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Business models for Solar

Parks

Strictly Private
and Confidential

October 2014
Section 1
RE in India

Business models for Solar Parks • Workshop on Solar Parks October 2014
PwC 1
 Section 1 – RE in India

An overview of Power sector in India

Source wise renewable capacity ( FY 07-14) Overview *
• India’s installed capacity is 246 GW
35000
31,707 MW (As on May 2014).
314% total capacity • India has RE capacity of 31,707 MW
30000 increase in 7 years WtE (as on May, 2014) which accounts to
25000 13% of the installed power capacity
Solar Power
• Current share of renewable energy (in
20000
energy produced) is 5% against a
MW

Biomass
15000 164.1 power target of 15% by 2020
Co Gen • Solar Purchase Obligation target of
10000 9389MW bagasse 3%, which would require 34 GW of
installed capacity by 2022
5000

0
2007 2008 2009 2010 2011 2012 2013 2014
Diesel Nuclear
0.49% Gas 1.94%
8.85%
*Source: MNRE, GoI ; Energy Statistics, 2012; Hydro
CEA Statistics 16.47% Wind
8.59%

India is endowed with huge solar energy

potential with most states having about Other
13.22%
300 sunny days per year with annual solar
SHP
radiation in the range of 4.5-6.5 1.55%
kWh/m2/day Biomass
Bagasse
Coal 0.84%
Business models for Solar Parks • Workshop on Solar Parks Cogeneration
October 2014
PwC 59.03% 1.08%
2
SPV
1.08%
Source: MNRE, Government of India
 Section 1 – RE in India

Policy measures supporting capacity addition of solar

projects Key Driver - National Solar Mission
(JNNSM)
3000 Installed Solar Capacity (MW) 2632
2500 • Conceived under the National Action Plan for
2000 1645 Climate Change to establish India as global leader
1500 941.24 in solar power by creating policy conditions for its
1000
500
diffusion.
2.12 2.12 10.3 37
0 • Accelerate generation capacity addition to drive
FY 08 FY 09 FY 10 FY 11 FY 12 FY 13 FY 14 (Till
March down costs and achieve grid parity by 2022.
2014)
• National Action Plan of Climate Change. Govt. • National Policy amended (Jan 2011) for
Of India mandates increase of renewable penetration mandatory Solar RPOs for all power utilities.
in energy from 5% to 15% by 2020. Phase 1: 2010-13
• National Solar Mission. Targets 20 GW Solar Policy framework to
Capacity Addition: 1,100 MW
energy capacity additions by 2022. attract and scale-up

• State policies. Individual State specific solar policy

targets 10GW+ capacity addition by 2022. Phase 2: 2013-17
• Renewable Purchase Obligations. States have Market based on FIT Capacity Addition: 3000 MW
already specified; ranging from 2% to 14% of the total and solar RPO Centre, 6000 MW States
energy demand to be met by renewable energy.
• Renewable Energy Certificate. Delinking green Phase 3: 2017-22
and brown power, facilitating regional transfer and
Grid competitive solar Capacity addition: 10,000 MW
equitable sharing of costs. power
Business models for Solar Parks • Workshop on Solar Parks October 2014
PwC 3
 Section 1 – RE in India

Solar policy directives- JNNSM and state policies

4000 MW Phase I (Already allocated) State wise solar capacity in
under India – March 31, 2014:
• NVVN – 1054 MW 10 2632 MW
centre • RPSSGP – 98.05 MW Mw
• Others – 24.38 MW 5
17 MW
Phase II MW 5
10 MW
• Batch-I (PV) with VGF – 750 MW MW
• Batch-II (PV) Bundling Mechanism – 730 21
3000 MW MW MW
Cumulative 10
• Batch-III (PV) with VGF – 1000 MW MW
target:
• Batch-IV (PV) Defense – 1000 MW 916
10,000 347 16 7
• Pilot Projects (CSP) – 100 MW MW MW
MW MW MW
8
(by MW 30
March 250 MW
2017) MW
Targets through state policies
• Tamil Nadu - 3000MW by 2015
• Andhra Pradesh - 1000MW by 2017 132
MW
• Rajasthan – 25000MW Chhattisgarh – 31
(500MW – 1000MW) by 2017 > 20GW MW
• Karnataka – 2000 MW by 2021 of solar
6000 MW • Madhya Pradesh - 800 MW by 2016 power
under • Uttar Pradesh - 1000 MW by 2017 by 2017 1 MW 98
states • Kerala - 500 MW by 2017 MW
• Punjab - 500 MW by 2022

