION .................................................................................................................................... 55
9.2. LIMITATION ...................................................................................................................................... 55
BIBLIOGRAPHY
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CHAPTER-1
INTRODUCTION
1.1 INDIA POWER SCENARIO
Indias power sector has witnessed drastic changes in the past decade. The Electricity Act, 2003
paved way for the advent of reforms and competition in the power sector. A slew of policies and
regulations followed, to facilitate an accelerated growth in the sector. The process started with
the restructuring of power distribution utilities, with some states corporatizing the functional
entities for power generation, transmission and distribution.
The generation capacity of the country stands at over 203 MW (as in 31st May, 2012) with a
dominant share of the state sector. The private sector, which currently contributes 28% of the
generation capacity, is expected to increase its share to 52% by 2017. Even with such an installed
base, about 15% of the villages in India are non-electrified, which would translate to about 450
million people. With a growing economy, the demand for energy is growing at about 6% every
year and the peak load demand is expected to reach 778 GW by 2030.
PRIVATE
SECTOR
CENTRAL
SECTOR
28%
42%
STATE
SECTOR
30%
Figure 1.1: Sector wise break up off installed capacity

The Indian power sector is highly dependent on coal as a fuel, with around 56% of the installed
capacity being coal based generation. Given the current scenario the coal consumption by the
power sector is likely to reach levels of 200MN MT by end of 2013.
According to the ministry of coal, the existing coal reserves are expected to last another 35 - 40
years.
To meet the 778 GW demand for power by 2030, the government of India is planning heavy
investments in coal based generation, where cost of production is lower than any other source.
1.2 SOLAR POTENTIAL IN INDIA

India, due to its geo-physical location, receives solar energy equivalent to nearly 5,000
trillion kWh/year which is equivalent to 600 GW. This is far more than the total energy
consumption of the country today. But India produces a very negligible amount of solar
energy - a mere 0.2 per cent compared to other energy resources. Further, entire electricity
generation is using Solar Photovoltaic (SPV) technology as power generation using solar
thermal technology is still in the experimental stages. Currently, India has less than 40 MW
of grid connected solar PV capacity.
The following map depicts solar energy potential in the country. While India receives solar
radiation of 5 to 7 kWh/m2 for 300 to 330 days in a year, power generation potential using
solar PV technology is estimated to be around 20MW/sq. km and using solar thermal
generation is estimated to be around 35MW/sq. km.
According to the Solar Radiation Handbook (2008), published by Solar Energy Centre,
MNRE the daily average global radiation incident over India is in the range of 4.3 kWh/Sq m
to 5.8 kWh/Sq m. The mean monthly solar radiant exposure per kWh/sq m/day has been
worked out based on the research conducted by MNRE in its Solar Radiation Study given in
the handbook. Also, it is noted that around 290 to 320 clear sunny days are prevalent across
most parts of India throughout the year. Hence, average clear sunny days around 300 and
daily average global solar radiation to be around 5.8 kWh/Sq m/day are being considered as
normative standards.
Fig: 1.2 Indian solar Power Roadmap
1.3.OBJECTIVE
The objective of the report is:1. To study and analyze the present condition of solar power in the country.
2. To know the details that what all work has been done in the solar sector.
3. To have an insight into what all problems are being faced by the solar project
developers.
4. To know the present status of the country compared to the internationally developed
countries in power.
5. To obtain the appropriate conclusions for proper development of solar power sector in
India.
6. To study the market from the perspective of the players who are developing solar power
plants.
7. To study the financial models of 1 MW solar PV plants.
1.4. SCOPE
With an ever increasing demand for power in the country, renewable energy plants with a
longer techno economic life have a better scope for taking up a larger share in addressing the
industrial & consumer demand for electricity without further affecting the eco system and
without compromising or depleting the non-renewable sources.
Thus there is ample scope for private players in the renewable energy space to be the preferred
but alternate route of power supply to cater to the industrial and economic growth.
1.5. RESEARCH METHODOLOGY:
Fig 1.3:Research methodology
1.6. ORGANISATION PROFILE

Introduction
The Ministry of New and Renewable Energy (MNRE) is the nodal Ministry of the Government
of India for all matters relating to new and renewable energy. The broad aim of the Ministry is to
develop and deploy new and renewable energy for supplementing the energy requirements of the
country. Creation CASE and Ministry:
Commission for Additional Sources of Energy (CASE) in 1981.
Department of Non-Conventional Energy Sources (DNES) in 1982.
Ministry of Non-Conventional Energy Sources (MNES) in 1992.
Ministry of Non-Conventional Energy Sources (MNES) renamed as Ministry of New and

Renewable Energy (MNRE) in 2006.
The role of new and renewable energy has been assuming increasing significance in recent times
with the growing concern for the country's energy security. Energy self-sufficiency was
identified as the major driver for new and renewable energy in the country in the wake of the two
oil shocks of the 1970s. The sudden increase in the price of oil, uncertainties associated with its
supply and the adverse impact on the balance of payments position led to the establishment of
the Commission for Additional Sources of Energy in the Department of Science & Technology
in March 1981. The Commission was charged with the responsibility of formulating policies and
their implementation, programmes for development of new and renewable energy apart from
coordinating and intensifying R&D in the sector. In 1982, a new department, i.e., Department of
Non-conventional Energy Sources (DNES), that incorporated CASE, was created in the then
Ministry of Energy. In 1992, DNES became the Ministry of Non-conventional Energy Sources.
In October 2006, the Ministry was re-christened as the Ministry of New and Renewable Energy.
Mission
The Mission of the Ministry is to ensure
Energy Security: Lesser dependence on oil imports through development and

deployment of alternate fuels (hydrogen, bio-fuels and synthetic fuels) and their
applications to contribute towards bridging the gap between domestic oil supply and
demand.
Increase in the share of clean power: Renewable (bio, wind, hydro, solar, geothermal &
tidal) electricity to supplement fossil fuel based electricity generation.
Energy Availability and Access: Supplement energy needs of cooking, heating, motive
power and captive generation in rural, urban, industrial and commercial sectors;
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Energy Affordability: Cost-competitive, convenient, safe, and reliable new and

renewable energy supply options; and
Energy Equity: Per-capita energy consumption at par with the global average level by
2050, through a sustainable and diverse fuel- mix.
Vision
To develop new and renewable energy technologies, processes, materials, components, subsystems, products & services at par with international specifications, standards and performance
parameters in order to make the country a net foreign exchange earner in the sector and deploy
such indigenously developed and/or manufactured products and services in furtherance of the
national goal of energy security.
Allocation of Business
The Ministry of New and Renewable Energy (MNRE) is a Scientific Ministry which has been
assigned the following subjects/business under the Allocation of Business Rules:
1. Research and development of Biogas and programmes relating to Biogas units;
2. Commission for Additional Sources of Energy (CASE);
3. Solar Energy including Solar Photovoltaic devices and their development, production
and applications;
4. Programme relating to improved chulhas and research and development thereof;
5. Indian Renewable Energy Development Agency (IREDA);
6. All matters relating to small/mini/micro hydel projects of and below 25 MW capacity;
7. Research and development of other non-conventional/renewable sources of energy and
programmes relating thereto;
8. Tidal energy;
9. Integrated Rural Energy Programme (IREP);
10. Geothermal Energy;
11. Bio-fuels: (i) National Policy; (ii) research, development and demonstration on transport,
stationary and other applications; (iii) setting up of a National Bio- fuels Development
Board and strengthening the existing institutional mechanism; and(iv) overall
coordination.
Functions
6
Facilitate research, design, development, manufacture and deployment of new and renewable
energy systems/devices for transportation, portable and stationary applications in rural, urban,
industrial and commercial sectors through:
1. Technology Mapping and Benchmarking;
2. Identify Research, Design, Development and Manufacture thrust areas and facilitate the
same;
3. Lay down standards, specifications and performance parameters at par with international
levels and facilitate industry in attaining the same;
4. Align costs of new and renewable energy products and services with international levels
and facilitate industry in attaining the same;
5. Appropriate international level quality assurance accreditation and facilitate industry in
obtaining the same;
6. Provide sustained feed-back to manufacturers on performance parameters of new and
renewable energy products and services with the aim of effecting continuous upgradation
so as to attain international levels in the shortest possible time span;
7. Facilitate industry in becoming internationally competitive and a net foreign exchange
earner especially through (ii) to (v) above and related measures;
8. Resource Survey, Assessment, Mapping and Dissemination.
9. Identify areas in which new and renewable energy products and services need to be
deployed in keeping with the goal of national energy security and energy independence;
10. Deployment strategy for various indigenously developed and manufactured new and
renewable energy products and services.
CHAPTER-2
REVIEW OF EXISTING LITERATURE
2.1 Electricity Act 2003Section 3. (1) says..The Central Government shall, from time to time, prepare the national
electricity policy and tariff policy, in consultation with the State Governments and the
Authority for development of the power system based on optimal utilisation of resources
such as coal, natural gas, nuclear substances or materials, hydro and renewable sources
of energy.
Section 4. Stipulates ..The Central Government shall, after consultation with the
State Governments, prepare and notify a national policy, permitting stand-alone systems
(including those based on renewable sources of energy and non-conventional sources of
energy) for rural areas.
Under section 6 of the act it is given as The Appropriate Commission shall, subject to the
provisions of this Act, specify the terms and conditions for the determination of tariff, for
the promotion of co-generation and generation of electricity from renewable sources of
energy
Under section 86 The State Commission shall promote cogeneration and generation of
electricity from renewable sources of energy by providing suitable measures for
connectivity with the grid and sale of electricity to any person, and also specify, for
purchase of electricity from such sources, a percentage of the total consumption of
electricity in the area of a distribution licensee
2.2 National Tariff policyPara 6.4 of National tariff policy on Non-conventional sources of energy generation including co
generation:
1.Pursuant to provisions of section 86 (1) (e) of the Act, the Appropriate
Commission shall fix a minimum percentage for purchase of energy from such sources
taking into account availability of such resources in the region and its impact on retail
8
tariffs. Such percentage for purchase of energy should be made applicable for the
tariffs to be determined by the SERCs latest by April 1, 2006.
It will take some time before non-conventional technologies can compete with
conventional sources in terms of cost of electricity. Therefore, procurement by
distribution companies shall be done at preferential tariffs determined by the
Appropriate Commission.
2. Such procurement by Distribution Licensees for future requirements shall be done,
as far as possible, through competitive bidding process under Section 63 of the Act
within suppliers offering energy from same type of non- conventional sources. In the
long-term, these technologies would need to compete with other sources in terms of
full costs.
3. The Central Commission should lay down guidelines within three months for
pricing non-firm power, especially from nonconventional sources, to be followed in
cases where such procurement is not through competitive bidding.
CHAPTER-3
JAWAHARLAL NEHERU NATIONAL SOLAR MISSION:

