EQ Magazine Oct'16 Edition Part 2/2 by EQ Int'l Solar Media Group

We turn passion into power. Every journey begins with the first step. At the turn of the year 1998/1999, Ralf Hofmann and a dozen engineers took the huge step and started an enterprise that was solely dedicated to photovoltaics. They brought with them a lot of ingenuity and enthusiasm as well as decades of experience from the original KACO company, which was one of the first suppliers of inverters in the late 1930s. With a close network of business locations on four continents, KACO new energy is today one of the largest manufacturers of solar PV inverters world-wide. Energy storage systems as well as accessories for system monitoring and grid management round off our portfolio. Now that our journey has taken us to India, we look forward to make the next steps towards India‘s renewable future together with you.

 100 years of quality engineering  Supplier of the first serially-produced, transformerless inverter  Over 8.5 GW of inverter power sold world-wide  Over 600.000 units in the field  Comprehensive portfolio from 250 watts right up

to the megawatt class  CO2-neutrally produced

+91-9971-157-755 . sales.india@kaco-newenergy.de . www.kaco-newenergy.com

You‘ve got the project, we‘ve got the inverter. At KACO new energy you will find the complete inverter program for residential, commercial and utility-scale solar PV plants – a consistent power spectrum; technology for any PV system; unique build: benchmark quality.

 Wide MPP range  Up to 3 MPP trackers  Integrated DC combiners available  Integrated monitoring  Priwatt self-consumption  5 year warranty

blueplanet 10.0 TL3

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blueplanet 3.0 TL1

blueplanet 20.0 TL3 INT

Meet us at Intersolar India: stand #1216.

DELIVERING ENERGIES WITH A

CLIP AND CLICK!

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Fastening solutions for

Industrial & Commercial roofs Ground mount

Grounding Cable routing

PHOTOVOLTAIC MODULES

ELECTRICAL MANAGEMENT

A RAYMOND FASTENERS INDIA Pvt. Ltd

Tel.:+91 2135 676 200 www.araymond-energies.com G.No. 259,276/8B Nighoje-Chakan, Taluka â&#x20AC;&#x201C; Khed Pune 410501 - MAHARASHTRA

30 + YEARS OF EXPERIENCE

2000

30+ years Experience in energy & power conditioning systems

Public Listed Company with large market capitalization

100 MW state-of-art manufacturing faciltiy at Bangalore, India

An Independent Power Producer with SPV projects developed under various national and state schemes

Over 45 MW Solar PV Projects with 2000 rooftop installations

Excellent after-sales service 3 decades of experience /service centres across 250 locations

Ministry of New & Renewable Energy Channel Partner with SP1A Rating

An ESCO empanelled company by BEE & IMS Certified company

Strong Business Tie-ups Elite customers from Corporates, Banks, Govt. Educational, Industrial etc.,

Turnkey Solution Provider For high-quality solar PV modules and complete Balance of Systems with IEC/MNRE certifications

(Formerly known as NUMERIC POWER SYSTEMS LIMITED) SWELECT HOUSE, No 5, Sir P.S. Sivasamy Salai, Mylapore, Chennai 600 004, Tamil Nadu, India. Tel: +91 44 2499 3266 Fax: +91 44 2499 5179 Toll Free No. Email: info@swelectes.com 1800 425 9600 www.swelectes.com

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FirstSource Energy INDIA PRIVATE LIMITED

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C ONTEN T

VOLUME 8 Issue # 10

POLICY & REGULATIONS Implications of GST on delivered cost of renewable energy

Smart Grid CESC Wins Smart Grid Project of the Year With Silver Spring Networks

SOLAR TRACKERS SunLink Introduces TechTrack Distributed Single Axis Solar Tracker Solution

19 SOLAR PV INVERTER ABB India doubles solar inverter manufacturing capacity with a new state of the art factory

The data and information presented in this magazine is provided for informational purpose only.neither EQ INTERNATINAL ,Its affiliates,Information providers nor content providers shall have any liability for investment decisions based up on or the results obtained from the information provided. Nothing contained in this magazine should be construed as a recommendation to buy or sale any securities. The facts and opinions stated in this magazine do not constitute an offer on the part of EQ International for the sale or purchase of any securities, nor any such offer intended or implied Restriction on use The material in this magazine is protected by international copyright and trademark laws. You may not modify,copy,reproduce,republish,post,transmit,or distribute any part of the magazine in any way.you may only use material for your personall,Non-Commercial use, provided you keep intact all copyright and other proprietary notices.If you want to use material for any non-personel,non commercial purpose,you need written permission from EQ International.

ROOFTOP & OFFGRID All Lighthouses To Be Solarized by December 2016

MOUNTING STRUCTURES Top Three Learnings In Ground Mount Solar Module Mounting Structures Design

24 INDIA NTPC bullish on power demand, to add 24 GW at Rs 1.6 lakh cr

with Li Xiande, Jinko Solar’s Chairman

PARIS AGREEMENT Tough negotiations and hard work ahead for India to make Paris Agreement equitable and effective: CSE

11 RESEARCh & ANALYSIS Solar Energy Sector: Strong Pipeline Of Solar Projects Aided By Policy Support; However Regulatory Challenges Persist

26 BUSINESS & FINANCE JinkoSolar Announced Withdrawal from EU Price Undertaking

JNPT Now Harnessing Solar Power

MIDDLE EAST Record low bids submitted for Abu Dhabi’s 350 MW solar plant in Sweihan

29 BUSINESS & FINANCE

InvITs may help unlock $ 5-7 billion from assets in roads, power

INDIA

ROOFTOP & OFFGRID UL supports adoption of Solar based water pumps for agricultural application in India

Govt mulls penalties for curtailing renewable power generation

ROOFTOP & OFFGRID

POLICY & REGULATIOS

RESEARCH & ANALYSIS

MNRE: Setting up of Rs 1500 Cr Payment Security Fund for VGF Scheme under JNNSM

The SUN is definitely rising, but will it shine?

WITH LOW DEMAND AND CHEAPER POWER ON EXCHANGES, DISCOMS FLOUTING SOLAR’S ‘MUST RUN’ STATUS

ENERGY STORAGE AES Energy Storage and RES Rank as Top Utility- Scale Energy Storage Systems Integrators in Navigant Research Assessment

43 INTERVIEW with Manish Chourasia, Chief Executive Officer (CEO) Tata Cleantech Capital Ltd.

NEWS & ANALYSIS Pg-12-37 PRODUCT Pg-79

rooftop & OFFGRID

JNPT Now Harnessing Solar Power India’s largest container port, Jawaharlal Nehru Port Trust (JNPT) will now harness solar energy and reduce its dependency on conventional electricity from the grid.

NPT is installing solar power plant on several rooftops in its township and commercial premises. This green initiative by JNPT is part of its push towards becoming the most sustainable energy generation port organisation in India. Rooftop solar plants allows the use of roof of buildings, an area which is otherwise not usable, for sustainable energy generation also ensuring financial savings. With this new initiative, JNPT is expected to get a payback on its investment on rooftop solar within 2.5 years due to its high cost of grid electricity (around Rs. 14 per unit). This 822 KWp of solar rooftop capacity is being installed at an expense of Rs 4.5 crore, supported by a 15% subsidy from SECI (part of Ministry of New and Renewable Energy). The 822 KWp project once commissioned will generate around 9.9 lakh units of electricity thereby saving around Rs.1.08 crore of electricity expense for JNPT in the first

year. Out of this 411 KWp is commissioned at Rooftop solar installation at JNPT premises i.e. Hospital- 234 KW, St. Mary School- 45.6 KW, IES School- 36 KW in the township and Port User Building (PUB)- 96 KW. The renewable energy of 234 KW generated from Rooftop solar installation at hospital has capacity of 25,350 KWh per month and is contributing 80% of approximate present consumption. The total 411 KWp will generate around 4.95 lakh units of electricity in year 1 contributing to 40% of approximate present consumption of these 4 premises, thereby saving around Rs. 0.54 crore of electricity expense for JNPT in the first year. This is a small but a significant step in the Central government’s widespread initiative to promote solar energy in our country and will contribute to the government’s ambitious target of having 1,00,000 MW of solar capacity installed in India by 2022.

Amplus to invest Rs 90 cr in Walmart’s rooftop solar plants Amplus Energy Solutions has committed an investment of Rs 90 crore to install and commission 15 rooftop solar power plants for world’s leading retailer Walmart in India.

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urgaon-based Amplus plans to fund the investment through the money it raised from a global infrastructure investment fund, I Squared Capital. It raised USD 150 million last year from the fund, the company said in a statement. The company has already commissioned a 297-kWp (kilowatt peak) rooftop solar plant for Walmart’s Best Price store at Agra, it added. It plans to commission 11 more plants for Walmart in the next 4-5 weeks in Punjab, Uttar Pradesh, Madhya Pradesh, Rajasthan and Andhra Pradesh, it said. Walmart India has signed a Power Purchase Agreement (PPA) with Amplus to solarise their 15 Best Price outlets. Once completed, these

October 2016

plants over their lifetime will help in saving 1,72,000 MT CO2, which is equivalent to planting 2.15 lakh trees. “We have pledged to meet 50 per cent of our energy needs through renewable energy and this partnership is testimony to the commitment. We are pleased that the rooftop solar plant has been commissioned at Agra and we will be monitoring the power generation through Amplus’ cloud based software.” Krish Iyer, President & CEO, Walmart India

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rooftop & OFFGRID

UL supports adoption of Solar based water pumps for agricultural application in India The solar revolution in India is not just limited to transitioning toward cleaner energy. For the millions of people in the rural hinterland who are off the grid, solar energy is a truly transformative force.

part from generating electricity for domestic use, the 300 days of sunshine in the country can also be harnessed for deploying solar water pumps, which are emerging as an important tool to invigorate the agricultural sector. By circumventing the need for either electricity or fossil fuels like diesel to run irrigation pumps for the fields, solar based water pumps are a boon to farmers in the remote areas the country that provide a greener and cheaper source of energy. With an aim to mitigate the usage of diesel for water pumps, the Ministry of New and Renewable Energy (MNRE) has been extending capital subsidy program under the National Solar Mission program to enable adoption of solar PV based irrigation pumps for agricultural application. Currently a large number of diesel engine based irrigation pumps are used in the country. MNRE wants to mitigate the usage of diesel by deploying solar based water pumps, which are a greener alternative. Along with MNRE, various central government agencies like NABARD and state government agencies have been promoting Solar PV based water pumping systems. M N R E has est ablished the “ Tec hnic al Specifications” for Solar Water Pumping Systems which lays down the performance requirements for each component used in the Solar Pump and the system as a whole. Solar Pumps are expected to work for 15 – 20 years, providing adequate water pumping capacity for agricultural purpose round the year, in remote locations of the country. All suppliers need to get their systems tested at a MNRE approved lab to these specifications, to be eligible for bidding for tenders and to qualify for subsidies.

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As a global safety science company with more than 120 years of expertise, UL has been continuously engaging with industries across the spectrum in India to support them with testing, inspection and certification facilities, whether for exports under the ‘Make in India’ campaign, or for improving quality and safety of products for the domestic market, in the ambit of the ‘India for India’ movement. UL has played a critical role in the large scale adoption of solar water pumping systems in India by helping to ensure that only the systems that meet the quality and performance criteria as defined in MNRE specifications are qualified to be installed in the country. UL’s state of the art Solar Pump testing facility in Bangalore is capable of testing PV Modules, Pump Controllers and the pump assembly as a complete system. UL facility has the capability to test Submersible and Surface pumps with rating ranging from 1 HP to 10HP. This facility has been operational for the past 12 months and has completed testing 200 pumps, thereby helping to ensure that the performance of the solar water pumps installed in the country have been verified by an independent, third party test laboratory.

October 2016

rooftop & offgrid

All Lighthouses To Be Solarized by December 2016

MYSUN Announces a Market Place to Solarize 10 Million Rooftops by 2022

D The Directorate General of Lighthouse & Lightships (DGLL), a subordinate organization under the Ministry of Shipping, Govt. of India is presently maintaining 193 Lighthouses which provide aids to marine navigation to the mariners transiting in coastal waters of India.

October 2016

ost of these Lighthouses were operating on the conventional source of energy i.e. Electricity and Diesel Generators which consume fossil fuel and emit high amount of carbon dioxide (CO2) thus increasing greenhouse effect and causing air pollution. Generation of 1 Mega Watt Hour (MWh) power through fossil fuel leads to emission of approximately 900 Kg of Co2. In order to reduce CO2 emission, DGLL has decided to replace the source of energy utilized at lighthouses to renewable source and started harnessing solar energy to operate its lighthouses. Till date 176 Lighthouses have been fully solarized. The Directorate has planned to achieve complete solarization of all the Lighthouses by 31.12.2016. With this complete solarization, approximately 1.5 MWh energy will be generated which will amount to approximately reducing 6000 Kg of greenhouse gases per day. On achieving complete solarization, all the Lighthouses under DGLL will be operating on Green Energy. This is a step in line with Government’s initiative to maximize the use of Green Energy for protection of environment besides making the Lighthouses operate on a reliable, resilient and renewable energy system and reduction of global warming emissions.

riven by the mission to bring solar energy to every person’s life, MYSUN, an engineering and technology-based marketplace for everything solar, has announced the commencement of its operations in India. MYSUN is envisioned as a one-stop solar marketplace that helps consumers understand and evaluate their solarisation potential and associated savings. It creates a convenient and guided buying environment for consumers by providing competitive pricing, rated vendors, quality standards, advanced engineering tools and financing options, all at one unique platform www.itsmysun.com Although Solar has grown very rapidly over the last 2-3 years, totalling about 7GW of installed capacity today, most of this growth has come from large scale solar power projects, which does not solve India’s primary power problems – transmission and distribution in-efficiencies and land acquisition. To find a sustainable, economical and scalable energy source for our large and diverse country, we need to adopt rooftop solar on a large scale. The Government of India’s bold Solar Mission target of 100GW has earmarked a substantial 40GW for rooftop solar alone. However, the progress on this front has been limited. The cost of solar power has dropped to less than grid tariffs for millions of consumers across India. But still, rooftop solar deployment has been quite restricted. MYSUN identifies the lack of awareness and difficulty in buying solar as one of the primary reasons for this. The consumers are not aware that buying solar is a need today and it’s a great financial investment too, apart from its environmental benefits. On the industry side, there are a number of solar installers, developers and other stakeholders. However, due to traditional business models and low market reach, conversion rates and productivity, high overheads and equipment costs, the industry has not been able to make a big impact in the rooftop solar segment. Identifying this unaddressed gap, a group of solar professionals with a shared conviction that every person in India should reap the benefits of solar energy came together to build MYSUN, thus beginning this unique journey. Combining their decade long experience in the Indian Solar Industry and an understanding of the need of digitizing solar, the team at MYSUN is striving to tap 10 million rooftops by 2022. “MYSUN attempts to impact the solar industry in such a manner so as to bring about a paradigm shift in the way solar is perceived, bought and sold today. The consumer of energy is at the forefront of our business philosophy as we believe the time has come for the consumers to start demanding solar. Whether Rural or Urban, Residential or Commercial, our ultimate objective is to make your relationship with solar easy, personalized and delightful.” - Gagan Vermani, Founder & CEO, MYSUN MYSUN, is committed to bringing technology-backed value added services for the consumers as well as the industry stakeholders, with a strong focus on catalysing the non-utility solar energy landscape in the country. The process of buying a solar system can be complicated and there is no easy, transparent way to evaluate and select service providers or financing alternatives. By simplifying and tailoring solar for all kinds of requirements, MYSUN strives to ensure that the power to purchase the most suitable solar products lies firmly in one pair of hands – the consumer’s.

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rooftop & offgrid

Indiagosolar.in rolls out first ever online ecosystem for Indian Solar Industry Indiagosolar.in, e-info marketplace rolls out its comprehensive service offerings, starting with basic information, consultancy to project execution and post implementation service across institutional and retail customers.

he company provides a unique platform that offers information, technical advisory services & multiple options to buy & sell solar products & services online. IndiaGoSolar also facilitates financing through banking partners, government subsidies, and loans available to customers, while purchasing a solar product or solution, thereby bringing complete transparency on each transaction. The platform also helps buyers identify the right solar products, projects and services best suited to their needs and make all relevant technical & commercial information available to support buyers making a prudent purchasing decision. The company also puts in a lot of effort to raise the quality standards of existing solar products

“Indian customers should have the choice to choose its own electricity supplier and if they can own their source of electricity generation on their roof, it is much better. Once the Government laid down the ambitious goal to set up 40 GWs solar roof top capacity, we decided to build a marketplace to allow people to freely buy & sell solar products & services online. Unlike older times, the solar industry in India has now evolved, driven by industry landscape, competition, fast evolving technology and ever decreasing cost. “Moreover, we seek to bridge the current gap in access to information about the solar market. It is for all those people intending to buy high tech high value solar products/projects but lacking knowledge of adequate size suitable for them, product life-span, safety, working modules, installation times, tax savings and available financing infrastructure. This is where our online marketplace can provide the right information & advisory on solar product technology, multiple suppliers, real-time price comparison, economic and commercial benefits, and options of purchasing standardised projects and delivery & installations. Besides, helping customers to find the right financing partner and facilitate the transaction online.” - Dr. Harish Ahuja, Founder & CEO, Indiagosolar.in

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and services available in the market and reduce customer’s worries related to technology, warranties, financing, transportation, installation and after sales service & repair of solar products and systems. Indiagosolar.in lists only those integrators, EPC and manufacturers on their platform which are already empanelled by MNRE and state agencies. To ensure authenticity and credibility, each of these companies go through a systematic process of scrutiny before they become channel partners or system integrators. All other smaller & motivated solar players can become IGS affiliates. Applicants are checked thoroughly before they can find affiliation on Indiagosolar.in in order to market & install products and services.

