Solar Energy: Path to Grid Parity
April 11, 2012
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Contents
Why Solar? Why Solar in India?
What is Stopping Solar?
Our Point of View: Grid Parity
Policy Focus – State and Center
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A small piece of land in Rajasthan can meet the power requirement of India!
Particulars Units Value
Area Required ( 55 KM * 55 KM) Sq. KM 3,025
Area Required ( 55 KM * 55 KM) Sq.Meters 3,025,000,000
Average Insolation in Rajasthan kwh per sqm per year 2000
Conversion Efficiency % 15%
Total Power Generation Potential MU 907,500
Indian Power Requirement in 2010 - (EPS Estimate) MU 891,163
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Infinite Source
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Three things will drive solar power in India
1.Large Incremental Power Demand
2.Well endowed solar radiation – among the best in the world
3.Emerging grid parity
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India needs to add:
• 80 GW (conventional power equivalent) in next five (5) years
• 200 GW (conventional power equivalent) in next ten (10) years
© 2011 KPMG Advisory Services Private Limited, the KPMG India member firm of KPMG International, a Swiss cooperative. All rights reserved. KPMG and the KPMG logo are registered trademarks of KPMG International, a Swiss cooperative.
Three things will drive solar power in India
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1.Large Incremental Power Demand
2.Well endowed solar radiation – among the best in the world
3.Emerging grid parity
India’s solar insolation ~ 1800-2000 kwh/m2/year
Operating hours
KWh/KWp
India
South AfricaChileEgyptBrazil
Average Irradiation SunbeltChina
AustraliaIndonesia
1,800
1,200
900
2,000
Italy
ChinaSpain
SouthKoreaJapanUSA
FranceCzech Rep.
BelgiumGermany
Top 10 PV Markets -
2010
Selected countries in Sunbelt
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Three things will drive solar power in India
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1.Large Incremental Power Demand
2.Well endowed solar radiation – among the best in the world
3.Emerging grid parity
With our analysis of grid parity suggesting 2017 to 2019 timeframe, we expect solar power to start making significant contributions to incremental demand by 2015
© 2011 KPMG Advisory Services Private Limited, the KPMG India member firm of KPMG International, a Swiss cooperative. All rights reserved. KPMG and the KPMG logo are registered trademarks of KPMG International, a Swiss cooperative. 8
Contents
Why Solar? Why Solar in India?
What is Stopping Solar?
Our Point of View
Policy Focus – State and Center
© 2011 KPMG Advisory Services Private Limited, the KPMG India member firm of KPMG International, a Swiss cooperative. All rights reserved. KPMG and the KPMG logo are registered trademarks of KPMG International, a Swiss cooperative.
Polysilicon Prices
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Contents
Why Solar? Why Solar in India?
What is Stopping Solar?
Our Point of View
Policy Focus – State and Center
© 2011 KPMG Advisory Services Private Limited, the KPMG India member firm of KPMG International, a Swiss cooperative. All rights reserved. KPMG and the KPMG logo are registered trademarks of KPMG International, a Swiss cooperative.
Other Enablers in Short to Medium Term
Enablers
Emerging regulatory regime
India aims to establish itself as a global leader in solar energy by creating policy
conditions for its diffusion across the country
Solar Power Purchase Obligation
Mandates utilities to source upto 3% of their total power demand from solar power
resources by 2022
TariffGovernment supported lucrative Feed-In-Tariff (FIT) programs and high peak prices in
the merchant market make solar an attractive proposition
ResourcesAvailability of sunshine for longer hours with greater intensity and abundance of large tracts of barren land suitable for solar
Cost leadershipUpcoming state-of-the-art manufacturing capacities at competitive costs will position
India as a hub for Solar Energy
GeopoliticalSolar power will occupy a central place in India’s quest for energy and environmental
security – depleting fossil fuel reserves and their black content endow solar an
inherent advantage
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Proactive Government Support for Solar Market….
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Renewable Energy Certificate (REC)
MarketState level solar programs
Jawaharlal Nehru National Solar Mission
(JNNSM)
I II III
Power Purchase Agreement (PPA) – Subsidy Driven Market Driven
• Grid Connected:
Phase – 1:
• 1000 MW by 2013
(500 MW of Solar thermal)
• 20,000 MW by 2022
• Rooftop & Small Scale Solar
Power Generation
100 MW already allotted
• Off-grid & Decentralized Solar
Applications
Market size of 200 MW by
2013
• Several states have come out with
solar power policies to encourage
deployment of solar power.
