Solar Energy Development - INDIA Prepared and compilation by JP Gupta Waaree Energies (P) Ltd, Mumbai-66

Status of Solar Energy Development in India

India has been undertaking a country wide solar programme for more than two decades: Remote village electrification amongst the largest decentralised solar programmes globally Approximately 95% of all remote villages electrification using SPV Promotion of solar in Urban, Industrial & Commercial applications At 1900 kWh/sq M, India receives one of the highest levels of solar irradiance globally. Most parts receive irradiance of 5-7 kWh per sq meter per day - average power generation potential of 20 MW per square kilometer Certain sites receive higher levels of insulation (Rajasthan, TN, AP, Ladakh, Gujarat) - average potential of 35 to 40MW/sq Km

Cumulative Capacity Added till upto 31.12.2011

Grid Based Solar Power - 600 MW Decentralised Solar Power Projects & Street Lights 23.9 MWp Solar Home Lighting Systems - 9,10,877 Solar Lanterns - 12,67,350 Solar PV Street Lighting Systems -1,82,384 Solar PV Pumps - 15,247 Solar Water Heating - 6.25 Million square metres (Collector Area) Solar Cookers 8,72,000

High Solar Incidence Zones

The Jawaharlal Nehru National Solar Mission: Key Highlights

Objective of the National Solar Mission To achieve volume production at a scale which leads to cost reduction and rapid diffusion and deployment of solar technologies across the country For this purpose set up enabling policy environment and regulatory framework.

Road Map for the Solar Mission

Jawaharlal Nehru Solar Mission Roadmap S.no Application Segment Target for Phase 1 (2010-13) 7 Million Sq meters 200 MW 1000 MW Target for Phase 2 (201317) 8 Million Sq meters 800 MW 4000 MW Target for Phase 3 (2017-22) 5 Million Sq meters 1000 MW 16000 MW

1 2 3

Solar Collectors Off Grid Solar applications Utility grid power, including roof top

National Solar Missions Strategy for Phase 1 & 2 Supporting Utility scale power generation Expanding off-grid applications Developing rooftop installations Accelerating Research and Development Enhancing the Domestic manufacturing base

Key Action Points under JNNSM Off-Grid, Rooftop & Demonstration Projects under JNNSM
Off Grid Solar Applications JNNSM proposed to add 200 MW capacity in Ist phase for off grid applications like solar lighting, rural power supply, telecom towers etc Soft loans up to 5% annual interest rate 30% subsidy for select applications 90% subsidy for niche applications in special category states and other remote areas. Rooftop Based Solar Generation JNNSM targeting 100 MW of rooftop solar PV connected by 2022 to replace conventional power/ diesel-based generators. Operators eligible to receive the feed-in tariff fixed by the SERC. Generation Based Incentives payable to utility to cover difference between solar tariff less the base price of Rs. 5.50/kWh with 3% p.a. escalation. Tariff to be fixed by concerned SERC & utility to pay a minimum of Rs. 5.50/unit - increasing annually @3% Demonstration Projects JNNSM to identify new technology configurations not covered under 1,100 MW capacity target Focus on large scale Solar Thermal projects and new solar thermal technologies PFC to prepare bidding documents for these projects - tariff based bidding - initiated in 2010

Key Action Points under JNNSM - Grid Connected Solar Power

Under JNNSM, NVVN (NTPC Vidyut Vyapar Nigam) to be the nodal agency for the procurement and sale of solar power NVVN to source and sell 1,000 MW solar power in Phase 1 based on
A Solar Tariff (to be paid to solar power project developers) fixed by Central Electricity Regulatory Commission (CERC)
Solar tariff for FY 2010-11 tariff as per CERC - Solar PV Rs. 18.44 per unit; CSP Rs. 13.45 per unit Solar tariff for FY 2011-12 further dropped by 20% and expected to drop in next few years @ 89% per annum.

NVVN to bundle an equal amount of conventional power with solar power

Bundled solar and conventional solar power to be sold to states by NVVN @ Rs 5.5/ unit

NVVN to sign a PPA (Power Purchase Agreement) with solar developers and NTPC as well as a PSA (Power Sale Agreement) with state utilities
PPA to remain valid for 25 years (in line with CERC regulations)

NVVN shall establish irrevocable revolving Letter of Credit (LCs) in favor of the Solar Power Developers
Distribution Utilities shall open irrevocable revolving Letter of Credit to ensure Payment Security.