Business models for Solar Parks • Workshop on Solar Parks October 2014
PwC 4
 Section 1 – RE in India

Feed-in-Tariff, accelerating capacity addition

20 Tariffs evolved in FIT - Competitive bid process (INR/kWh)
17.95
18
15.99
16 * L1 price matched by bidders /
14 12.76 discovered by utility
12 10.95
10 9.39 8.98 8.57.94 8.057.9 8.25 8.05
12.16
8 7.49 6.45 6.52 6.976.47
7.0 5.97
8.34 8.03 6.49 5.5
6 8.79 8.36 6.48 6.45 6.86 6.87
4
2
0
NSM Batch 1, NSM Batch2, Orissa, Karnataka, Madhya Tamil Nadu* Rajasthan * Andhra Madhya Karnataka,
Dec'10 Dec'11 Mar'12 Apr'12 Pradesh, Pradesh * Pradesh, Jan Apr'14
Jun'12 14
Highest Lowest Avg Price

• Bid process for solar projects indicate a downward revision in FIT prices.
o Weighted average price of INR 6.0 per kWh – 7 per kWh realized in the recent bids largely possible due to drop
in EPC prices by over 40% in the last 18 months.
• Ongoing projects / PPA signed under NSM– Indicates sites with high PLF (>19%) largely considered, i.e. Rajasthan
and Gujarat are much favoured with over 80% of installed capacity.
• States specific policies recently announced likely to add +2 GW – in the next 24 months (Tamil Nadu,
Andhra Pradesh, Telangana, Rajasthan, Karnataka, Uttar Pradesh, Bihar, Punjab)
• India is endowed with huge solar energy potential with most of the states having about 300 days of sunshine per year
with annual mean daily global solar radiation in the range of 4.5-6.5 kWh/m2/day.
Business models for Solar Parks • Workshop on Solar Parks October 2014
PwC 5
 Section 1 – RE in India

Availability of Land to support Solar: Utilising Wastelands

Solar Resource Wastelands in a few states (% of total area)

74.4%

40.1%

24.1% 17.8%

4.1%
24.8%
13.8%

10.2% 13.1% 10.2%

10.5%
12.3%

13.6%

6.8%

6.7%

Business models for Solar Parks • Workshop on Solar Parks October 2014
PwC 6
Section 2
Solar Parks

Business models for Solar Parks • Workshop on Solar Parks October 2014
PwC 7
Section 2 – Solar Parks

The value proposition

Benefits
• Utilization of large available wastelands
• Better network optimization, better grid integration and reduced transmission losses
• Huge potential for savings in terms of basic infrastructure facilities like land, water, construction power, roads,
power evacuation system
• The removal of regulatory hurdles allowing for accelerated deployment
• A 20% reduction in CAPEX from building within a Solar Park can lead to almost 18% reduction in tariff

POWER
PRODUCERS
- Lower
overheads
- Better infra

INVESTORS /
TRANSCO LENDERS
Cost effective to Solar Common site
evacuate from a Park appraisal for
larger pool multiple
projects

CONTRACTOR
- Easier to
mobilize
Business models for Solar Parks • Workshop on Solar Parks - Multiple October 2014
PwC projects 8
Section 2 – Solar Parks

Benefits from Solar park

Stand-alone Solar Project

Solar Project in Solar Park

Business models for Solar Parks • Workshop on Solar Parks October 2014
PwC 9
 Section 2 – Solar Parks

Gujarat Solar Park

Gujarat, with a motive to promote cleaner sources; took a pro-active
approach by formulating and announcing Solar Power Generation Policy
in January, 2009 and appointing Gujarat Power Corporation Limited
(GPCL) as the nodal agency for the development of solar projects.
Solar Park
PPA Signed No. of Projects 21
MW 231
Commissioned No. of Projects 19
MW 224

