World Renewable Energy Technology Congress thought paper.pdf

8/11/2019 World Renewable Energy Technology Congress thought paper.pdf

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India

For private circulation only

25 27 September 2013

www.deloitte.com/in

4th World RenewableEnergy Technology Congress


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2

Introduction 3

Renewable Energy Technology Trends 5

Policy environment and its implementation 13

Financing RE projects 22

Way forward 31

Contents


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4th World Renewable Energy Technology Congress 3

Introduction

Availability of energy is a crucial input for sustaining

long term GDP growth of a country especially in

country like India where there is unmet demand due

to limited access to energy. In India, the demand for

energy during the 12th Five Year Plan is projected to

increase as the economy grows and access to electricity

increase including in rural areas. The supply of primary

commercial energy is projected to increase by almost

70% from 710.79 mtoe in 2011-12 to 1219.76 mtoe by

2021-22.

Despite the promising growth witnessed in the

generation capacity additions in past few years, the

electricity shortage continues to impose significant

constraints to Indias economic development and

growth. During the financial year 2012-13, the shortage

conditions prevailed in the country both in terms of

energy and peaking availability as shown.

While coal will remain the mainstay of energy supply

for few more years, India intends to develop anddeploy emerging technologies, and focus on promoting

understanding of climate change, adaptation and

mitigation, energy efficiency, and natural resource

conservation committed through the National Action

Plan on Climate Change (NAPCC). Huge untapped

renewable energy potential will assume significance

in the energy supply scenario, currently constituting

12.20% of total installed capacity as on June 2013.

Renewable energy sector in India witnessed a rapid

expansion in the past few years Installed capacity has

almost tripled during the 11th five year plan (2007-

2012), increasing from 7.7 GW to more than 24 GW.

The strongest expansion was registered in wind energy

capacity addition (up by 10.3 GW), followed by small

hydropower plants (up by 1.4 GW). Also, from almost

negligible capacity in 2009 to over 1,142 MW in

December 2012, solar power has emerged as one of the

fastest growing segments.

However, renewable power remains an expensive

source of power vis--vis conventional power sources.

Sustained government policy support and technological

development would be required to enable the

renewable power to become competitive and accessible.

Also, overcoming technology cost disadvantages

relative to conventional sources of energy entails rapid

deployment of existing renewable technologies.

Deployment of renewable energy technologies involvesvarious stages right from basic R&D to commercialisation

to adaptation/deployment and these stages have varying

risk profiles as shown below.

Power demand supply gap

Various stages in the innovation process

FY 2012-13 Energy (MU) Peak Demand(MW)

Requirement 1,048,533 144,225

Availability 978,301 140,964

Surplus/(Deficit) (70,232) (3,261)

Surplus/(Deficit) (6.7%) (6.2%)

Note: Considering transmission constraints, anticipated all India peak

shortage works out to 6.2%

Source: CEA Load Generation Report, March 2013

Source: International Renewable Energy Agency Paper, March 2013

Landed

CostofElectricity(LCOE)

TechnologyRisk

Commercial Adoption (GWp)

Technology Maturity

Technology Venturing

Commercial Scale up

Adaptation

BasicScience

andR&D

AppliedR&D

DemonstrationMarketDeployment

Commercial

Diffusion


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4

Hence, while technology has a key role in development

and commercialisation of renewable energy sources,

government policy need to provide requisite enablers

for nurturing an environment of technology innovations

as well as deployment. In line with the technological

developments, the Government (at Centre and

State) has created a conducive policy framework

for adaptation and installation of renewable energy

projects.

On one hand, the Government (both Centre and State)

has introduced the policy and regulatory incentives for

promoting installation of renewable energy capacity

in the country and on other hand, it has developed a

variety of technical facilities for technology evaluation

and validation, testing and standardization, performance

reliability, monitoring and data analysis apart from

training over the years e.g. establishment of Centre

for Wind Energy Technology (C-WET) and Solar Energy

Centre (SEC).

Through this paper, we have attempted to highlight

various trends across the renewable energy sector

in India with respect to three aspects: technology,

policy and financing. In the first chapter, we would be

describing the various technology trends with regards to

renewable energy especially in wind and solar energy,

and their impact on the levelised cost of energy (LCOE)/

project economics and grid parity status. Second chapter

dwells on the policy framework for renewable energy

in India, Governments effort to promote technological

R&D and adaptation, State level policies to enhance

capacity addition and recent bidding rounds in the solar

sector. Third chapter provides financing requirements of

the renewable energy projects, recent financing trends,

available financing options for renewable projects and

financing mix.


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Renewable EnergyTechnology Trends

Over the years, technology development has largely

influenced the levelised cost of energy (LCOE) of

renewable energy and in turn, its project economics

thereby contributing to growth of renewable energy.

E.g. Decreasing capital costs for onshore wind and

hydropower have increased deployment of these

sources of renewable energy. Similarly, Capital costs

for solar photovoltaic (PV) continue to fall in 2012,

large-scale systems were at USD 1450-3500/kW

and small-scale systems were at USD 2200-5500/

kW (GRES 2013) which has led to increased capacity.

However, cost reductions are proceeding rather slowly

for other emerging technologies e.g. Turbines and

associated equipment suited for an ocean environment

make offshore wind costlier than onshore wind and

Concentrated Solar Power (CSP) costs remain high,

though hybridisation and storage features add value

that should enhance attractiveness over time for these

technologies as well.

These trends in capital costs of renewable energyinstallations have translated into increasingly attractive

generation economics compared to other sources

of power. For instance, renewable auction prices

(wind) have fallen significantly in recent past making

them compete well with natural gas and with other

historically less expensive renewable sources, such as

hydropower and bioenergy.

Solar Photovoltaic (PV) generation costs are higher,

but are falling rapidly. While utility-scale solar PV costs

are still significantly higher than base-load generation

from conventional fuels, they approach peak power

prices in places with summer peak demand (e.g. due

to air-conditioning needs) and unsubsidised fossil-fuel

alternatives. With PV expanding around different parts

of the world, the combination of decreasing capital

costs and favourable financing is expected to further

decrease generation costs.

Technology trends vis--vis efficiency / cost

Wind Energy Technology trends

Wind power technology has come a long way in the

last two decades, both globally and in India, improved

technology has slowly and steadily improved capacity

utilization levels of wind farms. Some of key existing

and emerging trends in development of wind power

technology are discussed in this section.

Improving capacity factors

Globally, improvements in the turbine technology

including higher hub heights, blade length/design,improved component parts, siting, turbine control

software and improved availability, have led to higher

average capacity factors/turbine efficiency as shown

below.

As a result of improving technology in terms of the

capacity factor of the wind turbines for onshore wind,

capital cost (Cost / MW) has observed a decline

over years.