The key offerings of Indiagosolar includes an exclusive range of innovative, best-of-breed solar products and services. Hosts several EPC players and suppliers and facilitates 24X7 shopping from anywhere, anytime, across India. From a humble beginning with 1 solar product supplier on board to presently having more than 42 manufacturers, 20 EPC players. 10 financial consultants, the company has been able to chart a high octane growth path, considering the constraints and inhibitions the industry faces regarding buying and selling of solar products and services online. Some of the initial road-blocks that the brand faced in its early days pertain to Government’s over-interference in the sector. Regulatory delays on net-metering policy, unavailability of industry accepted standards for solar products and end-consumers inhibitions of adopting solar as an alternative source of energy. Currently the company has a foot-print all across India supported by a well-entrenched partner & affiliate network and tie ups with 6-7 major PSU banks.

October 2016

Solar Trackers

SunLink Introduces TechTrack Distributed Single Axis Solar Tracker Solution SunLink Corporation expands its broad portfolio of photovoltaic project solutions with the launch of the TechTrack Distributed single axis tracker. TechTrack Distributed introduces a new era in solar tracking with “dynamic design,” unrivaled site flexibility and reductions in total project costs.

echTrack Distributed is the second single-axis tracker in the company’s TechTrack product line, joining the internationally deployed TechTrack Centralized. Central to the system’s innovation is a dynamic design feature called Dynamic Stabilization™ through which the characteristics of the tracker are changed depending on real-time, sensor-observed environmental conditions. Beyond simply adjusting tilt, SunLink’s TechTrack Distributed incorporates control over the damping and stiffness of the array, opening a completely new solution space for

increasing energy output, maintaining structural integrity and lowering cost. In addition, TechTrack Distributed solves the challenge associated with monitoring the thousands of electromechanical parts that make up a distributed tracker system via SunLink’s VERTEX Project Intelligence Platform. VERTEX enables next-generation real-time data monitoring and secure remote control, which provides greater visibility into energy assets, historical data collection and more efficient O&M – resulting in more valuable energy projects.

Other Techtrack Distributed Features Include: Superior structural efficiency – Maximum system torque is reduced by 67 percent, resulting in a stronger, lighter and more cost-effective tracker. Increased power – Continuous tables and 120° tracking yield the industry’s best power density and generation. Reduced fieldwork – Terrain following of 10 percent grade N-S, any practical E-W and up to 5 percent change in grade post-to-post. Fewest posts to install of any comparable tracker.Wireless and self-powered – Integrated solar panel and Li+ battery power, robust slew drive and motor. Communication via secure, proprietary mesh network. Unlike any other tracker provider on the market, SunLink also offers PowerCare installation and O&M services for TechTrack projects, making it possible for EPCs and developers to take on more projects successfully.

With both distributed and centralized tracker solutions as well as fixed-tilt and roof-mount products, SunLink’s full range of respected solar mounting products is able to meet the requirements of virtually any project site, anywhere in the world.

“We’re very excited about this revolutionary design, It reflects the very best of SunLink’s legacy for mechanical and structural engineering excellence combined with the leadership we’re now demonstrating in the software and electrical engineering arenas. Only by leveraging the power of technology advancements such as IoT, big data, machine learning and more can the solar industry move beyond a niche energy player into a gridenhancing asset, and the world’s dominant energy source. TechTrack Distributed demonstrates what’s possible. SunLink’s full-scope approach makes us a better partner, We’re able to introduce dynamically-designed products that perform better and cost less plus install them more efficiently and with higher quality results. We also can maintain them more intelligently and ultimately help our customers build larger portfolios of projects with better energy production and economic returns.” Gagan Vermani, Founder & CEO, MYSUN

Array Technologies brings streamlined approach to large-scale solar tracking

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rray Technologies, Inc (ATI) is a US-based manufacturer of single-axis tracking devices for large-scale solar farms. The company says that its latest generation of trackers – the DuraTrack HZ v3 – is one of the most durable and cost-competitive options currently available, thanks to technology design which reduces costs on both installation labour and long-term maintenance. Array Technologies’ tracking systems have been used in hundreds of utility-scale solar projects, plus countless commercial and residential systems as well, across 20 countries. With nearly 6 GW of capacity installed to date, the company is one of the largest providers of tracking systems in the world. The company is currently

October 2016

looking toward Australia for opportunities as the nation’s pipeline of large-scale projects expands. “Australia represents a nascent utilityscale solar market in a stable and mature business environment, making it attractive to any serious global solar company, Our industry-leading product, DuraTrack HZ v3, is built to withstand the harshest environments with little to no maintenance thanks to our 30-year life design goals and unrelenting focus on reducing potential failure points. Solar projects in Australia will benefit from the proven reliability of our tracking product as well as its inherent ease of installation.” Ron Corio, Founder And CEO Of ATI

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rooftop & offgrid

Ganges Internationale Partners with Panel Claw to provide world class roof mounting solutions

anges Internationale Private L i m i te d, a m u l t i f a c ete d technology company, recently announced it’s partnership with PanelClaw, the leading provider of flat roof mounting solutions in North America to offer world-class roof mounting solutions to the Indian and international markets. Through this association, Ganges’ global manufacturing experience and logistics capabilities will deliver superior manufacturing for PanelClaw’s Polar Bear® platform globally. Flat roof installations require specialized skill sets that consider factors such as water drainage, thermal expansion and contraction, turbulent wind forces, seismic response, corrosion resistance, mechanical loading, and more. Ganges, renowned for their manufacturing expertise and local engineering support will supply Polar Bear® components for PanelClaw and is going to be their exclusive license partner for the sale of Polar Bear in Southeast Asia.

- Vinay Goyal, CEO of Ganges Internationale

“We are delighted to associate with PanelClaw. Ganges now has access to the best in class flat roof products that are backed by extensive testing and a superior performance track record.”

PanelClaw’s Polar Bear is based on 7 years of experience in flat roof delivering constant innovation that has led to having a reliable, extremely cost effective product backed by an extensive suite of engineering data and support.

“Integrating Ganges’ expertise in manufacturing, logistics, and local engineering support, with PanelClaw’s globally accepted technology; we offer a world-class product that has been thoroughly engineered and tested. We are thrilled to announce our partnership with Ganges Intenationale. This partnership is one of the cornerstones of PanelClaw’s global expansion strategy in the flat roof racking space. Our goal is to reach the next Gigawatt of deployed flat roof products together in record time.” - Mr. Constantino Nicolaou, CEO, PanelClaw, Inc.

Energy Storage

AES Energy Storage and RES Rank as Top UtilityScale Energy Storage Systems Integrators in Navigant Research Assessment A new Leaderboard report from Navigant Research examines the strategy and execution of 14 leading energy storage systems integrators in the utility-scale market, providing industry participants with an objective assessment of these companies’ relative strengths and weaknesses.

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s the energy storage industry continues to develop, the role of the systems integrator is becoming more and more important. Energy storage systems (ESSs) will increasingly need to serve different applications— ranging from short-duration and high-power ancillary services to long-duration time shifting of energy—and systems integrators will be responsible for managing this complexity by designing systems that can provide maximum value to both the grid and the system owners. Click to tweet: According to a new Leaderboard report from @NavigantRSRCH, AES Energy Storage and RES are the leading utility-scale energy storage systems integrators in terms of strategy and execution. Currently, a variety of players from different backgrounds are entering utility-scale energy storage systems integration space, including those with experience in renewable project development, utility ownership, electrical grid equipment and services, battery manufacturing, civil and electrical engineering services, and innovative energy management systems. According to the report, this emerging trend allows industry participants to leverage their diverse backgrounds to provide a range of solutions, allowing them flexibility in meeting the needs of various customers. The report, Navigant Research Leaderboard Report: Utility-Scale Energy Storage Systems Integrators,

October 2016

“As the utility-scale energy storage industry continues to evolve, the leaders in this space will be companies with flexible offerings suited for a number of different grid services and customer types, AES Energy Storage and RES serve primarily as full project developers that also have in-house systems integration and software and controls expertise, which is a model Navigant Research believes offers great scalability.” - Alex Eller, Research Analyst With Navigant Research compares the strategy and execution of 14 leading ESSIs focused specifically on the utility-scale market. These companies are rated on 12 criteria: vision; goto-market strategy; partners; production strategy; technology; geographic reach; sales, marketing, and distribution; product performance; product quality and reliability; product portfolio; pricing; and staying power. Using Navigant Research’s proprietary Leaderboard methodology, vendors are profiled, rated, and ranked with the goal of providing industry participants with an objective assessment of these companies’ relative strengths and weaknesses in the global utility-scale ESSI market.

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SOLAR PV INVERTERS

ABB India doubles solar inverter manufacturing capacity with a new state of the art factory

ABB India, the power and automation technology major, inaugurated a new solar inverter manufacturing facility in the city. The facility is set to double the solar inverter manufacturing capacity of the company.

he factory was inaugurated by Sanjeev Sharma, CEO and Managing Director, ABB India and Robert Itschner, Global Managing Director for Power Conversion, ABB Group. The expansion follows earlier milestones achieved by ABB India last year – the first company to double the solar inverter installed base to 2GW in a span of five months. A first for the nation as well. ABB inverters manufactured at Nelamanagala, Bengaluru help power 40 percent of the utility scale solar power generated in the country. “ABB, a global leader in solar inverter technology, has also been powering solar projects across the country spanning the entire solar photovoltaic (PV) value chain, a key component of which has been our solar inverter technology, made in India, The government’s vision has provided the required catalyst and focus for clean energy and ABB is proud to partner this journey. This expansion reaffirms our commitment, innovation to cater to country-specific solutions and enhances our manufacturing presence of sixty years.” Sanjeev Sharma, CEO And Managing Director, ABB India In 2015, Prime Minister Narendra Modi set the ambitious new target of 100 GW solar capacity by 2022 under the country’s National Solar Mission – a fivefold increase over India’s previous 20 GW target. The

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targets will be supported by a mix of public and private initiatives, helping to raise India’s energy security and meet annual demand increases of around 7 percent. India’s current installed solar capacity is ~8GW out of which utility scale projects would comprise 6.5 GW to which ABB inverters are supplied. Other ABB landmark solar inverter projects in India include the world’s first fully solar powered airport, the world’s largest single rooftop solar project, the world’s longest canal top solar project, schools and solar installations at all of India’s major airports. In addition to utility-scale central inverters, ABB also supplies locally tailored solutions such as drives for solar powered water pumps to replace diesel pumps for crop irrigation in rural areas with limited power grid access. The Bengaluru site manufactures ABB’s PVS800 central inverter series which have proven popular in India due to their ease of commissioning and reliable performance in even the harshest of climates. ABB is the leading global supplier of solar PV inverters. Inverters form the heart of any solar installation. ABB pioneered manufacturing of solar inverters in India with the state of art Bengaluru factory in 2012. ABB central inverters range from 2 kW to 2 MW (2 kW to 50 kW are string inverters) and are optimized for residential rooftop usage as well as cost-efficient multi-megawatt power plants. They improve reliability, efficiency and are easy to install. Plant management solutions including environmental management, software tools and lifetime support are also part of the portfolio.

October 2016

MIDDLE EAST

Record low bids submitted for Abu Dhabi’s 350 MW solar plant in Sweihan Abu Dhabi could expand its Sweihan solar project to well over 1 gigawatts after record low bids were submitted on Monday. Abu Dhabi Water and Electricity Authority’s procurement arm received six bids for the upcoming 350 megawatt solar photovoltaic (PV) plant in Sweihan, with the lowest bid at 2.42 US cents per kilowatt-hour (kWh) coming from an Asian consortium.

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local firm bid second-lowest at 2.53 US cents per kWh. While the local figure is 16 per cent lower than the record lows reached in Chile last month, a whole new offer was put on the table from the Asian consortium. The consortium submitted an offer to expand the plant to 1,170MW at an offer of 2.30 cents, according to sources who did not want to be named. However, it is important to note that these submissions do not mean that the project has been awarded, as authorities will now evaluate the proposals to ensure thoroughness and economic viability. The UAE’s solar sector has been playing out on an international arena for a couple of years after Saudi Arabia’s Acwa Power, partnered with TSK of Spain, came to the forefront and delivered a winning bid of 5.84 cents for a 200MW phase of the Mohammed bin Rashid Al Maktoum Solar Park in Dubai. At the time this was a huge leap from what was considered normal at about 8 to 9 cents. It seems as though that price is long gone, because in June there were new lows in Dubai at 2.99 cents for 800MW. It was widely expected that Abu Dhabi would beat that rate, which resulted in many companies pulling out. In the beginning, 90 companies expressed an interest, with that number dwindling to only 34 becoming pre-qualified. Big names such as Italy’s Enel, TSK and Acwa, and Abdul Latif Jameel all pulled out over the summer, leaving a competition among seven. In the latest move the French firm Engie called it quits. While some are concerned that these rates will place a squeeze on the industry, Acwa believes that there is still room for further drops.

October 2016

“We haven’t reached the bottom yet, but we’re close, Clearly the market is still able to innovate, and given that the interest rate environment is remaining static I’m delighted to see this new normal. On the one hand I think the low cost of capital plays an important role and that will not remain so low forever, but on the other hand we’re still learning how to further reduce the cost of solar cells and other components as well as operation and maintenance cost.” - Paddy Padmanathan, The Chief Executive Of ACWA

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SMART GRID

CESC Wins Smart Grid Project of the Year With Silver Spring Networks CESC Limited, India’s leading fully integrated electrical company with over 2.9 million customer connections and serving over 17 million people in the state of West Bengal, won the ‘Smart Grid Project of the Year’ award at the Asian Power Awards for its program with Silver Spring Networks, Inc. (NYSE: SSNI).

ilver Spring is deploying StarfishTM, its IPv6 public cloud IoT network and data platform, for CESC in Kolkata for Advanced Metering Infrastructure (AMI) and Distribution Automation (DA) applications. Through Silver Spring’s Operations Optimizer solution, a powerful analytics application that creates insights from a variety of data sources, the program will further help CESC improve grid reliability, reduce energy loss and ensure billing accuracy. Silver Spring and CESC are also collaborating through Starfish to offer smart grid and smart city services to other organizations in West Bengal and throughout India. Starfish can help utilities, energy service providers, cities, commercial enterprises and developers access a reliable, secure and scalable IoT network and data platform that has already connected millions of devices on five continents.

“Apple is committed to running on 100 percent renewable energy, and we’re happy to stand beside other companies that are working toward the same effort, We’re excited to share the industryleading work we’ve been doing to drive renewable energy into the manufacturing supply chain, and look forward to partnering with RE100 to advocate for clean-energy policies around the world.” Sanjiv Goenka, Chairman, CESC

“New innovations in technology are heightening customer expectations for services such as energy management and city operations. CESC has recognized that global trend and set the bar for worldclass services in India through modernization of their grid using IoT technology that is proven, reliable, secure and scalable, We congratulate CESC on its initiative to create a new benchmark for performance and reliability in India, on par with some of the top utilities in the world, and we look forward to continuing our partnership to help offer new applications in the future.” Eric Dresselhuys, Co-founder and EVP of Global Development, Silver Spring Networks

PV MANUFACTURING

PERC and N-type technologies to greatly reduce market share of traditional Al-BSF cells by 2020, with major implications for the supply-chain

There will be major implications for the supply-chain, writes JESSICA JIN, Senior Analyst, IHS Markit

or the last decade, screen-printed Al-back surface field cells (AlBSF) have dominated the photovoltaic (PV) cell technology market. IHS Markit forecasts that this technology will retain its leadership until 2020, because of its proven track record and lower production cost. However, it will face increasing competition from passivated emitter rear cells (PERC), heterojunction (HJT), interdigitated back contact (IBC) and other higher-efficiency cells. The market share of Al-BSF cells, which currently exceeds 80 percent of the market, will fall below 60 percent in 2020. Strong global demand for higher-efficiency modules is driving the growth of PERC and the next generation of n-type cell technologies, like HJT and IBC that are expected to gain market share from 2017 onwards. PERC will become a mainstream technology by 2020, as it occupies the leading position among the competing new technologies. It is being increasingly adopted by top cell manufacturers upgrading part of their existing in-cell lines into PERC or booking orders for new PERC lines. By the end of 2016, there will be 23 manufacturers producing PERC cells with a total global capacity of 12 gigawatts (GW), which is 14 percent of total global cell capacity. Economics is a major reason for this rapid expansion, since PERC is currently the least capital-intensive technology available for cell producers looking to rapidly achieve cell efficiency improvement gains by upgrading their existing cell production lines. The current module oversupply environment is expected to continue through 2017, which will drive lower average selling prices (ASPs) for cells and modules.

To produce higher-efficiency modules — and serve ever more demanding and knowledgeable customers –will help differentiate individual companies’ product offerings in this environment. Manufacturing higherefficiency modules, and keeping tight control of production costs without compromising final product quality and performance, is critical during this time of forecasted price declines and declining gross margins for manufacturers.

N-Type cells are also forecast to increase steadily by 2020, from a minority 3 percent market share in 2015 to reach 14 percent by 2020. New niche technologies like HJT and IBC cells, which have already been successfully ramped by Panasonic and SunPower in recent years, are now quickly being adopted by other leading cell players. In the first quarter of 2016, the IHS Markit PV Supplier Tracker Q2 16 identified eight companies that had recently announced plans to invest in n-type cells for the first time. Many of these newcomers into n-type technology are second-tier players

October 2016

seeking a new niche market where they can compete with tier-1 players. The increasing adoption of PERC and n-type technologies is also having major implications for both BSF and PERC equipment suppliers. Investments in PERC cell equipment have sharply increased in 2016, mainly because the installed capacity of PERC more than doubled this year. A major switch in PV cell equipment investment is expected in the next few years. Beginning in 2019, investments in BSF cells are expected to decline, while equipment orders for PERC, HJT and IBC will continue to grow, due to increased investment from cell suppliers.

