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Volume 5 z No. 5 z March 2015

Domestic Drive

Demand creation imperative to the success of Make in India

Perspective

Spotlight

Technology Focus

Plus

Interview with Welspunâ&#x20AC;&#x2122;s Vineet Mittal

BoS & BoP for solar plants

Operations & maintenance

Budget 2015-16 fails to meet expectations . . 24 Punjabâ&#x20AC;&#x2122;s solar tender bid results . . . . . . . . . . 28 CLP expands its green portfolio . . . . . . . . . . 32

Renewables growth slows down in Gujarat . . 50

Volume No. 5 Issue No. 5

EDITORIAL

EDITORIAL PUBLISHING

The capacity addition plans for renewable energy have been ramped up significantly, to 100

Alok Brara

GW for solar power and 60 GW for wind over the next seven years. This, along with the

EDITOR Nandita S. Kochhar (Senior Editor, Copy)

EDITORIAL OPERATIONS

investment in high voltage evacuation infrastructure, implies that the demand potential for equipment like solar modules, wind turbines and generators, inverters, meters and high voltage electrical equipment is robust.

Mudita Mehta (Director)

Supported by the government’s flagship “Make in India” initiative, both domestic and glob-

Shyama Warner (Consultant)

al renewable energy equipment manufacturers are gearing up to invest in this space.

EDITORIAL Shreya Chakravertty (Sr. Subeditor) Nidhima Gambhir (Sr. Subeditor)

However, there remains a sense of cautious optimism among investors due to challenges related to demand sustainability, policy and regulatory uncertainties, availability of cheap finance, and duty and taxation structures.

Nilanjana Chakraborty (Subeditor)

While the government has set a target of 175 GW of capacity by 2022, there is no clarity on

Sugandha Khurana (Subeditor)

the implementation roadmap including the timelines, allocation procedures and financing

RESEARCH Senior Analyst: Dolly Khattar

models. Besides, the poor financial health of the state discoms is a cause of concern given that most of the power generated from renewable energy sources is sold to these discoms. Serious efforts need to be made to revive these utilities if they are to buy the renewable

Analysts: Meera Bhalla, Rahul Jain,

energy generated. Inadequate power transmission infrastructure is also a major hurdle in

Bhavya Laul, Shambhavi Sharan

such large capacity creation. Unless these issues are resolved, ensuring sustained

Associate: Mridula Pandey

demand will be difficult.

BUSINESS DEVELOPMENT

Policy and regulatory uncertainty is a further dampener in demand creation. The lack of a

Raman Dev Narang (Senior Vice-President)

clear, long-term framework has led to delays in project allocations, as has been the case in

Mohit Shrimal (Senior Manager)

the much-hyped solar project tenders in Tamil Nadu and Andhra Pradesh. Such instances

DESIGN Joybroto Dass (Art Director)

have created a negative sentiment among investors with regard to the states’ ability to carry out large-scale project allocations.

Jaison Jose (Graphic Designer)

On the capital front, while 100 per cent FDI through the automatic route is allowed for man-

ADMINISTRATION

ufacturing, obtaining cheap capital within the country is a challenge. Given that domestic

Jose James

CIRCULATION

manufacturers typically work on thin margins, operating on high interest rates is difficult. Innovative financing mechanisms are, therefore, needed to encourage entrepreneurs and companies to venture into manufacturing.

Sumita Kanjilal

PHOTOGRAPHY Pallee

The government must move expeditiously to address these issues and inject confidence among manufacturers.

PRINTING/PROCESSING IPP Ltd

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March 2015 ● Renewable Watch ● 3

CONTENTS

Mytrah Energy

Domestic drive

Strong player in the wind power segment

Demand creation imperative to the success of Make in India

Renewed focus

Technology focus

MNRE issues draft policies for geothermal and SHP

Operations & maintenanace

CONTENTS NEWS BRIEFS TRENDS AND DEVELOPMENTS Domestic drive: Demand creation imperative to the success of Make in India New beginning: RE-INVEST 2015 gives a fresh fillip to renewables Falling short: Budget 2015-16 fails to meet sector expectations Renewed focus: MNRE issues draft policies for geothermal and SHP Bid success: Punjab solar tender attracts major players Long-term benefits: Suzlon’s stake sale to free up capital for expansion COMPANIES CLP India: Expanding its green portfolio to minimise risks Mytrah Energy: Strong player in the wind power segment Interview with Anne McEntee: “We intend to maximise the efficiency of wind farms” PERSPECTIVE Investing in India: Exploring opportunities in renewables 4 ● Renewable Watch ● March 2015

16 21 24 26 28 30

Interview with Vineet Mittal: “Investor sentiment has changed for the better” Renewables roadmap: New initiatives and policies needed to tap resources

FINANCE Top lines tumble: Renewable energy firms report losses on 48 the back of higher costs STATE FOCUS Slowing down: Lack of policy initiatives hinder renewable energy growth in Gujarat PRODUCT RELEASE New products in the market

32 34 37

SPOTLIGHT: BoS & BoP FOR SOLAR PLANTS Market promise: Ambitious solar capacity addition target likely to boost BoS demand Cost cutbacks: Increasing focus on the downsizing of BoS capex Project economics: Benefits of BoP innovations for STE plants

54 58 60

CONTENTS

42 Interview with Vineet Mittal “Investor sentiment has changed for the better”

54 Spotlight BoS & BoP for solar plants

TECHNOLOGY FOCUS: OPERATIONS & MAINTENANCE Efficient upkeep: Importance of O&M in increasing plant life 62 Monitoring machinery: O&M challenges and solutions 64 in solar plants Optimising output: Strong focus on O&M to boost wind 68 plant efficiency UP AND COMING A promising start WORLD VIEW Planning for 2030: European Union finalises climate and energy targets PROJECT WATCH Progress update: Plants of 1 MW and above capacity

Manu Rishi Puri, Accenture Services Private Limited Amit Kumar, TERI University

79 79

DATA AND STATISTICS Key statistics: Renewable energy targets and achievements 80 REC trading on IEX and PXIL: Growth between 81 February 2014 and February 2015 EVENT WATCH Upcoming events

PHOTOGALLERY Sector snapshots

PEOPLE Dr Ajay Mathur, Bureau of Energy Efficiency D.V. Giri, Indian Wind Turbine Manufacturers Association

78 78

FORM IV Publisher: Alok Brara Printer: Alok Brara Owner: India Infrastructure Publishing Private Limited Editor: Alok Brara Printing Press: International Print-o-Pac Limited, C-4 to C-11, Hosiery Complex, Phase-II Extension, Noida 201305 Place of Publication: B-17, Qutab Institutional Area, New Delhi 110 016

March 2015 ● Renewable Watch ● 5

NEWS BRIEFS

National News Regulations

he Central Electricity Regulatory Commission (CERC) has issued a draft proposal to determine generic levellised tariffs for electricity generated from renewable energy sources in 2015-16. The net levellised tariffs for solar photovoltaic (PV) and solar thermal projects have been proposed as Rs 6.20 per kWh and Rs 10.80 per kWh respectively. The net levellised tariff for small-hydro power (SHP) projects in Uttarakhand, Himachal Pradesh and the northeastern states has been proposed as Rs 4.26 per kWh for capacities below 5 MW, and at Rs 3.61 per kWh for capacities from 5 MW to 25 MW. The net levellised tariff for SHP projects in the remaining states is Rs 5.02 per kWh for capacities below 5 MW and Rs 4.24 per kWh for capacities from 5 MW to 25 MW. The net levellised tariff for projects based on wind energy varies from Rs 3.67 per kWh to Rs 5.87 per kWh, depending on the wind zone in which the project is located. Further, tariffs for biogas gasifier power projects, biomass power projects and bagasse-based cogeneration projects have been proposed state-wise.

