Venture capital for solar business india
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Financing Renewables Energy Projects
in India
A presentation by:
Debashish Majumdar Chairman & Managing Director,
Indian Renewable Energy Development Agency Limited
New Delhi, India
Centre for Energy Studies
Indian Institute of Technology, Delhi
June 06 2008
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Presentation Outline
A. Power Scenario in India
B. Development of Renewable Energy in India – Institutional
Building
C. About IREDA
D. IREDA’s Experience in Renewable Energy Financing
E. Photographs
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Power Scenario in India
• Power Installed Capacity : 1,44,336 MW
• Energy Generation (p.a.) : 704.45 bn kWh
• Supply Demand Gap : 13.8 % Peak
: 9.6 % Energy
• Per Capita Power Consumption : 665 kWh/Year
• Access to Electricity (Rural) : 44% households
Target for Capacity Addition during XI Plan ( 2007 – 2012) : 78578 MW
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Per Capita Energy Consumption
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
10000U
SA
Chi
na
Rus
sian
Fed
erat
ion
Japa
n
Indi
a
Ger
man
y
Can
ada
Fra
nce
Uni
ted
Kin
gdom
Sou
th K
orea
Wor
ld A
vera
ge
Low per capita energy consumption
(kgoe)
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Power Sector at a Glance
Nuclear
3%
Renewable
9%
Hydro
25%
Thermal
63%
•Thermal 91, 907
•Hydro 35, 909
•Renewable 12,400
•Nuclear 4, 120
Total Installed Capacity : 1,44,336 MW
Renewable Energy accounts 34% of the installed capacity in India
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Sector-Wise Installed Capacity
State
52%
Central
34%Private
14%
State Sector : 74,689 MW
Central Sector : 48,361
Private Sector : 20,011
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Power Sector Reforms The Electricity Act 2003
• Objective : Competition, Protection of Consumers interests & Power for all Areas
• Creates liberal framework for power development.
• Creates competitive environment.
• Facilitates private investment.
• Delicenses generation except for hydro : Captive generation free from controls.
• Rural Areas : Stand alone Generation and Distribution delicenced.
• Stringent provisions for controlling theft of electricity.
• Obliges States to restructure Electricity Boards.
• Mandates creation of Regulatory Commissions (ERCs).
• Retail tariff to be determined by ERCs.
• Open access in Transmission allowed.
• Open access in Distribution to be allowed by ERCs in phases.
• Gradual phasing out of cross subsidies.
• Power Trading permitted with licensing.
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The Electricity Act 2003 Relevance to Renewable Energy
• National Policy to permit stand-alone systems including
renewable energy sources for rural areas.
• Open access for carrying electricity from generating
plants to point of use.
• Determination of tariff to consider promotion of
generation of electricity from renewable energy sources.
• Establishment, operation and maintenance of generating
stations de-licensed.
• State authorities to specify minimum percentage of
renewable energy consumption.
• Transmission and distribution of electricity in rural areas
de-licensed.
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Indian Renewable Energy Scenario
Sector Potential Achievement
(As on 31.03.2008)
Wind 45000 MW 8757 MW
Small Hydro 15000 MW 2180 MW
Biomass Power/ 16000 MW 606 MW
Bagasse Cogeneration3500 MW 800 MW
Waste to Energy 2700 MW 55 MW
Solar PV 20 MW/sq.km 3 MW
Renewables : Total installed capacity 12400 MW
Target for Capacity Addition during XI Plan ( 2007 – 2012) : 14000 MW
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A. Power Scenario in India
B. Development of Renewable Energy in India – Institutional Building
C. About IREDA
D. IREDA’s Experience in RE & EE Financing
E. Photographs
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Institutional Building:
• 1981 : Constitution of Commission for Additional Sources of Energy (CASE)
• 1982 : Constitution of Department of Non Conventional Energy Sources (DNES) under Ministry of Energy.
• 1987 : Incorporation of Indian Renewable Energy Development Agency Limited (IREDA)
• 1992 : The DNES converted into a full fledged Ministry of Non Conventional Energy Sources (MNES)
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Institutional Building : Outcome
• Promotion through :
– R&D
– Demonstration projects
– Programs supported by Government subsidies
• Overcoming financing barrier through :
– The catalytic role of IREDA
– Innovative financing mechanisms
– Success stories for commercial banks to follow
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A. Power Scenario in India
B. Development of Renewable Energy in India – Institutional Building
C. About IREDA
D. IREDA’s Experience in RE & EE Financing
E. Photographs
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The Beginning ...
Incorporated on March 11, 1987 as a Public
Limited Government Company.
Mission
Be a pioneering, participant friendly and competitive
institution for financing and promoting self-sustaining
investment in energy generation from renewable sources,
energy efficiency and environment technologies for
sustainable development.