• Gujarat: Signed PPA's for about
965 MW of solar power.
• Rajasthan:
• Phase-1 (up to 2013)
• Maximum Capacity to be
developed 200 MW
• Phase-2 (2014 -2017)
• Maximum Capacity to be
developed 400 MW
(Additional)
• Developers can trade
REC with utilities that
are short of the
mandated quota of
renewable energy for
each state in the power
exchange
• REC market started
trading in India
© 2011 KPMG Advisory Services Private Limited, the KPMG India member firm of KPMG International, a Swiss cooperative. All rights reserved. KPMG and the KPMG logo are registered trademarks of KPMG International, a Swiss cooperative.
Gujarat
• PPAs totaling 965 MWs signed
• Executing First Solar Park (~350 MW) in India that will be operational in 2011
– Pre feasibility study for Second Solar Park being undertaken
Rajasthan• MOU with Clinton Climate Initiative (CCI) for developing 3000-5000 MW in Solar Parks
– Feasibility study being done• State Solar Policy (2011):
– Targets 600 MW of generation capacity by 2017
West Bengal• India’s first grid integrated 1 MW solar power plant at Asansol.
• Targets more than 100 MW by 2012.
India – Radiation Map (kWh/m2/Day)
Andhra Pradesh• Emerging as a key Solar
Manufacturing hub with players like Solar semiconductor, Surana, Suryachakra, Xl Telecom and Titan energy systems.
• Land banks for solar projects have been identified in 12 districts.
Source: TERI
6.6 – 6.4
6.4 – 6.2
6.2 – 6.0
6.0 – 5.8
5.8 – 5.6
5.6 – 5.4
5.4 – 5.2
5.2 – 5.0
5.0 – 4.8
4.8 – 4.6
4.6 – 4.4
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State PoliciesCertain States are active in the Solar space….
…several states have signed MOUs and PPAs with developers for setting up solar power plants
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Renewable energy at preferential tariff
Environmental Attributes
Environmental Attributes
ElectricityElectricity
REC MechanismOption to sell renewable energy in REC market has been a major incentive for RE generators
RE Generator
Option 1
Option 2
At least 250kW grid connected renewable energy projects
Small Hydro
Wind
Solar
Biomass
Urban or municipal waste
All other sources
recognized or approved by
MNRE
Obligated entities
REC Mechanism
Solar
Non- Solar
Pow
er
Exch
an
ge
Discoms
Captive power consumers
Open access consumers
Other obligated entities
Host distribution
utility
Third party sale
Captive power plant
Power exchange
Price not exceeding pooled cost of power
Mutually agreed price
Market determined price through power exchange
RE C
Commodity
Sell the ‘electricity generation’ to one entity and the ‘environmental attributes associated with renewable energy generation in the form of RECs’ separately through the market based mechanism like REC to any Obligated Entities
Sell the ‘renewable energy’ at preferential tariff fixed by the concerned Electricity Regulatory Commission to an entity
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■ REC values the renewable energy attribute of electricity generated from renewable energy based projects
■ Price of REC is discovered in the power exchange based on the demand and supply of the RECs in the market, subject to a forbearance price
(ceiling price) and floor price determined by CERC
■ No solar RECs have been traded so far. Currently, non-solar RECs are being actively traded on both the exchanges (IEX and PXIL) and trading of
Solar RECs are also expected to commence soon.
REC Mechanism Floor and forbearance price for Solar RECs has been fixed till FY15 at INR 9,880/MWh and INR 13,690/MWh respectively
Source: CERC, NLDC, REC Registry of India
Forbearance priceCeiling price within
which certificates can be dealt
Floor priceMinimum price above which certificates can
be dealt
►Solar►INR 13,690/MWh
►Non- Solar►INR 3,480/MWh
►Solar►INR 9,880/MWh
►Non- Solar►INR 1,400/MWh
Basic minimum requirements for ensuring the viability of RE projects set up to meet the RE targets cover loan repayment & interest charges, O&M expenses and fuel expenses in case of Biomass and Cogeneration
Applicable from 1st April 2012
Highest difference between cost of generation of RE technologies / RE tariff and the average power purchase cost of 2010-11 for the respective states
Pricing of RECs as per REC framework
16© 2011 KPMG India Private Limited, an Indian limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
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Contents
Why Solar? Why Solar in India?
What is Stopping Solar?
Our Point of View
Policy Focus – State and Center
© 2011 KPMG Advisory Services Private Limited, the KPMG India member firm of KPMG International, a Swiss cooperative. All rights reserved. KPMG and the KPMG logo are registered trademarks of KPMG International, a Swiss cooperative.
