SOLAR PROJECTS IN INDIA

The entire debate around the growth narrative in India is an

incomplete one in the absence of an energy security blueprint.
What is growth, inclusive or otherwise without energy? We live in
the times of depleting resources and climate change; the days of
carbon-fuelled economy are numbered. We are already in a crisis
situation where, despite whopping spends, we are still starving for
energy… We need a comprehensive energy plan to find our way out
of our current predicament.

Jamshyd Godrej, CMD, Godrej & Boyce (November 25, 2011)

SolarUnlimited (India) Private Limited

1
SOLAR PROJECTS IN INDIA

• India lies in the sunny regions of the world ideally suited for
generation of power by solar energy.
• About 5000 trillion kWh/ year solar energy is incident over
India’s land area, with most parts receiving 4-7
kWh/m2/day with 250 to 300 sunny days in a year.
• The strategic location of India enables it to have long and
sunny days for major part of the year.

SolarUnlimited (India) Private Limited

2
SOLAR PROJECTS IN INDIA
Consider this:

Population of India today: 1.2 billion

Forecasted stabilized population: 1.6 billion
Annual per capita electricity consumption in India: 750 units
Annual per capita electricity consumption worldwide: 3000 units
Expected stabilized per capita electricity consumption in India: 4000 units
Present power generation capacity in India (all sources): 175,000 MW

Stabilized future power requirement: 1,244,444 MW

SolarUnlimited (India) Private Limited

3
SOLAR PROJECTS IN INDIA
Stabilized future power requirement: 1,244,444 MW

If solar PV has to meet all additional power requirement:

Land required per MW for solar PV power generation: 2 hectares

Land required for additional power to meet stabilized future requirement:
2,138,888 hectares

Total barren uncultivable land available in India: 18,000,000 hectares

Percentage of total barren uncultivable land required for solar PV: ~12%

SolarUnlimited (India) Private Limited

4
SOLAR PROJECTS IN INDIA

In India, the solar power market started in earnest in 2010

after the National Solar Mission was announced.

MNRE has initiated several programs to encourage

commercialization of solar industry.

National Solar Mission is the centerpiece program.

SolarUnlimited (India) Private Limited

5
SOLAR PROJECTS IN INDIA

Additionally, various states also have their own solar policies:

• Rajasthan
• Gujarat
• Karnataka

SolarUnlimited (India) Private Limited

6
SOLAR PROJECTS IN INDIA

WHY THEN ARE WE STRUGGLING WITH

SOLAR POWER IN INDIA?

SolarUnlimited (India) Private Limited

7
SOLAR PROJECTS IN INDIA

In hindsight, the reverse bidding process for allocation of

projects have not have the desired effects:

• Aggressive bidding have brought the tariffs down to

unsustainable levels
• Starting from tariffs of Rs.18.45 per unit in 2010, they
have now come down to ~Rs.8 per unit – all in space of
less than 2 years

SolarUnlimited (India) Private Limited

8
SOLAR PROJECTS IN INDIA

Some facts about solar projects:

• Solar projects are extremely capital intensive.

• In order for them to be economically feasible:
• They need to produce maximum power all through
their life, generally 25 years
• They need to be financed at low interest rates
• PPA needs to be signed at high tariff

Let us consider each bullet point separately

SolarUnlimited (India) Private Limited

9
SOLAR PROJECTS IN INDIA

They need to produce maximum power all through their life,

generally 25 years

Low tariff rate has resulted in employing poor quality

components (panels, inverters, cables, connectors etc.)

There is no concrete proof that this has indeed happened. We

will have to watch the performance of the plants for next
several years. However, above is a logical conclusion.

SolarUnlimited (India) Private Limited

10
SOLAR PROJECTS IN INDIA

They need to be financed at low interest rates

The interest rates have been of late very high (13%). At these
rates, the high installments will eat into the revenue (from
already very low tariff rate) and increase the payback period
and the levelized cost of electricity.

Additionally, financing of solar projects has become difficult

as banks are no longer willing to finance projects at such low
tariffs.

SolarUnlimited (India) Private Limited

11
SOLAR PROJECTS IN INDIA

PPA needs to be signed at high tariff

The reverse bidding has ensured that tariffs are low thus
landing the solar developers in a classic “Catch 22” situation

SolarUnlimited (India) Private Limited

12
SOLAR PROJECTS IN INDIA

Why are components prices falling

• Prices are falling because the biggest market, Europe, has
shrunk considerably owing to problems there.
• The inventory has been building up.
• The manufacturers have cut down on production.
• Most manufacturers worldwide are operating at less than a
third of their capacity

SolarUnlimited (India) Private Limited

13
SOLAR PROJECTS IN INDIA
• Today’s PV prices are artificially low and decreasing almost daily
• Price of technology per watt peak is below the cost of producing
it and manufacturers are failing
• On the buying side, low prices lead to healthy margins and there
is very little appetite for price increase
• On the selling side, the margins are negative and the future is
grim

If all the technology manufacturers go out of business, will there be

a PV industry

SolarUnlimited (India) Private Limited

14
SOLAR PROJECTS IN INDIA

In India, we should exercise caution and not treat the current

low component prices as natural extension of healthy market
forces.

Component prices WILL rise and therefore current low solar

tariffs should not become a policy going forward.

SolarUnlimited (India) Private Limited

15
SOLAR PROJECTS IN INDIA

So, what projects have high chance of

success in India?

SolarUnlimited (India) Private Limited

16
SOLAR PROJECTS IN INDIA
Renewable Energy Certificate projects:

These projects are attractive because the tariff from the PPA
combined with revenue from sale of REC can make the project
feasible.

However, there is uncertainty with respect to the pricing of RECs

after 2017 can affect financing of such projects

So far only three projects have been accredited and no trading of

solar RECs have happened so far

SolarUnlimited (India) Private Limited

17
SOLAR PROJECTS IN INDIA
Diesel based installed capacity

• India has a diesel based installed capacity of about 20GW.

• To replace diesel power by solar power makes a lot of economic
sense.
• Cost of diesel power varies by location – it can vary from about
Rs.8 per unit in New Delhi to about Rs.25 per unit in remote
hard to access locations.
• At many locations, diesel power can be replaced by solar power
with battery backup with little or no subsidy.

SolarUnlimited (India) Private Limited

18
SOLAR PROJECTS IN INDIA
Off-grid solar power for rural electrification

• India has about 6 lakh villages of which, according to the most

recent census, about 80,000 are connected to grid
• That leaves more than 5 lakh villages where off-grid solar power
can be successfully be employed
• Rural electrification through solar power can have other social
benefits: children can study at night for one.
• Pumps used for irrigation that normally would run on diesel can
be solar powered thus cutting down on diesel consumption

SolarUnlimited (India) Private Limited

19
SOLAR PROJECTS IN INDIA

SolarUnlimited (India) Private Limited

20
SOLAR PROJECTS IN INDIA

SolarUnlimited (India) Private Limited

21
SOLAR PROJECTS IN INDIA

So, following type of solar projects have good chances of

success in India:

• Projects based on the REC scheme

• Projects that replace diesel power
• Telecom towers
• Off-grid solar projects for rural areas
• Innovation based projects – along the highway

SolarUnlimited (India) Private Limited

22
SOLAR PROJECTS IN INDIA

THANK YOU
Ramesh Tiwari
ramesh.tiwari@solarunlimitedindia.com | +91 98109 33550

M. P. Singh
mp.singh@solarunlimitedindia.com | +91 98204 08104

Ashok Sharma
ashok.sharma@solarunlimitedindia.com | +91 93222 52256

SolarUnlimited (India) Private Limited

23