Source: BNEF

Average Capacity Factor (1984-2011)

40 m

80 m

100 m

20%

25%

30%

35%

1980

40%

1985 1990 1995 2000 2005 2010

24%

34%

40%+

Efficiency andhub height

Efficiency only


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6

Onshore Wind Turbine Prices

Global trends have largely been replicated in Indian

context of wind energy development. A key trend in

the Indian industry is development of multi megawatt

turbines installed at greater hub heights. Larger

diameter rotors mean that a single wind power

generator can capture more energy, or more power per

tower. This allows Wind Turbine Generators (WTGs) to

take advantage of higher altitudes with stronger winds

and less turbulence. Subsequently larger machines have

resulted in a steady increase in the capacity factor on

average from 10-12% in 1998 to 20-22% in 2010. For

two decades now, global average WTG power ratings

have grown almost linearly, with current commercial

machines rated on average in the range of 1.5 MW

to 2.1 MW (IWEO 2011) which may reach 2.4 MW by

2017 (NA Wind Power 2013).

The average size of WTGs installed in India also has

gradually increased from 767 kW in 2004 to 1,117

kW in 2009 (IWEO 2011). Currently, megawatt-scale

turbines account for over half the new wind power

capacity installed in India.

Also, the shift in India to larger WTGs is a result of

improved infrastructure available to handle bigger

turbines and improved economics of the sector. As

generator size increases, total fixed project costs fall ona per unit of output basis. Hence, installing fewer high

capacity turbines, as compared to installing a greater

number of smaller turbines, reduces overall capital

investment by lowering installation, maintenance and

potentially real estate costs and thereby improving

the project economics. For example, instead of siting

ten 600 kW turbines on acres of land, developers can

instead site only three 2.0 MW WTGs.

Currently, a study of WTG technologies across India

reveals a trend towards turbine size ranging from 600

kW to 2300 kW. Their technological features would

include pitch regulation, variable speed, gearbox etc.

and generator type would mostly be asynchronous,

Permanent Magnet Synchronous Generator (PMSG) and

Doubly Fed Induction Generator (DFIG).

Most parts of India, except in pockets in the State

of Tamil Nadu, have low wind regimes requiring

considerable changes not only in the design of turbine

components but also in generator configuration. Turbine

manufacturers usually utilize two parallel approaches

of reducing production costs and maximizing power

capture, thus optimizing performance and reducing the

LCOE. In case of India, most of the new manufacturers

offer Class III machines that are more suitable for low

wind regimes (Wind Speed: 7.5 m/s). Manufacturers

now offer Class II (Wind Speed: 8.5 m/s) and Class

III machines (Wind Speed: 7.5 m/s) with newertechnologies and higher power capture capabilities.

Source: BNEF

20112004200019901984

0.5

1.0

2.0

4.0

100 1,000 10,000 100,000 1000,000

Global

EUR

mn

/MW

Denmark and

Germany


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Notably, Indian manufacturers are engaging in

the global market by taking advantage of lower

manufacturing costs in India. Indian companies now

export wind turbines and blades to Australia, Brazil,

Europe, USA and a few other countries. Leading

manufacturers like Suzlon, Vestas, Enercon, RRB Energy

including newer entrants like Gamesa, GE, Siemens,

Regen Powertech and WinWinD have set up production

facilities in India. Some of the international companies

with subsidiaries in India are sourcing over 80% of their

components from Indian component manufacturers.

According to estimates by WISE the annual wind turbine

manufacturing capacity in India has increased to about

10,000 MW during the FY 2013.

Solar Energy Technology trends

Prevailing solar PV technologies include:

Crystalline silicon (c-Si) modules represent 85-90%

of the global annual market today. C-Si modules are

subdivided in two main categories: i) single crystalline

(sc-Si) and ii) multi-crystalline (mc-Si).

Thin films currently account for 10% to 15% of global

PV module sales. They are subdivided into three main

families: i) amorphous (a-Si) and micromorph silicon

(a-Si/c-Si), ii) Cadmium-Telluride (CdTe), and ii i) Copper-

Indium-Diselenide (CIS) and Copper-Indium-Gallium-

Diselenide (CIGS).

Emerging technologies encompass advanced thin films

and organic cells. The latter are about to enter the

market via niche applications. Concentrator technologies

(CPV) use an optical concentrator system which focuses

solar radiation onto a small high-efficiency cell. CPV

technology is currently being tested in pilot applications.

Novel PV concepts aim at achieving ultra-high efficiency

solar cells via advanced materials and new conversion

concepts and processes. They are currently the subject

of basic research.

C-Si cells have reached a record efficiency of around

25% and the efficiency of the best current commercial

c-Si modules is around 19-20%. The majority of

commercial c-Si modules, however, have efficiencies

in the range of 13-19% with more than a 25-year

lifetime. Commercial TF modules offer lower efficiency

between 6-12% (with a target to reach 12-16% by

2020). Figure presents the historical progress of the

best reported solar cell efficiencies to date based on

different technologies along with projected trends. (Theefficiencies of commercial (or even the best prototype)

modules are only about 5065% of the efficiency of the

best research cells.)

Improvement in solar cell efficiencies, by system (1975-2013)

Source: NREL

4%

8%

12%

16%

20%

24%

28%

32%

36%

40%

44%

48%

50% Multijunction Cells

(2-terminal, monolothic)

3 Junction (concentrator)

3 Junction (non-concentrator)

2 Junction (concentrator)

Crystalline Si Cells

Single Crystal

Multicrystalline

Thick Si film

Silicon Heterostructures

Thin Film Technologies

Cu (In, Ga) Se2

CdTe

43.5%

25%

20.4%20.3%

Efficiency(%)


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8

In addition to the commercial options, a number

of new PV technologies is under development (e.g.

concentrating PV, organic PV cells, advanced thin films

and novel concepts and materials) which hold out

promise of high performance and reduced costs in the

medium-term.

Concentrated solar power (CSP) is a re-emerging market.

The CSP technology includes four variants, namely

Parabolic Trough (PT), Fresnel Refl ector (FR), Solar Tower

(ST) and Solar Dish (SD). In 2012, the global installed

CSP capacity was about 2 GW (compared to 1.2 GW

in 2010) with an additional 20 GW under construction

or development. While CSP still needs policy incentivesto achieve commercial competitiveness, in the years to

come technology advances and deployment of larger

plants (i.e. 100-250 MW) are expected to significantly

reduce the cost, meaning that CSP electricity could be

competing with coal- and gas-fired power before 2020.