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India

Govt mulls penalties for curtailing renewable power generation Taking serious cognisance of some states curtailing power generation from solar projects, Union Power Minister Piyush Goyal today said his ministry is looking into how mandatory electricity production from renewable sources can be enforced.

have come across this issue wherein certain states are resorting to curtailing generation from solar projects and instead buying cheaper power from the exchanges. Some states including Tamil Nadu and Rajasthan have issued directives to curtail power generation from solar projects. Both the states backed down their commitment towards green power sources, claiming that they have already made provisions for it. Power producers body Independent Power Producers Association of India (IPPAI) had raised concerns that such decisions were affecting the generators.The government has set an ambitious target of 175 GW of power from renewable energy sources, with 100 GW from solar alone.

“We are finding a solution whereby anybody who does not fulfil the must run status, what can be done to either enforce that or penalise them (states).”

10 MW Solar project on Canal Bank commissioned in West Bengal

A 10 MW solar PV project has been commissioned on the Teesta canal bank of West Bengal under the Central Government’s scheme for Canal-top and Canalbank projects. This project is the first canal-bank project to be commissioned under the scheme.

he Plant has been inaugurated by Hon’ble Chief Minister of West Bengal, Mamata Banerjee, o n 2 3 .0 8 . 2 016 and commercial operation has started on 24.08.2016. Under the scheme for canal-top and canalbank projects under the National Solar Mission, 100 MW capacity has been approved for implementation across 8 states. Apart from a 1 MW canaltop project that was commissioned in Andhra Pradesh earlier in the year, all other projects are under various stages of implementation. MNRE’s 100 MW scheme of ‘Pilot-cum-Demonstration solar PV projects’ on canaltops and canal-banks projects, implemented by the Solar Energy

Corporation of India Ltd. (SECI), offers central financial assistance of upto 30 percent of project cost,for projects located on top of canals or on available land adjacent to canals. The scheme, launched in December, 2014, targets to make use of unutilized area above and beside the canals for solar power generation and also reduce water loss from canals due to evaporation. The 10 MW commissioned project, located between Mahananda Main Canal and Tailrace Channel of Teesta Canal Fall Hydroelectric Power Plant, is owned by the West Bengal State Electricity Distribution Company Limited (WBSEDCL), and was developed at a cost of Rs. 63.79 Cr. Power from the project would be used by WBSEDCL for captive consumption.

India

NTPC bullish on power demand, to add 24 GW at Rs 1.6 lakh cr Amid global economic uncertainty, state-owned NTPC remains sanguine about domestic electricity demand and has planned a total capacity addition of 24 GW entailing an investment of Rs 1.6 lakh crore.

he company has planned an all-time high stand-alone capex of Rs 25,960 crore exceeding the MoU target of 23,000 crore (with the power ministry) and the NTPC group capex stood at Rs 32,091 crore last fiscal. Singh is of the view that the national trends suggest a promising future for NTPC despite the overall atmosphere of uncertainty in the global business scenario. NTPC has commissioned 10,125 MW in the Twelfth Five Year Plan (2012-17) so far and aims to commission around 4,500 MW more during 2016-17. He also said that under UDAY scheme for revival of debt-laden discoms, bonds worth about Rs 1.66 lakh crore have been issued, relieving the balancesheets of state utilities and thereby enabling higher capacity utilisation by generators. He further informed shareholders that with about 7 billion metric tonnes of geological reserves estimated at its 10 coal blocks, NTPC expects to produce about 107 million tonnes of coal per annum. He also told that the mining operations have commenced in Pakri Barwadih and the company has progressed well in other coal blocks too. The company has moved forward on coal freight rationalisation, thereby reducing coal transportation cost. With improved domestic coal supplies, NTPC has been able to minimise import of coal. With these steps, it has been able to reduce the tariff by 14 paise (4.3percent) in the first quarter of 2016-17 from a year ago.

“Various projects of the company having an aggregate capacity of around 24 GW are under implementation at 23 locations across the country, This (24 GW) includes 4,050 MW being undertaken by joint venture and subsidiary companies. This translates into a capex of about Rs 1,60,000 crore.” The installed capacity of the NTPC group today stands at 47,228 MW, which includes 800 MW of hydro and 360 MW of solar generation capacity. India is the fastest growing major economy in the world with a huge potential appetite for power consumption… on September 9, 2016, actual energy demand met in India was all-time highest at 3,539 MU and NTPC (with group entities) contributed 866 MU (million units), Thus, green shoots are visible as far as upswing in power demand goes and this is in line with our long held expectations of growth.” Gurdeep Singh, CMD, NTPC

BELECTRIC Signs EPC Contract to Construct 104 MWp Solar Power Park in India BELECTRIC announced recently a 104 MWp EPC Turnkey EPC Contract for a solar project in India state Telangana. The whole solar project consists of six sub projects which will be commissioned turnkey in the 1st quarter of 2017.

elangana is one of the 29 states in India, located in the southern India, which has excellent solar resources. BELECTRIC, as one of the most successful international enterprises in the development and construction of freefield solar power plants, will provide a Turn Key system for the large-scale solar park including transmission line construction and bay extension at utility end. “This solar PV project marks an important step to provide eco- and grid-friendly electricity to this region, “All project details are approved, so we can start construction next weeks. We thank Think Energy Partners to have trust in our PV products and works.” Yogesh Dabhade, Managing Director Of BELECTRIC

October 2016

The projects are developed and owned by a consortium and were originated by Think Energy Partners, a USA based entity that develops and finances PV solar plants in India. After completion of the solar park Telangana, more than 160,000,000 kilowatt hours of electricity a year will be fed into the regional power grid from the sun. This corresponds to annual CO2 savings of round about 80,000 tons. The investment will not only secure the huge energy requirements of the country, but also hundreds of jobs for Indian employees in the Telangana region during construction.

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India

Delhi Metro likely to get green power from solar plantin MP Delhi, which is ranked among the most polluted cities, is expected to get green power from Madhya Pradesh starting next year to run its Metro trains.

he development has come at a time when the Delhi government is struggling hard to reduce pollution in the national capital and has even introduced the ‘odd-even’ number scheme to limit vehicular traffic – a major pollutant. MP will certainly supply power to DMRC and paper work in this regard is in the last stage, Shrivastava said adding that the solar power plant at Rewa would be commissioned possibly by June 2017. The Solar Energy Corporation of India and Madhya Pradesh Urja Vikas Nigam (MPUVN) have joined hands to facilitate setting up of the green power station, christened Rewa Ultra Mega Solar Project, on 1,500 hectares area at Bandwar region in Gudh tehsil of Rewa district, said Shrivastava, who is also the Managing Director of MPUVN. “World Bank is going to give Rs 250 crore for the project,” he said. Shrivastava said that the cost of the set up for 1 MW solar energy comes to around Rs 6 crore. At present, the world’s largest solar power project – Ivanpah Solar Power Facility of 392 MW – is at Mojave deserts in California, United States, officials said. In February 2014, Narendra Modi, as BJP’s prime ministerial candidate, had inaugurated Asia’s largest solar power project in Neemuch district of Madhya Pradesh.

“We are charting out the power purchase agreement to be signed between Delhi Metro Rail Corporation (DMRC) and developers of the world’s largest solar power plant of 750 MW coming up in the state’s Rewa district, We issued tenders for setting up the power project last month, This meeting was also attended by DMRC Director (Electrical) AK Gupta.” - Manu Shrivastava, Secretary Madhya Pradesh New and Renewable Energy Department Principal

We are proud to announce the opening of our new Wire Harness manufacturing unit at Dahanu, Maharashtra.

BUSINESS & FINANCE

JinkoSolar Announced Withdrawal from EU Price Undertaking

ADB approves $175 mn loan for renewable energy to Mytrah

JinkoSolar Holding Co.Ltd., a global leader in the photovoltaic (PV) industry, recently announced its withdrawal from the European Union (“EU”) Price Undertaking (“UT”) agreement.

ADB has approved up to USD 175 million (over 1,164 crore) loan for private renewable energy development to Mytrah Energies (India) Ltd (MEIL) for wind and solar power projects, which will generate up to 1,200 gigawatt-hours of clean energy a year.

nder the terms of the UT agreement that JinkoSolar was party to, Chinese companies selling solar cells and solar panels in the EU must sell at a price above a fixed Minimum Import Price (“MIP”). Chinese solar manufacturers that did not accept the UT agreement faced anti-dumping (“AD”) and anti-subsidy (“AS”) duties, which forJinkoSolar were 41.2% and 6.5%, respectively. After careful strategic consideration, the Company believes that the UT agreement is no longer conducive to the ongoing expansion of its business in the EU. The Company believes that trade protectionism only harms fair competition in the market, hinders the development of the entire PV industry, and hurts PV consumers. “After carefully reviewing our EU operations, we believe that the current MIPs no longer accurately reflect the current market price environment given that average selling prices (“ASPs”) in all major EU markets continue to decline, and seriously erode our competitiveness in those markets. We feel our competitiveness and market power were being unfairly hampered and have opted to withdraw from the UT agreement. We believe that we will be in a better position to leverage our strong brand name, industry-leading technology, global production facilities, and large customer base once we withdraw from the UT agreement. We remain committed to our European customers and will continue to supply them with the high quality, reliable products we have become synonymous with.” Mr. Xiande Li, Chairman of JinkoSolar

October 2016

One of India’s fastest growing independent power producers from renewable sources, MEIL is a step down subsidiary of the London Stock Exchange-listed Mytrah Energy Limited. It has 10 operating sites spread over six states with existing wind power capacity of 616.6 megawatts. It ventured into solar power in 2015 and is targeting total renewable energy capacity of 1,000 MW over the next 12 months. “The projects being financed include wind power projects in Rajasthan, Madhya Pradesh, Andhra Pradesh, and Karnataka, with combined capacity of 476 megawatts (MW), and photovoltaic solar power projects in Telangana and Punjab with capacity of 100 MW.” Manila-based Asian Development Bank Said, Bringing this clean power on stream is expected to help avoid nearly 1.2 million tons of carbon dioxide emissions a year from 2018, which would otherwise have been generated by conventional fossil fuel plants, it added. The statement said the project will see the development and commissioning of the plants by April 2017. The generated electricity will be supplied to respective state power distribution companies under long term power purchase agreements.

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BUSINESS & FINANCE

JA Solar Withdraws from Price Undertaking in the European Union JA Solar Holdings Co. Ltd.,one of the world’s largest manufacturers of high-performance solar power products,recently announced its decision to withdraw from the European Union’s (“EU”) price undertaking. The Company will now serve the European market through its manufacturing facilities outside of China.

he Council of the European Union imposed definitive anti-dumping and anti-subsidy duties on solar cells and panels imported from China. In parallel, the European Commission accepted a price undertaking, whereby companies were required to sell solar cells and panels in the EU at a price above a fixed Minimum Import Price (“MIP”), or else be levied anti-dumping and antisubsidy duties. Facing anti-dumping and anti-subsidy duties of 51.5% and 5.0%, respectively, JA Solar chose to participate in the price undertaking at the time and has since demonstrated full compliance with its terms and conditions. However, JA Solar believes the MIP currently in place no longer accurately reflects the market environment, as average selling prices in the EU are already considerably below today’s MIP and continue to decrease. The Company concluded that it can remain competitive in the EU markets only if it withdraws from the price undertaking.

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“We are committed to fair trade and market competition, as reflected by our prior participation in, and compliance with, the terms of the price undertaking. However, we strongly believe that the current MIP does not reflect the recent price trends in the market. Selling prices continue to decline, while the MIP has remained unchanged for the past 18 months. Unfortunately, the current MIP adversely impacts our ability to execute our business strategy and hinders the growth of the European solar industry. As a result, we believe that withdrawing from the price undertaking agreement is our only choice to be competitive and further our goal of providing clean energy to the EU. We believe this step will be beneficial to EU power producers, consumers, and the environment.” Mr. Baofang Jin, Chairman and CEO JA Solar’s

October 2016

BUSINESS & FINANCE

d.light Raises Over $22 Million to Expand PayGo Business into New Off-Grid Solar Markets A sharp increase in solar power production in China and a sharp fall in domestic demand have sparked a sudden surge of cut-price exports, undermining a China-EU agreement to limit damage to European producers. The company raised $15 million in Series D equity from KawiSafi Ventures Fund, Energy Access Ventures, Omidyar Network and NewQuest Capital Partners. Debt funding of $2.5 million was also raised through SunFunder.

.light’s commanding market share, dedication to reliability and user-centered design have allowed it to sell hundreds of thousands of units per month, while maintaining excellent quality at scale. With this new funding, d.light will focus on ramping up sales for its D30 solar home system, as well as bringing new products to market that can power other appliances, like TVs and fans. Currently, d.light operates five distribution hubs in East Africa, West Africa, India, Southeast Asia and the United States. “d.light has proven to be a leader in providing families at the base of the pyramid with an easy and affordable way to switch from kerosene to solar light,” said Amit Gupta, Partner and Chief Operating Officer of NewQuest Capital. “We believe that PayGo-enabled products provide the perfect way to put those in the developing world on the pathway to energy ownership, and we’re happy to support d.light in developing this portion of their business.” As of August 2016, d.light has impacted the lives of over 65 million people, including 17 million school-aged children, with its solar lighting and solar home system solutions. d.light aims to empower 100 million people with affordable and reliable solar by 2020. “Energy Access Ventures works closely with companies bringing reliable energy access to rural and peri-urban areas, and d.light is the perfect addition to our portfolio, This is our largest investment to date, and we wholeheartedly believe in d.light’s efforts to raise more people up the energy access ladder.” Dr. Michael H. Gera, Managing Partner of Energy Access Ventures

October 2016

The funding round also includes over $5 million in grant funding. Shell Foundation, the U.S. Agency for International Development – Development Innovation Ventures (USAID-DIV) and United Nations Capital Development Fund (UNCDF) were key contributors to this round. “We are thankful for the support from these global organizations, which is instrumental for achieving our goal to bring safe and affordable energy to off-grid families, Consumer financing for solar home systems makes the technology significantly more affordable for our customers. This funding will enable more families and business owners to enjoy access to the affordable, clean and reliable solar energy solutions they need to improve their quality of life.” Kamal Lath, CFO d.light As an early pioneer in solar lighting and home systems, d.light paved the way for the development of the off-grid solar industry and is now the industry’s largest manufacturer. “We’re extremely grateful for the partnership of such esteemed investors as we work to make solar and energy available for all households in the developing world, Our solar products have enabled tens of millions of customers to significantly enhance their homes and supplement their incomes. With this funding, we look forward to helping even more people living off the grid to achieve better quality of life through solar ownership.” Ned Tozun, CEO d.light

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BUSINESS & FINANCE

InvITs may help unlock $ 5-7 billion from assets in roads, power With the government and market regulator SEBI easing norms for setting up of InvITs, there is a potential to unlock USD 5-7 billion from assets in roads and power sectors in the next few years, says a recent report. According to the report by FICCI-Centrum, in the next couple of years, infrastructure investment trusts (InvITs) are slated to pick up and have the potential of unlocking USD 5-7 billion from assets primarily in the roads, transmission and renewable segments.

ompanies like IRB Infrastructure, MEP Infrastructure and GMR Infrastructure have so far received SEBI approval for listing InvITs. According to the report, companies like IL&FS Transportation Networks, Sterlite Power Transmission, Adani Group and Mytrah Energy have possibly also got approval from the SEBI to set up InvITs. However, the report notes that providing an attractive yield amid volatile interest rate is a major challenge for the issuers. The report said. Moreover, InvITs would be competing with similar domestic products such as alternate investment funds (AIF) which offer more operational flexibility and allow investors to invest in all forms of infra assets. With a view to help infra developers mop up funds for long-term projects in a more transparent manner, Sebi had in August 2014

introduced InvITs — an investment vehicle that would enable promoters to monetise completed assets. But the move failed to get enough attention of businesses owing to taxation issues, which have been resolved by the government. Further, Sebi Board has also decided to relax norms for both REITs as well as InvITs. “Companies with a strong portfolio, steady revenue stream and a resilient track record can be potential candidates for this type of investment. Firms in power, roads, transmission have applied for the SEBI registration. Additionally, issuers may face challenge in obtaining a premium valuation for their assets which would depend upon a number of factors like sponsor credibility and experience, quality and revenue generation ability of underlying assets and government policies.” The Report Said,

Azure Power Ties up for a Unique Rooftop Financing Facility With OPIC

zure Power, an Indian solar power producer, recently announced its tie up with Overseas Private Investment Corporation (OPIC), the U.S. Government’s development finance institution for long term low cost debt financing facility of USD 20 million for 15 years at a cost of capital of 4.74%. The proceeds of the loan will be utilized to construct 19 MW new solar rooftop projects across multiple states in India.

Azure has had a long-standing relationship with OPIC, the finance institute had previously funded Azure Power’s first solar plant in Punjab in 2009, which is India’s first private grid connected solar power plant.

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“Azure has unique rooftop solar power solutions for distribution companies in cities across India and industrial/commercial consumers to lower their current energy bill and meet their renewable purchase obligations in an environmentally friendly manner. We are pleased to announce our extended partnership with OPIC which will continue to allow us to help consumers lower their energy bills.” -Mr. Inderpreet Wadhwa, Founder And Chief Executive Officer, Azure Power

October 2016

BUSINESS & FINANCE

UL Acquires AWS Truepower to Expand Global Renewable Energy Portfolio UL, a global safety science leader, announces the acquisition of AWS Truepower, a leading energy engineering services and advisory firm. This achievement expands UL’s global renewable energy portfolio by strengthening full lifecycle solutions for wind and solar energy sectors.

AWS Truepower is an Albany, NY-based company providing renewable energy services through five business units covering project advisory, performance engineering, due diligence, information services and grid solutions. Its service portfolio complements UL’s current renewable energy offering focused on testing, inspection, and certification as well as performance verification of solar, wind, batteries, and energy storage systems. The acquisition supports UL’s global expansion strategy as many countries are pushing for energy independence, energy security and environmental sustainability. Hundreds of GW’s of energy capacity installed globally is pushing the demand for energy assessments of new projects coming online and ongoing support. AWS Truepower’s services are crucial in supporting this growing demand. AWS Truepower’s employees will join UL and remain with the company. For the time being, AWS Truepower will continue operating under its current brand name.