Eligible Unit Any company / corporate body /association / body of individuals

Capacity 590 MW
Land 2024.15 Ha (5,001.67 acres)
Investment Rs. 4500 Crore [Rs. 550 Crores for infrastructure and land acquisition and Rs. 3,996 crores for
Solar Power Plant (Developers investment)]
Sale Fixed tariff. Developers encouraged to get projects under NSM as well.
Facilities provided Adequate land, Road Connectivity, Water, Drainage network, Environmental clearances, Fire
by Govt. of Gujarat station, Compound wall, Fencing, Telecom network, street lights and other civic amenities.
Power Evacuation Transmission line, 66KV substation for supplying the Auxiliary power, 400 x 220 x 66 KV
Substation to evacuate power to be provided by State Transmission company -GETCO

Business models for Solar Parks • Workshop on Solar Parks October 2014
PwC 10
 Section 2 – Solar Parks

Gujarat Solar Park – Implementation Framework

Gujarat Solar Park, Charanka, Patan district

GEDA Financial Institutes

Policy
Processed directives Project
application
funding
s

Tariff Transmission GETCO

GERC/CERC GPCL
determination infrastructure
Nodal Agency for Solar
Government Tariff Park development Water SSNNL
agencies determination availability

Infrastructure
development
charge

Shared with solar

developer,
manufacture, R&D
Business models for Solar Parks • Workshop on Solar Parks setup October 2014
PwC 11
 Section 2 – Solar Parks

Rajasthan Solar Park

Land allocation and planning
• In March 2010, the GoR reserved 10,000 hectares of contiguous government land in the Jodhpur district and
16,000 hectares of government land in the Jaisalmer district as a land bank for solar deployment.
• The engineering study, soil & survey testing has already been completed and phase 1 is in progress.
• 75 MW of projects have been allocated and 20 MW from Essel Infra has already been commissioned.
Transmission
• Rajasthan State Transmission Utility, RVPN, approved plans, in principle, for extensive transmission build-out,
according to the need and build out pace of the solar parks.
• Land identified for 400 kV substation and construction has started. Transmission lines have also been drawn up

Location Village Bhadla, Tehsil Phalodi, District- Jodhpur

Area Available 10,000 hectare (3000 ha in Phase I, 5000 ha in Phase II and 2000 ha in Phase III)
Capacity Planned 1500 MW

Solar Policy for managing solar parks

• Rajasthan has released “Rajasthan Solar Energy Policy, 2011”, which features the development of solar parks and
provides incentives/ concessions to Developers of Solar Power Plants.
• RREC has been identified as the state’s nodal agency for solar, to operate as a single point of responsibility for the
solar park, including single window clearance, Allotment of Govt. land at concessional rate, Allocation of water etc.
• Prospective developers in Rajasthan who will receive a PPA allocation from Rajasthan state solar policy, are being
encouraged by the GoR to locate their plants in the solar park.

Business models for Solar Parks • Workshop on Solar Parks October 2014
PwC 12
Section 2 – Solar Parks

Role of PwC in development of Gujarat and Rajasthan

Solar Park
Technical Policy & Regulatory
• PwC prepared the master-plan for development of solar • Preparation of procurement plan, contract packages and
park related due diligence for the project.
• Detailed action plan and timelines in association with • Advise state government agencies for the development
govt. agencies. of conducive policy & regulatory framework for
• Advise state transmission company plan to evacuate establishment of solar parks.
power • Assessment of existing arrangements for industrial
• Assess technical issues and propose solutions parks, SEZ in India and abroad
• Identify best practices and propose optimal • Propose legal status of the solar park agency,
arrangement for equipment & facilities for the solar appropriate organization structure, governance and
park. management mechanism, dispute resolution etc.

Role of PwC

Financial Marketing and capacity Building

• Drawing Cost estimates
• Economic and financial model for the transmission line
and evacuation infrastructure
• Analysis of Financials of Transmission companies
(GETCO and RVPN) for ADB Loan
• Propose and evaluate appropriate business models.
Business models for Solar Parks • Workshop on Solar Parks
PwC
• Consultations with central and state government,
regulators, international and national private sector
investors and development partners.
• Organized Workshop on Solar park in Jodhpur and
Ahmedabad, hosting more than 400 participants (more
than 150 overseas participants)
• Assist RREC to get concurrence of the relevant agencies
October 2014
• Draft contractual agreements between govt. agencies 13
and potential investors.
Section 3
Developing Solar Parks

Business models for Solar Parks • Workshop on Solar Parks October 2014
PwC 14
 Section 3 – Developing Solar Parks