n a separate order, the CERC has proposed the benchmark capital cost norm for solar PV and solar thermal power projects applicable during 2015-16 and invited stakeholder comments on the same. The commission has proposed to fix Rs 58.73 million per MW as the total benchmark project cost for solar PV projects during 2015-16. Further, a benchmark capital cost of Rs 120 million per MW has been proposed for solar thermal projects during the same period. Parameters like the cost of PV modules, land, civil and general works, mounting structures, power conditioning units, as well as evacuation costs up to the interconnection point and pre-operative costs have been considered for calculating the revised capital costs of solar PV projects. Meanwhile, the capital cost of solar thermal projects has been proposed on the basis of the available cost data of parabolic trough technology.

he Karnataka Electricity Regulatory Commission (KERC) has revised the tariff for wind power projects from Rs 4.20 per kWh to Rs 4.50 per kWh. It will be applicable for all new wind power projects for which power purchase agreements (PPAs) have been signed on or after October 10, 2013 for a control period of five years from that date. The tariff revision has taken place after 6 ● Renewable Watch ● March 2015

the hearing of a petition filed by the Indian Wind Turbine Manufacturers Association, during which the Appellate Tribunal for Electricity found some irregularities in KERC’s tariff calculations. Subsequently, the tribunal had directed the commission to revise the tariff.

n a separate order, KERC has amended the wheeling and banking norms for power generated from renewable energy sources. The commission has directed all electricity supply companies (ESCOMs) in the state to delete the “wind year” clause from standard wheeling and banking agreements. For projects based on non-renewable energy certificate routes, the ESCOMs will pay 85 per cent of the latest generic tariffs for unutilised banked energy at the end of the financial year, provided that no transmission, wheeling or open access charges have been levied on the quantum of the unutilised energy that is deemed to have been purchased by the ESCOM. For captive projects, the ESCOMs will pay the average pooled purchase cost for unutilised banked energy at the end of the year, provided that no transmission, wheeling or open access charges have been levied on the quantum of the unutilised energy that is deemed to have been purchased by the ESCOM.

he Rajasthan Electricity Regulatory Commission has finalised its net metering policy for solar rooftop and small solar grid-interactive systems through an order dated February 26, 2015. As per the order, all electricity consumers in the distribution licensee’s supply area will be eligible to set up rooftop solar plants. The cumulative rooftop solar capacity connected to a particular distribution transformer should not exceed 30 per cent of the distribution transformer’s capacity. In addition, the maximum rooftop solar PV plant capacity to be installed at any eligible consumer premises should not be more than 80 per cent of the consumer’s sanctioned connected load or contract demand. The minimum and maximum rooftop solar plant capacities have been fixed at 1 kWp and 1 MWp respectively. The excess energy injected into the grid will be paid at a feed-in tariff determined by the state commission, provided at least 50 units of net electricity are injected at the end of the billing cycle.

he Punjab State Electricity Regulatory Commission has issued a consultation paper for determining renewable purchase obligation (RPO) targets from 2015-16 onwards. The commission has proposed a non-solar RPO of 3.9 per cent and a solar RPO of 1 per cent for 2015-16. Thereafter, the non-solar RPO is proposed to grow by 0.1 percentage point each year till 2018-19, while solar RPOs for 2016-17, 2017-18 and 2018-19 have been proposed to be fixed at 1.3 per cent, 1.8 per cent and 2.2 per cent respectively. A total RPO target of 7 per cent has been proposed for 2019-20, with the solar and non-solar components standing at 2.5 per cent and 4.5 per cent respectively. Further, the commission has proposed two amendments to the state’s RPO regulations. The definition of an obligated entity has been expanded to include the

NEWS BRIEFS state’s distribution licensees, captive users and open access consumers of electricity. In order to ensure RPO compliance, the commission has proposed that any shortfall will have to be fulfilled by the distribution licensee and the expenditure so incurred will be recovered from defaulters using suitable measures.

on solar water heater systems has been removed completely. Excise duty on round copper wire and tin alloys for use in the manufacture of solar PV ribbon (used in solar PV cells) has also been removed. However, there is no revision in the outlay for the Green Energy Corridors project.

he Bihar Electricity Regulatory Commission has issued a draft policy for promoting net metering-based rooftop solar grid-connected systems in the state. According to the policy, all power consumers within the discom’s area of supply will be eligible to set up rooftop solar plants. The minimum and maximum capacities of a rooftop solar plant have been proposed to be fixed at 1 kWp and 1 MWp respectively. The power procured from such systems will qualify for compliance with the discom’s solar purchase obligation.

he Uttar Pradesh Electricity Regulatory Commission has issued a draft policy for rooftop solar generation and net metering in the state. As per the policy, all electricity consumers in the distribution licensee’s supply area will be eligible to set up rooftop solar plants, which can be based either on net metering or gross metering. However, consumers claiming the accelerated depreciation benefit for such systems will only be eligible for installing net metering systems. In addition, the maximum peak capacity of the grid-connected rooftop solar system installed by any eligible consumer cannot exceed 90 per cent of the consumer’s contract demand. The cost of the net meters, meanwhile, is to be borne by the consumer. The energy procured by the distribution licensee from such systems will qualify to be part of its solar purchase obligation.

he Assam Electricity Regulatory Commission has issued draft amendments to the existing regulations on RPOs that were notified in 2010. The order specifies the RPO targets for the period between 2015-16 and 2019-20. For 2015-16, the RPO target has been fixed at 7.25 per cent, with the solar and non-solar targets being 0.5 per cent and 6.75 per cent respectively. After the period between 2015-16 and 2018-19, the non-solar RPO has been fixed at 6.75 per cent while the solar RPO is to increase by 0.25 per cent each year. For 2019-20, the total RPO target has been fixed at 8.5 per cent, with the solar and non-solar RPOs being 1.5 per cent and 7 per cent respectively.

Policies and programmes

he Union Budget 2015-16 has revised the renewable energy capacity target to 175 GW by 2022, with 100 GW coming from solar, 60 GW from wind, 10 GW from biomass and 5 GW from SHP projects. The budgetary allocation for the Ministry of New and Renewable Energy (MNRE) has been increased from Rs 50 billion in the Union Budget 2014-15 to Rs 62 billion this year. The coal cess, which will go towards the National Clean Energy Fund, has been doubled to Rs 200 per tonne for mined and imported coal. Excise duty on inputs for use in the manufacture of LED lamps has been reduced from 12 per cent to 6 per cent while that 8 ● Renewable Watch ● March 2015

he central government has approved the setting up of 15,000 MW of grid-connected solar PV power projects under the National Solar Mission (NSM). This will be done through NTPC Vidyut Vyapar Nigam Limited in three tranches. The first tranche of 3,000 MW will be set up under a bundling mechanism, wherein solar power will be bundled with unallocated coal-based thermal power at fixed levellised tariffs. The second tranche of 5,000 MW will be developed with government support. The remaining 7,000 MW under Tranche lll, meanwhile, will be set up without any financial support from the government. Out of the 3,000 MW under the bundling scheme, 1,000 MW will be set up on land that has already been identified in Andhra Pradesh. The remaining 2,000 MW capacity under the first tranche will be allotted to other interested states that come forward. Tenders allotting specific capacity to each state are likely to be issued soon.

he MNRE has issued revised draft guidelines for setting up 2,000 MW of solar power projects under the state-specific viability gap funding (VGF) scheme as part of Phase II, Batch III of the NSM. The Solar Energy Corporation of India (SECI) will be the implementing agency. Further, 250 MW of capacity has been reserved for the domestic content requirement (DCR) category. Solar power plants under this scheme will be put up in the 25 solar parks being developed by the ministry. Bidders will be selected through an e-bidding process to procure solar power at a predetermined fixed tariff. The tariff has been fixed at Rs 5.43 per kWh for the initial year, with an annual escalation of Re 0.05 per kWh for the next 20 years, resulting in the maximum allowable tariff of Rs 6.43 per kWh at the end of the 21st year and the remaining at that level thereafter. The upper limit for VGF has been fixed at Rs 10 million per MW for the open category and Rs 13.1 million per MW for the DCR category. The selection of projects will be technology agnostic, wherein crystalline silicon or thin film or concentrating PV projects, with or without trackers, can be installed. The minimum project size to be developed under the scheme is 10 MW.