Further, the solar industry is entering a period of

maturation that is likely to set the conditions for more

stable and expansive growth after 2015 as further

technological breakthroughs are already in testing

phase. Indeed, companies have an opportunity to

reduce their costs dramatically by adopting approaches

widely used in more mature industries to optimize

areas i.e. procurement, supply-chain management, and

manufacturing. For example, solar module and system

prices have fallen significantly over last decade to reach

$ 0.73 / Wp and $ 2.4 /Wp respectively (Renewable

Energy World, NREL, BTI). Thus companies could

position themselves to capture attractive margins even

as prices for PV modules decline.

The solar sector in India has responded to the globalsector trends at large. For example, recent solar

auctions have revealed significant fall in the bid price

quoted by the bidders suggesting that capital cost of

solar PV projects as estimated by the developers have

gone down in India as well. Improving cell efficiencies,

procurement and other supply side factors have led to

fall in the module prices.

Declining Module Prices

Source: BNEF

C-Si

CdTe

1979

0.5

1.00

10.00

100.00

10 100 1000 10000

Globalaveragemodulesellingp

rice(2011USD/MW)

100000 1000000

1992

19982002

2004

2011

2012

Cumulative production volume (MW)

2008 c-Si price increase due topolysilicon shortage

22% price reduction for each

doubling of cumulative volume


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Technology trends leading to improved project

economics

Wind Energy

Given improved technology conditions and steadily

improved capacity utilization, developers have an

opportunity to reduce their costs.

Solar Energy

The past six years have seen tremendous progress in

solar power mainly due to a technology, crystalline

silicon which continues to make incremental

improvements to all aspects of the technology. Further,

improving economics of solar would be a combination

of factors including procurement, supply-chain

management, and manufacturing as shown below.

Average Levelised Cost of Electricity (LCOE) of onshore wind 1984-2011 (EUR/MWh)

Significant cost reductions projected (c-Si multi crystalline solar PV system)

Source: BNEF

Note: Levelized cost of energy; assumptions: 7% weighted average cost of capital, annual operations and maintenance equivalent to 1% of

system cost, 0.9% degradation per year, constant 2011 dollars, 15% margin at module level (engineering, procurement, and construction

margin included in BOS costs).

Source: Industry experts; Photon; GTM Research; National Renewable Energy Laboratory; US Energy Information Administration; Enerdata;

press search; company Web sites; McKinsey analysis.

20112004200019901984

0.5

1.0

2.0

4.0

100 1,000 10,000 100,000 1000,000

Global

14%

EUR/MWh

Denmark and Germany

Levelised

costofelectricity

USDp

erkWh,2011

Polysilicon

0.8

1.6

2.0

Module Cell Wafer Balance of system (BOS)

1.2

2.4

2.8

3.6

3.2

4.0

0.06

0.12

0.10

0.08

0.140.16

0.18

0.20

0.24

0.26

0.28

Incremental

technology

improvement

10%6%

2011-15 2016-20

Best-in-classinstalledsystemcost

USDperWp,2011

Polysilicon

price decline6% Productivity

8%

Procurement

8%

Optimised

system design


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Other Renewable Energy Sources

We have attempted to summarise prevailing

technologies for other renewable energy power

especially with respect to their main features, capital

costs and energy costs.

Snapshot of other renewable energy technologies: Features and costs

Technology Main Features Capital Costs

(USD/kW)

Energy Costs

(LCOE U.S. cents/

kWh)

Power Generation

Hydropower: Grid-based Plant size:

1 MW18,000+ MW

Plant type: reservoir,

run-of-river

Capacity factor: 3060%

Projects >300 MW:


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Source: IRENA Report, March 2013

Grid parity projections

Based on sustained technological advancements

and government support as described in preceding

sections, levelised costs of generation from onshore

wind and solar PV have fallen while average global

costs (excluding carbon) from coal and natural gas

generation have increased due to higher capital costs

and increasing feedstock prices. As prices for many

renewable energy technologies continue to fall, a

growing number of renewables are achieving grid parity

in more and more countries around the world (IRENA).

Solar power is increasingly becoming financially viable

in many countries that have higher commercial and

industrial tariffs as shown below. Despite the flux in the

market, a gradual shift has been observed from policy

driven incentive based projects to parity driven projects.

Going forward, policy based projects will continue to

play their part but the share of installations based on

commercial parity, industrial parity, diesel parity and

RPO/REC projects will continue to increase its share.

Future challenges facing renewables are no longer

fundamentally about technology. Nor is economics

the bottleneck, as grid parity and other measures of

competitiveness have arrived, or are soon arriving, for

many renewables in many countries (GRES 2013).

LCOE for Different Renewable Energy Technologies compared to conventional power

OECD Europe

0.0

0.1

0.3

0.4

0.5

2011USD/kWh

SolarPV

OnshoreWind

OffshoreWind

CSP

HydroLarge

Biomass

HydroSmall

Geothermal

SolarPV

OnshoreWind

CSP

HydroLarge

Biomass

HydroSmall

Geothermal

SolarPV

OnshoreWind

CSP

HydroLarge

Biomass

HydroSmall

Geothermal

LargeSolarPV

OnshoreWind

CSP

HydroLarge

Biomass

HydroSmall

Geothermal

0.2

0.6

OECD North America China India

Cost of fossil fuelbased power


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Residential PV Price Parity Residential power price v. LCOE

Note: LCOE based on 6% weighted average cost of capital, 0.7%/year module degradation, 1% capex as O&M annually. $2.65/W capex

assumed for 2012, $2/W for 2015.

Source: BNEF

0.00

0.05

0.15

0.20

0.25

kW / kWh per year

0.10

0.30

Europe Middle East Africa

2015 LCOE

0.35

0.40

2015 LCOE

1000 1200 1400 1600 1800 2000

25

GW

America Asia

Denmark

Germany

ItalySpain

France

Turkey

Brazil

New Jersey

Texas

CaliforniaNorth India

Indonesia

North ChinaSouth China

South India

Potential

Residential

PV Market


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Policy environment andits implementation

Rapid growth and deployment of the renewable energy

capacities in India owes their success to the government

policy framework /incentives to a large extent. Starting

from fiscal incentives to regulatory policies for the

renewable sector, policy environment has played a

key role.

To begin with, the Electricity Act 2003 (EA 2003)

changed the legal and regulatory framework for

the renewable energy sector in India. The EA 2003

mandates policy formulation to promote renewable

sources of energy by the federal government, the State

governments and the respective agencies within their

jurisdictions.

An integrated energy policy framework

In India the first attempt at putting together an umbrella

energy policy came forth after almost 60 years of the

countrys independence. The Planning Commission

brought out the Integrated Energy Policy: Report of

the Expert Committee (IEP) in October 2006, which

provided a broad overarching framework for all policies

governing the production, distribution, usage etc. of

different energy sources. IEP includes provisions for

promoting renewable and nonconventional energy

sources which emphasized the need to move away from

capital subsidies towards performance incentives for

promoting renewable sources.

Renewable Energy Law

One of the critical requirements for India is to develop

and adopt an integrated energy framework that

has a long-term vision, a time-bound plan and an

implementing mandate that supports Ind ias efforts

for achieving clean, secure and universal energy access

for its people. Such a framework can help to address

not only the concerns of investors in relation to volatile

policy environment and market risks but also deliver

indigenous power supply free from the fuel price risk

associated with fossil fuels.

Recently the Energy Coordination Committee under

the Prime Ministers Office has decided to support

the enactment of a Renewable Energy Law and

subsequently, a national level technical working

committee for a Renewable Energy Law was constituted

by MNRE.

National Missions

India is acutely conscious of the need to address the

climate change issue, while focusing on growth of its

economy and development of its citizens. India, working

towards a sustainable development of the economy,

committed targeting a further emissions intensity decline

of 20-25% by 2020 on 2005 levels. With this objective

of addressing climate change issues and at the same

time managing economic growth, the Government

prepared the National Action Plan on Climate Change

(NAPCC) with the objective of preparing a strategy and

action plan for adaptation and mitigation mechanisms

for India to address the climate change challenge. The

NAPCC outlined its implementation strategy through theestablishment of eight national missions. Two of these

missions are energy related, the National Solar Mission

and the National Mission for Enhanced

Energy Efficiency.


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14

The NAPCC stipulates that a dynamic minimum

renewable purchase target of 5% (of total grid

purchase) may be prescribed in 2009-2010 and this

should increase by 1% each year for a period of 10

years. That would mean that by 2020, India should be

procuring 15% of its power from renewable energy

sources. To achieve such targets there is a clear need

for comprehensive and long-term planning both at the

federal and state levels.

National Solar Mission

Jawaharlal Nehru National Solar Mission (JNNSM) has

the objective of establishing India as a global leader in

solar energy, by creating the policy framework for its

large-scale diffusion across the country as quickly as

possible. JNNSM is divided into three phases as shown

in the following table.

JNNSM Phase-I was focused on capturing the low

hanging options in solar. It was divided into two

Batches-I & II over FY11 and FY12, respectively. InBatch-I, grid-connected capacity addition of 150MW

solar PV plants and 500MW of solar thermal plants was

envisaged including project through NTPC Vidyut Vitran

Nigam (NVVN), migration scheme and RPSSGP (off-grid).

However, in Batch-II the remaining targeted capacity i.e.

350MW was awarded (of which 290 MW has already

been installed), while for off-grid, 99MW was allotted

(12 MW already installed).

Policy and Regulatory Incentive Framework

The Government (central and state level) policy

framework to promote the renewable energy

development could broadly be summarised as below.

Regulatory Incentives

Preferential feed-in tariff (FIT) in 15 states for both

wind and solar power, 17 states for small hydro

projects, 10 states for biomass

Favorable provisions for wheeling, banking and third

party sale by renewable power producers

National-level dynamic Renewable Purchase

Specification (RPS) of 5% (2009/2010) increasing

by 1% every year to 15% by 2020 proposed under

National Action Plan on Climate Change; RPS

announced in 26 states as mandated by the Electricity

Act, 2003

Renewable Energy Certificate (REC) mechanism

introduced for inter-state trading of renewable power

(solar and non-solar power separately)

Concessional levy of cross subsidy surcharge inthe case of third party sales by wind / solar power

producers

Policy Incentives

Renewable Power Generators (RPGs) are eligible for

the provision of 80% depreciation for purpose of

Income Tax. For Wind Power Generators (WPG), this

incentive was withdrawn in March 2012, based on

substantial development made by the wind sector in

India. Solar Power Generators (SPG) continued to be

eligible for availing this provision

Application

Segment

Units Target

Capacity

Awarded

capacity

Actual

capacity

Target Capacity

Phase I (2010-2013) Phase II

(2013-2017)

Phase III

(2017-2022 )

Utility grade

power

MW 1,100 1,100 466 10,000 20,000

Off-grid solar

application

MW 200 200 89 1,000 2,000

Total MW 1,300 1,300 555 11,000 22,000

Source: MNRE JNNSM Phase II Policy Document


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Generation-based Incentive was introduced to

enhance generational efficiencies in the wind sector.

It was withdrawn in March 2012, to be further

reinstated from 1 April 2013 (Notification, September

2013)

Tax holiday for 10 years under section 80 I A of the

Income Tax Act, if the renewable energy power plants

start generation before 31st March 2013

Value-added tax (VAT) at reduced rates from 12.5%

to 5.5% in some States

Allotment and leasing of forest land for development

of wind power projects

Concessional customs duty (5%) on some of the

components of renewable power machinery

Institutionalization of sector financing through the

Indian Renewable Energy Development Agency

Exemption from excise duty for renewable energy

sector

Institutionalization of R&D, training, product

certification, testing and resource assessment

e.g. establishment of the Centre for Wind Energy

Technology (C-WET) and Solar Energy Centre (SEC)

Exemption of Electricity Duty by State Governments

100% Foreign Direct Investment in renewable energy

sector allowed through the automatic route

Note: The Government of India is likely to introduce a new direct tax

code (DTC), The alternative incentive mechanism suggested underDTC provided for expenditure-based incentives to the business of

generation, transmission and distribution of power. All revenue and

capital expenditures (with a few exceptions) will be allowed as tax

deduction upfront instead of claiming amortization/depreciation on

capital expenditure and no tax holiday would be available.

The solar sector growth primarily began with the

introduction of the solar FIT orders in many states.

However, it is being sustained by the solar policies and

bids invited by various states currently. Hence, solar

tariffs are largely being derived based on the bidding

rounds.

State level policies - Solar

Policy Target Off-taker Financial Exemptions Other key

benefits

DCR

National Solar

Mission

20 GW till

2022

Solar Energy

Corporation of

India (SECI)

Viability Gap

Funding (VGF)

based on reverse

bidding

Will depend on

the state in which

the project is

being executed

Will depend on

the state in which

the project is being

executed

DCR on 350 MW

out of the 750 MW

to be allocated

Tamil Nadu

Solar Policy

3GW till 2015 Obligated

entities (as

defined by the

state) - State

distributioncompany

Preferential tariff

based on reverse

bidding. (For a part

of the target)

No exemption Single window

clearance - GBI for

residential consumers

None

Uttar Pradesh

Solar Policy

500 MW till

2017

State

distribution

companies

Preferential tariff

based on reverse

bidding

Exemption

on wheeling/

transmission

charges

Evacuation

infrastructure

onstruction by the state

None

Andhra

Pradesh Solar

Policy

Not driven by

target

Third party

power

consumers

- Obligated

entities

None Exemption

on wheeling/

transmission

charges

Banking of

power permitted

with fee.

None

Karnataka

Solar Policy

200MW till

2016

State

distributioncompanies

Preferential tariff

based on reversebidding

Exemption only

for policy basedprojects

None None


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16

Policy Target Off-taker Financial Exemptions Other key

benefits

DCR

Rajasthan Solar

Policy

1 GW till 2022 State

distribution

companies

Preferential tariff

based on reverse

bidding

No exemption Exemption on land

stamp duty

None

Madhya Pradesh

Solar Policy

800 MW

(timeline not

provided)

State

distribution

companies

Preferential tariff

based on reverse

bidding

No exemption Solar parks to be reated

for policy allocations

None

Chhattisgarh 500 MW to

1000 MW by

2017

State

distribution

companies

Not known No exemption Exemption from

electricity and stamp

duty

None

Gujarat Target

exceeded

State

distribution

companies

No exemption Solar park infrastructure

provided

None


17/32


State level policies - Wind

States Current tariff rates

per kWh

Details of available tariff rates RPS Targets (% for wind)

Andhra Pradesh INR 4.70 Constant for 25 years for the PPAs to be signed by

31-03-2015

5% for all RE (2012-2013)

Gujarat INR 4.23 No escalation for 25 years of project life 5.5% for wind (2012-2013)

Haryana Wind Zone I INR 6.14

Wind Zone II INR 4.91

Wind Zone III INR 4.09

Wind Zone IVINR 3.84

Tariff is for FY 2012-13 3% for all RE (2012-2013)

Kerala INR 3.64 No escalation for 20 years of project life 3.3% (2011-2012) & 3.63%

(2012-2013) for all RE

Karnataka* INR 3.70 No escalation for 10 years 7-10% (2011/12) for all

Non-Solar

Madhya Pradesh INR 4.35 No escalation for 25 years of project life 4% for wind (2012-2013)

Maharashtra Wind Zone I INR 5.67

Wind Zone II- INR 4.93


Wind Zone IV INR 3.78

No escalation for 13 years 8% for all RE (2012-2013)

Orissa INR 5.31 No escalation for 13 years 5.5% for all RE (2012-2013)

Punjab INR 5.07 (for zone I) No escalation for 10 years 2.9% for all RE (2012-2013)

Rajasthan** INR 4.46 & 4.69 (for FY

2011-12)

No escalation over project life of 25 years

INR 4.46/kWh for Jaisalmer, Jodhpur & Barmer districts while

INR 4.69/kWh for other districts

7.5% for wind (2011-2012)

Tamil Nadu INR 3.51 No escalation for 20 years of project life 9% for all RE (2011/12)

Uttarakhand Wind Zone I INR 5.15

Wind Zone II INR 4.35


Wind Zone IV INR 3.20

INR 5.65 for the first 10 years & INR 3.45 11th year onwards

INR 4.75 for 1st 10 year & INR 3.00 for 11th year onward

INR 3.95 for 1st 10 year & INR 2.55 for 11th year onward

INR 3.45 for 1st 10 year & Rs.2.30 for 11th year onward

5.05% for all RE (2012/13)

West Bengal INR 4.87 No escalation for 10 years 4% for all RE (2012/13)

Note: * RPS for Bangalore Electricity Supply Company Ltd. (BESCOM), Mangalore Electricity Supply Company Ltd. (MESCOM), and Calcutta Electricity Supply Company Ltd. (CESC)

is 10% while for Gulbarga Electricity Supply Company Ltd. (GESCOM), Hubli Electricity Supply Company Ltd. (HESCOM), and Hukeri, it is 7%. **RPS percentage specified only for

wind.

Source: GWEC: India Wind Energy Outlook 2012


18/32

18

Renewable Technology R&D

Apart from providing a policy framework to promote

renewable energy, the government has developed

technical facilities for technology evaluation and

validation, testing and standardization, performance

reliability, monitoring and data analysis apart from

training over the years.

Centre, For Wind Energy Technology (C-WET) has been

established by MNRE at Chennai as an autonomous

R&D institution of Government of India. It is aimed at

carrying out research and development, large scale

demonstration and diffusion of the non-conventional

energy sources. A Wind Turbine Test Station with

technical and partial financial support by Danida,

Government of Denmark, has been established at

Kayathar, in Thoothukudi, District, and Tamil Nadu,

as an integral part of the Centre. It is envisioned that

C-WET will serve as a technical focal point of excellence

to foster the development of wind energy in the

country.

Solar Energy Centre (SEC) established in 1982, is a

dedicated unit of the Ministry of New and Renewable

Energy, Government of India for development of

solar energy technologies and its related science and

engineering. To achieve its objective, the Centre has

been working on various aspects of solar resource

utilization and technology development in collaboration

with other research institutions, implementing agencies

and industry.

R&D Projects by Institutions. MNRE provides fundingsupport for the renewable technology R&D and

demonstration projects to Universities, Government

Research Institutes, IITs, IISc and others.

Recent bidding rounds in solar

Initial growth in the solar sector was driven by the

introduction of the FIT by various states. Next drive

of capacity additions happened subsequent to the

launch of the JNNSM bidding. Phase I has resulted into

commissioning of over 550 MW solar capacity so far.

Based on the learning of the JNNSM bidding, several

states have outlined their solar polices stating their

capacity addition targets and have invited bids based on

these policies to carry out a solar price discovery.

An analysis of the recent solar bidding rounds has beendone to assess the solar policies of respective states with

respect to their success in attracting bidders interest

and solar price discovery. Also, certain parameters have

been defined for the solar attractiveness of states.

Andhra Pradesh

Under the AP Solar Policy, 184 bidders participated

in the bidding and in all, 294 bids were submitted. A

cumulative capacity of 1339.5 MW was bid for by the

bidders.

The lowest price offered or the L1 price under the AP

policy was INR 6.49/kWh. Based on that, APTRANSCO

received offers for setting up 418 MW capacity Solar

PV plants. These offers were received from 35 bidders

who accepted the solar purchase price at INR 6.49/unit.

Of those 350 MW capacity responses received from

34 bidders, only 7 bidders (contributing to 53 MW)

had accepted the price without any conditions and

acceptance for the remaining 297 MW was subject to

conditions.

Bid capacity range (MW) No. of players

20-50 8

50-100 6

>100 1

Total capacity 1339.5 MW


19/32


PunjabUnder the Punjab Solar Policy, bids were invited under 2

categories Category 1 for newly incorporated/existing

companies with project size between 1 and 4 MW and

Category 2 for existing companies with project size

between 5 and 30 MW.

The bid details for the Category 1 and II are as follows:

It may be noted that the average bid price for the

larger projects are higher than those for smaller plants.

Another interesting aspect is that the average bid price

was above INR 8/kWh. This rate is high compared to

Rajasthan (INR 6.45/kWh), Andhra Pradesh (INR 6.49/

kWh) and Tamil Nadu (INR 6.48/kWh with 5% escalation

for the first 10 years).

Tamil Nadu

Tamil Nadu received bids for less than 500 MW under

the 'L1' method of bidding process, wherein bidders

are asked to match the lowest bid. Out of the 500 MW,

40% of the capacity has been bid in INR 7 /kWh- INR 8 /

kWh range and only about 60 MW below INR 7 /kWh.

Bids for about 75 MW are above INR 10 /kWh, while

those for 141 MW are between INR 8 /kWh and

INR 10 /kWh.

The lowest financial bid for Tamil Nadu's plan to set

up 1000 MW of solar power, India's single-biggest

solar tender, has come in at INR 5.97 /kWh by Mohan

Breweries. However, state utility Tamil Nadu Generation

and Distribution Corporation Ltd will take a final

decision regarding a workable rate as the bid rate could

be too low.

Rajasthan

The financial bids for the allocation of 100 MW of solar

PV projects in Rajasthan were opened on February2013. A total of 25 bids worth over 200 MW have been

received.

Developers could bid for either a 5 MW project or a 10

MW project. The lowest bid has been submitted at INR

6.45/kWh by Essel Mining and Industries Ltd. This is

currently the lowest valid solar bid in India based on no

escalation provisions.

This tariff could be financially viable based on

accelerated depreciation benefits. However, the

Rajasthan solar policy does not consider separate tariffsfor projects that avail accelerated depreciation and

projects that do not.

Category Average

bid price

(INR /

kWh)

Weighted

average

(INR /

kWH)

Median bid

price (INR

kWh)

I 8.22 8.27 8.355

II 8.41 8.34 8.52


20/32

20

State-level Solar Bidding Summary

Various State Solar Policies

S. No. State Policy

Date

Target

Capcity

Bid

received

(MW)

Tariff

range

COD/

Target

cap.

Remarks

1 Tamil Nadu Oct-12 1000 (104

projects)

499 Lowest bid

is INR 5.97/

unit (20

year PPA);

PPAs with

bidders are

about to be

executed

NA Bankability

of PPA is an

issue

2 Kerala Feb-13 Only draft has released 500MW by

2017

3 AP Jan-13 1000 1340 Lowest bid

is INR 6.58/

unit (20

year PPA)

Jan-14 Incentive

for early

commissing

4 Rajasthan Feb-13 100 200

Lowest bid

is INR 6.48/

unit (20

year PPA)

No separate

tariff using

AD scheme

5 UP Mar-13 NA NA Benchmark

tariff is INR

7.0/unit

500MW by

2017

Poor

DISCOM

health

6 MP Jun-12 225 Awarded

225 MW

projects


21/32


Implementation issues

For utility scale projects, solar developers have given

preference to those states with 1) bankable PPAs

i.e. AP and 2) cheap land availability i.e. Rajasthan.

Furthermore, transmission evacuation infrastructure

and DISCOM health are the other major drivers for

investment in solar projects.

Grid based Solar Attractiveness parameters:

Bankability of PPA and DISCOM financial health:

Relatively higher weightage given to lower

counterparty risk and better DISCOM health

Evacuation Infrastructure: Relatively higher weightage

given to states making efforts to bring in dedicated

evacuation infrastructure

Consumer Profiling: Relatively higher weightage given

where non domestic tariffs are almost at par or higher

than solar FiT

RPO compliance: Relatively higher weightage given to

states with proven adherence to RPO compliance

Land Availability: Relatively higher weightage given tostates with lower land prices and ample availability.

Source: CARE Report


22/32

22

Financing RE projects

Renewable energy funding requirements

Improved technologies and government policy

framework have made a case for rapid growth of

renewable energy development in India. Such growth

in renewable capacity could be instilled though sound

financing systems/options.

Renewable energy development

Wind power installed capacity increased from 230

MW in 1994-95 to 16,078 MW by 2011, reaching

approximately 94% of the 11th plan (2007-12) target.

In 2007-11, wind capacity installations increased at

a compound annual growth rate of 19.7% as the

Government of India introduced additional incentives

such as the generation-based incentive (GBI) as well as

accelerated depreciation (AD).

Going forward, reaching Indias ambitious target of

total wind installed capacity of 31,078 MW by 2017,

will now depend upon new mechanisms, including the

Renewable Purchase Obligation (RPO) and Renewable

Energy Certificate (REC) market.

Significant growth in Indias solar power industrycommenced only in 2010 with the launch of Jawaharlal

Nehru National Solar Mission (JNNSM). The grid-

connected solar PV capacity increased by 165% in 2011

alone to reach 427MW.

India wind power installed capacity and future

targets

India grid connected solar PV installed capacity v.

Phase I target

Note: Yearly data is at the end of December every year; Source: BP

Statistical Review 2012

Note: Yearly data is at the end of December every year

Source: BP Statistical Review 2012; CERC; MNRE, India Infoline

0

10,000

20,000

30,00012th plan target

11th plan target

2006 2011 2012 2017

Installedcapacity(MW)

17,164

31,078

JNNSM

0

1,000

2,000

Installedcapacity

(MW)

Phase I

Target

2007 2011 20132009


23/32


Recent financing trends

Table below shows that wind asset finance came in at

USD 3 billion, solar at USD 1.8 billion and small hydro

and biomass and waste-to-energy at USD 641 million

and USD 544 million respectively. Overall asset finance

was, at USD 6.1 billion.

The reduction in solar asset finance, of around

two-thirds in 2012, comes as a surprise, given the

ambition of the targets set by Indias government for

its JNNSM as well as by few states. However, last year

marked a lull between different phases of the JNNSM,

after the first 1.1 GW had largely been financed and

before the next 3.6 GW phase, due to start in 2013.

State Governments meanwhile have about 2.2 GW

auctioned off during this year.

During 2006-09, Indias annual total renewable energy

investment remained between USD 4 billion to USD5 billion. Investment rose rapidly from USD 4.2 billion

to USD 12.3 billion in 2011 and thereafter reduced to

USD 6.2 billion in 2012 due to large capacity of solar

projects under Phase I of JNNSM financed during 2010

and 2011.

While wind continues to receive the majority of

investment, solar has seen the highest growth, and the

gap between the two is reducing rapidly.

Asset

Finance*

Public

Markets

VC/PE Total

Wind 3.0 - 0.1 3.1

Solar 1.8 - 0.01 1.8

Small

Hydro

0.6 - - 0.6

Biomass

& w-t-e

0.5 - 0.03 0.6

Biofuels 0.02 - - 0.02

Total 6.0 0.0 0.1 6.2

*Asset finance volume adjusts for re-invested equity

Source: UNEP, Bloomberg New Energy Finance

Renewable energy investment trends in India, 2012,

USD bn

Wind and Solar energy investment trends in India,

2012, USD bn

Source: Global trends in renewable energy investment 2013

Source: Global trends in renewable energy investment 2013

0

2

4

6

8

10

12

14

2006 2007 2008 2009 2010 2011 2012

0

2

4

6

8

10

12

14

2006 2007 2008 2009 2010 2011 2012


24/32

24

Financing requirements

Based on the capacity addition targets as per the

Strategic Plan for New and Renewable Energy Sector

for the period 2011-17, the funds required for

implementing the year-wise targets in grid and off gridrenewable energy is estimated at INR 142,047 crores.

Government support and funding gap estimate

About 60% of the capacity addition in renewable

sector in the period 2011-17 is expected to contribute

by private sector which implies higher borrowings

requirement as against XI plan. Further, total estimated

availability of debt including domestic bank credit,

non-banking finance companies, pension / insurance

companies, external commercial borrowings, multilateral

agencies etc. would be able to meet only 50-55%approximately of debt required by the private IPPs.

The sources of fund for the targeted deployment of

21.7 GW during 2011-17 shows a funding gap of about

INR 51,668 crores.

Mar-11 Add. Target (MW) Mar-17 Fund requirement

(INR Crores)

Biomass / Agri waste 1,025 500 1,525 2,225

Bagasse Cogen 1,616 1,600 3,216 6,720

U&I Energy 84 240 324 960

SHP 3,040 1,960 5,000 15,092Solar 35 4,000 4,035 40,000

Wind 13,900 13,400 27,300 77,050

Total 19,700 21,700 41,400 142,047

Note: Assumptions for capital cost: Biomass/Agri Waste INR 4.45 Cr. / MW; Bagasse Cogen INR 4.2 Cr. / MW; U&I Energy INR 4 Cr. /

MW; SHP INR 7.7 Cr. / MW; Solar INR 10 Cr. / MW; Wind INR 5.75 / MW

Source: MNRE Strategy Paper 2011-17, CERC Petition No. 35/2012 (Suo-Motu) dt. March 2012

Year-wise targets for Grid Interactive RE Power for the period 2011-17

Fund

requirement

Government

Support

Balance Fund Private Sector

Contribution

Funding Gap

Biomass /

Agri waste

2,225 35 2,190 1,314 876

Bagasse Cogen 6,720 250 6,470 3,882 2,588U&I Energy 960 360 600 360 240

SHP 15,092 1,065 14,027 8,416 5,611

Solar 40,000 8,368 31,632 18,979 12,653

Wind 77,050 2,800 74,250 44,550 29,700

Total 142,047 12,878 129,169 77,501 51,668

Source: MNRE Strategy Paper 2011-17, Deloitte assumptions


25/32


Financing options

A variety of investors finance renewable energy projects

in India, including institutions and banks. Institutional

investors are either state-owned or bilateral and

multilateral institutions. Among banks, both private

sector and public sector banks are financing renewable

energy projects. In addition to these, venture capital

and private equity investors are also actively contributing

equity investment. Return expectations of the investors

vary according to the sources of their funds and the risk

attached to the projects.

The different sources for debt finance available in theIndian renewable market vary with respect to speed,

cost (interest rate), lending criteria, risk perception and

motivation.

Indian commercial banks

The majority of renewable projects in India have been

financed by Indian commercial banks. Almost all of the

disbursed loans in India so far have been backed by the

promoters balance sheets.

Non-banking financial companies (NBFC)

Some of the prominent NBFCs that are open to

financing renewable projects include: L&T Infrastructure

Finance Company, Power Finance Corporation (PFC),

Mahindra Finance, IDFC, IL&FS and SBI.

The procedure, interest rates and expectations with

regards to IRR and DSCR for NBFCs is similar to that of

the Indian banks.

Export Credit Agencies/Investment insurance

agencies

An export credit agency (ECA) or investment insuranceagency is usually a government-backed institution

that supports exporters of a given country by reducing

the cost of risk/ debt associated with cross-border

transactions. The financing can take the form of direct

debt support and/or credit insurance and guarantees.

Financial details for Indian Commercial Banks

Financial details for NBFCs

Source: BTI

Source: BTI

Banks financing

the sector

Interest rates Debt equity

ratio

Loan tenure DSCR

expectation

Timeline

Indian Commercial Banks 10.25% (Base

Rate) + 2.75 to

4.25% (Margin)

=13 to 14.5%

Max of 70:30 9 12 years Approx. 1.40 3 months

NBFCs financing the

sector

Interest rates Debt equity

ratio

Loan tenure DSCR

expectation

Timeline

Various Ind ian NBFCs 10.25% (Base

rate) or + 2.00%

to 2.75%

(Margin)

=12.25-13.00%

Max of 70:30 9 12 years Approx. 1.35 2-3 months


26/32


27/32


Equity & Debt Scenario: A perspective

As compared to financing of renewable energy projects

in the developed world, relatively high cost and low

availability of debt for renewable projects in India adds

substantially to the cost of renewable energy projects.

While equity returns have a comparatively minor impact

on relative costs, impact of the cost and terms of debt

on renewable energy project costs is key issue that

concerns policy makers.

Conditions for renewable energy project finance vary

depending on the technology employed, the developer,

geography, and requirements of the investors. In India,

the differences between debt and equity are particularly

striking. Chart above highlights the differences between

renewable energy debt and equity markets in India

as compared to developed markets. While the equity

returns in India are comparable to those in the U.S. and

Europe, interest rates on debt are significantly higher.

Additionally, access to potentially lower cost

international debt is limited due to regulatory barriers,

the cost and risks associated with long-term currency

swaps, and perceived country risks. As a result, the

cost of debt to a renewable energy project in Ind ia

will typically be in the 10-14% range, as compared to

the 5-7% range typical in the United States. Despite

the higher cost, debt in India also suffers from inferior

terms, including shorter tenors and variable rather than

fixed interest rates.

Range of returns on equity and debt costs for renewable energy projects India versus US and Europe

Source: ISB-Climate Policy Initiative Report December 2012

India US Europe

0%

5%

10%

15%

20%

0%

5%

10%

15%

20%

Equity

Debt

Solar PVOnshoreWind

SolarThermal Solar PV

OnshoreWind

SolarThermal

EquityIRRorDebtrate(%p

er

year)

EquityIRRorDebtrate(%peryear)


28/32

28

Cost of Debt (Domestic and Foreign): Key issues

High benchmark

interest rate

Owing to macroeconomic factors, benchmark interest rate has been high in recent

times. Roughly 7-8% difference between benchmark interest rates in Ind ia and the

U.S. / Europe account for nearly all of the 5-7% difference in debt costs between

renewable energy projects, even when adjusted for the fixed rate premium (2%+) for

the U.S. and European debt.

Longer tenor debt is

generally unavailable

The short debt tenors in India play a significant part in keeping the costs high

compared to developed nations such as the US/Europe. This is mainly owing to factors

i.e. asset-liability mismatch of Indian Banks, weak bond markets and diminished role of

DFI after liberalisation.

Debt is not strictly

non-recourse

Though pure project finance (i.e., non-recourse based financing) has not become

popular in India, it has picked up pace lately. In 2007 only 6% of IREDA lending was

non-recourse, by 2011 this had grown to 55%.

However, as for private sector banking, in most cases guarantees from promoters/

developers are required.

Availability of debt As per regulatory requirement, Banks have assigned internal cap to limit their exposure

to any one market, sector, technology or Company. As renewable deployment

increases, more banks are nearing their sector exposure limits. Further, most banks in

India include renewable energy in their power/ utility/energy sector limits. As these

sectors have heavy borrowing demand, to the point that many banks may have been

near their limits even before lending to renewable energy could begin.

Many banks will restrict lending to select RE projects which are yet to be developed as

sector or are subject to fast changing technology and uncertain regulation e.g. solar,

LED etc.

Sourcing debt from foreign lenders is restricted by regulations that set caps on the

amount of money that can flow in as well as the pricing of such debt, which may be

too low for some international lenders.

State-level issues, including the poor financial condition of the State Electricity Boards(SEBs) who are the counterparties to power purchase agreements in most of the

renewable energy projects, will restrict lending in those states.



29/32


Equity & Debt Returns analysis

The spread between cost equity and debt represents the

allocation of risks and returns between equity and debt

which vary depending on factors like leverage levels,

spreads between technologies and markets.

For Indian wind projects, spreads are in the range of

4-7% between the cost of debt and the expected

return on equity that are similar to those found in other

countries. Key reason for this are proof and maturity

technology, competitive cost of generations and

relatively less project risk.

For solar, the observed spreads appear to be low

(0-3%). Thus equity investors are taking on more risk by

assuming debt, but, due to the high cost of debt, do

little to enhance their returns.

Expected returns, cost analysis and debt-equity spread for different renewable energy technologies in India

Technology Capital

expenses

(INR Cr. /

MW)

Operating

expenses

(INR/kWh)

Tariff (INR/

kWh)

Typical

initial debt

level (%

of total

capital)

Equity IRR

(%)

Cost of

domestic

debt (%)

Debt-

Equity

spread (%)

Solar PV 7-10 0.6 7.5-12.5 70-75% 12-15% 12-14% 0-3%

Solar CSP 12 0.9 11-15 70-75% 14-20% 12-14% 2-8%

Biomass

Power

5.5 1.00 (excl.

biomass

cost)

5 60-70% 20-25% 13-14% 7-12%

Wind 6 0.45 3.7 -5 70-75% 15-18% 11-12% 4-7%

Small Hydro 5.5 0.6 2.2-2.6 70-75% 17-20% 11-12% 6-9%



30/32

30

Investment issues

The Indian renewable energy market presents a

huge potential for investment. In recent times,

investment in renewable projects has seen slack for a

number of factors i.e. policy uncertainties (GBI, RPO

implementation, domestic content requirement for solar

etc.), poor balance sheet situation of power distribution

companies, lack of power evacuation infrastructure,

absence of non-recourse lending and withdrawal of

signed power purchase agreements (PPAs).

However, further analysis reveals that a slight dip in solar

energy installation in 2012 was because most projects

under JNNSM got financed between the financial

year 2011 and 2012. In the second half of 2012, the

slowdown was because the states were releasing

tenders for capacity installation. Andhra Pradesh and

Tamil Nadu invited bids for 1,000 MW each around

November last year. Now as the developers are in the

process of putting up these capacities the installations

which are likely to continue in 2013. The wind energycapacity installation in 2012-13 in India was 1,700 MW,

about 50 per cent lower compared to 2012-2012. In

solar energy, the capacity installation was around 780

MW in 2012-2013, which was slightly lower than the

capacity installation of around 900 MW in the

previous year.

However, the price of renewable energy technology is

reducing every year worldwide. Things are looking up

in solar energy alone PPAs have been signed for around

1,600 MW in states such as Andhra Pradesh, Tamil

Nadu, Punjab, Rajasthan, Uttar Pradesh and Karnataka.

Apart from this, an allocation of 750 MW is expected

under the JNNSM soon. This means that a large

quantum of new investments is expected as all these

projects begin procurement and construction.

Moreover, apart from the policy based demand for

the renewable energy capacity, parity based projects

have already begun to take shape in India and this

segment promises to provide a stable growth in capacity

additions going forward.

Given the current power market situation, there is a

strong case of parity for certain segments: Commercial

power consumers i.e. consumers such as malls, office

spaces and retail outlets paying a commercial tariff as

high as INR 11 ( 0.17/$ 0.20)/kWh in certain locations

(the highest amongst all segments); and Industrial

power consumers i.e. manufacturing facilities, that are

charged the industrial tariff, which is usually the second

highest and can be over to INR 8 ( 0.12/$ 0.15)/kWh in

certain locations.

It has been observed that renewable (solar) power

is already cheaper than grid power for commercial

consumers in certain states (e.g. Maharashtra, Delhi)

even without the capital subsidy. Commercial consumers

in other states can also reduce their energy costs if they

go through the subsidy route. Similarly, for industrial

consumer States like Delhi, Maharashtra, and Gujarat

are fairly close to being viable destinations for use of

solar power without the subsidies.


31/32


Growth trends of renewable energy suggest that the

initial challenges facing renewable energy in India have

largely been overcome. Renewable energy generation

has already become cheaper, efficient and scalable

based on the technology advancement and favourable

policy framework. As the sector is poised for the next

stage of growth, it faces issues such as evacuation

infrastructure and financial health of distribution utilities.

The grid is to be modernized to withstand more large-

scale connected projects. The Smart Grid concept

provides a platform to combine technology with power

to improve productivity, efficiency and reduce over cost.

Further, Net Metering could revolutionize the Indian

renewable scenario and encourage rural and urban

customers to generate their own electricity through

green means. The technology R&D and its deployment

would keep playing a key role as the renewable sector

treads the growth trajectory.

Way forward


32/32

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