Solar Park: Requirements

State •Follow MNRE Scheme on development of solar parks and endeavour to create necessary
Governments infrastructure.
•Designate a nodal agency responsible for the development of solar park
•Focus on utilising wastelands and buying power through state DISCOMs

Requirements

Resources (for 1000 MW) Infrastructure Policy

• Investment of Rs. 5,500- • Road (Internal and • Suitable model for

7,000 Cr for solar PV Approach road), plots
projects • Buildings- Administrative,
• Investment of Rs. 500-700 storage, residential,
Cr for transmission training etc.
network • Equipments for remote
• Shade free area of approx. monitoring, SCADA etc.
8,000 Acres • Transmission lines and
• Water requirement of substation
approx. 8Million Litres • Drainage, storage and
per day treatment
• Boundaries, lighting, watch
tower, telecom towers,
buffer zones
Business models for Solar Parks • Workshop on Solar Parks
PwC
developing the park
• Robust framework to
provide certainty and
oversight to investor
• Environmental clearances,
water, coastal, hazardous
material, airport clearances
• Standardised Power
Purchase Agreement
(SPPAs), RFS /RFP
• EPC contract, O&M
contract etc.
October 2014
15
 Section 3 – Developing Solar Parks

Developing Solar parks: Models

•Significant benefits to the developers come at a premium, which is being charged by the concerned government
entities

Investment Returns

Facilities Adequate land, Road Connectivity, Water, Options • Sell/lease out the plots to prospective
to be Drainage network, Environmental project developers. Allotment Price per
provided clearances, Fire station, Compound wall, metre square (inclusive of all applicable
Fencing, Telecom network, street lights and taxes, duties, cess etc.) payable by the
other civic amenities. plot applicant
Power Transmission line, 66KV substation for • MNRE also planning a subsidy scheme
Evacuation supplying the Auxiliary power, 400 x 220 x Power Developer to make his own arrangements
66 x 132 KV Substation to evacuate power to sale
be provided by State Transmission company

• Initial upfront investment requirement

100% Ownership
• Necessary infrastructure to be set up by States
Options
for States • SECI will also invest equity and know how of solar projects
JV with SECI
• SECI may also sign PPA

• Infrastructure to be set up by JV
JV with PSU or Private player • To reduce equity requirement, equity contribution may be the cost of
land as % of project cost
Business models for Solar Parks • Workshop on Solar Parks October 2014
PwC 16
Section 3 – Developing Solar Parks

Overall Framework: Leasing/Selling Land

During Solar Park Development During Solar Project Installation

Milestones Revenue Stream 1

Infrastructure
Development Funding

• Formation of Allotment of Upfront recovery of

Solar park SPV • Debt Raising plots to project x % of solar park
• Subsidy and developers development cost
• Land
Development support from Govt.
Recovery of
• Power • Owner’s Equity Project remaining (100-x)
evacuation commissioning % of solar park
infrastructure development cost
• Weather
monitoring Timelines as Recovery of service
station per agreement charge for services
• Water and (water, security etc)
other amenities
Revenue Stream 2

Lease agreement

Business models for Solar Parks • Workshop on Solar Parks October 2014
PwC 17
Section 3 – Developing Solar Parks

Building solar projects on IPP Mode

Prospective
Solar Park EA/SPV
Developer

Shareholders Agreement
Financing Agreement

Financial Institution O&M Contract

Project Company
(JV/SPV)

EPC Contract
Power Purchase Agreement
EPC Contractor

Off Taker

Business models for Solar Parks • Workshop on Solar Parks October 2014
PwC 18
 Section 3 – Developing Solar Parks

RESCO mode

Local Government
IREDA / FIs
Local regulations
Loan Repayment

Supply and Install Renewable Application

Energy Services MNRE
Solar PV supplier
Company
Agreement (RESCO) Subsidy
Power Purchase
Agreement
PSA
Solar Park SPV DISCOM

Benefits:
• RESCO designs, builds, finances and operates the equipment and takes on the performance risk of the project.
• Solar Park Agency signs PPA with the RESCO and PSA with DISCOM.
• RESCO with experience and good balance sheet can easily get funding , not a burden on Solar Park Agency.
• Technical expertise of RESCO and better O&M of project.