3.1. INTRODUCTION:
The Cabinet had approved the policy framework on Jawaharlal Nehru National Solar Mission
on 19th November, 2009 with an objective to establish India as a global leader in solar energy by
creating policy conditions for its diffusion across the country quickly and achieve a scale to drive
down costs to levels required to achieve grid parity by 2022. The Mission targets include (i)
deployment of 20,000 MW of grid connected solar power by 2022, (ii) 2,000 MW of off-grid
solar applications including 20 million solar lights by 2022, (iii) 20 million sq. m. solar thermal
collector area, (iv) to create favourable conditions for developing solar manufacturing capability
in the country; and (v) support R&D and capacity building activities to achieve grid parity by
2022.
In February 2010 ,the central electricity regulatory commission announced bench mark In feedin tariff for the financial year 2010-2011 of INR 17.91(USD 0.36) per kWh for PV and INR
15.31(USD0.31) per kWh for CSP and declared that power purchase Agreements(PPAs) would
have a validity of 25 years. It is assumed that at current cost levels the tariff will allow investors
to achieve an internal rate of return about 16%-17% after taxes. The tariff mention above were
applicable for those solar power projects that had their PPA signed on or before 31st March,2011.
As capital cost decreased CERC revised the tariff for the financial year 2011-2012. As per the
revision a feed in tariff of INR 15.39 per kWh for solar PV and INR 15.04 per kWh for CSP
projects will be applicable for projects whose PPAs are signed after 31st March 2011. Further if
accelerated depreciation at the rate of 80% is considered, the net levelized tariff would work out
to Rs 12.94 & Rs 12.96 for solar PV and solar thermal respectively.
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3.2. OBJECTIVES AND TARGETS

Objectives:
The objective of the National Solar Mission is to establish India as a global leader in solar
Energy , by creating the policy conditions for its diffusion across the country as quickly as
possible . The mission will adopt a 3-phase approach as follows:
Phase 1: Remaining period of the 11th Plan and first year of the 12th Plan (up to
2012-13)
Phase 2: Remaining 4 years of the 12th Plan (2013-17)
Phase 3: 13th Plan (2017-22).
Targets:
To create an enabling policy framework for the development of 20,000 MW of solar

power by 2022.
To ramp up capacity of grid connected solar power generation to 1000 MW within three
years by 2013.
Additional 3000 MW by 2017 through the mandatory use of the renewable purchase
Obligation by utilities backed with a preferential tariff.
To promote programs for off-grid applications, reaching 1000 MW by 2017 and

2000MW by 2022.
To create favorable conditions for solar manufacturing capability, particularly solar

thermal for indigenous production and market leadership.
30% capital subsidy for certain category of solar energy system.
Renewable Purchase Obligation (RPO) mandated for power utilities, with a specific solar
component.
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Set up 20 million standalone rural solar power plants in special category states such as
Lakshadweep, Andaman & Nicobar Islands and Ladakh region of J&K by 2022.Border
areas would also be included.
To achieve 15 million sq. meters solar thermal collector area by 2017 and 20 million by
2022.
The ambitious target of 20,000 MW or more for 2022 will be dependent on the learning
of the first two phases, which if successful, could lead to conditions of grid competitive
solar power. The transition could be appropriately up scaled, based on availability of
international finance and technology.
3.3. MISSION ROAD MAP

In order to ensure that the ambitious mission targets are achieved, smaller target with
shorter time horizons have been set under each of the three phase of the mission. The
deployment across the application segment is as follows:
Application segments
Utility grid power

including roof top
Off
grid
applications
Solar collectors
Target for phase I

2010-2013
Target for phase II

2013-2017
Target for phase III

2017-2022
1000-2000 MW
4000-10000 MW
20000 MV
200 MW
1000 MW
solar
7
million
meters
square 15 million
meters
2000 MW
square 20 million
meters
square
Table 3.3: mission road map
For PV, the highest discount offered on the CERC tariff was INR 6.96 ($0.17) per unit
and the lowest successful discount was INR 5.15 ($0.12) per unit7. The tariff range is INR10.95
to INR12.76 ($0.27 to $0.31) per unit with an average tariff of INR12.16 ($0.30) per kWh. With
12
a 32.1% fall, the new tariff is significantly lower than the feed-in-tariff announced by CERC
earlier in the year. Some of the successful bidders include well known players such as
SunEdison, Azure Power Rajasthan, Mahindra Solar One and IOC Ltd. However, most of the
successful bidders are less well-known companies. The promoters behind these companies are
often unknown. Some of the larger industrial houses were not awarded projects as they did not
bid aggressively. A possible reason is that the 5MW cap on projects made them too small to be
of any interest. Such companies are instead looking at 10-15 MW projects available under state
programs. A total of 21 successful NSM bids are for projects in Rajasthan. Eight of these are for
a single district, Nagaur, followed by five in Jodhpur and four in Jaisalmer. Other projects are
located in the states of Tamil Nadu, Andhra Pradesh, Karnataka and Maharashtra8.
For CSP projects, the highest discount offered was INR 4.82 ($0.12) per unit and the lowest
was INR 3.07 ($0.07) per unit9. All CSP projects have made use of accelerated depreciation of
80% in the first year. Therefore, the base feed-in-tariff was INR 13.45 or $0.33 (without
accelerated depreciation the feed-in-tariff was INR 15.40 or $0.38). The new tariff range taking
into account accelerated depreciation is therefore INR 8.63 to 10.38 ($0.21 to 0.25) per unit.
With an average tariff of INR 9.50 ($0.23) per unit, the new tariff is 29.3% lower than the
original base feed-in-tariff.
3.4. FRAME WORK FOR JNNSM:
The National Solar Mission, being a country level initiative that has ambitious targets of a
large magnitude, demanded an effective implementation framework to ensure successful fruition.
The government has responded to this demand by putting a robust institutional framework in
place for the effective implementation of the Mission. The following figure gives a description of
the institutional framework in place and identifies the various agencies involved along with their
roles:
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Fig 1.4:JNNSM framework
Ministry of Power:
The Ministry of Power (MoP), directly under the purview of the Government of India, is
primarily responsible for the development of electrical energy in the country.
It plays a significant role in the implementation of JNNSM. The ministry through NTPC; a major
entity involved in the execution of the JNNSM, has appointed NVVN, a fully owned subsidiary
of NTPC, for entering into PPAs and power sale agreements (PSAs) with power developers and
state utilities respectively. The Mission states that in order to incentivize a large number of solar
power projects and minimize tariffs, solar power will be bundled with cheap unallocated power
from central power stations and then sold to distribution utilities. The Ministry is responsible for
allocating an equivalent megawatt capacity, from the Central unallocated quota to NVVN for
bundling together with solar power.
CERC:
CERC, the chief regulatory body in the country, issues guidelines for fixing feed-in-tariff for
purchase of solar power taking into account current cost and technology trends. Under the
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National Solar Mission guidelines, CERC has been mandated to provide the benchmark tariff for
selection of projects under the bundling scheme. CERC has also been entrusted to discharge the
formulation of guidelines and solar specific regulations in order to achieve 3% solar RPO by
2022. Additionally, the CERC also notifies the Ministry of Power about the rates at which the
unallocated power from the Central quota is to be bundled with solar power and sets durations
for the PPA between NVVN and the project developers.
NTPC:
Set up in 1975, NTPC is Indias largest power company. Apart from power generation, which
is the mainstay of the company, NTPC has also ventured into consultancy, power trading, ash
utilization and coal mining.
NTPC has a total installed capacity of 34,854 MW. NTPC has 15 coal based and 7 gas based
stations, located across the country, under its purview. In addition, under joint ventures, there are
5 coal based stations & another naptha/LNG based station. The company has set a target to have
an installed power generating capacity of 1,28,000 MW by the year 2032. The capacity, it is
envisaged, will have a diversified fuel mix comprising 56% coal, 16% gas, 11% nuclear and 17%
renewable energy sources (RES) including hydro. NTPC plans to expand its non fossil fuel based
generation capacity to nearly 28% of its portfolio by 2032.
NVVN :
NVVN is a fully owned subsidiary of NTPC engaged in the business of power trading. The
Mission provides for NVVN to be the designated nodal agency for procuring the solar power by
entering into a PPA with solar power generation project developers who will be setting up solar
projects during the next two years, i.e., before March 2013 and are connected to the grid at a
voltage level of 33 kV or above. For each MW of installed capacity of solar power for which a
PPA is signed by NVVN, the Ministry of Power shall allocate to NVVN an equivalent amount of
MW capacity from the unallocated quota of NTPC coal based stations and NVVN will supply
this "bundled" power to the distribution utilities.
State Distribution Utilities:

The state distribution utilities enter into a PPA with NVVN to buy the bundled power at rates
determined as per CERC regulations. The state utilities are also entitled to use the solar part of
15
the bundled power for meeting their RPOs as mandated under the Electricity Act, 2003. Further,
the Mission document states that at the end of the first phase, well-performing utilities with
proven financial credentials and demonstrated willingness to absorb solar power shall be
included in the scheme, in case it is decided to extend it into Phase II.
Policy incentives:
Guidelines laid out by the JNNSM and the NVVN Mission statements have raised large
business opportunities within the country. JNNSM Mission document, in particular,
encompasses the objective of maximizing indigenous content which, it is envisaged, will lead to
the establishment of manufacturing facilities as well as R&D centres in the country. However,
the issue of domestic content restrictions laid out by the Mission is an important concern. The
following diagram highlights this challenge.:
16
Fig:1.5 JNNSM and NVVN guideline challenges and opportunities
17
3.5 NSM PHASE I BATCH I

For the first phase of the Mission, the Cabinet had approved a target to set up 1,100 MW
grid connected solar plants including 100 MW capacity plants as rooftop and other small solar
power plants till March 2013. In addition, a target of 200 MW capacity equivalent off-grid solar
applications and 7 million square meter solar thermal collector area were also approved.
The Bidding process under the first phase of the National Solar Mission was split into two
batches with the understanding that this circumspect approach would leave enough room for
rectification if some flaws or shortcomings that may emerge in the first batch of bidding. The
following diagrammatic representation gives a snapshot of the bidding process that ensued in the
first batch of bidding under the first phase of the Mission. Under the first batch, a total of 30
solar PV projects, each with an individual capacity of 5 MW (total capacity of 150 MW) and
solar thermal projects (CSP Segment) with a total capacity of 470 MW were allocated. In
addition to the 30 solar PV projects, capacity worth another 84 MW was contributed through the
Migration Scheme that permits projects planned before the Mission was launched, to migrate
into it and enjoy the incentives offered there under.
JNNSM Phase I batch I (400 bids for 650 MW on offer)

18
pv segment
CSP segment
Benchmark tariff Rs
17.91/Kwh
Benchmark tariff Rs
15.40/kWh
150 MW on offer
500 MW on offer
maximum size for a PV bid-100MW
maximum size for a PV bid-5

MW
Reverse Bidding
PV segment
CSP segment
30 projects worth 150 MW selected
7 projects worth 470 MWselected
tariff range:Rs 10.95-12.76/kWh
tariff range:Rs 10.85-12.33/kWh
TABLE 3.5 phase I Batch I bid