“There is strong alignment between the two brands. UL and AWS Truepower have a shared mission and complementary businesses,” said Jeffrey Smidt, VP & General Manager for UL Energy & Power Technologies. “As the market for renewable energy increases and demands a full life cycle service offering for renewable energy projects, the combined portfolios enable us to capture additional business globally.” Jeffrey Smidt, VP & General Manager, UL Energy & Power Technologies “We are excited by this opportunity to merge forces with UL and provide best-in-class services and products to the renewable energy industry, Clients can rest assured that customer service and technical quality will remain our top priorities, and that our newly integrated capabilities will deliver even more value.” Bruce Bailey, Former CEO of AWS Truepower and New VP – Renewable Energy for UL

NTPC – Masala Bonds at SGX

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ingapore Stock Exchange unveiled The Global Masala Bonds Hub at the Exchange on 26th September 2016. The event was attended by the Indian High Commissioner to Singapore, H.E., Ms. Vijay Thakur Singh, along with other senior dignitaries and officials of SGX and participants from business and investors community. Mr. K. Biswal, Director(Finance), NTPC was the special speaker at the event where a presentation was made by him to a large audience highlighting NTPC’s Green Masala Bonds issue for financing

October 2016

renewable energy projects.With this issuance, NTPC has become the flag bearer for Rupee denominated Indian paper bringing in a new set of investors to meet the financing needs of the Indian Infrastructure sector. Director (Finance) thereafter participated in the “Striking the Gong Ceremony”, a traditional practice at SGX, to mark the listing of NTPC’s Green Masala Bonds. A souvenir was presented to Mr. Biswal by Mr. Muthukrishnan Ramaswami, President of SGX, in appreciation of NTPC’s continuous support to SGX.

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BUSINESS & FINANCE

Azure Power Global Limited Announces Launch of its Initial Public Offering Azure Power Global Limited (‘Azure Power’) announced the launch of its initial public offering of 6,818,182 equity shares, including 5,863,637 equity shares to be sold by Azure Power and 954,545 shares to be sold by certain selling shareholders.

zure Power expects to grant the underwriters a 30day option to purchase up to an additional 1,022,727 equity shares at the initial public offering price. Azure Power intends to use the net proceeds from the offering primarily to fund the purchase by Azure Power of equity shares of its subsidiary, Azure Power India Private Limited (‘AZI’), and to fund future operating expenses of Azure Power. Net proceeds to be received by AZI as a result of such purchase are intended to be used for growth capital requirements, new project development and other general corporate purposes. Barclays and Credit Suisse are acting as joint bookrunning managers of the offering. Roth Capital Partners is acting as a co-manager of the offering. The proposed offering of these securities will be made only by means of a prospectus. When available, copies of the preliminary prospectus may be obtained from Barclays Capital Inc., c/o Broadridge Financial Solutions, 1155 Long Island Avenue, Edgewood, New York 11717, barclaysprospectus@broadridge.com, 888-6035847; Credit Suisse Securities (USA) LLC, Attention:

Prospectus Department, One Madison Avenue, New York, NY 10010, 800-2211037, newyork.prospectus@ credit-suisse.com; or Roth Capital Partners, LLC, 888 San Clemente Drive, Newport Beach, CA 92660, Attn: Equity Capital Markets, 800-678-9147 or rothecm@ roth.com . A registration statement, including a prospectus, which is preliminary and subject to completion, relating to these securities has been filed with the U.S. Securities and Exchange Commission, but has not yet become effective. These securities may not be sold, nor may offers to buy be accepted, prior to the time that the registration statement becomes effective, and, even then, the securities may only be sold pursuant to the registration statement and final prospectus. This press release shall not constitute an offer to sell or a solicitation of an offer to buy these securities, nor shall there be any sale of these securities in any state or jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state or jurisdiction.

Yes Bank to raise Rs 330 cr via green infra bonds Private lender Yes Bank recently said it will raise about Rs 330 crore (USD 50 million) by issuing a 7-year term green infrastructure bond to FMO, the Dutch Development Bank, on a private placement basis.

his is FMO’s first investment in a green bond issued by a bank in India.Yes Bank said it will raise the amount to finance green infrastructure, including solar and wind projects.This issuance will be externally assured. An external annual review and monitoring will be undertaken on the use of proceeds in line with the Green Bond Principles 2016, the bank added. This is Yes Bank’s third such green bond issuance in the last 18 months after its successful maiden issuance of Rs 1,000 crore (USD 160 million) in February 2015 followed by the Rs 315 crore private placement to International Finance Corporation (IFC) in Washington in August 2015. “This first-ever investment by FMO, the Netherlands, in a green bond in our country following IFC… Yes Bank has been assiduously working to evolve even more innovative and effective financing structures for acceleration of sustainable energy financing in India.” Rana Kapoor, MD and CEO Yes Bank

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”FMO will be investing in Yes Bank’s bonds through FMO’s own sustainable bonds. The definitive agreement was signed today at the fourth edition of FMO’s Future of Finance conference being held in Katwijk, the Netherlands.” Yes Bank Said, Through the bonds, we aim to contribute towards a more sustainable future, creating opportunities for durable activities that follow the goals set during COP21 in Paris last year.” On the occasion of COP21, Yes Bank had committed to mobilising USD 5 billion from 2015 to 2020 for climate action through lending, investing and raising capital towards mitigation, adaptation and resilience. This commitment was strengthened by indicating an action plan to target funding of 5,000 mw of clean energy, gradually increasing the percentage of renewable energy in the power portfolio.

October 2016

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October 2016

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October 2016

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FEATURED NEWS

Solar System is likely to face a global dust storm in months to come: NASA Mars is the fourth planet from the Sun and the second-smallest planet in the Solar System is likely to face a global dust storm in months to come, encircling the red planet in a thick haze and obscuring surface features beneath, NASA has predicted.

ust storms occurs frequently occur on Mars. These localised storms occasionally grow or coalesce to form regional systems, particularly during the southern spring and summer, when Mars is closest to the Sun. On rare occasions, regional storms produce a dust haze that encircles the planet and obscures surface features beneath. A few of these events may become truly global storms, such as one in 1971 that greeted

Dust storms also will present challenges for astronauts on the red planet. Although the force of the wind on Mars is not as strong as portrayed in an early scene in the movie “The Martian,” dust lofted during storms could affect electronics and health, as well as the availability of solar energy. Mars has been observed shrouded by planetencircling dust nine times since 1924, with the five most recent planetary storms detected in 1977, 1982, 1994, 2001 and 2007. The actual number of such events is no doubt higher. In some of the years when no orbiter was observing Mars up close, Mars was poorly positioned for Earth-based telescopic detection of dust storms during the Martian season when global storms are most likely.

the first spacecraft to orbit Mars, NASA’s Mariner 9. Discerning a predictable pattern for which Martian years will have planet-encircling or global storms has been a challenge. The most recent martian global dust storm occurred in 2007, significantly diminishing solar power available to two NASA Mars rovers then active halfway around the planet from each other Spirit and Opportunity. “The global dust storm in 2007 was the first major threat to the rovers since landing, We had to take special measures to enable their survival for several weeks with little sunlight to keep them powered. Each rover powered up only a few minutes each day, enough to warm them up, then shut down to the next day without even communicating with Earth. For many days during the worst of the storm, the rovers were completely on their own.” John Callas, Project Manager For Spirit And Opportunity “Mars will reach the midpoint of its current dust storm season on October 29th of this year. Based on the historical pattern we found, we believe it is very likely that a global dust storm will begin within a few weeks or months of this date.” James Shirley, A Planetary Scientist At Nasa’s Jet Propulsion Laboratory (Jpl) In California

Committed to promote International Solar Alliance, says PIYUSH Goyal Terming Prime Minister Narendra Modi’s International Solar Alliance (ISA) initiative as a unique implementation-focused alliance, Union Power Minister Piyush Goyal said the 3P model of partnerships, programmes and planning will be the key to achieve this.

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ast year, the World Bank signed an agreement with the ISA at the Paris climate summit to mobilise USD 1 trillion in investments in the solar sector by 2030. “We are committed to promote ISA and we believe that the interested parties need to come together to share ideas, best practises, knowledge, technology and resources towards a global low carbon transition,” said the Minister. Goyal pointed out that achieving the objective of ISA requires the establishment of a strong knowledge-sharing platform to locate and popularise each small and large stride already being taken in each and every unidentified corner (s) of the world.

October 2016

“An idea then, ISA has now transformed into a movement with countries and global agencies endorsing this initiative of Indian government to promote solar energy in the countries that are rich in solar resources.” It is encouraging to know that United Nations Development Programme and World Bank are already exploring synergies with ISA to deepen strategic co-operation in solar energy and establishing robust knowledge management systems.”

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October 2016

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Paris Agreement

Tough negotiations and hard work ahead for India to make Paris Agreement equitable and effective: CSE India has deposited its instrument of ratification with the UN Depositary to join the Paris Agreement. Centre for Science and Environment (CSE) welcomes India’s decision to ratify the Paris Agreement.

he Paris Climate Agreement was adopted by Parties to the UN Framework Convention on Climate Change (UNFCCC) on December 12, 2015, in Paris. It seeks to keep global average temperatures from rising above 1.5°C as compared to the pre-industrial years. The Paris Agreement shall enter into force on the 30th day after the date on which at least 55 Parties to the Convention accounting in total for at least an estimated 55 percent of the total global greenhouse gas emissions ratify the Paris Agreement. Till now 61 Parties have ratified responsible for 48 percent of the global emissions. With India’s ratification, the Paris Agreement inches closer for entry into force. “By being in the club of early ratifiers, India has shown itself as a responsible and serious global player in the climate negotiations. But ratification is just the beginning of tough and difficult negotiations ahead. India will have to pay an important role in making Paris Agreement effective and equitable. The rule book for implementation of Paris Agreement is yet to negotiated. India should play an important role in issues of adaptation, finance and loss and damage in the upcoming climate talks in Marrakech, Morocco as these issues are important for the poor and vulnerable population of the country.” Chandra Bhushan, Deputy Director General, CSE

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PARIS AGREEMENT INADEQUATE

aris Agreement is weak and not enough to keep the global average temperatures rise below 2.0°C as compared to the pre-industrial era. Developed countries have pledged very low emissions cut targets and consequently developing countries have also not been very ambitious. Currently US intends to cut its emissions by 26-28 percent by 2025 against 2005 levels and EU has pledged to cut its emission by 40 percent by 2030 against 1990 levels. These targets are clearly insufficient to meet 2.0°C targets. India is already experiencing the impacts of climate change like extreme weather events, frequent draughts and floods etc., when the temperature rise is about 1.1°C. A 2.0°C warmer world would be devastation for the water and agriculture sector and would keep millions of people in the poverty trap, says CSE researchers.

“The Paris deal is weak and erases historical responsibility of the developed countries in adressing climate change. However, there is still enough scope for equity and ambition in the current framework of Paris Agreement. India should strive to bring Equity back into the climate agenda.” Sunita Narain, Director General, CSE

October 2016

RESEARCh & ANALYSIS

Solar Energy Sector:

Strong Pipeline Of Solar Projects Aided By Policy Support; However Regulatory Challenges Persist the all-India solar installed capacity stood at 8,062 MW, accounting for 18% of the country’s renewable based capacity. Further, FY2016 saw the highest ever capacity addition – of 3,019 MW – followed by 1,299 MW of capacity addition in 4M FY2017.

October 2016

CRA notes that policy support both through the Central Government’s National Solar Mission (NSM) as well as solar sector policies across key states continues to be strong, which is also reflected from the progress in terms of the project awards. About 6,100 MW of solar projects have been awarded in 8M CY2016 (January – August) comprising 67% through NSM route and balance through state specific solar policy route mainly in states of Karnataka and Jharkhand. While the demand outlook for solar sector remains strong, ICRA notes that solar project tariffs being won through competitive bidding remain aggressive which could lead to challenges in achieving financial closure. During 8M CY2016, of the total solar projects awarded, about 2,520 MW cumulative capacity have a tariff of less than Rs. 5/kWh. ICRA notes that the viability of such competitively bid projects hinges on structuring of debt with longer tenures, competitive funding costs, and the ability of IPPs concerned to keep the cost of modules within the budgeted levels. While the solar generation project is supposed to operate on a “must run” principle basis under the grid code, any forced back down by the state-owned utilities (as reported in the state of Tamil Nadu) on the grounds of inadequate transmission capacity and/ or grid stability remains a credit concern for solar projects, in ICRA’s view, given the absence of any deemed generation clause in tariff structure. The solar sector further continues to face a regulatory challenge with regard to compliance with RPO (Renewable Purchase Obligation) norms. While

the solar RPO target has been revised upwards, ICRA is of the view that the timely alignment of the modified solar RPO trajectory under National Tariff Policy (NTP) by the State Electricity Regulatory Commissions (SERCs) remains extremely crucial.

The key aspects of the report are summarised in the following bullet list■■

Strong pipeline of projects awarded in CY2016: Supported by NSM and State Solar Policies, the solar project pipeline remains strong for the near to medium term. During 8M CY2016, about 6,100 MW capacity of solar projects have been awarded, of which about 4,100 MW capacity has been awarded under NSM. Significant solar capacities have been awarded in the states of Karnataka (2,380 MW), Jharkhand (1,200 MW), Rajasthan (550 MW) and Maharashtra (500 MW) which are expected to be commissioned over the next 12-18 months.

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Competitively bid solar PV tariff (weighted average) shows a further decline (Rs.5/kWh in 8M CY2016 v/s Rs. 5.6/kWh in CY2015): With state-owned power utilities and the nodal agency under NSM adopting the competitive bidding route coupled with falling module price levels, the bid tariffs1 have reduced significantly in the past two years. Imported module price levels have softened by about 21% in the last six months from 55 cents/

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RESEARCh & ANALYSIS

watt in February to 43 cents/watt in August. This has now further fallen to 36 cents/watt as per industry sources. The normative solar PV tariff announced by the Central Electricity Regulatory Commission (CERC) for projects setup in FY2017 is Rs. 5.68/kWh which is 19% lower than the tariff for projects setup in FY2016. The average competitively bid solar PV tariff has declined to Rs. 5.0/kWh for calendar 2016 till date as compared to Rs. 5.6/kWh for calendar 2015. Of the 6,100 MW of solar capacity awarded during 8M CY2016 (January-August), solar projects with about 2,520 MW cumulative capacity have a tariff of less than Rs. 5/kWh. Assuming the capital cost for solar PV project is at about Rs. 5.5 crore/MW, the ability of such projects with tariffs below Rs. 5/kWh to tie-up debt funding in a timely manner remains crucial. In ICRA’s view, the viability of such tariffs hinges on structuring of debt with longer tenures, competitive funding costs and the ability of the project developers to keep the cost of modules within the budgeted levels. Nonetheless, solar PV projects with their relatively shorter construction period (12-15 months) remain favourably placed within the renewable energy segment. Further, solar projects have a significant competitive advantage over conventional thermal projects, which face higher execution risks because of possible delays in acquiring land and statutory clearances. ■■

Although states are gradually revising their RPOs targets upwards, the wide divergence in RPO norms and their compliance continues to remain a challenge: During the period March 2016 to September 2016, SERCs in eight states, including the high potential states of Tamil Nadu, Maharashtra and Andhra Pradesh, notified revised RPO norms or issued draft versions for RPO norms. While this is a positive development for the solar sector, the current solar RPO norms set by the SERCs vary widely across states, being in the range 0.20% - 2.75% for FY2017. The RPO levels for most states also remain lower than the current RPO trajectory as suggested under NTP or as per the targets released by Ministry of Power. Timely revision of RPOs by the remaining states, thus, would be important. Additionally, compliance with RPO norms by the obligated entities remains weak in most states, as the SERCs concerned tend to carry forward shortfalls in RPO compliance to the subsequent period instead of levying any penalty for non-compliance. Monitoring of

◄ Highest ever solar capacity addition seen in the country in FY2016 supported by favourable State and Central Government policies ◄ Viability of competitively bid solar projects remains a concern with sizeable projects awarded in the current year at tariffs of less than Rs. 5/kWh ◄ Project pipeline remains strong with about 6,100 MW of solar capacities awarded in CY2016 till date ◄ Decline in solar tariffs is favourable for the buyers, mainly State distribution utilities

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RPO compliance, either on a quarterly or monthly basis, by the designated nodal agencies also remains absent across states. ■■

Risk of forced back-down by the utilities to adversely affect credit profile of the solar projects: The forced back-down by the utility as reported in the state of Tamil Nadu (industry sources) is matter of concern for solar projects, given that it has a direct impact on the generation profile and consequently, on the revenues due to a single-part nature of tariff and the absence of any deemed generation clause in the tariff structure. While a solar project is supposed to operate on “must run” principle basis under the grid code, any such forced back-down by the state owned utilities on the grounds of inadequate transmission capacity and/ or grid stability remains a concern for solar projects. For every 1% drop in PLF, impact on the IRR and DSCR for solar PV project assuming tariff of Rs. 5/kWh and capital cost of Rs. 5.5 crore/ MW is estimated at 90 – 100 bps and 0.07x respectively, as per ICRA estimates.