Business models for Solar Parks • Workshop on Solar Parks October 2014
PwC 19
Section 4
Options for Developers

Business models for Solar Parks • Workshop on Solar Parks October 2014
PwC 20
 Section 4 – Options for Developers

The way forward

Land and Project Commerci

Profitable
Other Economic ally Viable
Sales
Infrastruc s& solar
Models Project
ture Costing

• Land banks with • Well structured EPC • Analysis of various Right mix of
good solar cost sales options both factors:
irradiation and • Low finance options • Selection of right costing & sales
access to grid for supply and project power purchase model will
connectivity and agreements result in
• Efficient project commercially
infrastructure .
management • Well designed viable projects
• Fast approvals and contracts and
• Well designed
clearances agreements –
contracts and
agreements construction and
plant maintenance

Business models for Solar Parks • Workshop on Solar Parks October 2014
PwC 21
Section 4 – Options for Developers

Power sale options for solar energy projects

Power Sale Options for solar energy projects

2. Open Market
1. Regulated Market
(State specific policies) 3rd part & Captive
(National and State policies)
Sale

Feed-in-tariff Sale at competitive price and avail REC

APPC + REC
Sale to voluntary green power purchasers

Sale to Conventional Captive Plants

Business models for Solar Parks • Workshop on Solar Parks October 2014
PwC 22
Section 4 – Options for Developers
1. Regulated market sale options
Two options exist under regulated market:
Feed in tariff / Preferential tariff
• Most preferred sale option in the market as seen from
National and State policies.
• Sale through a long term PPA (25 years) to state
discom at preferential tariff /Feed-in-tariff.
• Weighted average price of INR 6.45 per kWh – 8 per
kWh realized in the recent bids largely possible due to
drop in EPC prices
• Tariff largely discovered through a competitive bid
process estimated to provide 10% - 15% returns and
largely driven by financing options.
• REC cannot be claimed under this mode.
Business models for Solar Parks • Workshop on Solar Parks
PwC
Average Power Purchase Cost + REC
• Sale under a long term PPA with state discom on
Average Power Purchase Cost notified by State
Electricity Regulatory Commission.
• REC can be claimed under this mode.
• In this sales mode, energy produced is sold to
State Utilities at APPC (INR. 2.0/kWh – INR
3.0/kWh) of the state as realization.
• Tariff largely discovered through a long term PPA
(10years) and largely driven by REC price.
However, low APPC, uncertainty in REC market
and low bankability is a hindrance
• Non-visibility of REC price beyond 2017 and firm
APPC for the PPA period are seen as market
hurdles.
October 2014
23
Section 4 – Options for Developers

2. Open market sale options

Open Market Sales Options
(3rd party & Captive)

Sale at competitive Sale to consumers with

Sale to Conventional
price without voluntary green power
Captive Plants
concession purchase plan

• Generator will not avail any • Avail concession • Avail concession, hence can not
concession provided by the • Sell at a price higher than grid avail REC
government (other than Solar Park price to satisfy RPO • Sell under open access
policy), so as to claim RECs. requirement mechanism with long term PPA
• Sale to licensee or to an open • No REC Claim • Share any upside and downside
access consumer at a mutually agreed in the REC price
price, shall be issued Half
Target markets • Captive plant meets its RPO
Certificate for 1 MWh. (CERC draft
amendment to REC regulations) - Multinational companies with
surplus cash flow; ( IT firms like- Target markets
Microsoft, IBM etc., Oil firms - Large captive plants based on
Target markets like- Shell, Essar, etc) conventional fuel;
- Large Industrial & commercial - Companies with high tax
consumers; outflow;
Business models for Solar Parks • Workshop on Solar Parks October 2014
PwC 24
Thank You

Amit Kumar
Executive Director
Ph: +91 9899452400
Email: amit2.kumar@in.pwc.com

This publication has been prepared for general guidance on matters of interest only, and does
not constitute professional advice. You should not act upon the information contained in this
publication without obtaining specific professional advice. No representation or warranty
(express or implied) is given as to the accuracy or completeness of the information contained
in this publication, and, to the extent permitted by law, PwC India, its members, employees
and agents do not accept or assume any liability, responsibility or duty of care for any
consequences of you or anyone else acting, or refraining to act, in reliance on the information
contained in this publication or for any decision based on it.

© 2014 PwC India. All rights reserved. In this document, “PwC” refers to PwC India which is a
member firm of PricewaterhouseCoopers International Limited, each member firm of which is
a separate legal entity.