he Indian Renewable Energy Development Agency (IREDA) has launched a new scheme for the direct discounting of the MNRE’s capital subsidy, payable to accredited channel partners and state nodal agencies for the installation of solar water heating systems. The MNRE-accredited channel partners that have already submitted a claim for the release of capital subsidy at IREDA will be eligible under this scheme, and the agency will provide them up to 80 per cent of their pending subsidy amounts. The channel partners could also opt for a minimum loan assistance of Rs 2 million. From the subsidy receipts, the MNRE will adjust an interest rate of 10.8 per cent per annum. IREDA has also launched a scheme to pro-

NEWS BRIEFS vide bridge loans against generation-based incentives claims, which are payable to wind and solar power project developers.

he MNRE has issued a request for proposal (RfP) for conducting a study on the socio-economic and environmental impact of biomass power projects. The ministry has invited bids under the two-bid system, which comprises a techno-commercial bid and a price bid from consultancy organisations or firms that have experience in renewable energy (especially biomass). The key objective of the study will be to assess and quantify the socio-economic and environmental effects of biomass-based power projects, particularly grid-connected projects above 1 MW, on the rural economy and environment. The project will have to be carried out within six months of the signing of the agreement.

he Ministry of Shipping has launched a scheme to encourage major ports to undertake green initiatives. Under the scheme, the government will provide a financial grant of up to Rs 250 million to all major ports for undertaking green projects such as wastewater treatment, renewable energy generation, biodiesel use and provision of shore power. Nine major ports have already committed to generating 150 MW of non-conventional energy through solar and wind power in the next five years. This includes 25 MW by the Jawaharlal Nehru Port Trust and 20 MW each by Paradip port, Kamarajar port and Kandla port.

he Punjab Energy Development Agency (PEDA) has announced the techno-commercial bid results of its 250 MW solar tender. The highest number of projects was allotted to Crocus Infra Realty (part of the Indiabulls Group), which has secured three projects with a cumulative capacity of 44 MW at tariffs ranging from Rs 7.45 to Rs 7.56 per kWh. Acme Solar has secured two projects of 24 MW and 50 MW at Rs 7.16 and Rs 7.06 per kWh respectively. Further, Solairedirect has won two projects of 30 MW and 24 MW capacities at Rs 6.88 per kWh, and Azure Power has secured two projects of 24 MW and 4 MW capacities at Rs 7.19 and Rs 7.33 per kWh respectively. Welspun Solar Punjab Private Limited has won a 4 MW project at Rs 7.71 per kWh. Punjab State Power Corporation Limited will sign PPAs with the successful bidders for a period of 25 years from the date of project commissioning.

he Uttar Pradesh New and Renewable Energy Development Agency has issued an RfP for setting up 215 MW of solar power projects in the state. The minimum and maximum project size for which an individual developer can bid has been fixed at 5 MW and 100 MW respectively. Bidders will also have to submit an earnest money deposit of Rs 3 million per MW. The commercial operations date for projects with a capacity of up to 25 MW has been fixed at 13 months and for projects above 25 MW at 18 months from the date of signing of the PPA. Further, project developers will have to ensure that the land required for project development, at 1.5 hectares per MW, is in clear possession. Uttar Pradesh Power

10 ● Renewable Watch ● March 2015

Corporation Limited will sign PPAs with successful bidders for a period of 12 years, which can be further extended by 13 years. The bids will be opened on April 10, 2015.

he Telangana government is reportedly planning to invite bids for setting up 1,000 MW of solar PV power projects through a reverse bidding process. The projects allotted under the tender will be commissioned by March 2016. The Telangana government has set a target of developing 5,000 MW of solar energy projects over the next five years.

he Tamil Nadu government has reportedly signed PPAs for 200 MW of solar projects in the state. The state genco is in the process of signing PPAs for 3,000 MW of solar power by end2015, with more than 200 firms showing interest in the same.

Projects

he SECI has signed an MoU with government-owned hydropower company THDC India Limited (THDCIL) for developing 250 MW of grid-connected solar power projects. While THDCIL will own the projects, SECI will execute them on a turnkey basis.

eliance Power has signed an MoU with the Rajasthan government for developing 6,000 MW of solar parks in the state by 2025. Under the agreement, the company will invest Rs 500 billion for the project besides developing a power transmission network and creating the basic infrastructure in these solar energy parks.

he Andhra Pradesh government has signed MoUs with various developers for setting up 4,000 MW of wind power and 200 MW of hybrid power projects. While the details of the agreements have not been fully disclosed, Mytrah Energy has reportedly received a contract for setting up a 220 MW wind energy project. Located in Kurnool district, the project is expected to be commissioned by mid-2016.

nox Wind has received an engineering, procurement and construction (EPC) contract from NHPC Limited for setting up a 50 MW wind power project at Lakmana in Jaisalmer district of Rajasthan. Inox Wind will also be responsible for the comprehensive operations and maintenance (O&M) of the project for a period of 10 years. Meanwhile, the company has signed an MoU with the Gujarat government for setting up 700 MW of wind power capacity in the state. Under the agreement, the company will invest Rs 45 billion to set up wind projects in the state’s Rajkot, Amreli and Kutch districts.

EDA has issued tenders for the design, manufacture, supply, installation, testing and commissioning of a 4 MWp solar PV plant at Mandvi village located in Sangrur district of Punjab. The project will also entail O&M for a period of 10 years. The earnest money deposit for the tender has been fixed at Rs 4 million. Bidding for the project will be carried out online.

NEWS BRIEFS

he New and Renewable Energy Development Corporation of Andhra Pradesh has invited bids for the design, manufacture, supply, storage at site, installation, testing, and commissioning of a 1 MWp gridconnected canal-top solar PV power project on the Losari main canal distributor located in West Godavari district. The scope of work also includes the supply of equipment, associated civil works on an EPC basis, and the maintenance of the system for 10 years. The estimated cost of the project is Rs 100 million and it is expected to be commissioned within eight months from the date of award.

unEdison, which has recently ventured into the Indian wind power segment, is planning to develop 3,000 MW of wind power projects in the country over the next few years. The company will add the targeted capacity through acquisitions as well as by developing greenfield projects. Meanwhile, the company has committed to developing 15,200 MW of solar and wind projects by 2022.

S-based First Solar is planning to set up dedicated solar power plants in India for industries and commercial organisations that are interested in meeting part of their electricity requirement through renewable energy sources and is reportedly in talks with a number of commercial establishments for the same. The company is planning to set up 5,000 MW of green energy projects in India by 2019, and is currently executing 200 MW of solar power projects in Andhra Pradesh and Telangana.

umeet Industries has decided to set up a 10.5 MW wind energy plant comprising five turbines with a capacity of 2.1 MW each. The plant, which is expected to be commissioned by July 2015, will entail an investment of Rs 775.1 million, of which IDBI Bank has already sanctioned Rs 577.5 million. It is expected to generate 27 MUs of electricity at a cost of Rs 1.30 per unit after six years of operations.

adhya Pradesh-based business conglomerate Aakriti Group is planning to develop solar and biomass power projects with a cumulative capacity of 20 MW in the Narmada belt of the state as part of its efforts to diversify into the renewable energy sector. The company intends to use the sugarcane waste generated at its four sugar factories for the biomass power plant.

urkey-based Seul Holding is planning to build a 20 MW solar plant in India. While the project’s final details are yet to be decided, clear solar policy guidelines are the key motivation behind the Turkish firm’s entry into the sector.