As the pictorial representation also suggests, there was substantial oversubscription for projects
to start with, and then the government invited reverse bids asking for discounts on the initial
benchmark tariff of Rs 17.91/ kWh for PV projects and Rs 15.40/ kWh on CSP projects. Thirty
19
PV projects worth a cumulative capacity of 150 MW and seven CSP projects worth a cumulative
capacity of 470MW were selected under Batch I of the scheme. Remarkably, the bidding process
did result in exceedingly competitive bids. PPAs have been signed at an average levelized tariff
of Rs. 12.16 / kWh for PV projects and Rs. 9.50/ kWh (taking accelerated depreciation into
account) for CSP (thermal) projects, i.e., the government has secured 32.1% and 29.3% discount
respectively in PV and CSP projects.
Among solar PV projects, the highest discount offered during the round of bids invited for the
first batch of Phase I was Rs 6.96/ kWh whereas the lowest successful discount offered was Rs
5.15/ kWh. Therefore, the tariffs varied from Rs 10.95/ kWh to Rs 12.76/ kWh. Notably, most of
the successful bidders were new players in the sector. It can be deduced that the larger industrial
houses failed to qualify as they did not bid aggressively, partly because of the 5 MW cap
imposed on the size of the projects, presumably rendering the size of the project vis--vis the
organizational commitment required, unattractive. New entrants have, as has emerged, made
good use of the opportunity afforded by the minimal pre qualification requirements in the policy.
For example, there was an absence of any technical experience requirements in the Policy. The
policy merely required a bank guarantee of Rs 3 million per MW along with unconsolidated,
audited accounts for the last four years as a proof of the net financial worth of the companies.
Among CSP projects, the highest discount offered was Rs 4.82/ kWh while the lowest
successful bid was for Rs 3.07/ kWh. As such, the average discount offered on the benchmark
tariff of Rs 15.40/ kWh was Rs 3.65/ kWh. Notably, all CSP projects have made use of the
accelerated depreciation of 80% in the first year. Consequently, the base feed-in-tariff before
discount worked out to Rs 13.45/ kWh instead of Rs 15.40/kWh. The new tariff range taking into
account the accelerated depreciation was from Rs 8.63 to Rs 10.38 per kWh and the average
tariff offered was Rs 9.50/ kWh.
Annexure I project awarded under JNNSM phase I
20
3.6. NATIONAL SOLAR MISSION PHASE I BATCH II

Building further on the lessons learnt from the first batch of bidding, bids were invited for a
cumulative capacity of 350MW in the second batch of Phase I. The entire quota of 350MW was
for capacity in solar PV only. CERC revised the benchmark tariff for solar PV in light of the
dropping trends in solar equipment prices. The following diagrammatic representation further
illustrates the Batch II bidding process and its outcome.
JNNSM phase I Batch II (total capacity offer 350 MW)
PV segment
Benchmark tariff 15.39/kWh

350 MV offer
capacity maximum:20 MW(+-5%) minimum: 5MW in multiples
of 5MW
Reverse Bidding
PV segmeent
27 projects worth 350 MW selected

tariff range:Rs 7.49-9.44/kwh
Table 3.6: NSM phase I Batch II bidding
21
Silent features of Batch II guide lines:
Maximum capacity of a single PV plant increased to 20 MW.
Plant capacity could be in multiples of 5 MW. In other words, a developer could bid for
projects of size 5 MW, 10 MW, 15 MW or 20 MW.
Winners of projects under the previous round of bidding or under the Gujarat Solar
Policy were allowed to bid for these projects.
A company in any form (including parent, affiliate, ultimate or any group company)
could bid for a maximum of 3 projects totalling 50MW.
Financial Criteria for bidding: The net worth of the company was required to be greater
than or equal to the value calculated at the rate of Rs 3 crore per MW of the project
capacity up to 20 MW. For every MW additional capacity beyond 20 MW, an additional
net worth of Rs 2 crore had to be demonstrated.
Foreign companies could participate in the bidding process. But before signing of the
PPA, the policy mandated such companies to form an Indian company registered under
the Companies Act ,1956.
Deadline for achieving financial closure has been raised to 210 days (7 months) from the
earlier 180 days (6 months). The timeline for the commissioning of the project has also
been extended by a month to 13 months from the date of signing PPA from 12 months
earlier.
Part commissioning of the Project shall be accepted by NVVN subject to the condition
that the minimum capacity for acceptance of part commissioning shall be 5 MW and in
multiples thereof. The PPA will remain in force for a period of 25 years from the date of
acceptance of respective part commissioning of the project.
As per the revised guidelines, the controlling shareholder of the project must now
maintain 50% share for 1 year (up from 26% earlier)
Domestic requirement Both cells and modules have to be manufactured in India. This
domestic content requirement does not apply for thin film and Concentrating
Photovoltaic (CPV) technologies.
The bidder will have to deploy only commercially proven technology those that have at
least one project successfully operational for at least one year, anywhere in the world.
22
Crystalline Silicon and most of the Thin Films Technologies (CdTe, CIGS, a-Si) easily
meet this criteria.
Interconnection point or metering point shall mean the point at 33kV or above where the
power from the solar power project is injected into the CTU or STU transmission system.
The Project Developer shall submit the RfS within 30 days of the invitation by NVVN
The Project Developer shall submit non-refundable processing fee of Rs. 1 Lac for each
Project along with the RfS.
Interconnection with the DISCOM network may be accepted in exceptional cases where
the DISCOM is the ultimate buyer of the entire quantity of power from that project; and
NVVN has signed Power Sale Agreement with that DISCOM and DISCOM agrees to an
agreed interconnection point and at an agreed voltage. This arrangement would be subject
to arrangement of energy accounting with the SLDC.
The entire cost of transmission including cost of construction of line, wheeling charges,
losses etc. from the project up to the interconnection point will be borne by the Project
Developer and will not be reimbursed by NVVN or met by the STU/DISCOM. This
connectivity can also be achieved through a shared line with any agency or any existing
line of DISCOM or STU, provided the energy accounts are bifurcated and clearly
demarcated for the power generated at solar project and are issued by the STU/ SLDC
concerned.
Short listing. In the event, the total aggregate capacity of the Solar PV Projects shortlisted by NVVN in Second Batch is higher than 350 MW or the capacity available and
disclosed at the time of short-listing, the final selection of the Projects from the list of
short-listed projects shall be done on the basis of discount to be offered by Project
Developers on CERC Approved Tariff as applicable on the date of submission of bids as
detailed in the next sub-section.
The Projects offering the maximum discount in Rs/kWh on the CERC Approved
Applicable Tariff would be selected first and so on.
23
Bid Bond:
Sr.no
Discount offered on CERC Approved Amount of Bid Bond applicable for

tariff
every price of discount on CERC

approved tariff(per MW)
1.
Up to 10% or 10%
Rs. 10000
2.
More than 10% Up to 15%
Rs. 20000
3.
Rs. 30000
4.
Rs. 40000
5.
More than 25%
Rs. 50000
Table 3.5: Bid bond

In case of Solar PV, the Project shall be commissioned within 13 months of the date of signing
of Power Purchase Agreement.
3.7. HIGHLIGHT AND COMPARISON OF PHASE I BATCH II BIDDING RESULTS
Highlight of phase I Batch II Bidding Results:

The NVVN bidding results were out on 2.12.2011. Most notably, the lowest bid submitted in
Batch II, offered more than 50% discount on the CERC benchmark tariff. This lowest bid
submitted by Solaire Direct was for a 5 MW capacity project and the quoted tariff was Rs. 7.49
per KWh. 1The tariffs quoted by winning bidders in Batch II bidding ranged from Rs. 7.49 to Rs.
9.44 per kWh. This tariff range is remarkably lower than the one discovered in Batch I. In fact,
the highest winning tariff in Batch II is almost Rs 1.5 lower than the lowest winning tariff in
24
Batch I. Such a steep drop in tariffs, that too within a short of one year, augurs well for the
Indian solar industry and may to some extent be attributed to the adaptive policy framework.
Hence Other Developers such as Welspun quoted for 3 Projects at Rs.7.97, Rs.8.05 & Rs.8.14
respectively, Sun Edison at Rs.9.28 Mahindra Bids at Rs.9.34, Sai Sudhir at Rs.8.22, VS Lignite
at Rs.8.54, Sunborne Energy at Rs.8.99. Azure Power quoted at a price of Rs.7.91 (50 MW),
Sujana Energy at 9.09,and Kiran Energy quoting Rs.9.34 for a 50 MW Project.
For example, besides prevalent market conditions such as dropping module prices, we
understand that by relaxing the 5MW size capping on PV projects to 20MWlarger companies
were encouraged to participate and it was one of the contributing reasons that resulted in
aggressive discounts. Some of the other highlights of Batch II bidding were:
Most of the successful bids belong to project development in Rajasthan.
As many as five developers have won bids in both rounds of JNNSM bidding. This goes
to show that developers are confident of sustaining their projects even at tariffs that are
still widely considered to be too low to guarantee viability.
The lowest quoted tariff in Batch II bidding is approximately 32% lower than lowest
tariff quoted in Batch I, Similarly, the highest quoted winning tariff is lower by nearly
26%.
Comparison of Batch I and Batch II Bidding:

French company, Solairedirect was the lowest bidder for a five megawatt (MW) project under
batch II of the JNNSM, at INR 7.49. Meanwhile, the highest bid under this batch, INR 9.44, was
from Green Infra. Looking to batch I, INR 10.90 was the lowest tariff quoted by bidders. While
higher than the bids from batch II, this figure created controversy at the time, with industry
insiders skeptical that such a low bid could turn a profit.
Overall, the average tariff dipped downward by 27.5 percent in batch II, compared to batch I.
The table below shows the successful bids for photovoltaic projects under batch II, which ranged
from INR 7.49 per kilowatt hour (/kWh) to INR9.39/kWh. Meanwhile, in batch I, the value
varied from INR 10.95/kWh to INR 12.76/kWh, with an average bid price of INR 12.15/kWh.
Annexure II.JNNSM Phase I Batch II solar PV Bid Winners
25
CHAPTER-4
STATE LEVEL INITIATIVES AND DEVELOPMENT TARGETS
Spurred by national level initiatives and policy push, several states like Gujarat, Rajasthan,
Madhya Pradesh, Karnataka and Jammu & Kashmir have also formulated and adopted solar
policies for development of solar energy projects in their respective states. Salient Features of
these policies have been discussed herewith.
4.1. THE GUJURAT SOLAR POLICY

The Gujarat solar policy was in place a year before the NSM was announced. It offers a tariff
of INR15 per kWh for the first 12 years and INR5 for the remaining 13 years for PV and INR12
per kWh for the first 12 years and INR3 for the remaining 13 years for CSP. This gives a
levelized tariff of INR 13.30 ($0.33) per kWh for PV and INR 10.54 ($0.38) per kWh for CSP
over 25 years.
Livelization of tariff under Gujurat solar policy
years
Tariff(per kWh)
Levelized
kWh)
tariff(per
PV
1-12
13-25
Rs.15
Rs.5
Rs 13.30 for 25
years
CSP
1-12
13-25
Rs.12
Rs.3
Rs.10.54
years
for
25
Table 3.6:Livelization of tariff under Gujurat solar policy

