INDIA

SOLAR
HANDBOOK
2016
Including our first

INDIA SOLAR
CEO SURVEY

Premium sponsor

BRIDGE TO INDIA, 2016

Illustration by tiffinbox

Harnessing the power of the sun

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April 2016, New Delhi
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BRIDGE TO INDIA, 2016

About BRIDGE TO INDIA

BRIDGE TO INDIA is the leading consulting and knowledge services provider
in the Indian cleantech market. Our multi-functional experience expertise
combined with comprehensive in-house research capability enables us to
develop insightful and highly sought-after industry analyses. Our overarching
goal is to provide customised cleantech solutions and enable innovative
business models in India.
We work actively with all leading stakeholders including project developers and
investors, energy customers, equipment suppliers, regulators, policy makers
and development institutions. We have also helped a number of international
top-tier cleantech companies in growing their business footprint in India by
providing them with strategic advice, business planning, risk assessment and
JV partner selection services.

Our services

BRIDGE TO INDIA, 2016

Introduction
Indian solar market in full bloom but financing poses a
key challenge
India is all set to become the fourth largest solar market globally in 2016
behind only China, USA and Japan with 5.4 GW of expected capacity addition in
the year. The tailwinds are exceptionally strong with rapidly falling costs and
greater environmental agenda in the post COP21 world.

35 new tenders
with a cumulative
capacity of 15.5 GW
have been announced
in the last year

The Indian solar market appears in full bloom right now with key policy
changes being introduced and 25 GW of projects under different stages of
development. 35 new tenders with a cumulative capacity of 15.5 GW have been
announced in the last year. An additional 5 GW of new tenders are awaiting
release in the coming months. There is burgeoning investment interest both
from Indian and international developers in the sector. This frenetic pace
of activity is a big step-up in contrast to historic solar capacity addition of
approximately 1 GW per annum for three straight years until 2014. But does the
sector have sufficient financial capacity to deliver all these projects?
The most buzzing topic for the sector right now is the intense competition with
tariffs coming down sharply to M4.34-5.00/ unit ($0.07-0.08) levels. But with
many developers struggling to raise capital and banks seemingly reluctant to
lend to projects at such tariffs, progress in 2017 and 2018 is not likely to be as
fast as expected. In contrast to Ministry of New and Renewable Energy (MNRE)
target of 12 GW of utility scale solar projects for FY 2016-17, BRIDGE TO INDIA
estimates that actual capacity addition will be only about 5-6 GW in FY 2016-17.
Other key theme in our view is the likely growth trajectory for the sector over
the 3-5 year horizon. The central government has taken early lead through
National Thermal Power Corporation (NTPC) and Solar Energy Corporation of
India (SECI) in releasing project tenders of more than 9 GW as of April, 2016.
The southern states have also shown huge interest in solar power to overcome
their growing power deficit. But with power demand showing slow growth and
grid stability issues growing more important over time particularly in areas of
high renewable penetration, we expect a slowdown in the sector after 2017 and
2018.

Ensuring
grid robustness and
investment/lending
appetite at aggressive
tariff levels will be the
two main challenges

On the policy front, the Solar Parks Policy and UDAY scheme have been
hailed largely as a successes but the broader sector policy reform through
amendments in the Electricity Act 2003 is still awaiting parliamentary approval.
Going forward, ensuring grid robustness and investment/lending appetite at
aggressive tariff levels will be the two main challenges. Policy interventions to
address these challenges together with demand growth measures will be key
to sustainable growth of the sector.
One major disappointment continues to be the rooftop solar market where the
40 GW target for 2022 seems like a very remote prospect. This market needs
more focused policy support to ensure effective net-metering implementation
and attraction of financial investors. Overall, the growth prospects for the India
solar market are very bright providing an immense opportunity for investors,
developers and equipment suppliers. But a dose of caution is needed as the
market will remain very price sensitive and with its share of challenges.

BRIDGE TO INDIA, 2016

International perspective
Global overview: Asian countries emerge as solar leaders
Globally, new solar capacity addition grew to 50 GW in 2015, y-o-y growth
of 25%. Asian countries led by China and Japan dominated the global solar
landscape, representing about 59% of the global PV market in 2015. India
added more than 2 GW capacity in 2015 to reach a cumulative capacity of 5.6
GW by the end of the year. This allowed India to rise to the eighth position for
total installed capacity repetition as of December 31, 2015.
Solar market in the Americas also continued to grow with the USA, Canada
and Chile leading the pace but Europe, which had previously led the way for the
solar industry globally, has seen growth stall in recent times because of the
pull back of the FiTs.