Financings

ingapore-based Sembcorp Industries Limited, through its subsidiary Sembcorp Renewables, has acquired a 60 per cent stake in Green Infra Limited (GIL) for $227 million. The former acquired the shares from private equity firms IDFC Private Equity [PE] Fund II and IDFC PE Fund III, which were the majority shareholders in GIL. While IDFC PE Fund II will completely exit the compa-

12 ● Renewable Watch ● March 2015

ny, IDFC PE Fund III will continue to hold 40 per cent share in GIL with a secured option to exit in the future. The acquisition marks the entry of Sembcorp into the Indian renewable energy sector.

es Bank is planning to launch 10-year green infrastructure bonds worth Rs 5 billion to fund infrastructure projects in renewable energy and energy efficiency. The bank has committed to developing green energy projects with a cumulative capacity of 5,000 MW and the funds raised through the bond issue will be used for the purpose.

he Foreign Investment Promotion Board has granted approval to Solar Arise Indian Projects Private Limited and BLP Wind Assets Holdings for receiving foreign direct investment (FDI). The government has approved an FDI of Rs 2.1 billion for Solar Arise to make downstream investments in various special purpose vehicles for developing solar power projects. Further, the government has approved an FDI of Rs 3.71 billion for BLP Wind Assets for setting up a joint venture firm to make investments in the renewable energy sector.

ytrah Energy has signed a long-term loan agreement with a leading Indian financial institution for Rs 8.52 billion. The funds will be utilised as long-term project finance debt for a 150 MW wind power project, which is expected to be commissioned by February 2016. The company has an installed capacity of 543 MW spread across six states, and a project pipeline of 3,500 MW. It has signed an MoU with the Andhra Pradesh government for setting up a 220 MW wind power project in Kurnool district, which is expected to be commissioned by June 2016.

rient Green Power Limited has sold its entire stake in its non-operative subsidiary, Theta Wind Energy Private Limited, to Andhra Pradesh-based Axis Energy. Theta Wind Energy has a licence for setting up a 200-300 MW wind power project in Andhra Pradesh.

nox Wind is reportedly planning to launch an initial public offering (IPO) valued at around Rs 10 billion. The company’s IPO will consist of around Rs 7 billion by way of a fresh issue of equity shares, along with the sale of Rs 3 billion worth of shares by its promoter, Gujarat Fluorochemicals. Axis Capital, DSP Merrill Lynch, Edelweiss and Yes Bank are reportedly serving as merchant bankers for the IPO.

lobal PE fund Actis Capital is planning to provide $230 million to wind energy company Ostro Energy for investing in the Indian renewable energy sector. Ostro Energy has already invested in a 50.4 MW under-construction wind energy project in Jaisalmer, Rajasthan, which is expected to be commissioned by June 2015. Ostro Energy is the fifth global energy platform that Actis has created, following Globeleq Meso America in Central America, Zuma Energia in Mexico, Aela Energia in Chile and Atlantic Renovaveis in Brazil. ■

NEWS BRIEFS

International News S

witzerland-based energy firm Alpiq has acquired solar photovoltaic (PV) and energy storage solutions provider Helion Solar Group, and merged it with the Alpiq Group. With the acquisition, Alpiq has ventured into the renewable energy and energy efficiency markets. Helion Solar installs PV systems in single-family homes, large-scale systems and large power plants. Therefore, Alpiq believes that the company’s acquisition will enable it to integrate its energy services into smart buildings in the future.

panel set up by Japan’s Ministry for Enterprise, Trade and Industry (METI) has proposed a 16 per cent cut in the feed-in tariff (FiT). The panel has suggested a reduction in FiT from Yen 32 per kWh to Yen 29 per kWh, and further to Yen 27 per kWh. This change followed METI asking for a review of the FiT and certification process. It was reported that several developers were delaying setting up their projects despite getting approval in order to benefit from the declining module prices. The ministry will now review the proposed changes in the FiT.

ment will offer a capacity of 150 MW with the maximum tariff set at Euro 0.11 per kWh. The decision to opt for a competitive bidding process is in line with the country’s revised Renewable Energy Sources Act, which states that incentives for renewable power should be determined by the market rather than by the administration. Through this tender, the government intends to carry out a pilot for utility-scale solar projects before introducing it for other renewable energy segments in 2017.

sraeli microinverter manufacturer SolarEdge has submitted an application for its initial public offering (IPO) on the NASDAQ Stock Exchange, USA. SolarEdge is planning to raise around $125 million through the IPO. The company intends to use the funds to enter new markets such as energy storage and smart grids, and take advantage of the additional financial flexibility.

rina Solar has signed a debt financing agreement with two private equity (PE) firms, Jiuzhou Investment and PingAn Trust, for developing up to 1 GW of solar PV projects in China over the next three years. The PE firms will provide convertible debt for the projects. As part of the deal, the firms will have the option to acquire stakes in Trina Solar’s project vehicle, Jiangsu Trina Solar Power Investment & Development.

he Sindh government in Pakistan has signed an agreement with Vestas for developing pilot wind projects in the country. As per the agreement, Vestas will provide engineering and technical services to the government while carrying out developmental activities for a 100 MW wind farm, which can be further expanded to 300 MW. In addition, Vestas will contribute equity and arrange debt financing for the project.

he Government of Nepal has secured $130 million from the International Development Association of the World Bank Group, for the development of solar power projects and grid infrastructure in the country. As per the agreement, the government will facilitate the establishment of solar PV projects with an aggregate capacity of 25 MW in 2015. The funds will also be used to reduce systemic electricity distribution losses, currently estimated at 25 per cent of the generation, to 10 per cent by the end of the project.

ermany-based utility E.ON has sold 100 per cent stake in its Italian solar PV portfolio to a private investment fund, Fondi Italiani per le Infrastrutture, for an undisclosed amount. The company has sold seven power projects aggregating 49 MW, of which 70 per cent are located in Sardinia. Fondi Italiani per le Infrastrutture holds a portfolio of power projects aggregating 89 MW of capacity in Italy through its subsidiary, Holding Fotovoltaica. ermany’s Bundesnetzagentur (Federal Network Agency) has issued the details of its first ever reverse competitive bidding process for the allocation of large-scale ground-mounted solar PV projects. The government will allocate solar capacity through three rounds of bidding each year. In the first round, the govern-

14 ● Renewable Watch ● March 2015

rance-based STEAG New Energies has awarded a contract to Nordex for the supply of turbines for its 27 MW Onze Muids wind project in France. As per the contract, Nordex will supply nine units of its N117/3000 turbines for the project and provide maintenance services for them for 15 years. STEAG acquired the Onze Muids project from the developer, Volkswind. The 27 MW wind project is scheduled to become operational in early 2016. outh Africa-based renewable energy company Mainstream Renewable Power has awarded a contract worth $770 million to Siemens for supplying wind turbines for three projects in the country, aggregating 360 MW of capacity. Construction work for the three wind projects will commence soon. Mainstream is planning to build a $1.9 billion portfolio of solar and wind power projects in Africa.

he Brazilian government has received proposals for setting up 475 wind energy projects with an aggregate capacity of around 11.45 GW for the A-3 auction scheduled for July 24, 2015. The government will soon publish a final list of qualified projects and issue details regarding the auction rules. The final projects will sell power under a 20-year power purchase agreement and

NEWS BRIEFS will have to be operationalised by January 1, 2018.

