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International Worksho on
"Solar Power Generation Technologies" PGT)
Policies / Loans / Incentives for SPV"
Dr. G. Giridhar
Ministry of New and Renewable Energy
ew e
ESCI, Hyderabad, 22nd February, 2011
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Don't get me wrong:I love nuclear energy!It's just that I prefer fusion to fission.And it just so happens that there's an enormousfusion reactor safely banked a few million milesyfrom us.It delivers more than we could ever use in justabout 8 minutes And it's wireless!about 8 minutes. And it s wireless!
William McDonough,
,
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THE SUN
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SOLAR ENERGY Is it Renewable?
Sun burns 5 million tons of Hydrogen/sec by fusion
It will burn and can deplete in 4.5 billion years
Strictly after 4.5 billion years, it is not renewable, butnobody knows
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1. Abundant Reserve
2. ract ca y Un m te
3. Available every where
4. Good Quality Green Energy
. 6. Energy Security
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Constraints of Solar Energy
Variable with Time and Place
Not Evenly Distributed
Low density
Not in Directly Useable Form and requires ConversionTechniques
Regularly intermittent by night fall and irregularly bypassing clouds, dust, haze, fog and weather changes
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Suitabilit for Solar Power Plants
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SOLAR TERMS
Beam Radiation or Direct Radiation (Ib):
Solar radiation received at earthsurface without change of direction and inline with sun.
Diffuse Radiation (Id):
o ar ra a on rece ve a ear sur acefrom all parts of skys hemispheres.
Global Radiation (IG):
It is the sum of beam radiation anddiffuse radiation
IG= Ib + Id
o ar rra ance or nso a on :
The rate at which solar energy reaches aunit area at the earth. w/m2 It isinstantaneous measure of rate and vary over
time.
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Solar output 11 year solar cycle
EarthSun distance 3.5 % annual variation
Water vapor Selective absorber
Air pollution 40 % less direct
Smoke from forest fires Natural or manmade
Volcanic ash Global effect for years
oca on
Time of day Solar position
Season
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Glance in India (as on 30062010)
Power from RenewablesI. Gridinteractive renewable power
potential(MW) (MW)
1 Wind power
45 195
12009.482 o power agro res ues anplantations)
3 Bagasse cogeneration
1 1
000
901.10
1 11.4 Small hydro power (up to 25 MW)
5 Energy recovery from waste (MW)
15 000
2 700
2767.05
72.46
o ar p o ovo a c power Total 84 776
12.2817173.90
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Glance in India (as on 30062010)
II. Captive/combined heat andpower/distributed renewable power
potential(MW)
1. Biomass/cogeneration (non
238.17
2. Biomass gasifier
3. Energy recovery from waste
125.44
2. 24. Aero generator/hybrid systems
Total
1.07
417.40
17591.30
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Glance in India (as on 30062010)
III Remote village electrification
potential 6867 villages
IV Decentralized energy systems
1. Family
type biogas plants
120 lakh
42.60 lakh2. o ar p o ovo a c sys ems
i. Solar street lighting system
ii. Home li htin s stem
m2
119634 nos
603 307 nosiii. Solar lantern
iv. Solar power plants
797 344 nos
2.92 MWp
v. Solar photovoltaic pumps 7334 nos
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Glance in India (as on 30062010)
3. Solar thermal systems
potential
i. Solar water heating systems
ii. Solar cookers
140 M. M2
3.53 M. M2
6.72 lakh4. n pumps
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JNNSM Mission Objectives
Jawaharlal Nehru National Solar Mission has been launched
un er e a ona ac on an on ma e ange w an
objective:
creating the policy conditions for its diffusion across
the country.Mission anticipates achieving grid parity by 2022 andparity will coal based thermal power by 2030.
To adopt a 3phase approach from 2010 to 2022.
m o e m ss on s o ocus on se ng up an ena ngenvironment for solar technology both at centralizedand decentralized level.
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Mission Strategy
To create necessar environment to attract industr andproject developers for investment in power generation,
manufacturing.
To work closely with State governments, regulators, powerutilities and local self government bodies.
To attract banks and financial institutions to providenecessary finance for setting up solar power projects for
grid/ off
grid.To promote offgrid solar applications to meet light andpower requirements of energy poor by provision of low cost
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Mission Approach
Segment
201013
201317
201722
Utility grid1,000-2,000 4000-10,000 20,000
Off grid
Applications 200 1,000 2,000
Solar ThermalCollectors Area 7 15 20
. qm
ManufacturingBase (MW)
-- -- 4,000-5,000
Solar LightingSystems (MillionNos)
-- -- 20
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Research and Develo ment
To set up a solar research council to guide the overall
technology development strategy
To establish a national centre of excellence tomp ement t e p ans ormu ate y t e counc .