There were no timelines or guarantees required from the developers by the government to
sign PPAs after the allotment of projects. Although, some companies like Moser Baer signed
26
PPAs as early as January 12th 2009, many awaited the formalization of the NSM as its draft
policy indicated a more attractive tariff of INR 17.91 ($0.44) per kWh for PV and INR 15.40 for
CSP. Until late 2009, many developers had not signed PPAs in Gujarat. After the NSM policy
was formalized in December 2009, developers moved away from Gujarat towards the NSM. In
the first phase of the Gujarat policy, only 396.5MW worth of PPAs were signed out of 716MW
allotments, leading to a conversion rate of 55% (PPAs signed as a percentage of projects
allotted).
The tremendous interest from developers from the NSM let to the competitive bidding for
projects and a subsequent fall in tariffs. The fall in the NSM tariff below the levelized tariff in
Gujarat suddenly made the Gujarat policy very attractive again to developers. Further, a
significantly higher feed-in-tariff in the first 12 years in Gujarat matches investors timelines, as
they would look to cover the cost of debt during this period.
To ensure developer commitment, Gujarats solar policy for the second phase has been
amended to include a deposit that would be encashed, if the developers fail to sign the PPAs.
Larger available project sizes and the relative ease of land acquisition have seen the larger
developers getting serious about the Gujarat policy, signing PPAs and starting the
implementation of projects. This has led to an increase in the conversion rate from 55% to 95%,
with 537MW worth of PPAs signed for 565MW of the projects allotted. With an increase of over
44% in the number of PPAs signed, Gujarat significantly improved the credibility of its solar
program from the first to the second phase.
As compared to the NSM, the Gujarat policy has longer timelines for the execution of the
projects. At the same time, it has a stringent penalty mechanism for delays and intends to levy
penalties on redundant projects. Delays in commissioning the projects can incur penalties of INR
10,000 ($250) a day per MW for the first 60 days and INR 15,000 ($375) thereafter. The
enforcement of these penalties is yet to be decided on. An initial 48.5MW of the first phase were
required to be commissioned by December 31st 2010. However, a 5MW project by
LancoInfratech and a 1MW project by SunEdison were the only ones that have met their
deadlines. Six projects, including a 10MW solar PV project by Zebasolar and projects by Azure
27
Power and Dreisatz GmbH were delayed despite their initial commitment to start operations
(please refer to Appendix A for a complete list of projects in Gujarat).
On December 29th 2010, Indias first solar park was inaugurated at Charanaka in Patan
district of northern Gujarat. So far, land has been allotted in the solar park for projects worth
176MW to 16 companies from the first and second phases. The total capacity of the solar park is
500MW with 30,000 sq. m per MW land allotted to CSP and 20,000 sq. m per MW of land
allotted to PV projects. The solar park has been financed with over INR 12 billion ($300m) by
financial institutions like the International Finance Corporation (IFC), the Asian Development
Bank (ADB) and the Infrastructure Development Finance Corporation (IDFC).The park tackles
land procurement, water availability and grid connectivity issues and offers a single-window
clearance process. Sixteen companies, including SunEdison Energy India (25MW), Alex Astral
Power (25MW), Roha Energy (25MW), GMR Gujarat Solar (25MW), Kiran Energy (20MW),
Emami Cement (10MW) and Azure Power (5MW) have been allotted projects worth a total of
176MW in the park.They have all signed PPAs with the state government.
4.2 THE RAJASTAN SOLAR POLICY

On April 19th 2011 Rajastan finalized its Rajastan solar energy policy 2011. It targets a
minimum of 550MW of grid connected solar power in Phase 1 (up to 2013). Projects will be
awarded through a process of competitive bidding. PV projects will be worth 300MW, out of
which 100MW are reserved for project developers and 200MW for panel manufacturers. The
minimum and maximum sizes for PV projects are 5MW and 10MW.Module manufacturers that
set up their manufacturing in Rajasthan can bid for either 10MW or 20MW worth of PV projects
based on their manufacturing capacity. A further 50MW will be allocated for rooftop PV (1MW
each) and other small solar power plants. The DISCOMS in Rajasthan will provide PPAs for the
projects. In addition, projects worth 100MW (50MW PV and 50MW CSP) are targeted for
bundled solar power. In such projects, the developer can sell conventional power and solar power
in a ratio of 4:1 at the weighted average tariff to the distribution utilities in Rajasthan. Varied
28
project sizes will attract small as well as large developers looking to invest in projects of
different scale.
The Rajasthan Renewable Energy Corporation Limited (RRECL), the nodal agency
responsible for implementing the states solar policy, has published the revised draft for the
Request for Selection (RfS) document for 250MW worth of projects in July 201113. The revised
draft incorporates some crucial suggestions from industry players and will most likely be
released as the official document to be used by developers looking to submit their bids for
projects under the Rajasthan solar policy. The RRECL has also published the draft for the Power
Purchase Agreements (PPA) for these projects.
According to the draft document, the competitive bidding for the 250MW worth of projects
will include 50 rooftop projects of 1MW each, 100MW of Solar PV and 100MW worth of CSP
projects. The bidding will take place in the latter half of September this year, while the period for
submission of the bids will be from August to September. The benchmark tariffs offered are
INR15.32 ($0.38) per kWh for PV and INR12.58 ($0.31) per kWh for CSP projects for 25 years.
Developers will be required to offer discounts on these in order to win the bid. Bids are open
to both Indian as well as international companies. Out of the 250MW being auctioned, a single
parent company can bid for 61MW worth of projects - one rooftop project of 1MW, up to 10MW
worth of PV and 50MW of CSP projects.
Unlike the National Solar Mission, there is no domestic content requirement in the Rajasthan
solar policy. The developer can choose any established and operational technology from India or
abroad. The draft also gives clear parameters for setting up evacuation infrastructure from the
plant to the nearest substation. This has been an issue between the distribution utility and
developers in other solar policies. For solar PV and CSP projects, if the power plant lies within
15km of the nearest substation, the cost will be borne by the distribution company (DISCOM).
For any length above 15km, the cost will be borne by the developer. For rooftop projects, the
cost will be borne by the DISCOM but the developer will need to take permission from the
DISCOM before finalizing the location of the project.
29
The policy has taken up lessons from forerunners like the NSM and the Gujarat solar policy it declined to have the 5MW limit on individual projects that made the NSM less attractive to
large players but, unlike the Gujarat policy, it has placed fixed limits on overall capacity
allocation. The policy also addresses the concerns of the developers, with regards to the
allocation of land and water, availability of an evacuation network and the localized supply
chain. Finding the right location and acquiring land is one of the major bottlenecks so far for
projects in India. To solve this problem, the policy looks to create land banks from government
land. Some of these land banks are situated near cities like Bikaner and Barmer. Under the
policy, after the 25 years of the PPA, the developer can use the land for commercial.
4.3 THE ODISHA SOLAR POLICY

Orissa, an eastern coastal state of India, so far has no official solar policy. However, the state is
likely to announce its solar policy in late 2011. It has notified its RPO which grows steadily from
0.1% in FY-2011 to 0.25% in FY-2014.
In the absence of a solar policy, developers can approach the Orissa Renewable Energy
Development Agency (OREDA) with proposals for PV projects. The Orissa Electricity
Regulatory Commission has decided a feed in tariff of INR15 per kWh ($ 0.38) for the first 12
years of generation and INR 7.5 per kWh ($ 0.18) from the 13th year onwards. This tariff is only
a benchmark and actual tariffs can wary across projects. It will include any incentives or
subsidies that a project receives from the Indian government as well as the government of Orissa.
OREDA has so far cleared solar projects worth 351MW. Out of this, only 50MW projects shall
be of solar PV technology, while the remaining301MW shall be based on CSP. The PV projects
are by EIO Six Orissa of 20MW at Bolangir, Cambridge Energy of 5MW at Ganjam, Abacus
Holding of 5MW at Nawarangpur, Green O Projects of10MW at Khurda and Green O Liteworth
of 5MW at Kalahandi. In addition, GRIDCO, a government owned bulk electricity supplier, has
entered into a Power Sale Agreement (PSA) with the NTPC VidyutVyapar Nigam Ltd (NVVN),
the trader for NTPC. Under the agreement, GRIDCO will avail 20MW of solar power bundled
with 20MW of thermal power from the NTPC stations. The solar irradiation in the state is around
5-5.5 kWh/m2/day. The state has an exploitable potential of 5,000MW by 2020. It is expected to
30
be a hub of conventional power generation in India with an installed capacity of around 38GW
by 2017. The significant increase in conventional power generation will increase the states
RPOs manifold. This is expected to create a tremendous opportunity for solar power
development in the state.
4.4. THE DELHI SOLAR POLICY

The government of New Delhi, the capital of India, is currently finalizing a rooftop solar
policy. Rooftop projects are the only solar solution that a city like Delhi can implement. Delhi
encompasses an area of 1500 sq KM, 75% of which is occupied. The policy is being made
targeting the area available on the rooftops of houses that are owned rather than rented.
According to the policy, house owners who do not want to develop the project themselves can
lease out their rooftops to a solar project developer. Solar power will be generated at rate of
INR17 ($0.42) per kWh, which will be directly fed into the grid. The PPA lasts for 25 years. The
government is currently working out the exact modalities of the scheme's benefits. The Delhi
government has set a target of generating 20MW of power from solar energy over the next three
years.
The DISCOMS may provide concessions on the electricity bills of house owners based on their
earnings from the sale of electricity generated by their rooftop solar systems. North Delhi Power
Limited (NDPL), a distribution company owned by the TATA group, is currently trying to
implement this model. The company has approached its customers with an offer to install solar
rooftop projects for which the house owners will get a fixed rent. The billing for the amount of
power the house owner consumes from NDPL will be done based on the net metering system
according to the State Grid Code. NDPL targets 100MW through rooftop installation in the next
two financial years. Other DISCOMS have shown a lack of initiative in the absence of fixed
RPOs by the state government. The state government has initiated the process of enacting the
statesRPO. The draft of the policy is with the Delhi Electricity Regulatory Commission (DERC)
for approval.
31
CHAPTER-5
GENERATION BASED INCENTIVE UNDER RPSSGP SCHEME OF MNRE
The Project Proponents would be selected as per these guidelines for development of
solar power projects to be connected to distribution network at voltage levels below 33
kV.
The projects should be designed for completion before March 31, 2013.
The local distribution utility in whose area the plant is located, would sign a Power
Purchase Agreement (PPA) with the Project Proponent at a tariff determined by the
appropriate State Electricity Regulatory Commission (SERC).
Project schemes from States wherein Tariff tenure for duration of 25 years with Tariff
structure on levellised basis has been determined by SERCs shall alone be considered to
be eligible to participate in this Programme (RPSSGP).
Generation Based Incentive (GBI) will be payable to the distribution utility for power
purchased from solar power project selected under these guidelines, including captive
consumption of Solar Power generated (to be measured on AC side of the inverter).
The GBI shall be equal to the difference between the tariff determined by the Central
Electricity Regulatory Commission (CERC) and the Base Rate, which will be Rs 5.50
per kWh (for Financial year 2010-11), which shall be escalated by 3% every year.
GBI shall be payable to the distribution utility for period of 25 years from the date of
commissioning of the project.
IREDA has been designated as 'Programme Administrator' by the Ministry of New and
Renewable Energy for administering the generation based incentive programme for
rooftop PV and other small solar power plants.
It is proposed to develop solar capacity of 100 MW under these guidelines.