Germany, juwi solar will be able to import high quality modules without paying any trade duties.

he Canada Border Services Agency (CBSA) has imposed provisional duties of 9.1-286.1 per cent on Chinese exporters of certain PV modules and laminates. The Chinese manufacturers include JA Solar, Hanwha SolarOne, JinkoSolar and Canadian Solar. The CBSA has levied a provisional duty of 9.14 per cent on Renesola, 27.7 per cent on Wuxi Taichen Machinery and Equipment and 50.6 per cent on Hefei JA Solar Technology. A duty of over 100 per cent has been imposed on all other manufacturers. The CBSA will provide additional details on the ongoing investigation against the dumping of PV modules in the Canadian market by end-March 2015.

orthland Power, Inc. has raised $231 million through the issuance of 14.43 million common shares at a price of $16 per share. The underwriters have exercised their overallotment option in full. The company has also issued 3.12 million common shares through a private placement. Northland intends to use the proceeds of the offering, net of the underwriters’ fees and the proceeds of the private placement to fund a portion of Northland’s investments in the Nordsee One project and the Grand Bend wind project in Ontario, to replenish working capital and for general corporate purposes.

inkoSolar has secured funds of $479 million under a five-year deal from the China Minsheng Bank. JinkoSolar intends to use the funds for expanding its downstream business and strengthening its manufacturing operations. The funds will also be used for project financing, mergers and acquisitions, and supply chain financing. Under the financing arrangement, China Minsheng Bank will provide credit for JinkoSolar’s overseas expansion plans, including foreign currency cash reserves and working capital expenditure.

harp is reportedly planning to sell its solar business in order to raise capital to improve its capital structure. Although the company remains a dominant player in the Japanese PV market, its profitability has been affected severely on account of the depreciation of the yen.

he European Commission has proposed the withdrawal of the minimum price agreement with Canadian Solar, ET Solar and Renesola, citing breaches of the agreement. The breaches include provision of additional benefits to customers, breach of import volumes, and use of original equipment manufacturers. Earlier, the European Union and the Chinese government had agreed to set a minimum price at which Chinese exporters would sell their equipment in European countries. With the withdrawal of the agreement, the three manufacturers will have to pay anti-dumping duty on solar equipment sold in these countries.

hina-based SPI Solar has secured a credit line of $1.6 billion from Chinese banks, including state-owned Industrial and Commercial Bank of China, China Construction Bank, Suzhou Bank and China Minsheng Bank. While China Construction Bank provided a debt facility of $319 million, China Minsheng Bank provided financial support of $1.1 billion and Suzhou Bank offered a credit line of $160 million to SPI Solar.

S-based solar energy company juwi solar has signed a 75 MW supply agreement with South Korea’s Hanwha Q Cells. Under the agreement, Hanwha Q Cells will deliver and install solar modules for juwi’s US-based projects. Since Hanwha Q Cells has its technology and innovation headquarters in

S-based solar companies First Solar and SunPower have formed a joint yieldco, 8point3 Energy Partners, which will own and operate a portfolio of solar power projects. The two companies have filed an application with the Securities and Exchange Commission for the yieldco’s IPO. The company will offer Class A shares with limited partner interest. The shares of the yieldco will be listed on the NASDAQ Global Market. The joint venture partners have appointed Goldman Sachs and Citigroup as the lead managers for the IPO.

he Bulgarian government has decided to withdraw preferential tariffs for new renewable energy installations. However, existing renewable energy projects will continue to receive incentives for their remaining operational life. The country has already met its green power target of 16 per cent in the total energy mix in 2013, much ahead of the deadline of 2020.

estas Wind Systems has raised Euro 500 million through the issuance of green bonds with a tenor of seven years. The bond issue has a coupon of 2.75 per cent and will mature in 2022. Vestas intends to use the net proceeds from the transaction for general financing and corporate purposes. The move is aimed at diversifying the company’s funding base and extending its average debt maturity profile.

ermany-based CPC Germania has awarded Vestas a contract to supply wind turbines for the 50 MW Hüselitz project. As per the agreement, CPC Germania will supply and install 15 units of its V112-3.3 MW turbine and provide operations and maintenance services for the project. The delivery of the turbines is expected to begin in the third quarter of 2015, and the project is expected to be commissioned by end-2015.

oogle has invested $300 million in SolarCity’s 750 million residential PV fund. Earlier, in 2011, the company had provided a capital of $280 million for the fund. The funds will help SolarCity improve its presence in 15 states in the US and cater to around 25,000 households. With this, Google will be able to claim federal tax benefits amounting to 30 per cent of the solar project’s costs. ■ March 2015 ● Renewable Watch ● 15

T R E N D S & D E V E LO P M E N T S

Domestic Drive Demand creation imperative to the success of Make in India By Dolly Khattar

s the “Make in India” chorus gets louder by the day, an increase can be seen in the number of companies announcing local production plans. Global conglomerates, ranging from consumer electronics majors like Samsung, Sony and Panasonic to automobile makers like BMW, have lined up investments to expand their local manufacturing bases. They are attempting to supply to not only the domestic market, but also neighbouring countries. The renewable energy sector is among the frontrunners as far as the interest generated by the Make in India initiative is concerned. The government’s strong emphasis on the development of renew-

able energy, especially wind and solar, is gaining the attention of equipment providers and technology specialists across the world, and encouraging them to invest in manufacturing in India. A large number of companies have announced their plans for local manufacturing over the past year. This includes foreign players like SunEdison, Gamesa, GE, Canadian Solar, Meyer Burger and Trina Solar, as well as domestic companies like Tata Power Solar, Vikram Solar and Gautam Solar Private Limited. This enthusiasm to invest in the Indian market is being backed by the government’s rigorous efforts to enhance the

country’s renewable energy capacity. There have been several positive developments over the past year, which have changed the mindset of investors who previously had strong reservations about investing in the sector. These include the revival of the accelerated depreciation benefit, anti-dumping duty removal, the announcement of a 100 GW solar target and a 60 GW wind target by 2022, the launch of the solar parks scheme, and the initiation of the process of drafting a separate renewable energy law. Industry experts believe that swift measures need to be taken to retain this interest. The long-pending issues of the renewable energy sector need to be resolved, some of which relate to the lack of project continuum in solar power projects, lack of clarity on the continuation of various wind power project incentives, and the strict enforcement of renewable purchase obligations. Other hurdles include the undue gap between planning and implementation (such as with the Green Energy Corridors project, which is essential if the target of 175 GW of capacity has to be met); decision-making delays; flawed tax and import duty structures (which have placed domestic manufacturers at a disadvantage with international peers); and high financing costs. The basic factors driving both domestic and global investments in manufacturing are demand, productivity (which includes the need for a skilled workforce), research and development (R&D) and advanced technologies, and policy and regulatory frameworks. The domestic renewable energy equipment manufacturing industry is currently weak on all these fronts.

16 ● Renewable Watch ● March 2015

T R E N D S & D E V E LO P M E N T S

Domestic manufacturing plans of select players Company

Plans

SunEdison

The company has signed an MoU with Adani Enterprises to establish a joint venture (JV) to build a vertically integrated solar PV manufacturing facility in India, entailing an investment of around $4 billion. The facility will be constructed in Mundra, Gujarat, over the next three to four years. It will vertically integrate all aspects of solar panel production on-site, including polysilicon refining, and ingot, wafer, cell and panel production, along with an extended supply chain for raw materials and consumables.

Canadian Solar

It is reportedly in talks for a possible takeover of Hyderabad-based Solar Semiconductor.

Meyer Burger

Although the investment details have not been disclosed, the company is reportedly very bullish on the Indian solar market and is exploring opportunities worth billions of dollars.

Trina Solar

It is considering setting up a manufacturing facility in India over the next few years, not only to cater to the Indian market but also to export to other countries.

Gamesa

The company plans to invest around Euro 100 million over the next five years to strengthen its manufacturing capacity in India.

Vikram Solar

It is considering the expansion of its module manufacturing capacity to reach 600 MW by the fourth quarter of 2015. It also plans to form a JV to establish its first solar cell production facility with a nameplate capacity of 250 MW. This plant is being planned for the first quarter of 2016.

Gautam Solar

It has announced the setting up of a dedicated in-house solar panel manufacturing factory at Haridwar. The facility will use German technology to develop,

Private Limited

manufacture and deliver solar energy products and solutions in India.