Ma n tas s w e test ng an cert cat on, eve op ngstandards and specifications, networking amongdifferent research institutions.
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Policy & Regulatory Framework
Solar Power Purchase Obligation
Solar specific RE Certificates
Incentivizing through NTPC Vidyut Vyapar Nigam Ltd. (NVVN) for
setting up of large solar power plants.
Designated as nodal agency for entering into PPA with Solar PowerDevelopers.
MoP allocating equivalent amount of MW to NVVN.
Sale of power as per CERC regulations (to provide Generation BasedIncentive)
KV grid with a remunerative feedin tariff ( routed through IREDA)
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SolarManufacturing
To establish low cost, high quality manufacturing
facility for solar PV with the targets of 45 GW by 2020.
To provide incentives to establish SEZ for solarmanu actur ng par s.
To provide soft loans for technology up gradation andworking capital through refinance facility from IREDA.
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Financing Mission Activities
Fund Sources
To provide budgetary support for the activities
To access International Funds under the UNFCCC
framework
Fund requirement for Phase II
Analysis of the efficacy of the model adopted
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Fin n i l In n iv
Soft loan at @ 2 % for domestic sector @ 3% for non
pro t organ zat ons an or pro t ma ng
organizations
5 years Annual Maintenance Contract
,
and for any end user
80% Depreciation for end user
Custom and Excise Exemptions
GBI based incentives @ Rs 18.45 for SPV and Rs.
. or so ar t erma power
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st ,
A maximum incentive with a 5% reduction and ceiling of Rs. 11.40 per
KWh.
The generation based incentive will continue to decrease as and when
the utility signs a PPA for power purchase at a higher rate.
Solar PV power generation plants of a minimum installed capacity of
1MWp per plant, either a single unit or modular units at a single location
will be eligible for generation based incentive.
However, 1 MWp capacity may be setup through modular units at a
single location.
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Rates
Secretary, MNRE, announced Quotes of the Winning Bids of SPV and ST
Solar PV:
NVVN reference price : Rs. 17.91/kWh
Lowest winning bid : Rs.11.18/kWh
Average bid : Rs 12.16/kWh
Solar Thermal:
NVVN reference price : Rs. 15.31/kWh
Lowest winning bid : Rs.11.14/kWh
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Fund Requirements
First stage Second Stage
A Grid Connected
1,100 MW 20,000 MW
Approximately Rs. 16500 crores Rs. 3,00,000 crores
rApplications
200 2,000
Approximately Rs. 5,000 crores Rs. 50000 crores
C Solar Thermalcollectors
7 million meter square 20 million meter square
x y . 7 . ,
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Authorized Share Capital :Rs 1000 Cr
Paid-up Capital :Rs 520 Cr
Net-worth :Rs 871 Cr
Domestic Borrowings :Rs 773 Cr
International Borrowings :Rs 1115.69 Cr
i l
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International Partners
Govt of Netherlands, 1991 : 18 Million Dutch Guilders
World Bank (1st LoC), 1993 : $ 145 Million
DANIDA, 1993 : $ 15 Million Asian Develo ment Bank, 1997 : $ 100 Million
KfW, Germany (1st LoC), 1999 : 61.35 Million
World Bank (2nd
LoC), 2001 : $ 110 Millionnd, ,
KfW, Germany(3rd LoC) : 19.9 Million
Lines of Credit in Pipeline
AFD (France) : 80 Million
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IREDA Financing Schemes
Project Financing Schemes
Equipment Financing Schemes
Financing Through Intermediaries
Rate of Interest - 11.25% to 12.75%
Repayment Period - Upto 13 Years
Channelization of Funds
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Channelization of Funds
Funding under scheme Project mode.
Directly by MNRE (approved by PAC)
Scheduled commercial banks, NBFCs, FIs such as NABARD, NHB,SIDBI, IREDA etc.
Additional channels for supply and maintenance (RESCOs, FinancialIntegrators, System Integrators, MFIs, Government agencies etc.)