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Regulatory challenges for solar projects arising from approval of forecasting & Scheduling (F&S) regulations by SERC in Karnataka: Subsequent to the notification of regulations on scheduling and forecasting framework by the CERC in August 2015 and by Forum of Regulators (FoR) in November 2015, Karnataka Electricity Regulatory Commission (KERC) vide its notification dated May 31, 2016 has approved the similar regulations. The objective of these regulations is to facilitate the integration of wind and solar power projects with the grid, while maintaining grid security, stability and reliability. As per the framework approved by KERC, scheduling and forecasting of generation is required on a day ahead and week ahead basis at intervals of 15 minutes for wind and solar power projects connected to the intra-state grid and selling power within the state, with the permissible deviation in scheduled generation in the range of +/- 15% and deviation charges applicable for a higher range. For the solar projects in Karnataka, the forecasting framework would have a negative impact on cash flows and project IRR, particularly if the actual overall deviation (mix of over-generation and under-injection) exceeds 30% of the scheduled generation, though the extent of impact for solar energy generation projects is likely to be relatively lower due to lesser variability in solar generation, as compared with that for wind energy projects.

◄ Ability of solar projects to tie-up funding requirements in a timely manner at competitive costs remains crucial ◄ Wide divergence in RPO norms across states along with weak compliance remain regulatory challenges facing the solar sector ◄ Forced back-down of solar projects by state utilities, as reported in Tamil Nadu, is a concern ◄ Karnataka is the first state to approve forecasting & scheduling regulations for solar power generators EQ

October 2016

PV MANUFACTURING

World’s Highest Conversion Efficiency of 26.33% Achieved in a Crystalline Silicon Solar Cell

aneka Corporation has achieved in a NEDO project the world’s highest conversion efficiency of 26.33% in a practical size (180 cm2) crystalline silicon solar cell. This record-breaking result will advance technical development of crystalline silicon solar cells and contribute significantly to reducing the cost of power generation through use of high-efficiency solar cells.

Summary

he levelized cost of electricity (LCOE)1 using photovoltaic technologies is still high compared with other power generation methods, and cost reduction is a continuous challenge. A number of companies and research organizations around the world have been carrying out technological development toimprove the conversion efficiency of solar cells, which will contribute to a considerable reduction in LCOE. Kaneka Corporation developed a high conversion-efficiency crystalline silicon solar cell (heterojunction back-contact type)2in NEDO’s Developmentof High-Performance and Reliable PV Modules to Reduce LCOEproject,and has achieved the world’s highest 3 conversion efficiency 4 of 26.33% in a crystalline silicon solar cell havinga practical size 5(180 cm2). This achievement breaks the world record of 25.6% by ~0.7%, exceeding 26% for the first time in the world.

Project Results

EDO and Kaneka Corporation have been working to develop high conversion efficiency crystalline silicon solar cells targeting LCOE reduction. The desired result wasachieved by means of a combination of heterojunction technology using high-quality amorphous silicon, low resistance electrode technology, and a back-contact structure that captures more solar energy, all of which were developed by Kaneka Corporation. Improvement in solar cell conversion efficiency will increase electric power generation and lead to a reduction of the cost to introduce photovoltaic power generation systems as less space will be needed to generate the same amount of solar power. Achieving a conversion efficiency of over 26% in crystalline silicon solar cells, which are themost widely used solar cells, will make a great contributionto LCOE reduction and isexpected to lead to even more widespread use of photovoltaic power generation in residenceswhich have installation space restrictions.

Figure 1. Crystalline silicon solar cell (heterojunction back-contact type)

Future Plans NEDO and Kaneka Corporation will continue to develop solar cell technology for reducing cost and improving performance andreliability to achieve the target electric power generation costs of 14 yen/ kWh in 2020 and 7 yen/kWh in 2030. Kaneka Corporation is planning to commercialize high-efficiency solar cells that utilize the results of NEDO’s project and will move ahead with development for practical use.

Figure 2. Schematic device structure of record-breaking crytalline silicon solar cell (heterojuction back-contact type)

October 2016

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rESEARCH & ANALYSIS

WITH LOW DEMAND AND CHEAPER POWER ON EXCHANGES, DISCOMS FLOUTING SOLAR’S ‘MUST RUN’ STATUS According to Mercom Capital Group’s latest report, India Solar Quarterly Market Update, large scale project development in India is largely fragmented but we are starting to see a shift towards the sector dominated by large corporations and private equity-backed players.

ccording to Mercom Capital Group’s latest repor t, India Solar Q u a r t e r l y M a r ke t Update, the power deficit numbers in India do not paint the full picture. Though low power deficit and even a surplus situation is touted by a Central Electricity Authority (CEA) report, large populations in India are still without electricity and power cuts are still part of daily life in urban areas and more so in rural areas. The reduction in the power deficit we are seeing is largely due to a combination of a drop in power demand in the commercial and industrial sector, and the financial health of DISCOMs. Falling demand has led to record low prices on the power exchanges. According to CEA, plant load factors have fallen by 20 to 30 percent due to the drop in power usage from commercial and industrial customers, a major source of revenue for DISCOMs. These customers also usually end up subsidizing residential and rural customers for whom DISCOMs refuse to increase tariffs in line with costs, leading to massive losses year after year. DISCOMs, which continue to have financial struggles, are purchasing cheaper power from the exchanges, which is resulting in curtailment issues for solar power. Some DISCOMs are simply resorting to power cuts as they cannot afford to even purchase power at low rates on the exchanges. Some states have surplus power but still don’t supply power 24/7 for fear of losses due to low tariffs from residential and agricultural customers.

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October 2016

rESEARCH & ANALYSIS

“Total new renewable energy capacity addition has increased to 30 percent as of calendar year July 2016 with intermittent renewable energy capacity additions including wind and solar accounting for almost 28 percent (solar accounted for 16 percent), a huge positive largely due to government’s push for renewables.” Mr. Raj Prabhu, CEO of Mercom Capital Group

October 2016

his increase in renewable energy addition has caused some solar power curtailment issues in Rajasthan and Tamil Nadu where DISCOMs have flouted the ‘must run’ status of solar power thereby negatively affecting developers. However, based on our discussion with developers and state agencies, curtailment is still not widespread, but the issue needs to be addressed immediately before it starts to hurt investor sentiments in the sector. The problem is more pronounced in Tamil Nadu, especially in high wind energy density areas when wind and solar generation peak simultaneously. In Tamil Nadu curtailment is mostly due to the utility opting to buy cheaper power from the exchanges rather than paying Rs.7 (~$0.1045)/ kWh for solar (the state has signed PPAs for that rate). While grid congestion due to a lack of transmission capacity and integration of intermittent energy sources is an issue, the more challenging issue right now is the lack of power demand and the financial health of DISCOMs.

The UDAY program was set up to fix the financial health of DISCOMs but turnaround has not been immediate. Unless states increase power tariffs on residential and agricultural consumers to reflect present costs it will not take much time for these DISCOMS to be back in financial trouble again which will be bad news for renewables and especially solar which is growing at the fastest pace.

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INTERViEW

INTERVIEW WITH MANISH CHOURASIA Chief Executive Officer (CEO) Tata Cleantech Capital Ltd.

EQ: GOI has set up a target of 100GW Solar & 75GW Wind Energy by 2022….What would be the financing requirement and will it be a challenge to raise this finance ?

h EQ: Developers Healt ring : Big developers decla SunEdison bankruptcies such as financing of and its impact on the solar projects ruptcy was mainly MC: SunEdisons bank MC: Since May 2014, when the l portfolio and curnew Government took office, India contributed by globa t because of their has embarked upon an ambitious rency volatility and no ver,lenders will target of increasing renewable energy Indian exposure. Howe global exposer (RE) capacity five-fold by 2022 (from carefully evaluatethe developers ~40GW currently to ~200GW). This of various renewable would require additional funds in the for projale and their ration range ofUS$130-150 billion depending on ia. Ind in g ect biddin the global price scenario of solar and wind technology. Of this, 25-30% are expected from sponsors’ equity and the rest through debt instruments. Organizing such a huge funding is going to be challenging but not impossible provided a few structural issuesare properly addressed. Most importantly, renewable energy is fast becoming a mainstream source of power across the world. Continued technological advancement, reduced cost of modules and large investments in utility scale play have been bringing down the cost of renewable energy generation significantly. Certainly, the timing of the government’s renewable energy initiative is favorable, coming as it does in the backdrop of both solar and wind energy nearing grid parity. The increased pace of capacity addition in the recent times has boosted the confidence of all stakeholders. India added over 10GW RE capacity during last 12 months, which indicates the seriousness of the government support. Therefore,India can achieve the targets

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provided the government continues to address the structural issues such as financial health of State owned electricity distribution companies of India (DISCOMs), land acquisition, and adequate transmission infrastructure With regards to the current financial landscape of India, the main players are: • Global and domestic private equity firms such as, Morgan Stanley, Goldman Sachs, Actis, IDFC, Syndicatum, JP Morgan, Equis Fund, etc. • International utility players such as First Solar, EDF, Erene, etc. • Development Finance Institutions: ADB, IFC, Proparco, FMO, etc. • Domestic institutions: PFS, Yes Bank, L&T Finance, Axis Bank, Tata Cleantech

Capital etc. However, given the ambitious renewable energy targets, there is a need to explore alternative modes ofrenewable power projects financing by leveraging existing resources more effectively as well astapping additional sources like pension funds, insurance funds and capital market products. The Indian government has attempted to bridge this gap in infrastructure investment through a number of initiatives, such as Infrastructure Debt Funds and the National Clean Energy Fund. Further, ADB is increasing its sovereign and non-sovereign lending to support India’s new initiatives from the present US$7 billion to US$9 billion in three years from 2015 to 2017 and then from $10 billion to $12 billion between 2016 and 2018 using ADB’s expanded lending capacity.New renewable energy policies and clarifications from various State Governments onsolar park allocation, distributed solar generations, etc. are taking place continuously, which is enhancing confidence from potential investors and financiers. These kind of ongoing initiatives can certainly push India towards achieving its stated renewable energy targets.

EQ: Financial health of DISCOMS is a concern for Bankability of Solar Projects. How to overcome this challenge: MC: Poor financial health of State owned Discoms remains a major barrier for deployment private sector capital in Indian power sector including solar energy sector. The Discoms have an estimated accumulated loss of about US$60 billion, which is big concern. Ministry of

October 2016

INTERViEW Power, Government of India has introduced a new package named Ujjwal Discom Assurance Yojana (UDAY), which targets to improve the operating efficiency and wipe out the losses of Discoms by 2019. UDAY is not compulsory, but participating discoms and states will be incentivized with various funding options. Majority of the States have already agreed to adopt the scheme. The scheme allows State governments to take over 75% debt of the respective discomsand pay back lenders by selling bonds. Bonds worth INR 166 billion (~US$ 25 billion) have already been issued at around 8.5% interest rate, which is expected to reduce interest burden of these discoms to extent of US$1 billion.Besides, implementation of UDAY will reduce T&D losses significantly, which will further improve the health of discoms. In addition, the cost of solar power generation has come down substantiallyon account of declining module price and improvementsin solar technology, which is reducing the tariff payment burden on the discoms.

EQ: UDAY Scheme: What are the benefits of UDAY scheme and would it give any comfort for the financiers: MC: The key components of UDAY include the following: • improving operational efficiencies of DISCOMs • reduction of cost of power • reduction in interest cost of DISCOMs and • enforcing financial discipline on DISCOMs through alignment with state finances. The expected benefits of the scheme are as follows: • Breakeven of State Electrivity Boards (SEBs) in next 2-3 years; • Reduction of AT&C loss to 15% in 2018-19; • Reduction in gap between Average Revenue Realized (ARR) & Average Cost of Supply (ACS) to zero by 2018-19; • DISCOMs are expected to be profitable by 2018-19 Proper implementation of UDAY scheme will certainly enhance the financial health and creditworthiness of State owned discoms.

October 2016

such as Climate Bonds, Green Bonds, Debt securitization, International Finance, Bonds, Pension Funds, Infra Funds, Invits etc.…

EQ: Priority sector r in the lending: Is RE Secto the need if MC: Climate and Green bonds are a new priority sector...what way to attract foreign capital which is for the same mn .2 D2 US essential for growth of the sector. Some to up RE in MC: Bank loans iorpr IPPs and institutions have already used the r de un d ifie ss are already cla r this route to raise funds. Green bond we po lar unted so ity sector. Ground mo market is expected to be USD 60 bn ms ter in grid parity has already reached next year and must be tapped by Indian srea inc and are institutions and IPPs. This will attract of cost of generation ercially viable. mm co ng new foreign institutional investors and ingly becomi t there is no pension funds as well to the sector. Debt We therefore, feel tha nnected securitization as an instrument has not need to make grid co yet been utilized due to certain challenges solar part of priority with regards to tax &stamp duty and lack of g. din len r cto se

EQ: What will be the trends in Debt Financing….. Rates, Tenure, Moratorium etc.: MC: Traditionally, debt financing was primarily being provided by commercial banks and a few NBFCs. With increasing number of projects moving from under construction stage to the operational stage, the risks associated with the projects are going down significantly, resulting in an arrival of new lenders wanting to participate in this sector.While the current interest rates in this sector are in the range of 11% - 12%, there are significant downward pressures on the interest rates due to decreasing inflation and increasing supply of debt financing options. While the initial tenure of loans in this sector were in the range of 10 – 12 years due to the financiers’ lack of comfort, the tenures are now being observed to have increased to 16 – 18 years on average on account of increased confidence levels of lenders. With decreasing stabilization periods being observed, the typical principal moratorium periods observed in this sector are around 6 - 12 months post commissioning. This is expected to remain in the same range going forward.

EQ: Explain about the modern and innovation financing mechanism

capital market appetite. However, there is a scope to tap this as an additional source of funding. Infrastructure Debt Funds can also be another vehicle to raise funds at competitive rates for the RE sector – however, they prefer only operational projects. Larger institutional foreign investors (like pension and insurance funds) require high ratings andclarity on regulatory and taxation issues. Credit enhancement through partial guarantee scheme could be a viable an option to attract such funds.

EQ: What are the Financing challenges….PPA, Land, Grid Connection, Technology, Policy & Regulatory Problems: MC: The current push by the government in the RE sector is being driven by the long-term energy policy and necessitates the reduction of dependence on fossil fuels due to environmental concerns. More importantly, if the current cost curves continues to evolve, renewable energy will become a self-sustained source of energy in India without major dependence on government support or subsidies. A few key challenges will always remain as is typical for infrastructure projects anywhere in the world such as counterparty-risks, execution and honoring of PPAs, land availability, environmental and other statutory approvals. Technological advancement in the RE sector is

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INTERViEW only going to improve the commercial viability of renewable energy projects. However, with the increase in renewable energy capacity, India also needs to enhance its investment in T&D infrastructure. The Government along with the Powergrid Corporation has come out with various viable models for private sector T&D projects, which is expected to address the T&D infrastructure to a large extent.

EQ: Banks reaching sectorial cap for lending in power sector….what is the cap and need for a separate quota or cap for RE Sector MC: While there is no regulatory cap on sectoral exposure, RBI prescribes that each commercial bank / NBFC should have a sectoral cap to be determined by their respective Boards as a part of prudential risk management strategy. Renewable energy is part of power sector exposure and most large banks are almost reaching the exposure limits. With the expected higher economic growth, credit is also expected to grow in the coming years. Hence, this may not be a major obstacle given that additional sources of fund coming in the RE sector.

EQ: What are the expectations from RBI, Finance Ministry and MNRE for the betterment of financing of solar projects? MC: In recent years, India’s energy sector has been primarily exacerbated by delayed environmental approvals and other statutory approvals, fuel shortages and land acquisition challenges. However, the RE sector does not have any fuel requirement. Besides, it does not have to face serious land acquisition and environmental challenges as the project can be built in modular fashion and no need of big land parcels. Further, the country is craving for energy security and energy at affordable prices. Both concerns around climate change and worries about energy security are driving India’s renewable energy policy initiatives. Continued focus on improving discoms’ financial health and enhancing T&D sector investments will remain crucial.

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EQ: What are the schemes, benefits, subsidies for rooftop, off-grid and distributed solar projects MC: The 30% subsidy is only available for household and institutional segment as for commercial and industrial solarpower is already at grid parity or slightly cheaper thus subsidy is not required. The subsidy is 70% of benchmark cost for special category States i.e., North Eastern States including Sikkim, Uttarakhand, Himachal Pradesh, Jammu & Kashmir and Lakshadweep, Andaman & Nicobar Islands. In addition last year the government had increased the budget for implementation of solar roof top from USD 90 mn to USD 750 mn.

EQ: In Private PPA market….what is your view on the PPA Risk and the way forward: MC: In the private PPA market, we observe that the PPAs are typically of short tenure and counterparty credit worthiness is questionable in many cases. These aspects limit the bankability of such projects.We believe that the way forward is to create a model PPA of longer tenure with minimum offtake guarantees, which will give financiers the comfort to fund more such projects.

EQ: How much your bank/NBFC/ institution has currently financed and what is your target: MC: Tata Cleantech Capital Limited has participated in the funding of over 2 GW of renewable energy generation saving approximately 3 million tonne CO2 emission annually. Our target is to participate in financing of over 5 GW RE projects over next couple of years.

EQ: Have your bank raised any foreign fund for financing RE Projects…what will be the rates, terms and benefits to the projects financed from these foreign funds: MC: Tata Cleantech Capital Limited has

not raised any foreign funds so far. We are exploring raising funds through issue of green bonds in the near future. This will help us gain a significant reduction in overall cost of funds, enabling us to offer more competitive interest rates.

EQ: What is your suggestion to Developers, Government, Policy Makers and Regulators? MC: Given the growing demand for energy and over-reliance on thermal power, the alternative source of energy helps India. India is well endowed with huge potential for both wind and solar generation. Further, India is gearing up to meet the climate change challenge. Unlike other nations, India has taken significant steps to eliminate oil subsidies and gone beyond to impose taxes on petroleum products. India is among the few countries in the world to have introduced a carbon tax. Conducive government policy and regulatory regime backed by increasing private sector participation is making the capacity target achievable.

EQ: Please share some projects you have financed MC: Tata Cleantech Capital Limited is quite active in the Solar Energy, Wind Energy and Small and Mini Hydro energy space. We have funded over 65 projects thus far in the Cleantech space.