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Sectors being financed
Solar Energy
Wind Energy
Hydro Energy
Biomass Cogeneration
Biomass Power Generation
Waste to Energy
Energy Efficiency and Conservation
Bio Fuels
New & Emerging Technologies
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International Assistance
Government of Netherlands - 18 Million Dutch Guilders
Asian Development Bank - 100 Million US $
The World Bank I LOC - 145 Million US $
DANIDA - 15 Million US $
KfW, Germany - 61.35 Million Euro
World Bank IInd LOC - 135 Million US $
IREDA is likely to receive € 250 Million financial assistance from Nordic
Investment Bank, European Investment Bank & KfW, Germany
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International Recognition
Second Prize in Water
Globe Award Category
of the Energy Award
2002 presented at Linz,
Austria.
World Climate
Technology Award for
the year 1999 by
Climate Technology
Initiative (CTI), Paris,
France.
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A. Power Scenario in India
B. Development of Renewable Energy in India – Institutional Building
C. About IREDA
D. IREDA’s Experience in RE & EE Financing
E. Photographs
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Highlights Of Cumulative Lending Operations
• Number of Projects Approved : 1849 • IREDA’s Loan Commitment : 8890 Crore • Loan Disbursements : 4984 Crore
• Sanctioned Capacity : 3086 MW
• Conventional Fuel Replacement : 1.28 Million MTCR / Year
[ or 0.4 Million MTOE/Year]
(As on 31. 03.2008)
IREDA envisages capacity addition of 1750 MW during XI Plan Period ( 2007 – 2012)
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Impact of IREDA funded projects
• Created awareness in the country.
• Encouraged entry of private sector investments in RE sector.
• Catalyzed market development by showcasing success stories - encouraging other
lenders to support the sector.
• Helped in creating manufacturing, design & engineering, operation and maintenance
capabilities.
• Encouraged several states to declare policies and incentives to encourage private
investments in RE sector.
• Assisted in policy shift from technology demonstration to commercialization making RE
development demand driven.
• Helped in creating direct and indirect employment generation, economic development
and improving living conditions.
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Drivers
Renewable Energy Energy efficiency
•Rising energy demand •Competitive Advantage
•Energy security •Legislative Mandate
•Access to energy •Bottom Line
•Climate change •Rising Energy Costs
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Key Obstacles to Growth
• Absence of assured customer / market
– All RE projects are : • Small in size
• Widely dispersed in remote locations
• Lacking infrastructure (evacuation facilities, roads etc )
• Generally high cost ( not factoring positive environmental and social impacts)
– 90% of small hydro potential is in hilly areas which have no industry – No demand.
– Only buyer State Utility – Not willing to pay more for RE Power.
• Absence of aggregating agency / trader.
– All small RE projects are forced to market their products (electricity) directly to monopoly buyer (State Utility) – Buyer’s Market.
• Higher cost of generation due to :
– Small size ( no economies of scale)
– Disadvantaged locations
• Lack of adequate capital (both debt and equity) at affordable cost.
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How do we address these issues?
• Government:
• Providing conducive Policy support
• Intensive Resource mapping
• Providing Financial incentives to improve project viability – preferably through generation based incentives
• IREDA:
• Developing sector specific evaluation criteria for proper risk management
• Factoring in financial benefits of the Clean Development Mechanism (CDM) in order to improve project viability
• Providing end to end Financing solutions including tying up equity, long term debt and assured power off take through strategic alliances
• Encouraging Insurance Companies to design new instruments for risk coverage
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Lessons learned in Indian RE Programme
• Renewable energy sources require much higher efforts to penetrate the
market in comparison to conventional energy sources, which are mature and
proven.
• Developing nature of renewables require adequate and conducive policies
and regulatory framework for effective market development.
– Properly designed feed-in tariff
– Development of associated infrastructure – roads, evacuation & transmission facilities etc
– Rationalization of grid connectivity charges levied by the different states.
• Better understanding and increased awareness of economic benefits of RE
technologies is required amongst regulators.
• Frequent policy changes are counterproductive.
• Due to riskier nature of RE sector, presence of a dedicated financing
institution is very useful - leading to multiplier effect.
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A. Power Scenario in India
B. Development of Renewable Energy in India – Institutional Building
C. About IREDA
D. IREDA’s Experience in RE & EE Financing
E. Photograph
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3 MW Small Hydro Project
District Darjeeling, West Bengal
1 MW Small Hydro Project
District Kullu, Himachal Pradesh
1 MW Small Hydro Project,
Sangrur District, Punjab
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4.2 MW Wind Farm Project
set up in Chitradurga District, Karnataka
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7.5 MW Biomass Power Project
Raipur District, Chhattisgarh
20 MW Biomass Power Project
Turicorin District,Tamil Nadu
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40 MW Bagasse based
Cogeneration & Energy
Efficiency Project
Pennadam, Cuddalore
District, Tamil Nadu
8 MW Waste
Heat Recovery
Captive Power
Plant, Raipur,
Chhattisgarh
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24 MW Baggase Cogeneration Power Project,
Davengere District, Karnataka
22 MW Cogeneration
Project, Nagpur District,
Maharashtra
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6 MW Waste-to-Energy Project
Vijayawada District, Andhra Pradesh
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Thank you
Indian Renewable Energy Development Agency Limited
Core 4 A, India Habitat Centre, Lodhi Road, New Delhi 110003, India
Email : [email protected]
www.ireda.in