This capacity addition is envisaged under the following categories:
Classification of Project Scheme(s) and Eligibility Conditions:
32
The Projects under these guidelines fall within two broad categories:
1. The projects connected to HT voltage at distribution network (i.e. below 33 kV)
2. The projects connected to LT voltage i.e. 400 volts (3-phase) or 230 volts (1-phase).
Accordingly, the projects have been divided into following two categories.
Category 1: Projects connected at HT level (below 33 kV) of distribution network
The Projects with proposed installed capacity of minimum 100 kW and up to 2

MW and connected at below 33 kV shall fall within this category. The projects
will have to follow appropriate technical connectivity standards in this regard.
Category 2: Projects connected at LT level (400 Volts-3ph or 230 Volts-1ph)
The Projects with proposed installed capacity of less than 100 kW and connected
to the grid at LT level (400 Volts for 3-phase or 230 V for 1-phase) shall fall within this
category.
Capacity allocation to different project categories: It is proposed to develop solar capacity of

100MW under these guidelines. This capacity addition shall be achieved by developing the
projects in the above-mentioned two categories in the following manner:
Projects connected at HT level of distribution network with installed capacity of 100 kW

and up to 2 MW.
Projects connected at LT level of distribution network with installed capacity lower than
100kW.
33
Sr.no
Project category
Capacity limit
Projects Connected at HT Level of Distribution

1.
Network with installed capacity of 100Kw and up to
90MW
2 MW
Projects Connected at LT Level of Distribution
2.
Network with installed capacity lower than 100Kw
10MW
TABLE 3.7:Generation based incentives
Applicability of these Guidelines:

The issues related to grid integration, metering, measurement and energy accounting for
projects to be connected at LT level with installed capacity lower than 100 kW is complex.
Detailed guidelines for such Project Schemes will have to be issued once the clarity on such grid
integration standard emerges. As a result, the present Guidelines are applicable to Category 1
projects i.e. with installed capacity of 100 kW and up to 2 MW having grid connectivity at HT
level (below 33 kV) of the distribution network.
34
CHAPTER-6
ROOF TOP STATUS
6.1. INTRODUCTION
India could potentially generate over 230 GW of power just from putting up solar panels on the
rooftops of all households and institutions. However, in its quest for large-scale utility grade
solar power to drive volumes, the government has so far ignored the potential of rooftop solar
power.
The Jawaharlal Nehru National Solar Mission (JNNSM), the flagship programme for the
development of solar power in India, provides for only 10 per cent of the first phase target to
come from rooftop power projects, a target that is woefully limited in its ambition and horizon to
showcase the real potential of rooftop solar power. The mission has awarded 78 projects across
12 states for 98 MW of rooftop capacity, of which only 3 projects are below 1 MW range.
In fact, India is probably the only country that is set to make significant process in solar power
without a significant rooftop programme. Industry experts tend to agree that this has been a
missed opportunity as far as JNNSM or the countrys overall solar plans are concerned. The solar
industry in Europe has grown primarily because of solar rooftop installations and not large-scale
utility plants. In fact, over 90 per cent of global solar installations are based on rooftop.
Even the small achievement that India has made on this front has been in the non-residential
segment, which is unlike what the experience has been internationally. Globally, solar rooftops
largely mean households installing PV panels on their rooftops and supplying the power
generated to the utility grid. In India, almost all the projects undertaken in this space have been
for the non-residential segment. This, in a scenario where the residential/household segment
alone accounts for over 180 GW of rooftop potential, of which 110 MW is in urban centers alone
35
as per analysis taken by Lanco Solar, based on 2011 census data. Given the high level of
economic growth witnessed in urban India during the past 10 years and the potential for rooftop
power generation through solar panels, this estimate is bound to go up significantly.
Taking the lead

West Bengal became the first state in the country to put in place solar rooftop regulations, which
have been notified by the West Bengal Electricity Regulatory Commission (WBERC).
Earlier there was a lot of resistance but today three successful rooftop installations have been
done in the state and 11 more are in the development stage. These include a 50 kW solar plant at
Gurudas College and a 4 kW plant at the Heritage Institute of Technology in Kolkata.
Moving away from the globally accepted feed-in tariff (FiT) model, the state has introduced a net
metering model. According to this concept, the difference between the energy produced by the
rooftop system and that consumed by the household/institution from the grid is measured using a
standardized single net meter or two different meters. The consumers bill reflects the
difference between the power fed into the grid and the total consumption, and the consumer pays
only the difference.
In the West Bengal model, two meters are being used, one for measuring power consumed by the
user and one for measuring power exported to the grid. However, the household/institutional
customer is bound to use a minimum of 10 per cent of its load from the grid. This model has
several benefits. Besides reducing ones electricity bill by about 90 per cent, the solar rooftop
owner gets charged at a lower price slab for net power consumption. This would imply that a
user who was earlier paying Rs 6 per unit for consuming 1,000 units of power will now have to
pay Rs 4 per unit for net power consumption of, say, a 100 units.
The states pioneering efforts are beginning to pay off. Over 50 institutions across the state
applied for WBGEDCs rooftop programme. The corporation has so far selected 11 institutions
that are putting up the rooftop panels and are likely commence operations in 2011-12. The solar
rooftop potential in five cities of West Bengal (Kolkata, Asansol, Siliguri,
Durgapur and Kalyani) has been estimated to be about 300 MW. Within this, the educational
institutions will contribute to large portion of the growth. The area available on these roofs is
much larger than an average household space. Meanwhile, apart from educational institutions,
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the state is also encouraging commercial establishments and new residential societies to install
solar panels.
The success of West Bengals net metering model has encouraged several other states to develop
their own solar rooftop programmes. The Tamil Nadu Electricity Board, for instance, is likely to
introduce the net metering scheme wherein residents will soon be able to generate electricity
through rooftop units. The state government is also planning to install meters at distribution
transformers and feeders, and use it for meter reading and billing. The Karnataka government
also has plans to install solar panels on major state buildings and public utilities.
Under its recently announced solar city project, the state government is planning to install PV
panels with a capacity 0f 2-5 kW on rooftops of over 10,000 houses in Bengaluru for residential
use, with the leftover energy to be fed into the state grid.
In February 2011, the Delhi government came up with a cabinet note to install solar power units
on rooftops of households across the capital. As per the draft policy, home owners can either
lease their roofs to a developer, who can then set up the unit, or they can pay 30 per cent of the
installation cost. The remaining 70 per cent could be financed through banks. The owners can
keep Rs 17 per unit for power produced through the solar panels, which would be fed directly
into the grid. The DISCOM stand to benefit too. Since the power produced from these units is
expected to be expensive, DISCOM will get about Rs 13 per unit as subsidy from the
government. The state government which plans to spend Rs 4.7 billion over 27 years for this
purpose is currently working out the final modalities of the schemes benefits.
In fact, Delhi already has an operational grid-connected project at the Thyagaraj Stadium that
hosted the netball event in the Commonwealth Games 2010. Implemented and commissioned by
Reliance Industries Limited, the 1 MW solar plant was built on the rooftop, using a total of 3,640
modules of 280 W. The project is expected to generate around 1.4 million kWh of electricity per
year to fulfill the power requirements of the stadium, with surplus electricity being fed into the
grid at 11 kV. Another initiative came from North Delhi Power Limited (NDPL) that installed
rooftop solar panels at seven places in Delhi. Most of these projects have been implemented on
existing substations/warehouses owned and operated by NDPL. The electricity generated is fed
directly into the utilitys grid. So far,
37
NDPL has installed around 1.2 MW of solar rooftop capacity and is in the process of installing
five more rooftop projects in the National Capital Region, aggregating 300 kW.
These projects, which have been by the utilitys internal accruals and without any subsidy from
the MNRE, are part of the DISCOMs renewable power obligation target.
6.2. GRID HYBRID ROOFTOPS

As about 15 per cent of the power generated is lost in the storage process, if not being directly
fed into the utility grid, the best use of solar power being generated would be to consume it
rather than store it for later use. Over the past two years, industry players like
Moser Baer and Lanco Solar have set up several projects wherein if the power generated through
the rooftop systems cannot be exported to the utility grid, it is directly fed into the building grid.
This system, known as grid-hybrid, enables the power generated during the daytime to be
consumed as and when produced. If the power generated is more than what is being used, it gets
saved in a battery and if it is less, the system draws power from the utility grid.
The existing level of infrastructure at the building level is more capable of supporting a
gridhybrid system as opposed to a grid-tied one. Moser Baer Photo Voltaic has undertaken
several grid-hybrid solar rooftop projects, the most recent being a 200 kW rooftop solar PV
generation facility for OMAX Auto. While the costs have not been disclosed, such a unit is
expected to save the company about 30,000 liters of diesel annually. The companys investment
is likely to reach the break-even point in two years. Other projects taken by Moser
Baer include a 157 kW project for the World Health Organization in Delhi, a 200 kW project for
Himurja in Himachal Pradesh, another 100 kW project for OMAX at its Dharuhera complex, a
75 kW project for Bayer in Greater Noida, a 50 kW project for NDPL, a 135 kW project for
R&B in Surat and a 100 kW project for IIT in Jodhpur.
Lanco Solar is also betting big on solar rooftops. It has recently commissioned an 80 kW solar
rooftop project for the Parliament Building in Chandigarh. The Rs 129 million project is a gridhybrid setup, where the power generated is consumed within the premises. Besides, corporations
and enterprises are also implementing such projects as part of their corporate social
responsibility initiatives. For instance, Larsen & Toubro commissioned a 406.8 kW grid38
connected PV system (at Rs 100 million) for captive usage in its Manapakkam, Chennai campus
in December 2009. The project availed 80 per cent accelerated depreciation benefit as per the
government guidelines. This was further scaled up to 1 MW in the next year. Also, in Delhi,
Kolkata, Bangalore, and Mumbai, malls and residential developers are considering implementing
rooftop solar energy units. One example is DLF, which implemented a solar unit at a Gurgaon
shopping centre and is now considering similar investments across its various shopping centres.
6.3. AN INSIGHT INTO ROOFTOP PROJECTS
6.3.1 Delhis first utility-scale solar plant commissioned