EQ: What are the key financial parameters sought to make projects worth financing? MC: While funding a project, lenders carry out a detailed assessment of various financial parameters including capital cost, actual generation estimates (Plant Load Factor), tariff, payment track records and payment cycle of counterparties, long-term O&M arrangement and cost thereof among others. The key financial parameters though will remain investment cost and per unit cost of generation of power. If the generation cost remains reasonable, the project is likely to survive even under unforeseen adverse scenarios.

October 2016

MOUNTING STRUCTURES

Top Three Learnings In Ground Mount Solar Module Mounting Structures Design

AGAMI ENGINEERING CONSULTANTS has been fortunate to have worked in a broad range of areas of module mounting solutions for Solar Utility Projects, from detailed designs of mounting systems to peer reviews for EPC Majors. AGAMI might be one of the few , if not the only consultant in India currently, to have done a full-fledged structural design for a Single-Axis Tracker Structure. This provided us with very deep insights into wind tunnel studies, dynamic failure modes of structures in wind and quantification of complex wind effects. As this is a nascent field, and the engineering consulting industry is taking its first steps, there are many critical errors in the design of these seemingly simple structures. The below is a round-up of common errors that consultants/EPC design teams need to watch out for, which can save your project in extreme wind events.

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MOUNTING STRUCTURES

Learning 1: Forgetting the eccentricity in wind load application from IS 875:3 IS 875:3 Table 11: Monoslope roof coefficients, which is the wind table referred for all solar MMS design, has hidden the most important criteria which has the ability to govern design of your members as a footnote, which reads thus - “ the center of pressure should be taken to act at 0.3*w from the windward edge. “ In Layman terms, what this means istaht the wind pressure is not symmetric but is BIASED towards the windward end. This is to be expected , for why would something as complex as wind, be completely uniform across your panel and act at the center?

Applying this criteria results in lot of bending moments or torsions in most systems, and has a significant impact. This has been caught time and again in our peer reviews with large EPCs, as also with reviewing designs of other consultants, and is indeed a “rookie” mistake many commit.

Fig. 1 Center of Pressure shifted from center

Learning 2: Providing specs to the geotechnical agencies The geotechnical agencies investigating the parcel are often given no idea of what kind of structures would be installed , and what their output needs to be. The report often comes up with recommendations that are more aligned towards normal building structures. For e.g. the recommended “type”

of foundation and sample calculation in the report would be of a PAD FOOTING, at 3m depth below ground. Whereas a pad footing is never used in Solar Module Mounting Structures. Sometimes even the first set of results starts below 1.5m of soil depth, thus

Fig 2. Schematic Showing Pile versus geotech testing results availability This creates various problems, say if the first 2 metres of soil were problematic, the geotechnical consultant would have solved the problem by giving pad footings at 3m, visualizing a building coming up in the parcels. Other times, the report would have no testing data about first 1-1.5 m of soil.This results in bad foundation design, based on interpolations and speculations where none is needed. Hence, detailed specifications are necessary to prime a Geotechnical agency into what needs to be done w.r.t. Solar Projects. The geotechnical specs should provide info about the type of structures, and request for calculation of capacities of a bored pile 1.5 or 2m deep.

Learning 3: Dynamic Effects It is seen that many large EPCs are doing some interesting experiments in module mounting to reduce tonnage per MW. Already most EPCs are in the 30 tons/MW range of steel usage, and still aggressively pushing further down. The approaches are based mostly on using very high strength steel or galvalume, which has twice the strength of usual steel. This creates very thin structures that pass all the static tests of design.

Fig 3 Mode shape for a Solar Ground Mount Row.

What is often neglected is that, as the structures become more slender, dynamic effects become more powerful. Wind creates vortices at a particular periodicity, and if you are unlucky and the period of oscillation of your structure matches the vortices, resonance can happen. The structure will then most probably fly off or damage a lot of mounted equipment. A more comprehensive analysis of the adequacy of the structure is required at such competitive levels of tonnage.

The above explains why sound Structural Design and Consulting is required for Solar Mounting Structures design, where although the cost of the mounting structures themselves is 10-15% of the total project cost, any failure of the MMS would precipitate failure of the entire project and decommissioning.

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RESEARCH & ANALYSIS

The SUN is definitely rising, but will it shine?

Solar tariffs in India have continued to fall during the last 2-3 years, almost reaching grid-parity levels. Claims of reaching coal-parity in a not-too-distant future are no longer considered blasphemous. Thus it seems that the key question is no longer how low the solar tariffs can go but how quickly. Are these falling tariffs sustainable? Will such low tariffs propel growth?

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re lenders financing these projects? What are the risks in the industry? These are some of the key questions in the mind of stakeholders who are either present in the solar industry or evaluating entry into this industry. In this article Rahul Gaba and Gurpreet Chugh from ICF international describe the key drivers of solar tariffs, explore how low the tariffs can go, gauge what risks the industry is facing and caution on what can de-rail this growth. The total installed power capacity in India stood at 301 GW in Mar 2016 of which renewables form 14% and solar forms a mere 2%. Indiaâ&#x20AC;&#x2122;s current per capita consumption of electricity is 900 kWh/ annum compared to 2200-3500 in Eastern European countries and 5000-6500 in Western European countries. India is a growing economy and electricity

demand is expected to rise significantly over the next two decades as more and more consumers get electricity access and the standard of living improves. Whilst India may still not reach parity with Eastern Europe per-capita consumption by 2030, nonetheless the increasing demand for electricity will require significant new capacity additions and the total installed capacity is expected to reach 467 GW by 2022 and 730 GW by 2030. In order to grow sustainably, the Government of India has embarked on a very ambitious renewables fuelled growth strategy with a target of achieving 100 GW installed solar capacity by 2022. If India does indeed deliver on these aggressive RE targets, solar power will comprise 21% of the installed capacity in 2022 compared to only 2% today (see Figure 1 below)

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Figure 1. Installed Capacity Mix in GW (All-India) in FY 2016 and expected in 2022

Solar scale up in India

uch phenomenal growth aspirations are great news for the Indian and global solar community alike as India will possibly provide the fastest growing market for products and services in the solar Industry. This is one of the biggest reasons we have seen rapidly falling solar tariffs in India as more and more global and Indian companies have

identified this potential and want to get in early. Some international companies have also paid entry premiums and bagged projects at low tariffs to get a foot in the door. Since the inception of National Solar Mission in 2010, various policy measures such as accelerated depreciation, viability gap funding, renewable purchase

obligation etc. have been adopted by the Government to support solar sector growth. Such measures along with reverse tariff mechanism for bidding resulted in rapidly falling tariff bids. Overall as the installed solar capacitygrew 8 fold during the last five years, it was accompanied bydrop of 72% in tariffs(seeFigure 2 below).

Figure 2. Increasing solar capacity accompanied by reducing tariffs

Source: CEA, MNRE + Business intelligence reports

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hat this means is that the cost of power from new solar plants in India today is comparable to that from a hydro power plant and lower than that from a LNG based power plant (even when LNG pricesare at historical lows) (see Figure 3 below) Figure 3. Comparison of cost of power from different sources

Source: ICF analysis

Global trends

he trend of falling solar tariffs is not unique to India. Low tariffs in reverse auctions are being witnessed around the world. Tariff benchmarks across North America, Latin America and Middle-East too witnessed a downward trend and tariffs fell by more than 50% between the global lowest in 2013 (for a project in New Mexico, USA)

and the global lowest in 2016 (for a project in Dubai, UAE). Conspicuously, the lowest solar bid in India is still considerably higher than the global lowest â&#x20AC;&#x201C; Rs 4.34/kWh (Rajasthan 2016) is double of Rs 2.01/kWh (Dubai, 2016) (see Figure 4 ). These bids cannot and should not be compared simply because the key factors such as incentives, land

costs, currency hedging, cost of capital and other project risksvary widely from country to country. However it is important to understand the global wave that the Solar Industry is riding on and assess how this might impact the global risk appetite and also the bidding for projects in India by the same entities that are bidding globally.

Figure 4. Annual lowest solar bids: Global vs India

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RESEARCH & ANALYSIS Factors impacting solar tariffs Some of the key factors that impact the solartariff bids in India include project related technical aspects, financing aspects and overall commercial viability of the deal. Figure 5. Key drivers for solar tariffs in India

hile all of these factors (and others) are critical to understand for arriving at the tariff, some of them are more important than the others. For instance, solar radiation is a critical factor as it impacts the project viability and tariffs significantly. A 1% increase in CUF can lead to a reduction of about 0.20 - 0.25 Rs/ kWh in the tariff. Consequently the states with higher irradiation levels like Rajasthan have seen lower bids on average compared to states with lower irradiation levels. The highest cost item in a PV solar project is the PV module (> 50% of the total capex). Given the small scale and

high cost of solar PV cell and module manufacturing in India these components have increasingly been sourced from global markets, mainly China and Taiwan. Globally the module prices have fallen drastically over the last few years primarily due to falling polysilicon prices that fell from $475 /kg in 2008 to $17/kg in 2014. This fall in polysilicon prices coupled with increase in demand for modules and establishment of the global supply chain led to falling module prices. Further, in Asian markets the module prices are significantly lower than in Europe and North America. This is due to the antidumping duty on Chinese modules in

EU and NA which has led to a lot of Chinese coming to India at very low prices during the last 1 year. Such low prices for modules had a significant impact on reducing the tariffs being bid for projects. The next important factor leading to low tariff bids has been the reducing BoScosts in Indiawhich have dropped significantly during the last few years. According to CERC annual estimates contained in the benchmark tariff orders (see Figure 6) BoS costs have fallen by 50% during the last 4 years. Overall falling capex has played a significant role in reducing the tariffs being bid for projects during the last few years.

Figure 6. CERC benchmark solar project capital cost FY 17

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Tariff Optimisation while Bidding –An Illustration

o illustrate how developers look at tariffs while bidding, we will take the CERC capital cost benechmarks and suitable O&M costs for a100 MW solar project in a state where 19% CUF is possible, say Jharkand. We assume 70:30 debt:equity financing with debt cost at 11.50% and cost of equity at 15%. With these assumptions, the project can be viable at a tariff of Rs 5.25 – 5.35/kWh over the project life of 25 years. With this base tariff, we further evaluate

the impact of optimising different elements. The first parameter is the capital cost. While the CERC benchmark cost assumes modules available at $0.50/W, there have been deals where project developers have been able to source Tier 1 modules at lower costs of $0.45/W and even at $0.40/W. A reduction of 10 cents in module prices can lead to a tariff reduction of Rs 0.55 – 0.60/ kWh. In case the project is in a state with higher radiation that can lead to 20% CUF

Figure 7. Tariff bid optimisation cascade

Source: ICF analysis using ICF-SBM (Solar Bid Model)

(say Telangana or Rajasthan) the tariff can be reduced by Rs 0.20 -0.25/ kWh. Next, with a strong project promoter balance sheet, the debt may be available at lower rates and 10.5% interest rate is a possibility with refinancing on project completion. This can further lead to a tariff reduction by 0.15 - 0.20/ kWh. The figure below (see Figure 7) shows how some of these optimisations further impact the base tariff as a cascade of reductions.

In addition, innovative financing structures are being experimented such as long term equipment financing, parent company support, SPV financing and others. These structures are enabling bidders to further optimise their cash flowsby reducing upfront cash outflow thereby increasing return on equity and providing further opportunity to bidders to reduce day 1 tariff bids. Similarly strategic tie-ups between module suppliers and developers can offer symbiotic relationships to be leveraged. In addition, alternate tariff models by bid inviting authorities such as providing annual escalation clauses can present additional routes forday 1 tariff reduction.

So what could eclipse the solar growth?

s the solar capacity builds up and more and more projects are developed, it will result in injection of a significant amount of variable solar power into the grid. In case India is indeed able to install 100 GW of solar by 2022, it will require ramp up and ramp down requirement of 15-18 GW per hour to balance solar alone. Under such circumstances it will become critical to ensure that balancing power is made available through variable

generation sources such as - pumped hydro, open cycle gas or other energy storage solutions. There is need for very detailed hourly modelling to understand the requirement of such variable power at state level and undertake advance planning. Such planning would require coordinated response on policy, market, infrastructure and investments in variable generation assets. The second critical risk will be buyer

creditworthiness. Ensuring financeable PPA terms and enhancing creditworthiness of ailing DISCOMS through innovative payment security mechanisms will be essential to ensure that the RE capacity addition does not falter midway. A strong step has been taken with UDAY but it will be equally important to ensure implementation of the measures identified in UDAY especially on loss reduction, energy efficiency and tariff filing.

Overall there is a strong potential for growth of solar power in India and this presents an exciting opportunity to domestic and international investors. Many investors have already entered or are close to entering the solar value chain and have aggressive plans for ramp up. Capital will be available from both domestic and international sources. Likewise, technology and human capital too can be quickly ramped up to support this growth. The only factor determining how much of this promised growth materialises will be the ability and willingness of DISCOMs to buy this clean power and integrate the variable nature of this power into the grid.

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MNRE: Setting up of Rs 1500 Cr Payment Security Fund for VGF Scheme under JNNSM In implementation of JNNSM Phase II, the Government of India introduced the concept of viability gap funding mechanism wherein solar projects are developed by developers selected through transparent competitive process on BOO basis to supply solar power at a pre-determined tariff with support from Government in terms of VGF.

n implementation of JNNSM Phase II, the Government of India introduced the concept of viability gap funding mechanism wherein solar projects are developed by developers selected through transparent competitive process on BOO basis to supply solar power at a pre-determined tariff with support from Government in terms of VGF. The Government Guidelines prescribe ceiling on maximum VGF, which can be allowed under the specific scheme. Solar Energy Corporation of India limited (SECI) has been designated as the implementing agency for this VGF Schemes under JNNSM.

SETTING UP OF RS 1500 CR PAYMENT SECURITY FUND FOR VGF SCHEME UNDER JNNSM INTRODUCTION

he Jawaharlal Nehru National Solar Mission was launched in January 2010 by the Government of India with a target of 1,00,000 MW of grid connected solar power by 2022 envisaging active participation from the States to promote ecologically sustainable growth while addressing Indiaâ&#x20AC;&#x2122;s energy security challenge. The total achievement in terms of installed capacity of grid connected solar power projects in the country is over 8000 MW as on date. In implementation of JNNSM Phase II, the Government of India introduced the concept of viability gap funding mechanism wherein solar projects are developed by developers selected through transparent competitive process on BOO basis to supply solar power at a predetermined tariff with support from Government in terms of VGF. The Government Guidelines prescribe ceiling on maximum VGF, which can be allowed under the specific scheme. Solar Energy Corporation of India limited (SECI)

has been designated as the implementing agency for this VGF Schemes under JNNSM. First scheme under VGF mode for 750 MW capacity has already been implemented. MNRE vide letter no.32/2/201415/GSP dated 04th August 2015 has brought out Second Scheme for setting up of 2000 MW of Grid Connected Solar PV Projects. Thereafter, another scheme for development of 5000 MW through VGF support under JNNSM has been sanctioned by MNRE vide letter dated 23rd Feb. 2016. In addition to these schemes, MNRE has sanctioned several other schemes under VGF mode viz. Solarization of IndoPak Border, Special Scheme for High Visibility Areas. As per the Scheme Guidelines, SECI is envisaged to set up a payment security mechanism in order to ensure timely payment to the developers. This fund will have a corpus to cover 3 months payment for the various VGF Scheme approved by MNRE from time to time.

ELIGIBILITY

OBJECTIVE

The following MNRE Schemes would be eligible to be supported under Payment Security Mechanism:

The Payment Security Mechanism is envisaged to cover delays/defaults in payments to SECI by entities (discoms/ State utilities/ bulk consumers), so that timely payment to developers could be ensured in addition to provide support to SECI to meet financial implications on account of regulatory/ policy/ legal/ evacuation/ open access requirements, not foreseen at the time of approval of the Schemes as well as difficulties arising during implementation of PPA/ PSA/ VGF Securitization.

A. B. C. D. E. F.

750 MW JNNSM Phase-II, Batch-I 2000 MW JNNSM Phase-II, Batch-III 5000 MW JNNSM Phase-II, Batch-IV Solarization of Indo-Pak Border 50 MW Special Scheme for high visibility area Any other VGF Scheme approved by MNRE time to time.

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SCOPE Payment security fund is to be utilized for the following purposes: A. To make timely payment to Solar Project Developers in case of delay in realizing the payment from the buying utilities. B. For providing security in the form of Letter of Credit/ Bank Guarantee for the purpose of obtaining long-term open access, transmission charges, etc. not envisaged at the time of signing of PSA/ PPA and applicable charges as per Bulk Power Transmission Agreement (BPTA) or other appropriate agreement signed with CTU/ STU in line with the applicable regulations. C. To make the differential payment to the developers from the agreed PPA rate in case of short recovery of tariff from the buying utilities based on average pool pricing due to policy/regulatory issues and transmission-evacuation/open access constraints etc.

D. To make the payment on account of short-term open access charges, cancellation charges paid to CTU/STU on account of non-availability of open access, Deviation Settlement Mechanism (DSM) charges, as per applicable regulations. E. Any charges on account of litigations and arbitration awards, etc. related to implementation of the scheme including issues arising out of operational difficulties of PPA/PSA/ VGF Securitization. F. Rebate to buying utilities wherever incentive is not extended for early payment to SPDs on back to back basis. G. To support SECI to meet requirements of payment security under standard bidding documents including PPAs for grid connected solar power PV projects whenever brought in force by MNRE/ MoP. H. Any other cost implications/ charges recommended by the PSM Management Committee constituted by SECI in consultation with MNRE.

PAYMENT SECURITY FUND

overnment of India has sanctioned an amount of Rs.500 Cr. to create Payment Security Fund. This fund will be suitably enhanced through budgetary support from Government of India to cover the 3 months working capital requirement for the capacities allocated through VGF from time to time under various schemes. The present estimated requirement is around Rs.1500 Cr. once the entire capacity envisaged so far is commissioned.