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Components of Tariff
The following are the components of tariff for solar energy:-
1. Capital Cost
3. De-rating
4. Debt-equity ratio
5. Term of loan
6. Rate of interest.
8. Return on equity
9. Life of plant and machinery10. Rate of depreciation
11. Operation and maintenance expenditure
12. Auxiliary Consumption13. Accelerated Depreciation Benefit
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Capital Cost
The cost of a solar power project is mainly dependent on the cost of PV modules/ plant and machinery, technology adopted, location of the site and capacity
The Indian Renewable Energy Development Agency Limited (IREDA) has
recommended a capital cost of Rs.18 to 20 Crores per MW for Solar PV thin film.
technology
The Commission decides that the Infrastructure Development Charges (IDC) ofRs.25.75 lakhs per MW should be loaded to the capital cost. Accordingly, the
capital cost is refixed as Rs.17.1575 crores per MW.
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Solar PV has one of the highest capital costs of all renewable energy sources, but it
has relatively low operational costs, owing to the low maintenance and repair needs.
For a solar PV power plant, the approximate capital cost per MW is approximatelyRs. 16 crores the precise cost depends on scale.
s nc u es e cos o pane s, e a ance o sys ems, e cos o an an o er
support infrastructures.
Component Amount
(in Rs crores)
% of Total
Solar panel arrays 8 50
Inverter 2 12
Balance of System 2 13
Installation
Others (Infrastructure, Margins) 2 15
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Current Capital Cost for Solar PV
Capacity (MW) Capital Expenditure
(Rs Crores /MW)
15 17
510 16
1050 15.5
50100 15
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Capacity Utilization Factor (CUF)
s t e rat o o actua energy generate y t e o ar pro ect over t e yea
to the equivalent energy output at its rated capacity over the yearly period. CUF for
Solar PV project depends on solar radiation and number of clear sunny days.
The Indian Renewable Energy Development Agency Limited (IREDA) has
recommended a CUF of 15 to 20%.
The maximum solar radiation in Tamil Nadu is 5.8 kWh/Sq.mtr/day in the Solar
,Chennai as 5.37. Considering the above, the Commission adopts a CUF of 19% in
this order as adopted by the CERC
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De-rating
De-rating factor has not been foreseen by other StateCommissions / CERC. It is natural that any material used
in the PV module for energy conversion, loses its
efficiency due to aging
e ng a new area w ou n orma on on pas
performance parameters, fixation of de-rating factor for a
Solar PV Plant can only be an approximation. IREDA hasrecommended a de-rating factor of 0.5 to 1% per annum
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Terms ofLoan
The Commission fixed a tenure of ten years with
mora or um o one year n s ar r er ase on e
consideration that term loans sanctioned by IREDAstipulated this tenure. The Commission decides to retain
the same tenure in this order.
Rate of interestCERC has considered the long-term PLR of State
Bank of India plus 150 basis points as adequate. IREDA
period of 7-8 years.
e omm ss on cons ers a n eres ra e o12% is reasonable.
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The Central Electricity Regulatory Commission has included the followingcomponents in working capital in their Regulations, 2009:
(i) Operation and Maintenance expenses for one month;
(ii) Maintenance spares @ 15% of the O&M expenses,
(iii) Receivables equivalent to 2 months of energy charges for sale of
electricity calculated on the normative CUF;
considered in order of 2009 by the Commission along with the following working
capital component :
(i) Operation and Maintenance expenses for one month;
(ii) Maintenance spares @ 1% of the O&M expenses and
(iii) Receivables equivalent to 1 month of energy charges for sale ofelectricity calculated on the normative CUF.
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Return on E uit
The CERC has adopted RoE of 19% pre tax for the first ten years and 24%
.
adopt 19.85% pre-tax return on equity for this order.
Life of plant and machinery
The Commission decides to consider the solar PV lant life of 25 ears as
considered by CERC in their Terms and Conditions for Tariff determination
from Renewable Energy Sources Regulations, 2009.
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The CERCs regulations recommended Differential Depreciation Approach
Straight Line Method.
It is ro osed to ado t the rate rescribed in the CERCs re ulation i.e.
depreciation rate of 7% for the initial 10 years and 1.33% for the remaining
years.
Operation and Maintenance expenses
The O&M expense includes the expenditure on manpower, repairs, spares,
consumables, insurance and overheads.
IREDA has suggested a O&M charges of 0.5% of the capital cost. Commission
decides to adopt the rates prescribed in the CERC regulation. i.e. Rs.9.515 Lak
per MW for the first year of the Control period (2010-11) and shall be escalated at
the rate of 5.72% per annum for the remaining periods.