Sources: Media reports; company releases

Demand creation There should be adequate demand, either domestic or export, to absorb the local production of renewable energy equipment in the country. For instance, India has the capacity to manufacture 10 GW of wind turbines per year, while the size of the Indian wind market is just 2-2.5 GW per annum. The majority of the remaining capacity goes towards exports, but a significant proportion still lies unutilised. While wind power equipment manufacturing is still an established industry, the domestic solar manufacturing segment has been in a grim state since the global glut in the solar market. Over the past three to four years, India has been installing 800-900 MW of capacity per annum against a domestic annual production capacity of 2,000 MW. More importantly, 70 per cent of this capacity has been set up using imported equipment, implying that only 20-30 per cent of the domestic capacity has been used over the past few years. A similar situation exists in the country’s power sector. In the case of power generation equipment, India has over 30 GW of annual production capacity. However, the overall utilisation in the past few

years has only been about 10 GW. In this backdrop, it is essential for a higher demand to be generated in order to make economic sense for manufacturers to invest in capacity building and addition. Moreover, having a tall target is not enough. How can fresh investments be expected in manufacturing if investors cannot be assured of stable demand in the future? To ensure that this is the case, the industry will require a policy that is consistent over the long term.

Productivity enhancement A skilled workforce is key for meeting the government’s targets as well as to innovate, carry out R&D, and implement new technologies. The Economic Survey 2014-15 has stated that as per the Labour Bureau Report 2014, the skilled workforce in India is currently only 2 per cent, which is much lower as compared to that in other developing countries. As per the report, the number of persons aged 15 years or above who have received or are receiving skills education is merely 6.8 per cent. The survey also stated that as per the

National Skill Development Corporation, there had been a need for 120 million skilled people in the non-farm sector for 2013-14. The dearth of formal vocational education, high rate of school dropouts, inadequate skills training capacity, negative perception towards skills development, and lack of industry-ready skills even in professional courses have been the major reasons for the poor skill levels of India’s workforce. Some recent initiatives that aim to enhance access, equality, quality and innovations in education are the Rashtriya Uchchatar Shiksha Abhiyan, the Technical Education Quality Improvement Programme, and the National Skills Qualification Framework. A dedicated Department of Skill Development and Entrepreneurship has been created under the Ministry of Skill Development, Entrepreneurship, Youth Affairs and Sports to bring a sharper focus on this area. The Deen Dayal Upadhyaya Grameen Kaushalya Yojana for poor rural youth and the Nai Manzil initiative for the education and skills development of minority dropouts have also been set up. However, all these programmes will take time to generate results, so the private sector will also need to take action to March 2015 ● Renewable Watch ● 17

T R E N D S & D E V E LO P M E N T S

“

Industry views

”

The Make in India initiative was a key highlight of the recently held RE-INVEST 2015 summit. The following are the highlights from various sessions that focused on the initiative...

technologies abroad or the development of in-house facilities for R&D. Funds should be provided for acquiring or developing new technologies at concessional rates.

Ajay Goel, CEO, Tata Power Solar We want to take the Make in India programme one step further to “Innovate in India”. We need to not only be competitive with what is mainstream in the solar segment, but also go beyond and innovate. This will give us an opportunity to create products that are unique to the Indian market and allow us to leverage the human capital available in the country. It will also allow us to leapfrog China, which has been able to achieve what it has by driving economies of scale. We need to get better products at lower costs to surpass China.

Ramesh Kymal, Managing Director, Gamesa India has the capacity to manufacture 10 GW of wind turbines a year. But the size of the Indian wind market is just 2-2.5 GW today. To absorb local production in the country, there should be adequate demand. For this, we require a consistent, long-term policy, which is missing at present. This is essential for ensuring that investors are able to fully evaluate their returns while investing in the country.

H.R. Gupta, Managing Director, Indosolar Given the current scenario in Indian solar manufacturing, the export possibility is limited. The entire segment is concentrated in the domestic market. Till 2010, India used to export about $500 million worth of solar PV products, which came down to practically zero post 2010. The real problem for manufacturing for export is the cost of capital in India. If that is rationalised, we would be on a very competitive footing. Gao Jifan, Chairman and CEO, Trina Solar It is surprising that no Chinese company has come forward to commit to setting up a power plant or manufacturing facility in India. Clearly, more efforts need to be made. A joint task force should be set up by the Indian and Chinese governments to form partnerships between Indian and Chinese companies. Amitabh Kant, Secretary, Department of Industrial Policy & Promotion, Ministry of Commerce & Industry, Government of India There are several policy changes that must be encouraged to achieve the targeted capacity addition: feed-in tariffs, the right infrastructure, time-of-day pricing, large-scale solar banks, utilisation of low-value lands like deserts, and net metering. This will encourage large-scale capacity addition and create an ecosystem for manufacturing in India. Madhusudan Khemka, Managing Director, ReGen Powertech There should be a technology upgradation fund. We must upgrade our turbines either through the acquisition of existing

inculcate these skills.

Policy visibility and strong governance India currently ranks 142nd among the 189 economies evaluated in the World 18 ● Renewable Watch ● March 2015

Alok Srivastava, Additional Secretary and Chief Vigilance Officer, Ministry of Shipping Since the country has such a large renewable energy potential, a big domestic market is expected to open up. However, before talking about manufacturing for export, we must first have a strong base for manufacturing renewable energy equipment, appliances and other materials for servicing our domestic requirements. While our cost of labour is low, our productivity is still not up to the mark and not in accordance with international standards. Two areas that I would like to highlight are skill building and technology upgradation. The government needs to have a policy that would encourage people to opt for renewable energy jobs in a big way. We should be able to find ways to bring the latest technologies available in the world to our country. We also need to make higher outlays for R&D for all segments of renewable energy. Tulsi Tanti, Founder and Chairman, Suzlon Energy Limited It is important to have a long-term and consistent wind energy policy and an alignment of the goals of the central and state governments. If we can touch 10 GW per annum in the country, our competitiveness will increase further. Costs will come down, thereby giving enormous opportunities to export. We can make the initiative successful in the domestic and export markets. Kapil Dev Tripathi, Director, Ministry of New and Renewable Energy The Indian Ex-Im bank has helped in encouraging exports of our manufactured products across industries. It is now important that it comes forward to incentivise manufacturers in the renewable energy space as well.

Bank’s Ease of Doing Business list prepared as part of its Doing Business 2015 report. To move up the ranks, it is imperative to bring in greater transparency, stability and certainty for businesses.

The sector needs to learn from the experience of the past telecom spectrum and coal block allocations. Allocations in both these segments were cancelled as a fallout of corruption charges and subsequent

T R E N D S & D E V E LO P M E N T S needs to recognise certain market realities related to excess and idle manufacturing capacities, as well as the availability of capital for creating incremental capacities in such a scenario.

investigations. No attention was paid to their effect on businesses that had made investments accordingly, as well as the countless people whose livelihood depended on these businesses. While the new government has resolved to replace faulty policy frameworks with transparent and effective rules and regulations, it is not going to be easy. In the case of the renewable energy sector, the delay in project allocation under the Jawaharlal Nehru National Solar Mission is already worrying investors and developers who have their hopes pinned on the programme for future capacity building. Despite the strong institutional framework in India in terms of departments and regulators, there is no doubt that the policy framework and governance need to be more transparent and stable.