Figure 1: Cumulative installed solar capacity as of

December 31, 2015 (GW)1

In 2016, about 65 GW of solar capacity is expected to be added globally. Asian

countries including China, Japan and India are expected to be in the top five
countries. China is expected to continue leading the global PV market while
USA is set to overtake Japan as the second largest solar market, exceeding the
much-anticipated 10-GW mark.
India is expected to be at the fourth position leaving behind the major European
solar markets (UK, Germany and France) with expected new capacity addition
of 5.6 GW in 2016.

---------1 Source: IEA PVPS, Snapshot 2015 of Global PV markets; India nos. estimated by BRIDGE TO INDIA
BRIDGE TO INDIA, 2016

Figure 2: India to add >5 GW of solar capacity in 20162

---------2 Source: GTM Research, BRIDGE TO INDIA

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Utility scale solar

Installed capacity
Figure 3: India has installed 6.6 GW of utility scale solar
as of March 31, 2016

2,687

2,263

Discom Rating
Calculated based on profit/ loss
of DISCOM as % of state GDP

200
1,291

Source: BRIDGE TO INDIA research

636

Haryana

24

OP WIP

2,254

Delhi

367

1,105

200

5
OP

Uttarakhand

700

OP WIP

Punjab

OP WIP

125

Bihar

122

OP WIP

767 780

Uttar Pradesh

OP WIP

Assam
OP WIP

48

OP WIP

OP WIP

403
340

OP

OP WIP

Rajasthan

Tripura
West Bengal

Gujarat

10

WIP

1,191

OP

OP

433

Jharkhand

18

OP WIP

571

78

Madhya Pradesh

Odisha

OP

Telangana

Daman & Diu

530

OP WIP

Andhra Pradesh

Maharashtra

OP WIP

103

105

OP WIP

1,200

595

Karnataka

13

OP

Kerala

BRIDGE TO INDIA, 2014

Chhattisgarh

OP

Andaman &
Nicobar

OP

Tamil Nadu

OP WIP

10

Solar parks
MNRE has approved 33 solar parks in 21 states with 19.9 GW capacity.

Figure 4: Solar parks plan

100 MW, Samba

Jammu & Kashmir

1,000 MW, Spiti Valley

Himachal Pradesh

50 MW, Kashipur

Uttarakhand

100 MW, Lohit

Arunachal Pradesh
600 MW, Jalaun, Allahabad,
Mirzapur & Kanpur

Uttar Pradesh

60 MW

Nagaland

500 MW, Hisar, Bhiwani,

Mahendergarh

Haryana

69 MW, Amguri, Sibsagar

Assam

Rajasthan

3,251 MW, Bhadla,

Jaisalmer, Jodhpur

Madhya Pradesh
2,750 MW, Rewa, Shajapur,
Morena

Meghalaya

Gujarat

700 MW, Banaskantha

20 MW, Jaintia

Odisha

Maharashtra

1,000 MW

1,500 MW, Beed, Dhule

West Bengal
500 MW, Bankura

Chhattisgarh
Karnataka

2,000 MW, Tumkur

500 MW

Telangana

500 MW, Mehboobnagar

Kerala

200 MW, Kasargode

Andhra Pradesh

4,000 MW, Anantpuramu, Kurnool,

Kadapa, Anantpur

Tamil Nadu

500 MW, Ramanathapuram

Source: SECI, BRIDGE TO INDIA research

BRIDGE TO INDIA, 2016

11

Types of policy based projects in India

Figure 5: India has multiple types of utility scale solar
projects with several off-takers and processes

*Pipeline includes projects under construction, PPAs signed and open tenders
Source: BRIDGE TO INDIA analysis
BRIDGE TO INDIA, 2016

12

Project development landscape

As the Indian solar market grows and project sizes increase, international
utilities and IPPs with strong balance sheets and lower cost of capital are likely
to play a greater role. We have already witnessed this trend growing over the
last one year.