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The auxiliary consumption for solar PV power plant is to be
considered to meet the auxiliary power requirement for
equipments/devices for cooling of the power conditioning units, lighting
of office/station yard, water sprinklers, monitoring and control units,communication services etc.
Commission considers 2% of auxiliary consumption is reasonable for
solar PV power plants.
Accelerated Depreciation Benefit
For the projects availing the benefit of accelerated depreciation as per
.Education cess) has been considered.
Channelization of Funds
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Channelization of Funds
ccre tat on
Performance Monitorin
Refinancing
MoU signed by IREDA with NABARD, NHB and Central Bank ofIndia.
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Risk Factors in Funding Solar Projects
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Risk Factors in Funding Solar Projects
Regulatory Risk Fixing of the tariff and assurance on the power sale
a reement
Technology Risk Technology yet to be proven on the ground
per schedule
Infrastructure Risk Inadequate evacuation facility and clearances on land.
Repayment Risk Non assurance of repayment from the utilities may
result in repayment risk to the developers/ FIs.
Political Risk Changes in fixing of unallocated power with respect to
change in political system.
Policy Risk Assurance of long term policy with greater accuracy
and uncertainties in development of the solar sector.
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Risk Factors in Funding Solar Projects
Financial Risk In time financial closure by the project developer.Hi h cost so fundin from sin le source is a risk.Raising of equity
Guarantee and Lon term uarantee and warrant from theWarranty Risk technology providers for the new technology.
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Suggestions for Risk Mitigation tofinance Solar Projects
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Su estions for Risk Miti ation
Advocation for long term / stable/ consistent policies at centralstate level- to honor PPAs and MoUs.
Frequent / close interaction with all stake holders including-
based on capital cost.
Pro er Resource assessment studies.
Provision of partial risk guarantee fund from Govt.
mportance o t me y c earances approva s or so ar pro ects.
To create special single window clearance cell at state level.
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Su estions for Risk Miti ation Promoters to take advance actions to avoid delay of deliveries- to
meet targets under JNNSM.
To encourage establishment of more manufacturing units/suppliers in the country- to deliver indigenous cells and.
To establish a mechanism to have information exchange betweenvar ous s an an s- or co- nanc ng or consor umfinancing.
eta e s te survey reports to e un erta en t rougprofessional bodies- to maximize performance efficiencies.
To establish more training institutions for producing skilledmanpower-capacity building.
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Suggestions for Risk Mitigation
o stipulate suitable conditions for recovery of loan from
operations of solar projects in the event of failure of corebusiness (for non IPP projects).
Concurrent monitoring of projects by Fis by appointment of
lenders engineers.
Periodic inspection / monitoring of projects even afterimplementation. (TRA and Generation data)
Innovative financing models by accessing low cost funds frominternational institutions.
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Migrated JNNSM List of SPV Projects
Sr. No. Name of Applicant State Capacity(MW)
Maharashtra State Power Generation Co.Limited, (MAHAGENCO), Mumbai
2 Clover Solar Pvt. Ltd., Mumbai Maharashtra 2
3 Videocon Industries Ltd, Mumbai Maharashtra 54 Enterprise Business Solutions, USA Punjab 5
5 Azure Power (Punjab) Pvt. Ltd., Amritsar Punjab 2
6 Comet Power Pvt. Ltd., Mumbai Rajasthan 5
7 Refex Refrigerants Limited, Chennai Rajasthan 58 ston Field Solar Ra asthan Pvt. Ltd. Ra asthan9 Entegra Ltd, Ansal Bhawan, New Delhi Rajasthan 1
10AES Solar Energy Pvt. Ltd., Gurgaon,Haryana
Rajasthan 5
11 Moser Baer Photo Voltaic Ltd. New Delhi Ra asthan12
OPG Energy Pvt. Ltd., Chennai, TamilNadu
Rajasthan 5
13 Swiss Park Vanijya Pvt. Ltd. Rajasthan 5
ota 54
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Migrated JNNSM List of Solar-Thermal Projects
Sr. No. Name of Applicant StateCapacity
(MW)
1cme e e ower m te ,
GurgaonRajasthan 10
2Dalmia Solar Power Limited,
Rajasthan 10
3Entegra Ltd, Ansal Bhawan, New
Delhi
Rajasthan 10
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THANKSFOR YOUR PATIENCE