Conducive environment International experience has shown that even if one of the aforementioned factors is 20 ● Renewable Watch ● March 2015

addressed appropriately, the case for domestic manufacturing becomes stronger. Scandinavia and Germany are global manufacturing hubs, essentially on the basis of their highly skilled workforce, despite the negligible local demand in their economies. Singapore and Dubai are also global manufacturing hubs owing to highly efficient governance, again despite limited local demand. Brazil is trying to leverage its domestic demand to encourage manufacturing. China, meanwhile, is trying to push forward on all three factors but it is mostly its domestic demand that is driving investments in manufacturing. In the Indian scenario, creating a skilled workforce and establishing good governance are time-consuming tasks, but they are essential for attracting largescale investments. In the short term, it is imperative for policymakers to ensure that there is significant demand for products manufactured in the country. The government also

In this regard, besides promoting domestic demand, a key measure that can be considered by the government is the easing of exports. However, there are certain challenges that still persist, especially with respect to financing and duty structures. According to Tulsi Tanti, founder and chairman, Suzlon Group, “The China and US Ex-Im banks give lines of credit of $1 billion and $2 billion respectively to local companies exporting abroad. In India, the Ex-Im bank does not give more than $200 million per company per year. We recommend that the government should remove the 10 per cent limit on the Ex-Im bank. Also, a minimum $5 billion fresh equity must be provided to the Ex-Im bank to expand its ability to lend. Further, there is a huge demand potential in the emerging markets of Africa and Latin America. If the Ex-Im bank can provide financing in consortium with the banking institutions of these countries, it can help unlock the potential.” Lessons can also be drawn from international experience. For instance, under the Make in Brazil programme, if a product has 60 per cent local content, a 5 per cent interest subsidy is made available to the project owner. Such benefits provide an impetus to the local market. Another factor that needs to be evaluated in the short to medium term is the sustained demand for locally manufactured products, given that generation capacity addition has to be complemented by reforms in the electricity distribution sector. This is the overarching policy measure that is required to improve the bankability of power off-take arrangements. Market-driven tariff mechanisms are also needed to incentivise participants across the value chain, to be more efficient and bring in new technologies in order to be more competitive. ■

T R E N D S & D E V E LO P M E N T S

New Beginning RE-INVEST 2015 gives a fresh fillip to renewables By Bhavya Laul

he prime minister’s inauguration of the much-awaited first edition of the Renewable Energy Global Investors Meet & Expo, RE-INVEST 2015, on February 15 in New Delhi, marked the beginning of a fresh journey for the sector. It signalled taller targets and widespread objectives, backed by greater confidence and interest from all industry stakeholders, in India as well as globally. The three-day event brought forth the commitment of the state governments, the industry and the financing community towards fulfilling the new government’s vision for renewable energy. It also elicited views, opinions and discussions related to almost every aspect of the sector – financing, manufacturing, policy, regulations, etc. – across key segments like wind (offshore and onshore), solar (including rooftop), biomass and small hydro. Sessions were also dedicated to decentralised generation and smart grids.

About 2,800 delegates from 42 countries participated in the event. Various sessions were addressed by 202 speakers, which included 40 international speakers from 29 countries. In addition, 118 exhibitors showcased India’s strength and potential in renewable energy. A total of 200 global investors providing financing and investment solutions were also part of the meet. State participation was impressive, with nine showcasing their policy initiatives in renewable energy. REINVEST 2015 was organised with three main objectives. The first of these was to showcase India’s renewable energy potential and attract investments. The aim was to elicit investor confidence in renewable energy. The second objective was to establish India as a manufacturing hub for renewables and for research and innovation, which is pitched in the Make in India campaign and has become a

core initiative of the new government. In addition, the government wanted to notify the world about its commitment towards combating climate change. These three objectives were the main talking points of the event. The government has, in fact, been largely successful in working towards the targets as it has managed to attract capacity commitments from a large number of companies as well as states.

Green energy commitments With the objective of achieving the central government’s ambitious renewable energy targets by 2022, the secretary, Ministry of New and Renewable Energy (MNRE), in-vited public and private sector companies and proprietorship firms to invest in the renewable energy sector during the period 2015 to 2019. The firms could commit any quantum of generation, even

March 2015 ● Renewable Watch ● 21

T R E N D S & D E V E LO P M E N T S 1 MW, in any renewable energy segment. In response, the government received green energy commitments worth 266 GW. A total of 14 companies from seven countries made commitments for 58 GW. Similarly, 22 PSUs and 257 private limited companies committed to putting up 18 GW and 190 GW respectively. The railway segment submitted a commitment of 5,000 MW. These commitments are considerably higher than the government’s target of setting up more than 160 GW of renewable energy by 2022, which comprises 100 GW of solar energy and 60 GW of wind energy. It also plans to install 10 GW in the biomass segment. The new targets appeared to be ambitious at first but with the above-mentioned commitments in place, they seem to be more achievable than before.

Financing Financing was thought to be the biggest challenge in the way of realisation of the government’s large-scale renewable energy plans, with the solar and wind targets alone requiring an investment of around Rs 10 trillion. RE-INVEST witnessed commitments coming in from 27 banks for financing 72 GW of renewable energy projects, but that figure is still short of the long-term target. Banks have been lending actively to the sector, but they are still cautious on account of the accompanying risks. The scale of required investments

means these issues must be resolved at the earliest in order to change the perception about the sector. During the event, at least six sessions related to financing were conducted, along with side events, and each had a different motivation.

allocate the cash available for distribution in each year or quarter to shareholders in the form of dividends. This investment is attractive to shareholders because they can expect low-risk returns (or yields) that are projected to increase over time.

During a session on financing renewable energy, Arvind Subramanian, India’s chief economic adviser, said that the role of public sector financing would assume paramount importance if India was to expand its renewable energy footprint in generation over the next decade. At the same time, Arundhati Bhattacharya, chairperson, State Bank of India, pointed out the need for persistent policies and addressing issues pertaining to land acquisition, power offtake and management of developers. Apart from resolving such issues, financiers were of the belief that according priority status to the renewable energy sector would facilitate funding. The need for currency hedging, structured finance options and tax incentives was also discussed. Another session focused on the emerging financing options for meeting the country’s long-term renewable energy financing requirements. Most participants were enthusiastic about yieldcos, which are dividend growth-oriented public companies created by parent companies that bundle renewable and/or conventional long-term contracted operating assets to generate predictable cash flows. Yieldcos

Manufacturing

Green energy commitments made by select companies Company SunEdison Energy India

Commitment (MW) 15,200

Renew Power

11,500

Welspun Renewables Energy Limited

11,001

Azure Power

11,000

NTPC Limited

10,000

Hindustan Clean Energy Limited

10,000

Greenko Energies

9,990

ACME Solar

7,500

Mytrah Energy

7,000

Adani Power

6,000

Reliance Power

6,000

Source: RE-INVEST website

22 ● Renewable Watch ● March 2015

RE-INVEST was organised as a follow-up to the Make in India initiative and, therefore, manufacturing was one of the key agendas at the event. Significantly, while the country has made considerable strides in ramping up its renewable energy capacity, the benefit of this growth has not really trickled down to the manufacturing segment. While the wind manufacturing market is in good shape with several foreign suppliers having established local facilities for key components, domestic solar module and cell manufacturers in particular have been struggling to sustain operations on account of stiff foreign competition. In this context, the Make in India initiative provides a new ray of hope, and market confidence is already riding high due to this initiative. This is reflected in the fact that the government has been able to attract commitments aggregating over 40 GW for the manufacturing sector. During the session “Make in India – Renewable Energy Focus”, Amitabh Kant, secretary, Department of Industrial Policy and Promotion, said, “The key challenges for India are achieving a growth of 9-10 per cent per annum for three decades or more, to be able to create jobs for the young population. Another challenge is the rapid urbanisation of India. These issues can be dealt with only if the manufacturing sector grows at 13-14 per cent per annum.” Renewable energy can indeed play a pivotal role in supporting economic growth and in creating jobs and employment. Meanwhile, during another session, “Make in India – Incentivising Renewable Energy Equipment Manufacturing for Exports”, the panellists discussed the renewable energy sector’s potential in terms of the initiative as well as its export potential. While the panel suggested that the Indian

T R E N D S & D E V E LO P M E N T S renewable manufacturing industry had ample opportunities to scale up under the Make in India initiative, they also raised the issue of financial support and incentives to match the competition from global manufacturing markets. At the same time, the experts were of the opinion that domestic manufacturing needed to have good export prospects.