Figure 6: Role of international developers and utilities

has been increasing in the Indian solar market
Commissioned projects (>10 MW) as of March 31, 2016

Projects under development (>10 MW) as of March 31, 2016

Source: BRIDGE TO INDIA analysis

BRIDGE TO INDIA, 2016

13

Figure 7: Pipeline of top 10 private project developers in

India, MW

Source: BRIDGE TO INDIA analysis

BRIDGE TO INDIA, 2016

14

Recent auctions
Figure 8: Solar tariffs have fallen by almost 33% in India
in last two years

BRIDGE TO INDIA, 2014

15

Market projections
Figure 9: BRIDGE TO INDIA expects 37 GW of cumulative
utility scale capacity addition in India until 2020

Figure 10: Capacity breakup by project category,

by 2020 (%)

Source: BRIDGE TO INDIA projections

BRIDGE TO INDIA, 2016

16

Rooftop solar
Installed capacity
Figure 11: India has installed 740 MW of rooftop solar
capacity as of March 31, 2016

55

13

Chandigarh

Jammu &
Kashmir

43.4
12

Uttarakhand

Punjab
62.6

9.1

32

35

44.4

Uttar Pradesh
16

Delhi

Bihar

Haryana

10.5

Jharkhand
12

Rajasthan

62.3

West Bengal
Gujarat
16

Odisha

Madhya
Pradesh
Maharashtra

30

12

Chhattisgarh
37

47

Telangana
36

Karnataka
19

Kerala

20.3

North east
states

Andhra
Pradesh
30

Tamil Nadu

BRIDGE TO INDIA, 2016

85.4

Others

17

Policy landscape
The Indian government is offering several tax and financial incentives to
support the rooftop solar market
Capital subsidy: 30% subsidy for residential and institutional consumers
(M50 billion)
Accelerated depreciation: 80% depreciation
Tax holiday: 10 year tax holiday (MAT payable)
Low cost funding: $1.5 billion funding from World Bank, ADB and KFW

Table 1: Overview of state net metering guidelines

State

Policy scope

Individual system
size limit

Grid
penetration
% of
distribution
transformer
capacity

Excess
electricity sale
price

Eligibility

Andhra Pradesh

Upto 1 MWp

100% of annual
consumption

Not
mentioned

APPC

All consumers

Assam

1kWp to
1MWp

40% of contracted
load

Not
mentioned

APPC

All consumers

Bihar (Draft)

Upto 1 MWp

90% of annual
consumption

15%

Not mentioned

Not mentioned

Chhattisgarh

50 kWp to
1 MWp

49% of annual
net generation

Not
mentioned

50% of regulated
solar tariff

Not mentioned

Delhi

>1 kWP

100% of contracted
load

20%

APPC

All consumers

Goa and UTs

1 kWp to
500 kWp

Not mentioned

30%

As per regulated
solar tariff

All consumers

Gujarat

Not Mentioned

50% of contracted
load

Not
mentioned

APPC/ 85% of
APPC for REC
projects

All consumers

Haryana

1kWp to
1 MWp

90% of annual
consumption

15%

Himachal
Pradesh

1 kW to
5 MW

80% of contracted
load

30%

M5.00/ unit

Karnataka

Upto 1 MWp

Not mentioned

80%

All consumers
M9.56/ kWh
(without subsidy),
M7.20/ kWh
(with 30%
subsidy)*

BRIDGE TO INDIA, 2016

All consumers

All consumers

18

State

Policy scope

Individual system
size limit

Grid
penetration
% of
distribution
transformer
capacity

Excess
electricity sale
price

Eligibility

Kerala

1kWp to 1MWp

Not mentioned

50%

APPC

All consumer
categories, up to
11kV

Madhya Pradesh

Not mentioned
Up to
permissible
individual rated
capacity of 112
kW at LT

15%

APPC

All consumers

Maharasthra

Upto 1 MWp

100% of contracted
load

40%

APPC

All consumers

Meghalaya

Upto 1 MWp

<90% of annual
consumption

15%

No payment

All consumers

Odisha

Not Mentioned

<90% of annual
consumption

30%

No payment

All consumers

Punjab

1kWp to 1MWp

<80% of contracted
load

30%

As per retail
supply tariff of
the consumer
category

All consumers

Rajasthan

1 kWp upto
1MWp

<80% of contracted
load

30%

As per regulated
solar tariff

All consumers

Tamil Nadu

Not mentioned

<90% of annual
consumption

30%

No payment

All consumers

Uttar Pradesh

>1 kWp

100% of contracted
load

15%

M0.50/ kWh

All consumers

Uttarakhand

Upto 500kWp

Not mentioned

Not
mentioned

M9.20/kWh (with
subsidy)

All consumers

West Bengal

>5 kWp

<90% of annual
consumption

Not
mentioned

APPC

Only for
institutional
consumers

Telangana

Not Mentioned

Not mentioned

Not
mentioned

APPC

All consumers

Note
APPC - Average pooled purchase cost
* No new PPAs signed under this rate now

Source: BRIDGE TO INDIA research

BRIDGE TO INDIA, 2016

19

Market projections
Economic fundamentals for adoption of rooftop solar in India are improving
rapidly. In 2016, the market is expected to add a capacity similar to the
entire capacity added in India till date. The market is expected to grow at
compounded annual growth rate of 58% per annum.