Delhis first utility-scale solar power plant was commissioned in December 2010. The 1 MW
project was commissioned by distribution utility North Delhi Power Limited (NDPL), a joint
venture of Tata Power and the Delhi government.
The project marks an important milestone for NDPL, which is the latest utility and the first
DISCOM to commission a megawatt-scale solar plant. The plant will cater to the power needs of
500,000 households in north and west Delhi.
Though small in size, the project is a noteworthy step for Delhi, which currently has a negligible
share of renewable energy in the power mix and is among the 10 most polluted cities in the
world. In addition, with Delhi launching the Climate Change Agenda 2009-12, which is an
ambitious plan for developing renewable energy projects in the city, this project will contribute
to the governments strategy of promoting alternative energy sources and energy efficiency.
NDPL gained project development experience for this utility-scale plant by setting up seven
similar small-scale solar photovoltaic (PV) capacities in the past. In May 2010, the DISCOM
commissioned a 54 kW project at Pooth Khurd in Bawana in north-west Delhi. Given the
regulatory stipulations for solar power purchase obligations for distribution utilities, such
projects are imperative for companies like NDPL.
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Project details:
Tata BP Solar provided engineering, procurement and construction services as well as equipment
for the project. The company was selected as the project developer through a competitive
bidding process. As the module supplier, Tata BP Solar is also subject to performance guarantees
for the project. The plant was commissioned at a total cost of Rs 140 million and was financed
through internal accruals.
The solar panel at the plant consists of 5,506 crystalline silicon modules of 180 kWp each.
The panel has four 250 kVA inverters manufactured by ABB and is designed to work for 25
years with minimal maintenance needs such as dusting and cleaning. A common bottleneck in
developing solar power projects is the issue of land acquisition. The high cost of land, especially
in cities like Delhi, makes such projects financially unviable. NDPL, however, did not face this
problem. Land for the plant site, which spans a total area of 13,000 square metres, was in the
companys possession as Delhis distribution licensee.
Moreover, NDPL developed a novel solution to utilize the arrangement of solar arrays as covers
storage, thereby doubling the use of the available land. The solar panel was built on the rooftop
of an open storage area, which was converted into a closed area for erecting the plant. A 925
million tonne steel structure, nearly 10 metres high, was designed and erected. It took the
company 10 months to commission the project as it involved the mounting of solar panels at a
height of about 10 metres
The plant is designed to produce 1.58 MUs of electricity annually and is currently generating
2,000-6,000 units of power per day. It is located at the Keshavpuram site of NDPLs distribution
circle, where the average daily insolation is estimated at 5.06 kWh per square
metre. At this insolation level, the company is expecting a plant load factor (PLF) of 18 percent
in the first year and an average PLF of 17 per cent over the 25 years of project life.
Currently, PLF is being recorded on a daily basis and is in the range of 16-18 per cent.
Accordingly, the cost of generation is estimated at Rs 10-Rs 12 per unit. The generation arm of
NDPL, which was responsible for setting up the project, will sell power to the companys
distribution division.
Four 250 kVA transformers are used to step up the voltage from 330 V to 415 V, while one
1,250 kVA transformer is used to step up the voltage to 11 kV. The output is synchronized to
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NDPLs distribution network. Also, a central control room equipped with a micro supervisory
control and data acquisition system has been installed in order to monitor the generation of this
plant as well as NDPLs other small PV plants.
6.3.2 OMAX AUTOS LIMITED

Automotive parts maker Omax Auto Ltd has installed 200 kWp rooftop solar photo voltaic
(SPV) power generation systems, at its Manesar and Dharubera facilities. These efficient and
cost-effective SPV systems, designed and developed by Moser Baer Photo Voltaic Ltd, feed
power directly to the building level grid of the facilities and obviate the need for any battery
back-up systems or the maintenance associated with them.
Omax estimates each of these rooftop projects to result in an annual saving of over 40,000 litres
of diesel, leading to savings of approx 2 million kilograms of CO2 over a period of 20 years.
Moser Baer has provided a complete turnkey solution including design, engineering,
procurement, construction, commissioning, grid and DG Set synchronisation and will provide
operations and maintenance services for the project.
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CHAPTER-7
BANKABILITY AND FINANCING IN INDIAN MARKET
7.1. INTRODUCTION
Bankability remains an issue for the vast majority of the 1,637.5MW worth of projects with
signed PPAs at the moment in India. Project developers are finding it difficult to attain financial
closure for projects under the NSM as well as the Gujarat Solar Policy. Especially difficult is
obtaining non-recourse debt financing.
Project financing is difficult because lenders feel uncomfortable with the level of risk in the
industry. With a lack of reliable irradiation data, it is difficult to calculate the generated output
and therefore, the return on investment. There are so far only a few projects in the country that
provide actual generation data as a reference. In addition, the majority of developers are new
entrants with no track-record to prove their ability to build and operate solar power plants. Indian
commercial banks are unsure about the generation capacities of power plants and hesitant to
extend debt to projects.
The banks are also concerned about the reliability of the PPAs. The power sector in India is
heavily subsidized and makes large losses. As a result, public power utilities have poor financial
health and a dearth of financial resources. The market perceives a risk that the utilities will
dishonor the PPAs and default on their payments. Given the present structure of the PPAs, the
risk of payment default by the utilities is passed on to the developers. There is a significant
counter-party risk for both Indian and overseas banks if they extend debt to projects.
For projects under the NSM, banks are especially wary of the heavily discounted tariffs that have
arisen from the bidding process. The present tariffs are among the lowest in the world for solar,
and banks are concerned that the project risks have been underestimated in order to win bids.
Banks are also wary of the small margins that projects are looking to operate on in order to be
42
viable at such low tariffs. In addition, the small size of the PV projects (5MW) is creating
unattractively high transaction costs for larger banks.
Considering the large number of projects waiting to attain financial closure and begin
construction, there is an immense pressure on the market to explore options other than nonrecourse project financing.
A majority of large players are taking loans based on the strength of their balance sheets while
providing corporate guarantees. Some players are in a large part funding their projects
themselves through equity. Overseas private equity funds also are actively investing in
companies to channel funds into projects that can provide a high rate of return. An example is
Kiran Energy which has received investments of nearly INR 1.2 billion ($30m) from three
overseas private equity players namely New Silk Route, Bessemer Ventures and Argonaut
Ventures for a majority stake in the company. It has signed PPAs for a 20MW PV project in the
second phase of the Gujarat Solar Policy.
Some investors with a stake in project development companies such as Kiran are looking to
monetize their investments about two years after commissioning, either by restructuring their
stakes into debt or issuing bonds. They would ideally look to sell back the stake to the developer
who would fund the buy-back through debt. The expectation is that two years into the running of
projects, banks would be more comfortable with the reliability of output and would be willing to
provide debt.
External credit agencies (ECA) are playing an increasingly prominent role in financing projects.
Components for projects have to be bought from a company in the domestic market of the
agency and debt is provided for 80-90% of the technology. These include agencies such as
Frances COFACE, Germanys KfW-IPEX Bank, the United States Export-Import Bank (US
Ex-Im Bank) and Israels Foreign Trade Risks Insurance Corporation. Reliance Power for
example has received INR 240 billion ($600m) from the US Ex-Im Bank, part of which will be
used to fund its solar projects in India. Such loans are for an eight to ten year period with
LIBOR-based interest rates averaging around 5%. While such rates are significantly lower than
the domestic lending rates of nearly 12%, high costs of 6-8% for hedging against foreign
exchange risk can make the advantage negligible.
Developers are also looking at obtaining debt from development agencies like the IREDA and
the private investment arms of international organizations like the International Finance
43
Corporation. International development organizations like the World Bank, the KfW Bank and
the Asian Development Bank provide large funds at low interest rates to IREDA which are then
available for projects (in such cases too, the considerable hedging costs reduce the advantages of
lower foreign lending rates). Such funds are backed by credit guarantees from these banks with
the intention of making lending to projects viable. However, many developers approaching
IREDA for funding do not provide adequate project information, fall short on regulatory
clearances or lack a track-record. As a result, only a limited number of projects have been able to
raise debt through this route. A 5MW PV plant, jointly being developed by Astonfield from India
and Spains Grupo T-Solar, has secured a 14-year combined loan on a non-recourse basis from
SBI Capital and the Export-Import Bank of India. The project is located in Osiyan in the western
Indian state of Rajasthan and falls under the Migration Scheme of the NSM. This is the first solar
project in the country to obtain a long-term loan and one of only three in the country that have
secured non-recourse project financing. The other two are a 10MW plant by Azure Power
financed by the Overseas Private Investment Corporation and a 10MW plant by SunEdison
financed by unnamed equity investors, both in the western Indian state of Gujarat. As a project
under the migration scheme of the NSM, it will receive a feed-in-tariff of INR17.91 ($0.44) for
25 years. The high feed-in-tariff increases the economic viability of the project and thereby
makes it easier for the two banks to extend non-recourse debt.
In order to reduce the payment default risks inherent in the PPAs with financially weak State
Electricity Boards (SEBs), the central government on June 2nd 2011 approved a Payment
Security Scheme worth INR4.86 billion ($121m) for projects under Phase 1 of the NSM. The
scheme will be implemented by the Ministry of New and Renewable Energy (MNRE), which
will allocate the funds to the NTPC VidyutVyapar Nigam (NVVN) through a Solar Payment
Security Account (SPSA). Given that the government is often slow to react to market
requirements, this is a significant and timely policy impetus from the government to provide
banks with the confidence to invest in solar projects.
Despite these developments, the bankability of the projects under the NSM and the Gujarat Solar
Policy remains an issue. Banks are still concerned about the larger package of risks that include
the lack of performance data and the inadequate track-record of developers. However, developers
that are partnering with established EPC companies and module manufacturers, mostly from
abroad, are now being considered very seriously by banks for project financing. Performance
44
guarantees from EPC companies and output guarantees by the module manufacturers are a
necessity as well. In general, Indian banks take a more positive view on financing solar power
projects. At the moment, they feel over-exposed to the conventional power sector and want to
diversify their portfolio into the renewable energy space. Given the technology risks, banks are
able to apply margins of up to 300 basis points on their debt. This offers potentially attractive
profit opportunities to those banks that are able to clearly circumscribe and limit the risks. To
further cover the risks, banks are incorporating strict default clauses in the contracts. In the case
of non-recourse financing, these could, for example, allow them to automatically receive project
equity if the actual electricity generation does not match the originally projected numbers.
From the point of view of project developers, in order to successfully raise debt from banks, the
focus should be on comprehensive and accurate Detailed Project Reports (DPRs) that form the
basis for a strong business case for their projects. In addition, they need to have all the required
regulatory clearances and statutory permits. Both these requirements are currently not easily met
by Indian developers as the entire industry as well as the government still lacks the experience
and established processes. A further boost for bankability would come from more reliable
irradiation data. Currently, there is an up to 30% variation between the satellite data provided for
example by the National Renewable Energy laboratory (NREL) of the U.S. Department of
Energy and the MNRE, and on the ground measurements. At the moment, the Indian
Meteorological Department manages a network of 45 radiation monitoring stations across India,
of which New Delhi, Patna, Jaipur and Thiruvananthapuram have data loggers installed. In
addition to these stations, the MNRE is currently in the process of establishing 50 new stations
across the country through the Centre for Wind Energy Technologies (CWET) in Chennai.
CWET is an autonomous body under the MNRE and has pioneered wind data measurement,
monitoring and modeling. It is expected to take over a similar role for Indian solar radiation
monitoring as well.
In the short-term, very few developers will be able to obtain non-recourse debt finance,
especially from Indian commercial banks. Some of the larger players will be able to finance
projects through a combination of balance-sheet financing, equity participation and loans from
various ECAs.
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7.2. TERM AND CONDITION OF FINANCING

