Solar Market in India, 2012“Key risks and challenges

associated with solar projects”

29th August, 2012

About IREDA

• Established in 1987 as a Public limited Government Company under the Companies Act, 1956

• Promotes, develops and extends financial assistance for RE and Energy Efficiency/Conservation Projects.

• 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 Environmental Technologies for sustainable development.”

• Motto is “Energy for Ever.”

IREDA’s Role As a financing institution

Financed 15 projects - JNNSM, Gujarat Policy, RPSSGP & GBI scheme of MNRE of a total capacity of 60 MW out of which 13 have been commissioned.

Acted as Programme Administrator for RPSSGP projects. Out of the total 78 projects (98.05 MW) under RPSSGP, 65

(81.55 MW) commissioned PLF 17-20%

GBI routed through IREDA for various schemes like RPSSGP/GBI Scheme of MNRE

Key Growth Drivers for Solar in India

Shortage

Access

RadiationSecurity

Climate Change

Demand

In next 12 years India’s electricity requirement to

grow 2.5 times

Climate Change is also an important

issue

India is dependent on oil imports for 80% of its demand,

increase in conventional energy prices by 8-10% in last

6 months

400 Million people still without access

to electricity

Electricity shortage estimated at 25-35

GW, likely to increase to 100 TWh by 2017

High radiation available 4-6kWh per sq. m per

day

Enabling Policies/Schemes • The Electricity Act, 2003 – SERCs to specify RPOs• The Tariff Policy, 2006 – setting solar specific RPOs for states• Amendment in Tariff Policy, January 2011 – SERCs to specify a

min. percentage of solar power to be purchased by discoms – upto 0.25% by end 2012-13 and up to 3% by 2022

• National Action Plan on Climate Change (NAPCC) – RE electricity injection into grid to be 5% starting from 2009-10 and to increase 1% every year to achieve 15% at the end of 2019-20

• Jawaharlal Nehru National Solar Mission (JNNSM) – Migration Scheme, New projects scheme, RPSSGP etc.

• State Solar Policies – Gujarat, Rajasthan, Karnataka etc., Gujarat being the 1st one to notify solar policy in 2009 i.e. before launch of JNNSM

• Solar Specific Renewable Purchase Obligation (RPO) – 26 states have their RPOs in place

• Solar specific RECs – 1st solar REC already issued to M&B Switchgear

Contd./-

• Various states gearing up and introducing their solar policies

• CERC - comprehensive tariff regulations for RE based power

• CERC has waived interstate transmission charges and losses for entire life of solar projects commissioned in 2012-13. For under or over-generation, the developer is not liable to pay or receive any unscheduled interchange charges

7

JNNSM Road Map

Application Segment Target for Phase I

(2010-13)

Cumulative Target for Phase 2

(2013-17)

Cumulative Target for Phase 3

(2017-22)Grid solar power (large plants, roof top & distribution grid plants)

1,100 MW 4,000 - 10,000 MW

20,000 MW

Off-grid solar applications 200 MW 1,000 MW 2,000 MW

Solar Thermal Collectors (SWHs, solar cooking/cooling, Industrial process heat applications etc.)

7 million sq.

meters

15 million sq.

meters

20 million sq. meters

Solar Lighting System 5 million 10 million 20 million

Growth in Solar Installations, Manufacturing

2008-09 2009-10 2010-11 2011-120

200

400

600

800

1000

1200

1400

1600

1800

Growth in Solar Installations, manufacturing

Solar Installations Manufacturing -cells Manufacturing - modules

Current status of JNNSM Phase-IScheme / Technology Projects

allotted (no.)

Capacity (MW)

Projects commissioned

(no.)