The payment security mechanism shall also be contributed by the money received from encashment of BGs, interest earned on this fund, incentives for early payment (wherever applicable), the savings on account of tariff reduction due to Accelerated Depreciation and other statutory benefits. Income arising out of the difference in tariff for solar power in excess of contracted energy as per the provisions of PPA/PSA shall also be credited to the fund under the Payment Security Mechanism.

OPERATIONAL MECHANISM

ECI shall open a separate flexi bank account and the funds shall be deposited and operated as per these guidelines. For the purpose of utilization of funds as per these guidelines, SECI shall be responsible to make the payments within scheduled timeframe as per PPA. In order to ensure smooth operation of this fund, SECI shall constitute a PSM Management

Committee in consultation with MNRE. The concerned Division in SECI in consultation with Finance will be authorized to utilize the PSM funds for making timely payments to the SPDs as per the due date and such payments shall be reported to the Committee in subsequent meetings. The utilization details shall be reported to MNRE on quarterly basis.

PSM MANAGEMENT COMMITTEE The Committee shall comprise of the following: 1. Head of Solar Division 2. Head of Finance Division 3. Head of Trading & Commercial Division – Convener The Committee’s recommendations shall be approved by the Managing Director. The broad terms of reference of the Committee will be as follows: (a) To consider all cases triggering requirements of PSM (b) To recommend specific action points and financial proposals for approval under PSM

(c) To prioritize the payments based on the availability of funds (d) To review availability of funds and to recoup the required funds from MNRE (e) To suggest alternate source of fund availability, if required. (f) To have regular feedbacks from all stakeholders including SPDs and buying utilities with a view to improve/ modify the provisions, if required. (g) To consider and suggest course of action including diversion of power in case of continuous default of payment by buying utilities over prolonged period of time. (h) Any other related issues.

POWER TO REMOVE DIFFICULTIES For situations which are not envisaged under the PSM, the empowered Committee constituted by MNRE for implementation of the MNRE VGF Schemes would be approached for removing the difficulties.

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POLICY & REGULATIONS

Glossary

Implications of GST on delivered cost of renewable energy

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Table of Contents

Rating Criteria

1. Executive summary

4. Assumptions

renewable energy sector

2. Overview of current regime

5. Methodology

7. Key issues and recommendations

3. Overview of GST

6. Impact of GST on various segments of

8. Scope limitations

1. Executive summary

ultiple Indirect taxes are currently levied on transactions in India. Some of the taxes are levied and collected by the Central Government, while other taxes are collected by the State Governments. Accordingly, the current Indirect tax regime is beset by myriad problems such as complexity, tax on tax and lack of credit fungibility. Considering the issues plaguing the current Indirect tax regime, India is gearing up to introduce a comprehensive Indirect tax regime under GST. All existing Indirect taxes, barring a select few, would be subsumed into the new GST. Taxes on consumption or sale of electricity have been proposed to be kept outside GST. In such case, the electricity generated by renewable sources would continue to be outside the GST regime. However, taxes on various capital goods, inputs and input services (both

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forming part of capital cost as well as operation & maintenance costs) used for generation of renewable energy should be subsumed in the GST regime. Taxes paid on procurements would continue to be non-creditable for the energy sector and hence, forming part of costs. Accordingly, any impact of taxes paid on procurements used in renewable energy sector would have a direct impact on cost of renewable energy Basis information available in the public domain on levy of GST, it appears that taxes on procurements for renewable energy sector would go up, which would

lead to increase in cost of renewable energy (resulting in negative impact for the sector). Further, it is imperative to note that the adverse impact of tax cost would vary from project to project (as well as from one source of renewable energy to another) based on the procurement pattern (import vs. domestic purchase) as well as extent of exemptions available currently. Based on the exercise undertaken, the summary of impact on various types of renewable energy projects is provided below

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For the bio-fuel sector also, there would be a substantial increase in prices of inputs as well as bio-fuels itself due to pruning of exemptions, removal of statutory forms and increase in rate. Further, any GST charged on bio-fuels would become a cost to the OMCs (as petrol and diesel would be outside GST unless otherwise notified). The key factors resulting in an adverse impact on cost of renewable energy are as under:

In line with the Governments initiatives of boosting the renewable energy sector, the following key recommendations should be kept in mind

Further, the following recommendations should be kept in mind for the bio-fuel sector:

Overview of current regime

arious Indirect Taxes are levied currently by the State Government as well as Central Government on different transactions. A brief overview of the current Indirect tax environment is provided below for ease of reference:

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There are exemptions granted under aforesaid laws (specifically for capital goods and inputs) used for setting up renewable energy devices. The same have been discussed subsequently in the report.

Overview of GST

he current Indirect tax regime in India provides for a complex tax environment due to multiplicity of taxes, elaborate c o m p l i a n c e obligations and tax cascading. To address such problems, a comprehensive ‘consumption tax’ levied on the supply of all goods and services has been proposed which is known as GST. GST would subsume majority of Indirect taxes, thus, eliminating need for different Indirect tax legislations. Further, GST aims at providing a seamless credit chain by providing for cross utilization of credits (inter se goods and services) and minimal credit restrictions. GST is being touted as the single biggest Indirect Tax reform in India and aims at bringing a

fundamental shift in the way business transactions are taxed in India. The motto of the GST regime seems to be ‘One Tax One Market’ which aims at providing a cohesive tax approach across India. Besides simplifying the current system and lowering the costs of doing business, GST will call for a fundamental re-design of supply chains. It will affect how companies operate their businesses, making GST not just a tax reform but an overall business reform. Given that India is a federal administrative structure with the Central Government existing alongside respective State Governments, GST in India must be commensurate with this governance structure. Accordingly, the dual GST model has been proposed. Under this model, the following taxes are chargeable on supply of goods and services:

On within the state transactions - CGST (To be collected by the Central Government) and SGST (To be collected by the State Government) 58

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• On interstate transaction • Sale of goods transactions: IGST - To be collected by the Central Government and additional 1%: To be collected by the origin state (applicable for a period of 2 years • Supply including provision of services (other than sale of goods transaction) - IGST • On import of goods - BCD and IGST • On import of services - IGST Recent momentum of changes and progress reflects Governments intention to introduce GST at the earliest. Provided below is a diagrammatic representation of the steps current state of play and steps required for implementation of GST:

amended1/ modified and accordingly, various articles as well as entries of the Seventh Schedule are being subsumed and replaced by Articles enabling the GST implementation. The power to levy taxes on consumption or sale of electricity has been provided to the State Government vide entry 53 of List II of Seventh Schedule of Constitution. However, such entry is not being subsumed and accordingly taxes on consumption or sale of electricity have been proposed to be kept outside GST. Therefore, the electricity generated by renewable sources would continue to be outside the GST regime and the State Government would have the power to continue to tax the same. However, Entry 54 which empowers the States to levy tax on sale of goods has been subsumed as part of GST. The term ‘goods’ has been defined in the Constitution as ‘goods include all materials, commodities, and articles’. Given the wide definition of the term ‘goods’, it may be argued that electricity qualifies as ‘good’. This is also supported by judicial precedents and the fact that in various State VAT laws, electricity has been included in the category of ‘exempted goods’. Also, electricity has been mentioned in the Excise Tariff. In light of the discussions, it is possible to consider electricity as goods and accordingly, technically possible to tax electricity under GST (as sale of goods). Currently, tax on electricity is levied only under Entry 53 and it’s specifically exempted/ excluded from levy under Entry 54. It may be highlighted that for the purpose of this report has assumed that the same dispensation would continue (ie States would continue to tax electricity as presently under Entry 53 as this Entry has not been subsumed in GST) and that there would be no levy under GST on output electricity although Entry 54 has been subsumed in GST.

However, taxes on various inputs and input services (both capital cost as well as operation & maintenance costs) used for generation of renewable energy would be subject to GST.

Impact on GST on Renewable Energy Sector

he power to legislate is engrafted under Article 246 of the Constitution of India and the various entries in the three lists of the Seventh Schedule are the ‘fields of legislation’ which provide power to the Central and State Government to govern various matters. To enable levy of GST (which would be under a dual structure), various entries of the Constitution of India are proposed to be

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POLICY & REGULATIONS

GST is based on the foundation of credit fungibility and reduction of exemptions. Considering the fact that renewable energy sector currently benefits from various exemptions and concessional duty, the impact on the ‘delivered cost of renewable energy’ needs to be examined under the GST regime which is likely to eliminate/ reduce exemptions. Further, specified petroleum products (such as petroleum crude, high speed diesel, petrol, aviation turbine fuel and natural gas). The outputs of the bio-fuel sector are also supplied as inputs to such OMCs for blending. Any GST charged on bio-fuels would become a cost to the OMCs. Provided below are assumptions and comments on how the ‘delivered cost of renewable energy’ as well as the impact on the bio-fuel sector could be impacted in the GST regime.

2. Assumptions Since the GST law is yet not available in public domain, the current exercise has been undertaken basis certain assumptions. For the purpose of this report, it has been considered the following assumptions for analyzing impact of GST on renewable energy sector:

GST Model •

The proposed model will be in the form of a ‘Dual GST model’ comprising the following: •

CGST – levied by the Central Government

•

SGST – levied by the States Government

•

Inter-state and import transactions proposed to be covered under IGST to be levied by Central Government (likely tax rate to be sum of CGST and SGST)

•

GST at the applicable rate would be levied on supply of all class of goods and services except those which are exempted/ excluded from GST

•

Provider/ supplier/ seller of goods/ services would be liable to pay GST except in specified cases (such as import of services, few other specified services as may be specified under law where the recipient would be liable to deposit GST under reverse charge mechanism)

•

For the purpose of this report, States would continue to tax electricity as presently under Entry 53 of the State List. As under current Indirect tax regime, no GST would be levied on electricity

•

Petroleum products (petroleum crude, high speed diesel, motor spirit i.e. petrol, aviation turbine fuel and natural gas) would be kept outside GT unless otherwise notified by the GST council

•

Provided below is summary of key taxes to be subsumed and to be kept outside the ambit of GST:

October 2016

GST Rate •

Currently, there is no clarity on the rate of CGST, SGST and IGST. For the purpose of the preparation of the report, the rate of taxes is proposed to be assumed as below : • SGST – 10% (uniform across all states ) • CGST – 10% • IGST – 20%2 Select Committee of Rajya Sabha also indicated that the standard GST rate should not be more than 20%. Further, the Committee also recommended a concessional rate of GST of 14%. The Chief Economic Advisor has recommended GST rates as under: • RNR has been computed at 15 - 15.5% • Standard rate: 17% - 18% - Rate dependent upon various factors including status of exemptions, tax rate on precious metals • Lower rate: 12% - Applicable on essential goods. No specific recommendation for essential services • Demerit rate: 40% - applicable on luxury cars, tobacco products However, no information is available on the goods and services on which such reduced rate would apply. Therefore, for the purpose of computing maximum possible impact under GST regime (basis information currently available), the peak rate of 20% has been assumed for both goods and services used for setting up renewable power project in this report. • The rate of tax on goods and services has been assumed to be the same ie 20% based on the current information • Additional tax • Central Government will levy an additional tax not exceeding 1 % on inter-state supply of goods for 2 years which would be non-creditable • No additional tax on stock transfers – As per recommendation of the Select Committee, additional tax be levied only on supplies for a consideration • Additional tax would be levied on each inter-State sale transaction • Imports • Imports would attract both BCD and IGST in lieu of the current additional duties/ cess of Customs • BCD rate would remain the same as under current regime • IGST on imports to be computed on assessable value plus BCD amount • No additional tax would be levied on imports • Works contract transactions to be classified as ‘services’ (whether classified as goods or service, the rate is same

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• • • • • •

•

and no credit is available for either) Abatement on GTA services would continue at 70% and tax would be payable at balance 30% only Generation of electricity and supply thereof would be exempt from GST No exemption/ concessions will be available on supply/ procurement of renewal energy devices as well as components/ parts of such devices under GST law Similarly, no exemptions/ concessions will be available on services procured for setting up and operating power project/ plant Exemption/ concessions provided to bio-fuel sector as well as its inputs would be done away with For the purpose of the report, assumptions on cost of generation of electricity (in respect of grid projects) have been taken based on information available under the Tariff Orders issued by the CERC Assumptions as to structure for procurement of inputs/ components and services have been taken basis mutual discussion with the stakeholders in the industry and MNRE

3. Methodology Summarized below are the key steps followed for undertaking GST impact assessment: • Finalization of the list of projects for which impact assessment to be conducted basis information available and discussions with MNRE • Identification of the key indicators (such as Levelised Tariff, Total COG etc.) for each project for which impact is to be analyzed. • List of projects with key indicator and key source of information for computing the possible impact has been tabulated below:

•

Understanding contribution of different factors (such as beak-up of capital cost, source of funds) in computation of the above key indicators of cost of electricity. Following factors have an impact under GST regime: • Capital Cost: One time cost for setting-up of the project; • Operation & Maintenance (O&M) charges: Annual charges for operation and maintenance of plant; and • Others – Cost of major input such as Biomass in respect of Biomass project • Computation of tax element in respect of different components of capital cost, O&M charges and biomass cost, basis reasonable assumptions, under the current regime and proposed GST regime: •

Computation of impact on indirect tax costs in respect of capital cost under GST regime - Methodology • Capital cost generally includes cost of plant and machinery, civil construction, erection services, transportation services etc. As a first step, break-up capital cost for different project was identified Basis discussions, finalizing assumption regarding pattern of procurements ie whether components, plant and machinery or any other goods would be imported, procured on inter-state basis or within the state • Apportion value of each component according to assumed source of procurement (imported, within-state procurements or inter-state procurements) • Break-up of capital cost along with assumptions on source/ nature of procurement considered for each type of project has been tabulated below:

Wind Projects

Solar PV Projects

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Biomass Power Projects

Small Hydro Projects

Biomass Gasifier Projects

Wind Solar Hybrid Projects Biomass Power Projects

Solar Off-grid Projects

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Basis nature and source of procurement, mapping current indirect tax rates against each component of capital costs •

Computation of total indirect tax applicable under current regime for each component. Under current regime, indirect taxes paid on procurements are non-creditable and hence, form part of costs. Accordingly, it has been assumed that the above taxes (computed) have been included in the respective capital costs. Considering the same, the computed taxes have been reduced from the value of capital costs to arrive at a tax exclusive value of capital cost;

•

Computation of taxes applicable under GST regime. For this purpose, GST rates (basis assumptions mentioned in previous section) were applied on each relevant component of capital costs

•

Comparison of indirect tax costs under current regime and the proposed GST regime

Please note that the above States have been considered only to demonstrate different level of impact on account of variation in current VAT applicability on different components procured for setting up of power projects/ plants. The exercise has been undertaken using CERC order (for determining levelised tariff) to ensure parity in comparison and have accordingly, not referred to the State wise tariff orders. •

GST impact only has been analyzed for the goods, services procured by the developer for setting up of power plant/ project. As part of this study, impact of GST on vendors manufacturing goods meant for supply to or rendering services to the project owner/ developer has not been examined. Further, in relation to the bio-fuel sector, since the output is not electricity but various types of bio-fuels, the impact of GST on the input and output in various States (Karnataka, Maharashtra, Punjab, Tamil Nadu and Uttar Pradesh) has been compared. Such input tax costs of manufacturers and other vendors have not been considered due to the following:

Computation of impact on indirect tax costs in respect of O&M charges under GST regime - Methodology •

Mapping of tax rates applicable on various components of O&M charged under current regime.

•

Basis the same, computation of to compute O&M charges excluding taxes.

•

Map tax rates applicable under GST regime to calculate O&M charges (inclusive of taxes under GST regime).

•

Comparison of indirect tax costs under current regime and the proposed GST regime.

•

• •

• Computation of biomass cost under GST regime •

While for other types of renewable energy projects (ie solar, wind or hydro, generally there is no input costs other than capital cost and O&M cost discussed above), in case of bio-mass project there is additional cost of inputs ie biomass. Accordingly, in these projects cost of biomass also needs to be computed under both current and GST regime as under”

•

Map tax rates applicable under current regime to compute biomass cost excluding taxes. For this purpose the rate of VAT on biomass related inputs has been considered at lower rate under each of the relevant State VAT law. Please note that the same could vary depending on the type of inputs being used.

•

Map tax rates applicable under GST regime to calculate biomass cost inclusive of taxes under GST regime.

•

Comparison of indirect tax costs under current regime and the proposed GST regime

•

Additionally, to demonstrate the impact of state levy under current indirect tax regime as well as GST, an exercise has been conducted considering the following relevant state for each type of project:

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•

Various Indirect tax benefits/ concessions provided to goods to be used in renewable energy projects are also available to parts/ accessories etc which may be procured by manufacturer/ supplier to be supplied to project owner. Hence, it would not be the case that manufacturer/ supplier would be paying taxes on all their procurements and no exemptions/ concessions would also be available to them. In such case, the contention that GST impact would be only on the value addition of the manufacturer/ supplier may not be technically correct as pruning of exemptions would impact the input cost of such manufacturer/ supplier as well. For various renewable energy projects (such as solar projects), a portion of capital goods may be imported from outside India. For such imported supplies, no input taxes on their parts would be payable in India. Accordingly, introduction of GST would not have an impact of cost of manufacture of such imported supplies. The purpose of exercise was to provide the maximum possible GST impact on various renewable energy projects, so as to understand the possible GST implications and identify key recommendations. Consideration of input taxes for manufacturers would only to a certain extent reduce the possible GST impact and therefore, the same were not taken into account at this stage.