Recently Sunborne succeeds to get 12-year loan for a 15MW plant in Gujarat. The company get
loan from multiple banks including State Bank of Patiala, Canara Bank, EXIM bank of India.
Other banks like Bank of Baroda and State bank of India is lending to projects under Gujarat and
NSM. The developers are looking to get loan from multiple banks as it reduces banks exposure
to particular project failure and they readily lends to the developers. Banks are also looking to
solar sector as an equity financing opportunity. Yes Bank and State Bank of India are among the
few banks which have shown interest in equity financing. Though they have not made clear that
what IRR they are looking for these investments. Financial institutes investments like IDFC
private equity which has investing INR 800mn in Green Infra Ltd are also increasing. The terms
and conditions for both equity and debt financing depend of financial institution decision
regarding risk, creditability of developer and bankability of projects. The interest rates charged
by domestic banks vary from 300-400 basis points above State Bank of Indias base rate, which
is 10% in August 2011. The period of loan is generally according to the tariff guidelines which
are from 12-13 years with grace period of 9-12 months. The mortgage required by lender also
varies from project to project. Banks generally ask full mortgage of the land, all fixed assets and
hypothecation of moveable. As an equity investors banks and other financial institutes expect
IRR which varies from 15-17% as under competitive bidding higher IRR are not possible. The
leveraging capabilities of the developer plays important role while arranging funds for project
development. As non-Recourse financing is not popular in Indian solar sector yet, project
developers are looking for limited recourse financing to decrease their liability and financers
risk. Though no project is able to achieve it yet, but with good number of projects to be awarded
by end 2012, the limited recourse financing can emerge as new option in Indian solar market.
International Players like Asian development bank and KfW of Germany has shown keen
interest in Indian solar market and has long term portfolio plans. EXIM bank of US and IFC are
also investing in Indian solar market as a strategy move to enter Indian solar market. IFC plans to
invest $50mn in India recently, while EXIM bank of US has long term plan of investing $1
billion in emerging Indian renewable sector with solar as an important part of portfolio.
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CHAPTER-8
FINANCIAL MODELING OF 1MW SOLAR POWER PLANT
8.1 INTRODUCTION
1. Financial modeling is an integrated part of financial planning.
2. It uses the past data to estimate the financial requirements.
3. The model makes it easy for the financial managers to prepare financial forecasts.
Financial Model has three parts
Input
1. Cost related to the Project.
2. Guidelines of regulator related to the Project
3. Terms and condition of the company.
4. Existing financial rules & regulations.
5. Taxation and Corporate laws.
Model
1. It defines the relation between financial variables and develops appropriate equations.
E.g. net working capital and fixed assets investment may be related to sales.
2. When one independent variable changes the corresponding variable also changes.
Output
1. Applying the model equations to the inputs, output in the form of projected financial
statements are obtained.
2. The output shows the investment and funds requirements given the sales objective and
relationship between the financial variables.
3. The use of excel applications can help develop the financial model.
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8.2. NEED FOR FINANCIAL MODEL

1.Transactions (e.g. receipts of the bills, incentives, penalties)
2. Investments new plant, machinery, facilities or financial investments.
3. Corporate finance to assist in deciding the best capital/corporate structure of a company.
4. Project financing if borrowing money, banks will usually wants to see a model, which
shows the borrower will be able to meet the repayments, and stay within the covenants set by
the bank.
5. What-if scenarios to forecast the potential outcomes of available courses of action.
8.3. ADVANTAGES AND APPLICATIONS

Advantages
1. It makes financial forecasting automatic and saves the financial managers time and efforts
performing a tedious activity.
2. Financial planning model helps in examining the consequences of alternative financial
strategies.
Applications
1. It establishes the relationship between financial variables and targets, and facilitates the
financial forecasting and planning process.
2. The financial model can be improved by including many more financial variables e.g.
assets as current assets and fixed assets, borrowings as long term and short term borrowing
components.
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8.4. FINANCIAL INDICATORS
8.4.1. NET PRESENT VALUE(NPV)

Net present value (NPV) is a standard method for the financial appraisal of long-term
projects. Used for capital budgeting, and widely throughout economics, it measures the
excess or shortfall of cash flows, in present value (PV) terms, once financing charges are met.
By definition, NPV = Present value of net cash flows.
Each cash inflow/outflow is discounted back to its PV. Then they are summed. Therefore
Where
t - The time of the cash flow
n - The total time of the project
r - The discount rate
Ct - the net cash flow (the amount of cash) at time t.
C0 - the capital outlay at the beginning of the investment time (t = 0)
The Discount Rate
Choosing an appropriate discount rate is crucial to the NPV calculation. A good practice of
choosing the discount rate is to decide the rate which the capital needed for the project could
return if invested in an alternative Venture.
Relationship between the NPV and Discount rate
For some professional investors, their investment funds are committed to target a specified
rate of return. In such cases, that rate of return should be selected as the discount rate for the
NPV calculation. In this way, a direct comparison can be made between the profitability of
the project and the desired rate of return.
NPV > 0 the investment would add value to the firm the project should be accepted
NPV < 0 the investment would subtract value from the firm the project should be rejected
NPV = 0 the investment would neither gain nor lose value for the firm we should be
indifferent in the decision whether to accept or reject the project. This project adds no
monetary value. Decision should be based on other criteria, e.g. strategic positioning or other
49
factors not explicitly included in the calculation.
8.4.2. INTERNAL RATE OF RETURN (IRR)

The internal rate of return (IRR) is a capital budgeting method used by firms to decide
whether they should make long-term investments. The IRR is the annualized effective
compounded return rate which can be earned on the invested capital, i.e. the yield on the
investment.
A project is a good investment proposition if its IRR is greater than the rate of return that
could be earned by alternative investments (investing in other projects, buying bonds, even
putting the money in a bank account). Thus, the IRR should be compared to an alternative
cost of capital including an appropriate risk premium.
Mathematically the IRR is defined as any discount rate that results in a net present value of
zero of a series of cash flows. In general, if the IRR is greater than the project's cost of
capital, or hurdle rate, the project will add value for the company.
To find the internal rate of return, find the IRR that satisfies the following equation:
To understand internal rate of return, we must first know what is NPV or net present value.
IRR is discounted rate of return derived based on the condition that net present value for an
investment is 0. IRR is then compared to the companys discounted rate of return. If IRR is
higher than the companys / projects discounted rate of returns, then the investment is
deemed to be worthwhile for the company or investor. The investors themselves determine
the discounted rate of return for the company. Discounted rate of return is derived based on a
number of factors. One of them is the consideration of risk. If the investor is evaluating a
more risky investment, he is likely to have a higher rate of return. This is to compensate the
risk that he is taking on this project. Another factor that could influence the discounted rate of
return is the general market rate of return.
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8.4.3. DEBT SERVICE COVERAGE RATIO (DSCR)

The debt service coverage ratio, or debt service ratio, is the ratio of net operating income to
debt payments on a piece of investment. The higher this ratio is, the easier it is to borrow
money for the property. The phrase is also used in corporate finance and may be expressed as
a minimum ratio that is acceptable to a lender; it may be a loan condition, a loan covenant, or
a condition of default. In corporate finance, it is the amount of cash flow available to meet
annual interest and principal payments on debt, including sinking fund payments.
In commercial real estate finance, this is the main measure to determine if a property will be
able to sustain its debt based on cash flow. Most banks will lend to a 1.2 DSCR, but at times
with more aggressive practices you begin to see this number decreasing. A DSCR below 1.0
on a property indicates that there is not enough cash flow to even cover the loan.
In general, it is calculated by:
DSCR = Net Operating Income / Total Debt service
PAT+DEPRICIATION+INTEREST ON LOAN+LEASE RENTALS
Or DSCR = -------------------------------------------------------------------------------INTEREST ON LOAN + REPAYMENT OF LOAN
A DSCR of less than 1 would mean a negative cash flow. A DSCR of less than 1, say .95,
would mean that there is only enough net operating income to cover 95% of annual debt
payments. For example, in the context of personal finance, this would mean that the borrower
would have to delve into his or her personal funds every month to keep the project afloat.
Generally, lenders frown on a negative cash flow, but some allow it if the borrower has
strong outside income.
Typically, most commercial banks require the ratio of 1.15 - 1.35 times (net operating income
or NOI / loan amount) to ensure cash flow sufficient to cover loan payments is available on
an ongoing basis.
8.4.4 WEIGHTED AVERAGE COST OF CAPITAL (WACC)