Solar Power in India Market Potential is Significantly Large
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• We expect the Solar Market to be about 68 GW by 2022 unlike JNNSM target of 20 GW
• We forecast 36% of the 56 GW market (from 2017-18) to come from utility-scale solar potential
• Solar rooftops and solar-powered agriculture pump-sets may require government interventions to encourage solar adoption
• However, utility-scale solar installations would be driven by cost economics of solar power
Solar Potential In GW
2012-17 ~9.8
2017-22 ~57.3
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Solar Grid Parity – When?The point at which grid parity occurs is a function of the rate of increase in conventional power prices and the rate of decrease in solar prices
• We expect landed cost of conventional energy to consumers to increase over the next decade at the rate of 4% p.a. in base case and 5.5% p.a. in an aggressive case
• This factors in increasing proportion of raw material imports, cost of greenfield generation and network assets and improvements in operational efficiencies of the utilities
• We expect solar prices to decline at the rate of 5-7% p.a over the next decade
• This factors in increasing economies of scale in equipment manufacturing and advancements in product technology thereby improving solar-to-electricity conversion efficiency
Note: We expect to reach grid parity in about the same time in the case of CSP too
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Solar Grid Parity – Rooftop MarketThe difference between the landed cost of power and the solar power price at consumer end is on the decline
Category Small Capacity(<5 kW)
Medium Capacity(~50 kW)
Large Capacity(>50 kW)
Profile Domestic Households
Small Commercial Establishments
Large Commercial Establishments /
Industries
Indicative Solar Rooftop Power Cost (INR/kWh)
12.5 12 11.5
Prevailing Levelised Tariffs in Gujarat (INR/kWh)
LT - Domestic6.64
LT – Industrial6.24
HT – Commercial7.40
Applicability of Accelerated Depreciation Benefit – (INR/kWh)
NA Applicable1.0-1.5
Applicable1.0-1.5
GAP (INR /kWh) 5.90 4.7 3.1
ILLUSTRATION
For large scale commercial and industrial establishments the gap between solar
power and tariffs is already very low
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Solar Grid Parity – Decentralized Applications
Solar power is already economical when compared to diesel powered applications market
Today, Solar power price is competitive with the effective price of diesel based power for applications like telecom towers, agricultural pumpsets
India has about 17 mn grid powered pumps and close to 7 mn diesel
powered pumps* - Only 7,500 solar pumping systems have been
installed for agricultural use
Market Potential
*Source: Energy Alternative India (EAI)
ILLUSTRATION
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Solar Water
Heaters
70 million sqm of
collector area by 2022
Solar Powered Telecom Towers
3,500 MW by 2022
Solar rooftops
19,000 MW by 2022
Solar Powered
Agricultural
Pumpsets
16,000 MW by 2022
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Solar Power in IndiaDecentralized Stand-alone Applications can contribute 65% of the total demand during 2017-22
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2012-17 2017-22
USB Bn USB Bn
Small Scale Solar Market (Rooftops, Agriculture Pumpsets, Telecom, Solar Lighting)
5 64
Utility-scale Solar Farms (CSP & PV) 15 28
Cumulative Investments in 5 year periods 20 92
2012-17 2017-22
USB Bn USB Bn
Solar PV Segment
Inverter Market 1.8 12.3
Solar CSP Segment
Parabolic Troughs 0.6 1.8
Mirrors 0.4 1.2
Subtotal 1 3
Total 2.8 15.3
2012-17 2017-22
USB Bn USB Bn
Solar PV Segment
EPC Services Market 1.5 7.5
Solar CSP Segment
EPC Service Market 0.5 1.6
Civil Works 0.2 0.6
Subtotal 0.7 2.2
Total 2.2 9.7
Supporting IndustriesSolar Specific Vendor Market
Solar Investments in India
(Source: KPMG’s Solar Market Size Model)
Solar Power in IndiaIndian solar sector offers significant investment opportunities
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According to a KPMG study, these three drivers could mean the following…
1. Solar power can potentially meet 7% of India’s power requirement in next ten years
2. It can mitigate 2.6% of India’s carbon emissions
3. It can enhance India’s energy security by reducing dependence on energy imports
• Oil imports stand at around 75%
• Coal imports expected to increase from 15% to 30% in next 5 years
• Solar energy can offset 20% of India’s coal imports and save 5% of India’s diesel consumption annually within 10 years, which can result in cumulative savings of USD 25 billion over the next 10 years
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Thank You