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4. Impact of GST on various segments of renewable energy sector

Excise duty – General exemptions The following exemptions/ concessions from excise duty are available generally for goods/ equipment used in various renewable energy plants:

As discussed above, GST impact on the following sources of renewable energy has been analyzed: • • • • • • • •

Solar PV Wind Biomass Small Hydro Solar Off-grid Wind Solar Hybrid Biomass Gasifier Bio-fuel sector

It is expected that the exemptions/ concessions prescribed under various current indirect tax laws would be pruned under GST regime. This would have a significant impact on the cost of renewable energy. In order to compute the possible impact, it would be first important to analyze the exemptions available under the current regime.

VAT – General exemptions/ concessions for renewable energy

The following exemptions (provided by the Central as well as State Government) are applicable on most of the renewable energy projects: BCD – General exemptions/ concessions The following exemptions/ concessions from BCD are available generally for goods/ equipment used in various renewable energy plants:

SAD – General exemptions The following exemptions/ concessions from SAD are available generally:

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CST – General exemptions/ concessions for renewable energy sector

6.1 Solar energy - Impact To boost the solar energy industry, various exemptions have been provided by both Central as well as State Government for setting up, operation as well as maintenance of solar energy sector. Provided below is a summary of exemptions which are provided currently to the solar energy sector (in addition to the general exemptions mentioned above which are available for various renewable energy sectors which have been discussed earlier). •

BCD - Specific exemptions for solar plants

The following specific exemptions/ concessions from BCD are available for goods/ equipment used in solar power plant: The State wise impact on the levelised tariff is summarized below:

SAD - Specific exemptions for solar plants The following specific exemptions/ concessions from SAD are available for goods/ equipment used in solar power plant

6.1.2 Solar off-GRID The following break-up for capital cost and O&M for a solar off-GRID project has been considered:

Excise duty - Specific exemptions for solar plants The following specific exemptions/ concessions from excise duty are available for goods/ equipment used in solar power plant

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VAT/ CST - Specific exemptions for solar plants The following specific exemptions/ concessions from VAT/ CST are available for goods/ equipment used in solar power plant

Analyzed below are the exemptions on various components for solar GRID as well as off-GID projects.

6.1.1 Solar PV (GRID) The following break-up for capital cost and O&M for a solar PV GRID project has been considered

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SAD The State wise impact on the levelised tariff is summarized below:

The following specific exemptions/ concessions from SAD are available for goods/ equipment used in wind power plant

Excise duty The following specific exemptions/ concessions from excise duty are available for goods/ equipment used in wind power plant

6.2 Wind energy - Impact Various exemptions have been provided to the wind energy sector as measure to ensure its growth. Provided below is a summary of exemptions which are provided currently to the wind energy sector (in addition to the general exemptions mentioned above which are available for various renewable energy sectors which have been discussed earlier).

VAT/ CST The following specific exemptions/ concessions from VAT/ CST are available for goods/ equipment used in wind power plant

BCD The following specific exemptions/ concessions from BCD are available for goods/ equipment used in wind power plant:

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6.2.1 Wind GRID

The State wise impact on the levelised tariff is summarized below:

Following break-up for levelised tariff for a Wind GRID project has been considered:

6.2.2 Wind-Solar hybrid â&#x20AC;&#x201C; Off-GRID The following breakup for capital cost and O&M for a Wind GRID project has been considered:

The State wise impact on the capital cost and O&M cost is summarized below:

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6.3 Bio mass energy - Impact To boost the bio- energy industry, various exemptions have been provided by both Central as well as State Government for setting up, operation as well as maintenance of solar energy sector. Provided below are summary of exemptions which are provided currently to the bio-energy sector (in addition to the general exemptions mentioned above which are available for various renewable energy sectors which have been discussed earlier). BCD The following specific exemptions/ concessions from BCD are available for goods/ equipment used in biomass plant:

Excise duty The following specific exemptions/ concessions from excise duty are available for goods/ equipment used in biomass plant

6.3.1 Bio-mass GRID The following breakup for levelised tariff for a Bio-mass GRID project has been considered:

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Following break-up for levelised tariff for a Wind GRID project has been considered:

6.3.2 Bio-mass gasifier The following breakup for levelised tariff for a bio-mass gasifier project has been considered:

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6.4 Small hydro project - Impact Provided below is summary of exemptions which are provided currently to the small hydro power plants sector (in addition to the general exemptions mentioned above which are available for various renewable energy sectors which have been discussed earlier). VAT/ CST

6.4.1 Small Hydro GRID projects The following break-up for levelised tariff for a Small Hydro GRID project has been considered:

Figure 1: Daily power generation comparison for fixed and single axis tracker

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6.5.1 Ethanol The primary input for ethanol is molasses (which is obtained as residue of the sugar industry). The ethanol produced from such molasses is supplied typically to the OMCs for blending in petrol. The following exemptions have been provided under central excise to molasses as well as ethanol:

The State wise impact on the levelised tariff is summarized below:

Hence, no excise duty is levied on molasses supplied to the ethanol producers as well as ethanol produced for supply to OMCs. Provided below is comparison between current rates on molasses and ethanol and proposed rate under GST:

6.5 Bio-fuel sector - Impact Bio-fuel is an upcoming source of renewable energy in India. Biofuels are produced through contemporar y biological processes, such as agriculture and anaerobic digestion, rather than a fuel produced by geological processes (such as coal or petroleum).Unlike other sources of renewable energy where the end product if electricity, bio-fuel sector is engaged in production of bio-fuel itself. Such bio-fuel is supplied to OMCs, Government and State bodies including railways as well as in bulk to various industrial players. The different types of bio fuels are ethanol, bio diesel and bio ethanol.The implications on the same have been discussed below. 74Â

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6.5 Bio-fuel sector - Impact The primary input for bio-diesel are palm fatty acids, palm stearin , edible oil seeds etc (the main input is palm stearin.) The bio-diesel produced is supplied typically to the OMCs for blending in high speed diesel. Bio-diesel may also be separately supplied to other customers (such as railways or industrial units when sold in bulk). The following exemptions have been provided under central excise to molasses as well as ethanol:

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6.5.4 Impact of GST on bio-fuel sector For all the aforementioned bio-fuel sources, the key impact of GST would be as under: Increase in cost of procurements for biofuel– The cost of procurements of inputs used in production of bio-fuel would increase due to the following reasons:

•

Hence, no excise duty is levied on palm stearin supplied to the bio-diesel producers as well as bio-diesel produced. Further, no excise duty is also levied on high speed diesel which has 20% blend by volume of bio-diesel. Provided below is comparison between current rates on molasses and ethanol and proposed rate under GST:

•

Since GST aims at pruning of exemptions to continue the credit chain, the exemptions produced to various inputs of the bio-fuel sector (such as excise exemptions to molasses, palm stearin etc) may be done away with. In such case, there may be an increase in the rate of tax paid on inputs which would have a cash flow impact. However, such taxes paid on input should be available as credit to the bio-fuel producer Removal of statutory forms – Procurement against Form C (at 2%) may be removed. Since Form C would be removed as well as exemptions removed, the cost of procurements may go up leading to higher working capital requirements Increase in rate – Possible increase in rate under GST as compared to the current VAT rate leading to higher cost of procurements

•

Increase in taxes on bio-fuel – Currently, excise exemption provided to ethanol as well as bio-diesel. Such exemptions may be pruned leading to higher cost and increase in prices of ethanol/ bio-diesel. Further, there may also be an increase in the rate of tax on bio-fuels under GST as compared to current VAT rates leading to higher tax burden

•

No credit available for OMCs – OMCs which produce petrol/ diesel etc would be outside GST unless otherwise notified. Hence, the GST charged on ethanol/ bio-diesel would not be available as credit to OMCs and would become a cost. Further, the cost would increase substantially due to removal of exemptions and statutory forms as well as increase in rate of tax. Hence, any GST charged by the biofuel producers would become a cost to the OMCs – OMCs may seek to reduce the consumption of such bio-fuels which would go against the objective of the Government to produce this sector

5. Key issues and recommendations 6.5.3 Bio-ethanol

Per the aforesaid analysis, it is evident that the cost of renewable energy would increase under the GST regime. Analyzed below are the key factors under GST which lead to a potential negative impact for the renewable energy sector and recommendations for the same.

The primary input for bio-ethanol is bio-mass. This is a comparatively new field and currently there are no bio-ethanol plants in India.

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Key factors for negative impact under GST 1. Increase in tax costs due to removal of exemptions Current regime

However, various taxes are levied on procurement of goods and services (on both capital procurements as well as O&M charges). The taxes paid against such procurements become a cost as there is no output liability (and in any case such taxes cannot be utilized against electricity duty). The Government has always strived to promote the renewable energy sector and accordingly, various exemptions have been provided to the sector. A few of these include: Customs duty exemptions/ concessions on import of goods required to be used in specified renewable energy sector. Few examples include: •

Concessional rate of BCD of 5% is provided to import of all goods used for Project Imports

•

Solar - Exemption from BCD on solar panels, cells and modules. Also, exemption from ACD and SAD provided to all items of machinery, transmission equipment, auxiliary equipment etc used for setting up of solar power plant. Further, import of various other solar components has been exempt or provided concessional rate

•

Wind – Concessional rate of BCD of 5% and exemption from ACD and SAD provided to import of various components used by a wind power plant (such as wind operated electricity generators, wind turbine controllers etc)

•

Small Hydro – No specific exemption for small hydro projects

•

Bio Mass – Concessional rate of BCD of 5% and exemption from ACD provided to all items of machinery, auxiliary equipment etc for setting up a project for generation of power or generation of compressed bio-gas

•

Excise duty exemptions/ concessional rates on production of renewable energy as well as procurement of goods to be used in production of renewable energy. Few examples include: •

Solar – Excise duty exemption provided to all items of machinery, transmission equipment, auxiliary equipment etc used for setting up of solar power plant

•

Wind – Excise duty exemption provided to specified goods/ parts used for manufacture on products which may be used in a wind operated power plant

•

Small Hydro- No specific exemption for small hydro projects

October 2016

Bio Mass- Exemption from excise duty provided to all items of machinery, auxiliary equipment etc for setting up a project for generation of power or generation of compressed bio-gas using non-conventional materials, namely, agricultural, forestry, agro-industrial, industrial, municipal and urban waste, bio waste or poultry litter

•

Bio-fuel – Excise exemptions provided to bio-fuels (ethanol as well as bio-diesel) as well as its key inputs (such as molasses and palm stearin)

•

Electricity generated by renewable energy sources is generally exempt from electricity duty in most of the States10.

•

Exemption/ concessional rate have been provided under various State VAT legislations on sale of goods to be used for generation of renewable energy. For example: •

Tamil Nadu – Concessional rate of VAT of 5% available to renewable energy devices and spare parts other than few specified goods

•

Gujarat - Concessional rate of VAT of 5% available to renewable energy devices and components and parts thereof

•

Rajasthan – Exemption provided to solar energy equipment and plant and Machinery including parts thereof, used in generation of Electricity, from- (a) Solar Energy;(b) Wind Power

•

Further, lower rate of VAT has also been provided on various inputs for bio-fuel sector in few States Various other exemptions/ concessions under both State as well as Central Indirect Tax legislations – exemptions under Entry tax law, incentives under State industrial policy etc

GST regime GST is based on the foundation of providing a one tax regime, seamless credit chain (through cross utilization of credits inter se goods and services) and reduction of exemptions. However, electricity is expected to continue to be an exempted product under GST regime. Considering the same, for renewable energy projects, the GST paid on inputs, capital goods and services would continue to be a cost. Therefore, if exemptions/ concessional rates are pruned under the GST regime, there would be a substantial increase in the cost of procurements. Since electricity duty would be outside GST, the GST paid on such procurements would continue to be a cost and would have an adverse impact on the cost of renewable energy. Similarly, taxes charged on bio-fuel would become a cost to OMCs (as they would be outside GST). Further, it is imperative to note that the adverse impact of tax cost would vary from project to project (as well as from one source of renewable energy to another) based on the procurement pattern (import vs. domestic purchase) as well as extent of exemptions available currently (For eg – Solar has more exemptions currently than Small Hydro plants. Hence, impact on Solar would be more adverse that on Small Hydro plants). For the purpose of computation, it has been assumed that all exemptions available currently would be removed and the BCD rate would continue to remain as in current regime (whether concessional or otherwise).

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2. Increase in tax rates Current regime Currently, different tax rates are applicable depending on the nature of procurement. For example, generic Excise duty rate is 12.5%, Service tax is 14.5% and VAT is 5%-14%. All such rates could be reduced/ exempted basis the actual nature of goods and purpose. GST regime GST aims to provide a single rate for goods and services. The Select Committee has recommended that the standard GST rate should not exceed 20%. For the purpose of computation, it has been assumed a CGST rate of 10%, SGST rate of 10% and IGST rate of 20% (for inter-State transactions). Further, an additional tax 1% may be levied for 2 years on inter-State sales/ purchases. A GST rate of 20% would also be substantially higher than the rates applicable currently on procurement of goods and services in the renewable energy sector. For example: •

Concessional rates (both excise duty as well as VAT) are available on procurement of goods within India. GST rate of 20% would be substantially higher than the taxes which are paid on domestic procurement of goods currently

•

Service tax is paid at 14.5% currently while GST would be applicable at 20%. This clearly shows a significant increase in tax costs which would be paid on procurement of services such as installation, transportation etc

•

Operation and Maintenance – Both VAT and service tax is applicable currently on operation and maintenance activities. However, concessional rate and valuation provisions are provided for under VAT as well as Service tax laws. Accordingly, the effective tax generally is lower than the proposed GST rate of 20%

In such case, IGST at 20% would be applicable on inter-State procurements along with an additional tax of 1%. This showcases a substantial increase in tax costs as compared to the current regime which would directly impact the cost of renewable energy.

Key recommendations The Government has always strived to boost the renewable energy sector. This is also evident from the current Government policies and initiatives. Current tax concessions play an important role to make renewable energy competitive. Under GST, increase in tax cost for renewable energy sector could not only have a possible negative impact on cost of settingup renewable energy plants but also increase the working capital requirements for the renewable energy sector leading to higher financial as well as operating costs. Further, the renewable energy sector benefits every strata of the society (including various rural areas) and hence, any increase in tax costs would also have an adverse social impact. In line with the endeavour of the Government to promote the renewable energy sector and to ensure that there is not a substantial increase in the delivered cost of renewable energy, the following recommendations may be taken into account:

For renewable energy sector •

•

Hence, an increase in tax rate11 would have an adverse impact on the taxes which would be paid on procurements as the same would increase the tax cost burden for the renewable energy sector.

Removal of statutory forms Current regime Currently, inter-State procurements are liable to CST. A concessional rate of CST of 2% is provided against issuance of statutory form (Form C) in case the goods are to be used in generation or distribution of electricity. Hence, the tax cost on account of CST is limited to 2% in case of inter-State procurements for renewable energy projects.

•

• •

•

GST regime It is expected that statutory forms would be done away with in the GST regime. Hence, concessional rate of tax would not be available even if the goods are to be used in generation of distribution of electricity.

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•

Current tax exemptions provided to the renewable energy sector should be continued under the GST regime as well. In addition even the services rendered to a project owner for setting up and operation of renewable energy plant/ project should be exempt from levy of GST. This would ensure that there is no adverse impact on the procurements made for generation of renewable energy due to increase in tax costs Exemptions should be provided for all categories of goods supplied to a renewable energy project (whether meant used in setting up or are parts/ components of the plant or are used for O&M). If exemption is provided HSN classification wise, detailed HSN classification should be provided, to eliminate ambiguity. Sale of goods and services to renewable energy projects should be zero-rated, ie the vendors providing such goods and services at nil GST rate should be eligible to avail credit of the GST paid on inputs, capital goods and services used. Wherever, exemptions are not available, concessional rate of GST (both at Central and State level) should be applicable on goods and services used by renewable energy sector Currently, the VAT rate in respect of renewable energy sector vary from state to state. It is recommended that the SGST rate on such goods should be uniform across states under GST regime Currently, a lot of ancillary products (such as battery, transformers) meant for renewable energy projects are liable to taxes at normal rates. Under GST, it is recommended that all the goods used for setting up or operating a renewable energy project should be eligible for relevant exemptions. The project developer should be eligible to claim refund of GST paid (both at Central and State level) on goods and services used for setting up and operating renewable energy project.

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For renewable energy sector

For bio-fuel sector

•

Exemptions provided to goods used in bio-fuel production as well as on bio-diesel itself should continue and be zero rated

•

Exemptions should be provided for all categories of goods supplied to a renewable energy project (whether meant used in setting up or are parts/ components of the plant or are used for O&M). If exemption is provided HSN classification wise, detailed HSN classification should be provided, to eliminate ambiguity.

Wherever, exemption is not granted, a concessional rate of GST should be applicable on both goods and services used in bio-fuel sector as well as on bio-diesel itself

•

OMC should be eligible to take refund of taxes paid on bio-fuel considering that petrol/ diesel would be outside GST

•

Refund of unutilized credits should be available to bio-fuel manufacturers in case of inverted duty structure

•

Sale of goods and services to renewable energy projects should be zero-rated, ie the vendors providing such goods and services at nil GST rate should be eligible to avail credit of the GST paid on inputs, capital goods and services used.

•

Wherever, exemptions are not available, concessional rate of GST (both at Central and State level) should be applicable on goods and services used by renewable energy sector

•

Currently, the VAT rate in respect of renewable energy sector vary from state to state. It is recommended that the SGST rate on such goods should be uniform across states under GST regime

•

Currently, a lot of ancillary products (such as battery, transformers) meant for renewable energy projects are liable to taxes at normal rates. Under GST, it is recommended that all the goods used for setting up or operating a renewable energy project should be eligible for relevant exemptions.

•

The project developer should be eligible to claim refund of GST paid (both at Central and State level) on goods and services used for setting up and operating renewable energy project.

October 2016

6. Scope limitations •

This report only provides the impact on various renewable energy sectors.

•

Comments are based upon the assumptions stated in the report, CERC orders, discussions with MNRE officials and industry players, existing drafts available in the public domain and various discussions.

•

Only those renewable energy projects have been covered as mentioned above for which reliable information could be gathered.

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