CERC discussed with SERCs and set RPOs at state level for solar
Solar RPO to start with 0.25% in the phase-I, and increase gradually to 3% by 2022.

For FY 2012-13 it is 0.5% and increasing by 1% or 1.1% or 1.2% or so every year.

Proposed Time Lines & Requirements for New Projects

New Projects - Requirements for Setting up of Solar Projects Confirmation that Capacity shall be commissioned on or before 31st March 2013. Post this date there will be different tariff and OR PPA may be cancelled and EMD forfeited. Net worth of the SPD for the past three years and turn-over of last three years Technical requirements New Projects Conditions for signing of MOU (Even for REC Projects) Confirmation from STU regarding availability of evacuation infrastructure at >33 kV Statutory (allotment of land) and other clearances as applicable & Bank Guarantee Complete Detailed Project Report (DPR) & Letter of comfort from Promoter(s) /FIs Time-Frame for major activities Necessary water linkages for solar thermal from the concerned State Authorities

Key Messages & Issues

CERC Solar Tariff Duration of solar feed in tariff inadequate for developers to risk such high investment 1 year solar FIT does not allow a developer enough time to develop projects Financial closure for solar projects solar feed in tariff window not large enough to accommodate project gestation period 12 months for SPV and 28 months for CSP Capital costs assumed for solar tariff design may not be appropriate Solar tariff based on capital cost prevailing in market today however project gestation period may move the capital costs higher risk especially as MNRE expects a development guarantee while awarding projects RoE for the first 10 years assumed at 17 % (provides an effective post tax return of 14.11 %) - on the lower side considering the risks associated with new technology No or limited information on CUFs achievable by solar power projects CERC CUF (of 19% - SPV) might be difficult to achieve in most parts of India except Rajasthan & Gujarat developers of the view that this should be in the range of 1619%. CSP case to be considered seperately

Key Messages & Issues

JNNSMs Goal Play to Indias strength Shift focus to Solar (India has very high solar potential) Address energy security & high cost of solar power through rapid scale-up & technological innovation for driving down solar power costs towards grid parity. Mid-term appraisal (based on emerging cost & technology trends) to be undertaken to evaluate progress & review capacity and targets for subsequent phases protect Government from un-necessarily high subsidy exposure Shift in focus of Renewable Energy Development from State to Federal Level:

JNNSM Shifts focus in renewable energy development to the centre

MNRE & NVVN emerge as main players in RE promotion from states like in wind etc Limited role of states land, water allocation However limited clarity on Solar RPOs and RECs and how these will function A number of issues still to be addressed by JNNSM in conjunction with Central & State Governments, Regulators, Power utilities etc: Availability of year on year funding for the JNNSM (solar tariff 25 years from which budgetary head) Solar projects - connected at 33 kV & above grid substations & not discom substations escalate project costs - longer evacuation networks

Project financial closure within 3 months from date of signing of PPA highly ambitious considering the Indian banking systems unfamiliarity with solar

Key Messages & Issues

Risk Mitigation for Key Stakeholders Risk mitigation for solar power developers & NVVN in case of default or non purchase of power by state utilities No clarity on chain of events or liabilities in case a utility stops buying power from NVVN or is late in making payments to NVVN for the power domino effect MNRE & Multi/ Bi lateral institutions (WB & ADB) for development of appropriate Risk Funds for NVVN and solar developers No risk mitigation instruments for solar project developers Need for a technology guarantee from solar technology providers Development of Solar Parks MNRE very keen to develop solar parks in states like Rajasthan and Gujarat Gujarat already has a very ambitious solar policy in place and had already bid out projects with a cumulative capacity of 900 MW. Promotion of Solar Manufacturing An incentive package, similar to SIPS, to be considered for development of manufacturing for solar thermal systems and components. SMEs to be supported through soft loans for expansion of facilities and technology Technology transfer to be built into procurement from foreign sources