Capacity (MW)

Batch I

Large scale PV 28* 140.00 25 125.00Migration scheme (PV) 13 54.00 11 48.00

Migration Scheme (Thermal)

3 30.00 1** 2.50

RPSSGP 78 98.05 65 81.55

Solar thermal 7 470.00 -- --

Batch II

Large scale PV 28 350.00 -- --

*30 projects were originally sanctioned**Only 1 project has been partially commissioned

State ScenarioGujarat 1st to notify solar policy in 2009 i.e. before the launch of JNNSM Allocated 1200 MW of solar PV & thermal projects Signed PPAs for 968.50 MW of which 680 MW is commissionedRajasthan Plans to set up 12 GW by 2022Karnataka Targets solar capacity addition of 350 MW by 2016 under its policy notified in July,

2011 In mid April, 2012, 80 MW allottedMaharashtra To set up 125 MW PV plant at DhuleMadhya Pradesh Targets setting up of 800 MW (4 solar parks of 200 MW each) Clearance awarded for setting up 297 MW. Orissa Targets 50 MW by 2012-13UP Draft released, target of 1 GW by 2017

RPOs of various states

Tariff for Batch I & Batch II projectsAverage Tariff

(Rs./kWh)CERC tariff (Rs./kWh)

% discount on CERC tariff

Batch I

Solar PV 12.16 17.91 32%

Solar Thermal 11.48 15.31 25%

Batch II

Solar PV 8.77 15.39 43%

Solar Thermal -- 15.04 --

Recent developments• Melt down in the US Economy and Eurozone

Effect• Disproportionate Supply & Demand scenario

resulting in unexpected cost reduction • Major solar manufacturers from all over the

world showing interest in India• Immense investors’ interest• Reduction in Tariffs • Abrupt increase in installed capacity from 3

MW to approx. 1 GW in 3 years

Issues & Barriers

Technology

Financing

Policy

Technology related issues• Solar grid power projects new to India - Lack of

adequate technical expertise • Compromise in quality for cost cutting• Lack of sufficient authentic irradiation data – Data

from Meteonorm, NASA etc. being used which is quite different from actual data

• Delay in Evacuation / Transmission facility• Lack of skilled Project Management staff• Non- availability of stable grid• Lack of best practices for Operation & Maintenance • Lack of availability of quality water for cleaning

purposes

Finance related Challenges Financial closure not achieved on time Uncertainty of payment by utilities for long period i.e. 25 years Non-availability of ground data at site and excessive variation in satellite

data from various sources Many developers not opting for external EPC Contracts and implementing

projects in their own capacity without adequate experience thus increasing risk

Wide variations in costs using similar components & technology Contract clauses not adequate w.r.t.

• LDs, penalties, Performance guarantees, insurance• Inadequate specifications

Improper selection of inexperienced / quality vendors for BOS More time taken for obtaining clearances, Usual time taken for N/a use is 6

months No planning for supply of water during construction and O&M

Unreasonable time lines at various stages like financial closure, COD etc. with substantial financial implications

Contd./-Critical Financial health of utilitiesDelay in Land allotment / possession

before financial closure High project costs, not commensurate

with low tariffs, viability is an issueUnrealistic generation projections for

the projects

Policy related Barriers

• RPO yet to enforce fulfillment

• REC mechanism– yet to be fully realized for Solar

• Not adequate support available for indigenous module manufacturers

Suggestions/Challenges • Single window Clearances to be encouraged• Techno-commercial viability of projects to be

critically examined before bidding• PLF to be realistic considering de-rating and

heat & dust losses • Condition of substation (downtime) to be

critically examined• Experienced EPC Contractors to be selected• EPC Contractors to give back to back

guarantees/warranties

Contd./-

• Realistic radiation data to be used (ground data). CWET has set up 51 solar radiation monitoring systems to measure on-ground data.

• Domestic Solar PV Manufacturing sector needs additional support

• State transmission companies to ramp up their transmission infrastructure

• To ensure timely implementation of CSP projects allotted and performance evaluation

• Strict compliance of RPO will ensure more projects under REC

Thank you

Analysis of generation data

State No. of Projects

PLF Technology

Andhra Pradesh 1 18.72% PolycrystallineChhattisgarh 2 15.22-18.83% Polycrystalline

Haryana 2 15.55% Polycrystalline 18.75% Thin Film

Maharashtra 3 18.74% Polycrystalline 16.53-18.71% MonoCrystalline

Orissa 3 12.80% Thin Film (a-Si) 3.17-12% Polycrystalline

Rajasthan 2 9.73% Polycrystalline 10.46% Thin Film

Punjab 1 16.77% Polycrystalline

Tamil Nadu 2 17.77-18.38%Polycrystalline + Thin

film16