Figure 12: 6.8 GW of new rooftop solar capacity addition is

expected in India between 2016 and 2020

Source: BRIDGE TO INDIA projections

BRIDGE TO INDIA, 2016

20

Survey sponsor

India Solar CEO Survey

Our first pulse check of the state of

the Indian solar market
It is a great pleasure to announce the results of our first Solar CEO survey.
The purpose of this survey, coming at a critical time in the evolution of India's
solar sector, was to seek honest, critical opinion of senior corporate leaders
and get their perception of the opportunities and challenges facing the
industry. Are we on the right track? Where might we be falling short and what
does the government need to do differently? How do different parts of the
sector government policy projects, rooftop and open access compare?
The survey has got excellent response from both Indian and multinational
companies across the sector value chain:
Project developers

EPC contractors

Equipment
manufacturers

Aditya Birla

Enerparc Energy

Delta Power

First Solar

Jakson Engineers

DuPont

Fortum India

Juwi India Renewable

EMMVEE Photovoltaic

Hero Future Energies

L&T

First Solar

Jakson Engineers

Mahindra Susten

Ganges Internationale

Mahindra Susten

Moser Baer Solar

Hitachi Hi-Rel Power

Mytrah Energy

Sterling and Wilson

Jakson Engineers

Rattan India Solar

SunSource Energy

SMA

Sky Power

Ujaas Energy

SNS Corporation

SunEdison

Vikram Solar

Vikram Solar

Rays Experts

Moser Baer Solar

Refex Energy
While some findings seem obvious, there are many insightful results and some
clear warning signs for the government. Key findings are summarized below:
1. The industry is very buoyant about sector growth prospects but the 100 GW
target still seems too ambitious with key challenges expected to be grid
stability and financing.
2. There is genuine concern about bankability of SECI as an offtaker. Unless
SECI gets capitalized adequately, it is seen merely as an intermediate layer
between the developer and ultimate offtaker ie DISCOM.
3. The rooftop sector needs much stronger push as the consensus
estimate for total rooftop capacity addition by 2022 is only 10-11 GW,
significantly below the governments 40 GW target. Key challenges here
are ineffective net metering policy framework and lack of more attractive
debt financing solutions.
Notes:
1. Some company names are shown
more than once in this table
depending on their business activity.
2. For multinational companies, the
survey has been completed by the
respective head of Indian solar
business.

4. The industry is generally positive about the prospects of domestic

manufacturing and India is expected to have an annual cell-module
manufacturing capacity of 5 GW by 2022.
We propose to conduct further relevant surveys in the near future and welcome
all feedback.

BRIDGE TO INDIA, 2016

23

Market growth and challenges

Solar capacity addition by 2022
As per the survey participants,
India is expected to add a total
of 57 GW solar capacity by
2022, substantially below the
government target of 100 GW.

Rooftop solar capacity addition by 2022

Capacity addition in the rooftop
and open access markets is
expected to be <10 GW and < 5
GW respectively by majority of
participants, again substantially
below government targets.
This should be an alarm call
particularly for the government
and all policy makers. Most
of government focus so far
has been on large policy
driven, ground based projects
whereas the biggest benefit of
solar power lies in distributed
generation and market driven
solutions.

Open access solar capacity addition by 2022

BRIDGE TO INDIA, 2016

24

Business growth by 2020

There is huge optimism in
the sector. The participants
believe that their individual
solar businesses will grow
by an average of 3-5x by 2022
with about 37% of participants
believing that their business will
grow by more than 10x in this
period.

Biggest challenge for 100 GW by 2022

We asked the participants to
select the biggest challenge
for India to achieve the 100 GW
target as well as to share their
view on availability of key inputs
for the sector. The three top
challenges identified are grid
integration, lack of FiTs and
poor operating environment (ie
general day-to-day difficulty in
doing business).

Inputs for achieving 100 GW target

In terms of availability of key
inputs that go into solar project
development, the industry
is most concerned about
transmission connectivity/
grid failure, debt financing and
INR depreciation risk. Land
availability concerns seem
to have relatively come down
perhaps because of proactive
government moves on solar park
development.

BRIDGE TO INDIA, 2016

25

Central government rating

Rating of central government initiatives
74% of the survey participants
give the central government
a rating of Good/Very Good
on overall policy framework.
But the government does
not do so well on specific
initiatives including solar park
development, transmission
capacity, debt financing
and support for domestic
manufacturing.