The weighted average cost of capital (WACC) is used in finance to measure a firm's cost of
capital. This has been used by many firms in the past as a discount rate for financed projects,
51
as the cost of financing (capital) is regarded by some as a logical discount rate (required rate
of return) to use. Weighted Average Cost of Capital is the return a firm must earn on existing
assets to keep its stock price constant and satisfy its creditors and owners.
Corporations raise money from two main sources: equity and debt. Thus the capital structure
of a firm comprises three main components: preferred equity, common equity and debt
(typically bonds and notes). The WACC takes into account the relative weights of each
component of the capital structure and presents the expected cost of new capital for a firm.
The weighted average cost of capital is defined by:
Where
c = weighted average cost of capital %

y = required or expected rate of return on equity, or cost of equity %
b = required or expected rate of return on borrowings, or cost of debt %
tc = corporate tax rate %
D = total debt and leases currency
E = total equity and equity equivalents currency
K = total capital invested in the going concern currency
Or in other words:
WACC = (weight of preferred equity cost of preferred equity) + (Weight of common equity
cost of common equity) + (Weight of debt cost of debt (1 tax rate))
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8.5. RECOMMENDATIONS for growth and development of solar PV
In India all the states have to make their own solar regulations. But in India most of
the states has followed the CERC regulations as it is. This is not a good step as the
conditions in all states are not same so the same regulation in all the states regarding
the T&C of tariff is not a welcome step. The SERCs should work on this aspect, as it
defines all the economical aspect of the plant.
The capacity utilization factor is a very major concern for the solar power plants. But
it has not been emphasized as it should be. The solar irradiation in the country varies
from 4-7 kWh/ square meter, but the CUF for all the states is almost equal. This CUF
changes the financials for a plant greatly. This should be calculated with due research.
The CERC or MNRE should make a guideline to calculate the CUF for any location.
As the SERCs are using different kind of technologies to calculate CUF. This is not
uniform throughout the country. The CERC guidelines for the same will bring the
harmony in this aspect.
The financial incentive should be provided upfront as the cost of solar plant set up is
very high. IREDA should come up with new regulations/guidelines to overcome this
problem.
The targets for generation of home Roof Top must be set. The target of Home Roof
Top with supporting schemes can boost the solar generation.
A new scheme like Solar Credit should be introduces. In this kind of scheme the plant
set up can be promoted by the home Roof Top PV generation. Here the incentive
equal to the RECs generated by the plant capacity in a year or more could be provided
upfront.
For GBI selection the latest technology should be priorities. This must be one of the
selection parameter.
The GBI capacity eligibility can be changed to support the lower capacity generation
plant.
The limit of setting up at least 250 kW at one place could be removed as in stats like
53
Delhi the space is a very big constraint. This will help to promote the solar generation
as the plant can be of lower capacity or can be one of higher capacity with separate
generation location.
The Solar PV Module manufacturing in India is very negligible. The target of 20000
MW requires a large capacity installation for that enough manufacturing capacity is
not available. This should be emphasized more.
The latest technology for Solar Power generation should be used. The silicon thin film
has better efficiency and it requires lesser space. Technology like this can be used to
have better results.
New Research centers must be established to create new technology which provides
better result in lesser space as this field is immature a lot of possibilities are still there.
A Feed in Tariff policy can be introduced. This will clear all the aspects of the
scheme. The Feed in Tariff has very high possibilities to improve the solar
installation.
The utilities must be obliged to procure all the power generated using solar power
either the RPO is fulfilled or not.
Training and development of human Resources - to drive industry growth and PV
adoption.
Enact laws and pass mandates for expanding solar PV adoption and generation (both
off-grid and grid connected applications).
Evolve a comprehensive research roadmap, in collaboration with universities and
national labs, with clearly defined, time-bound, technology and cost goals,
encompassing all aspects of the PV eco-system including materials, cell technologies,
process, equipment, packaging, test and characterization, manufacturing
engineering and automation, battery/storage technology, inverter and BOS
electronics, metering, etc.
Put a plan in place for achieving and sustaining true manufacturing scale. Create a
plan to develop and strengthen the entire PV supply chain from silicon feedstock,
wafer manufacturing, materials and equipment to end-systems Focus on training
and human resource development in collaboration with the college, university
and training eco-system .
54
Create awareness in the financing community about PV technology, its promise and
prospects, to enable informed project evaluation, to accelerate decision making

on proposals and to streamline the flow of funds.
Roll-out financing models and schemes to enable lending to all categories of PV
customers and develop appropriate financing arrangements to spur the industry.
Implement a large program for rural electrification and lighting through
solar home electrification systems.
IREDA should be more aggressive towards project financing. They are afraid of
taking risks which should not be the case.
More financing institutions should come forward with an aggressive attitude to
finance more and more projects.
CHAPTER-9
CONCLUSION AND LIMITATION
9.1. CONCLUSION
Solar power generation in India has a very great potential. But as the solar generation is very
expensive the Indian govt. is trying hard to provide as much support as possible to promote
solar power generation. States like Gujarat and Rajasthan are doing a rigorous work in the
solar power aspect. Various regulations have been notified, various agencies are being made,
and the financial help is also being provided. This all is very much required as the country
has just started in this field and all states need to follow the likes of Gujarat and Rajasthan.
9.2. LIMITATION
All studies are surrounded by certain limitations and this project is not an exception. Apart
from constraint of time, it does involve certain limitations listed below.
55
Majority of information is collected from internet. So trustworthiness of information
is wholly relying on adequacy and dependency of the internet
Study and assessment of solar sector is entirely and wholly dependent on ones own
perspective. The market remains changing from time to time and so market reading
could be difficult.
Most the charges and figures involved in project are need to be updated time to time.
Since the project report comprises of solar power market scenario and was framed
earlier, so things like achievement of financial closure by project developers was missed.
9.3. BIBLIOGRAPHY
http://www.mnre.gov.in/
http://www.nvvn.co.in/
http://www.cercind.gov.in/
http://www.cea.nic.in/
http://www.ireda.gov.in/
http://www.forumofregulators.gov.in/
http://recindia.nic.in/
http://www.eai.in/
http://www.iea.org/
56
16. ANNEXURE
Annexure I project awarded under JNNSM phase I
Company
State
capacity
Camelot Enterprises
Private Limited
Maharashtra
Khaya Solar Projects

Private Limited
Rajasthan
DDE Renewable Energy

Limited
Rajasthan
Electromech Maritech Pvt.

Ltd.,
Rajasthan
Finehope Allied Energy

Pvt. Ltd
Rajasthan
Vasavi Solar Power Pvt.

Ltd.,
Rajasthan
Karnataka Power Corporation

Ltd
Karnataka
Newton Solar Pvt. Ltd.
Rajasthan
57
Greentech Power Pvt. Ltd.
Rajasthan
Saidham Overseas Pvt.

Ltd.,
Rajasthan
Mahindra Solar One Pvt.

Ltd
Rajasthan
Azure Power(Rajasthan)
Pvt. Ltd
Rithwik Projects Pvt. Ltd.,
Rajasthan
Andhra Pradesh
SAISUDHIR Energy Ltd

Andhra Pradesh
Maharashtra Seamless
Limited,
Viraj Renewables Energy
Pvt. Ltd.
Northwest Energy Pvt.

Ltd.
Rajasthan
5
Rajasthan
5
Rajasthan
Sun Edition Energy India Pvt

ltd. Rajastan
Electrial Manufacturing
Co. Ltd.,
Rajasthan
Alex Spectrum Radiation

Pvt. Ltd.
Rajasthan
Rajasthan
Indian Oil Corporation

Ltd.,
Coastal Projects Ltd.
5
Karnataka
Welspun Solar AP Pvt.

Ltd.,
Andhra Pradesh
58
CCCL Infrastructure Ltd

Alex Solar Pvt.
Tamil Nadu
Orissa
PUNJ LLOYD
Infrastructure Ltd
Rajasthan
Bhaskar Green Power (P)

Ltd.,
Rajasthan
Amrit Animation Pvt. Ltd.
Rajasthan
Oswal Woolen Mills Ltd.,
Rajasthan
Precision Technik Pvt.

Ltd.,
Rajasthan
Lanco Infratech Limited
Rajasthan
100
KVK Energy Ventures

Private Limited
Rajasthan
100
Godavari Power and Ispat

Limited
Rajasthan
50
Annexure II.JNNSM Phase I Batch II solar PV Bid Winners

Developers
State
Capacity
Solairedirect(SA)
Rajasthan
Welspun solar AP
Rajasthan
45
Azure power India
Rajasthan
35
Sai sudhir Energy
Andhra Pradesh
20
V.S Lignite power
Rajasthan
10
Laxicon vinaiya Ltd
Rajasthan
10
Symphony vyapar(p)
Rajasthan
10
Shree saibaba sugars
Rajasthan
Jakson power
Rajasthan
20
59
JEPL projects
Rajasthan
10
Sun born energy
Rajasthan
Sujana Towers Ltd
Tamilnadu
10
Fonroche Energy
Rajasthan
20
NVR Infrastructure
Rajasthan
10
Enfield Infrastructure
Rajasthan
10
Essel Infrastructure
20
SEI solar power
Rajasthan
20
GAIL(India) Limited
Rajasthan
Mahindra solar
Rajasthan
30
Kiran Energy
Rajasthan
20
Green Infra solar Farms
Rajasthan
20
Green Infra solar projects
Rajasthan
60

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DECLARATION

I, Yashobanta Naik, Roll No. 1120812298, MBA (Power Management), Batch

Batch II to provide corrective measures of phase II and Financial

(Signature of the Candidate)

Figure 1.1: Sector wise break up off installed capacity.1

4.2 THE RAJASTAN SOLAR POLICY .................................................................................................... 28

8.5. RECOMMENDATIONS for growth and development of solar PV.................................................... 53

Figure 1.1: Sector wise break up off installed capacity

1.2 SOLAR POTENTIAL IN INDIA

Fig: 1.2 Indian solar Power Roadmap

1.5. RESEARCH METHODOLOGY:

Fig 1.3:Research methodology

1.6. ORGANISATION PROFILE

Commission for Additional Sources of Energy (CASE) in 1981.

Department of Non-Conventional Energy Sources (DNES) in 1982.

Ministry of Non-Conventional Energy Sources (MNES) in 1992.

Ministry of Non-Conventional Energy Sources (MNES) renamed as Ministry of New and

Energy Security: Lesser dependence on oil imports through development and

Energy Affordability: Cost-competitive, convenient, safe, and reliable new and

JAWAHARLAL NEHERU NATIONAL SOLAR MISSION:

3.2. OBJECTIVES AND TARGETS

Phase 2: Remaining 4 years of the 12th Plan (2013-17)

Phase 3: 13th Plan (2017-22).

To create an enabling policy framework for the development of 20,000 MW of solar

Obligation by utilities backed with a preferential tariff.

To promote programs for off-grid applications, reaching 1000 MW by 2017 and

To create favorable conditions for solar manufacturing capability, particularly solar

30% capital subsidy for certain category of solar energy system.

3.3. MISSION ROAD MAP

Utility grid power

Target for phase I

Target for phase II

Target for phase III

Table 3.3: mission road map

Fig 1.4:JNNSM framework

State Distribution Utilities:

Fig:1.5 JNNSM and NVVN guideline challenges and opportunities

3.5 NSM PHASE I BATCH I

JNNSM Phase I batch I (400 bids for 650 MW on offer)

maximum size for a PV bid-5

30 projects worth 150 MW selected

7 projects worth 470 MWselected

tariff range:Rs 10.95-12.76/kWh

tariff range:Rs 10.85-12.33/kWh

TABLE 3.5 phase I Batch I bid

Annexure I project awarded under JNNSM phase I

3.6. NATIONAL SOLAR MISSION PHASE I BATCH II

JNNSM phase I Batch II (total capacity offer 350 MW)

Benchmark tariff 15.39/kWh

27 projects worth 350 MW selected

Table 3.6: NSM phase I Batch II bidding

Silent features of Batch II guide lines:

Maximum capacity of a single PV plant increased to 20 MW.

Discount offered on CERC Approved Amount of Bid Bond applicable for

every price of discount on CERC

More than 10% Up to 15%

More than 15% Up to 20%

More than 20% Up to 25%

More than 25%

Table 3.5: Bid bond

3.7. HIGHLIGHT AND COMPARISON OF PHASE I BATCH II BIDDING RESULTS

Highlight of phase I Batch II Bidding Results:

Most of the successful bids belong to project development in Rajasthan.

Comparison of Batch I and Batch II Bidding: