Financing Renewable Energy: Mechanisms, Challenges & Risks By Ujjwal Bhattacharjee, PhD Senior...
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Transcript of Financing Renewable Energy: Mechanisms, Challenges & Risks By Ujjwal Bhattacharjee, PhD Senior...
Financing Renewable Energy: Mechanisms, Challenges & Risks
By Ujjwal Bhattacharjee, PhD
Senior Fellow, TERI
Regional Workshop on Innovative and Sustainable Energy Technologies for Developing Countries:
Opportunities and Challenges
30th May 2014, New Delhi
Outline
• Financing mechanisms to support RE as a commoditized product – Rooftop SPV
• Financing linked to resource availability – Biomass energy systems
• Performance based RE financing
• EE retrofit financing – Collateral issues
Commoditizing Rooftop SPV
• Availability
– Range of standardized products
• Accessibility
– Wider network of suppliers and service providers
• Affordability
– Easy financing
Rooftop solar PV
Consumer awareness
Product attributes
Cost & procurement parameters
Policy & regulatory
After sales service
Barriers to RE Commoditization
• High upfront cost• Limited financing schemes by banks• Lack of awareness among consumers• Limited standardized rooftop SPV systems• Inadequate supply chain for rooftop SPV system • Less experience in grid connectivity at low voltage• Higher cost of dual function inverter (which allows consumption of solar
electricity during power outage)
Market specific challenges• Cost reduction for small capacity SPV system is a challenge• Only few companies in the market• Utility scale system integrators (EPC providers) are not willing to enter
into the small SPV domain
Traditional Front Loaded Financing Scheme for Rooftop SPV
Back Loaded Financing Scheme Designed to Balance with Electricity Cost Offset
Assess RE Resource Value Chain-Biomass Energy Systems
RE Resource Value Chain
Little biomass is left for energy generation• Fronds (leaves) are used up for soil nutrition • Shells are used in the coconut drying process
Performance Based Financing – Energy Access RE Projects
PaymentFuel Supply Agreement
Payment (Regulated Tariff)
Power Purchase Agreement
Payment
Electricity
Consumers (Domestic/Commercial)
10-20% electricity
80-90% electricity
Surplus Power @ FiT
DISCOM/Open Access
Large DDG Operator/RESCO/Franchisee
Fuel Supplier (if any)
Biomass/Fuel
Move from 90% capital subsidy to performance based VGF funding
Financing EE Retrofit Projects
TECHNOLOGY ENERGY EFICIENCY COMPONENTS Air Conditioning; Controls, Exhaust Fan
Lighting, Maintenance, Pool Pumps, Solar Hot Water Heater, Solar PV, Window Films
HOTEL INVESTMENT AND PROFITIBILITY INDICATORSUS$ BB$
Initial Investment 2,99,250 5,98,500 Annual Electricity Saved (kWh) 3,77,477 Year 1 Electricity Cost Saved 1,50,991 3,01,982 Project Simple Payback Period (years) 2.0 Internal Rate of Return (IRR) 99%Loan Amount 2,39,400 4,78,800 Annual Debt Repayment (after moratorium period) 23,940 47,880 Total Interest Payment 46,085 92,169 Total Net Profit (after interest, depreciation and tax) at present value 6,53,070 13,06,139
Arranging Collateral is a Challenge
Concluding Remarks
• Financing schemes should be developed to support commoditization of RE (rooftop solar)
• RE resourced linked financing is critical for long-term sustainability of projects.
• RE access projects should move from high initial capital subsidy to performance based subsidy.
• Special funds created for EE retrofit projects should take into account the collateral issues.