Bankability of SECI as an offtaker

We also sought participants
view on SECIs bankability as
an offtaker and only 50% of
them believe that SECI is an
acceptable offtake risk. This
response seems consistent with
actual experience on-the-ground
with payment delays being
experienced by developers in
previous SECI projects.

Are you optimistic that the UDAY scheme will make

DISCOMs bankable?
54% of the participants are
optimistic about the UDAY
scheme, a signature reform
policy of the current government.
But there is also a fair degree
of skepticism with 46% of
participants either indifferent or
pessimistic. Given the result of
previous moves to restructure
DISCOM finances, these results
are not surprising but show
that the scheme needs strong
monitoring and proactive
enforcement.
BRIDGE TO INDIA, 2016

26

State government ratings

We asked the participants to rank eight key states on overall ease of doing
business and their attractiveness for developing solar projects.

Ease of doing business

Ease of doing business covers a
wide category of issues including
land acquisition and conversion,
transparency and predictability
of policy, approval process. The
results are revealing as some of
the leading states Karnataka,
Maharashtra and Tamil Nadu
come near the bottom of this
table.

Ranked list of states in order of attractiveness for open

access projects

BRIDGE TO INDIA, 2016

27

Project development returns and quality of

implementation
Expected project IRR (post tax) @ M5/kWh tariff
With bid tariffs falling sharply,
there has been concern in the
industry on sustainability of
these tariffs. 23% of participants
believe that post-tax project IRR
at current tariffs is less than 12%
and another 42% believe the IRR
to be in the 12-14% range, which
is barely enough to cover risk
adjusted cost of capital.

Overall solar project quality and expected power output

over 25 years
There has been some onthe-ground evidence of low
tariffs forcing developers and
contractors to compromise on
component quality and project
performance. The survey shows
mixed opinion on project quality
issues.

BRIDGE TO INDIA, 2016

28

Rooftop solar
Ranked list of challenges for rooftop solar
The participants believe
predominant challenges for
the rooftop sector to be poor
net metering policy framework
and lack of more attractive debt
financing solutions.

Ranked list of challenges for BOOT/PPA model

On prospects for success
of BOOT/PPA model in the
rooftop sector, the participants
believe that the most important
challenges are poor legal
enforcement and bankability of
private clients.

Measures needed the most to boost open access market

in India
The open access market is
hamstrung by uncertainty of
policy and poor enforcement of
RPO. 82% of the participants
feel that these challenges are
holding this market back. Waiver
of open access charges is not
seen as a critical factor as the
fundamental competitiveness of
solar power has improved hugely
and the industry needs certainty
of policy/ charges rather than
concessions.

BRIDGE TO INDIA, 2016

29

Domestic manufacturing
Potential for domestic manufacturing till 2022
The industry is largely positive
about the potential of domestic
manufacturing in India with
consensus expectation for cell
and module manufacturing
capacity of 5-6 GW by 2022.
However, 60% of the participants
dont expect India to have any
integrated manufacturing
line even by 2022. This is a
setback to the governments
aspiration of promoting domestic
manufacturing.

Annual domestic manufacturing capacity by 2022

Will India see an integrated module manufacturing line

(polysilicon extraction wafer cell modules) by 2022?

BRIDGE TO INDIA, 2016

30

Glossary of terms
AD

Accelerated Depreciation

ADB

Asian Development Bank

APPC

Average Pooled Purchase Cost

BOOT

Build Own Operate Transfer

CEO

Chief Executive Officer

CERC

Central Electricity Regulatory Commission

CPSU

Central Public Sector Utility

CSS

Cross Subsidy Surcharge

DCR

Domestic Content Requirement

DISCOM

Distribution Companies

ED

Electricity Duty

EPC

Engineering, Procurement and Construction

FiT

Feed-in Tariff

IRR

Internal Rate of Return

MAT

Minimum Alternate Tax

MNRE

Ministry of New and Renewable Energy

NSM

National Solar Mission

NHPC

National Hydro Power Corporation

OA

Open Access

PPA

Power Purchase Agreement

PSU

Public Sector Unit

PV

Photovoltaic

REC

Renewable Energy Certificate

RPO

Renewable Purchase Obligation

RGO

Renewable Generation Obligation

SECI

Solar Energy Corporation of India

UDAY

Ujwal DISCOM Assurance Yojana

VGF

Viability Gap Funding

BRIDGE TO INDIA, 2016

31

C 8/5, DLF Phase 1,

Gurgaon 122 001,
Haryana, INDIA
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