Select state-level snapshots from RE-INVEST Andhra Pradesh

MoUs with the state government Punjab

In this context as well, the government has not missed the mark. During the event, several announcements were made by the government, indicating its commitment to the resolution of long-standing issues that have been restricting growth in the sector. The implementation and enforcement of renewable purchase obligations (RPOs) is one of them, and the government intends to shortly impose penalties for non-compliance. Piyush Goyal, minister of state for coal, power and new and renewable energy, has also said that the new renewable energy policy, which is to be enacted soon, will also have a provision for renewable generation obligations. The minister also said that the government was contemplating bundling coal block allotments with renewable energy production commitments. He said that if coal block allotments through the auction route

Punjab has signed MoUs worth Rs 135 billion for investment in solar projects. It has also signed pacts for setting up five bio-ethanol plants worth Rs 60 billion in the state. There is a strong case for promotion of solar panels on rooftops, reservoirs and canals

Madhya Pradesh

The state is on course to ensure that 21 per cent of power produced comes from renewable energy. It will commission 5,247 MW of capacity by 2017. All the necessary

Steps towards scaling up growth The government is looking at developing a renewable energy ecosystem in the country. If it is working towards bringing renewable energy’s share in the total energy generation to 15 per cent by 2020, a lot more needs to be done in terms of creating a favourable business environment. After attracting commitments from developers, manufacturers and financiers, the government now needs to take steps to ensure the long-term protection of investments. This requires enforcing a sustained policy and regulatory regime, ensuring the bankability of power purchase agreements, and making infrastructural and network improvements. Apart from this, considerable investments have to be made in technology advancement, skill development and research and development.

Solar and wind power policies for 2015 were announced. The state is targeting 10,000 MW of renewable energy capacity by 2018-19. A total of 17 companies have signed

applications have been made online Delhi Rajasthan

Will allow a ‘no-permission required’ system Plans to install 25,000 MW of solar power capacity. There are no charges for conversion of land

Karnataka

By 2021, 3 per cent of the total projected consumption of energy in the state has to come from solar energy in a phased manner

Himachal Pradesh

Revisions have been made to the state’s Hydro Policy 2006; efforts have been made to fast-track the implementation and execution of hydro projects

Tamil Nadu

Vision 2023: the government has plans for 5,000 MW of solar, 10,000 MW of wind and 200 MW of offshore wind

West Bengal

The state is working on pumped solar projects. It has launched two such plants of 1,000 MW each. The state will also be setting up a 100-feet solar dome full of solar panels in Kolkata

Source: Media reports

could happen in four months, the targets of 100 GW in solar, 60 GW in wind and 10 GW in biomass could be achieved far sooner than the scheduled dates. The setting up of a Power Training Institute in Andhra Pradesh, which would be offering mining engineering, the study of transmission and distribution losses and renewable energy as subjects, was also announced. The central PSUs will support this initiative. As the centre does its bit, equal enthusiasm is called for on the part of the states. Union Railway Minister Suresh Prabhu pointed out that states are the drivers of change and should make specific laws and policies to become self-sufficient in energy. He also said that states generating more renewable energy should be given more incentives. The formulation of state-wise action plans and mapping each district’s potential was also suggested. Besides this, the minister of state for environment, forests and climate change, Prakash Javadekar, announced that environmental clearances for green energy would be granted through a

green channel.

Taking the success forward Addressing the valedictory session, Finance Minister Arun Jaitley said that REINVEST 2015 was the take-off point that would have a multiplier effect on the economic front. He pointed out that the conference marked the start of a great initiative, the effect of which would be clearly visible in the years to come. While the event was undoubtedly a big success, it needs to be carried forward with concrete planning and on-the-ground implementation. The government now plans to draw up a long-term roadmap for achieving the renewable energy targets. There will also be a monthly working session with various states to enable developers and states to work together. A six-monthly review will also be conducted to ensure the actual implementation of policies on the ground. The MNRE has made a commitment to working actively to identify infrastructure requirements and remove roadblocks so that manufacturers can successfully take their plans forward. ■ March 2015 ● Renewable Watch ● 23

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Falling Short Budget 2015-16 fails to meet sector expectations By Dolly Khattar

he renewable energy industry was expecting the Union Budget 2015-16 to hold a lot of positives for the sector, especially after the announcement of the government’s increased renewable energy target of 175 GW by 2022. While there have been a few positives, the budget has largely fallen short of industry expectations.

The following are the key highlights: The budgetary allocation to the Ministry of New and Renewable Energy (MNRE) has been increased from about Rs 50 billion in the Union Budget 2014-15 to Rs 62 billion. z There is no revision in the outlays for the central transmission utility, Powergrid Corporation of India Limited, and for projects like the Green Energy Corridors. z Budget 2015-16 has set an ambitious target of 175 GW of renewable energy capacity by 2022 – five times the current installed base. A part of the funding required to meet this target will come from the government’s National Clean Energy Fund (NCEF). z The coal cess, which goes towards the NCEF, has been doubled to Rs 200 per tonne of coal mined or imported. z The government aims to ensure provision of 24x7 power to all by 2020. This includes off-grid solar power generation as well. This is a continuation of the earlier targets envisaged in the erstwhile Rajiv Gandhi Grameen Vidyutikaran Yojana, which is now subsumed into the newly launched Deendayal Upadhyaya Gram Jyoti Yojana. z

Outstanding concerns In the solar energy segment, the govern24 ● Renewable Watch ● March 2015

ment is keen to attract private sector investments, but financing, land acquisition, policy instability and grid unefficiency issues continue to hold back capacity installation and power generation. No details have been announced on the implementation roadmap and financing to meet the 100 GW target. Second, the funds allocated to the MNRE seem inadequate given the number of schemes and projects they have to be utilised for. The ministry is expected to use the allocated funds to provide central financial assistance for grid-interactive power capacity addition from wind, small-hydro, biomass power/cogeneration, urban and industrial waste-to-energy, and solar. In addition, it should promote the deployment of off-grid/distributed renewable power systems. It is also expected to help fund a scheme for mega renewable power generation of 100 GW; a 20 GW scheme for unemployed graduates, village panchayats and small-scale industries; and rooftop grid-connected projects as well as provide interest and subsidy schemes for such projects; create an international agency for solar policy and applications; formulate a scheme for the establishment of solar zones; and provide an outlay of Rs 100 million for a scheme to train 50,000 youths under the Surya Mitras programme. Third, the budget did not incentivise investment or manufacturing in the sector other than an excise duty cut on round copper wire and tin alloys for use in the manufacture of solar photovoltaic (PV) ribbon (used in solar PV cells), subject to certification by the Department of Electronics and Information Technology. Although there is some

support in the form of a reduction in the basic customs duty on active energy controllers (which are used in renewable energy generators) to 5 per cent, the industry’s expectation of a reduction in the minimum alternate tax (MAT) remained unfulfilled. Renewable energy companies will continue to pay 18 per cent MAT. Besides, the industry has been impacted by some announcements on the overall infrastructure sector. For instance, an increase in service tax to 14 per cent is likely to add to the engineering, procurement and construction, and operations and maintenance costs of solar projects.

Some positives The most positive budget announcement for the sector has been the doubling of the clean energy cess on coal for the second year in a row. At Rs 200 per tonne, the government is expected to collect around Rs 120 billion during 2015-16. This trend, coupled with the continuation of higher taxes on petroleum products, effectively changes India’s status from a carbon subsidising economy to a carbon taxing economy. However, there has been no clarity so far on how these funds will be utilised towards promoting renewables. Many industry experts also believe that while the budget did not offer any shortterm benefits to the renewable energy industry, it is likely to create a more financially liquid economy in the long term, which will benefit all infrastructure sectors including renewables. The announcement relating to infrastructure investment trusts (special purpose companies that own income generating assets) is a big positive. Similarly, setting up the National Investment and Infrastructure Fund, with a corpus of Rs 200 billion, could help clean energy projects. Overall, for the renewable energy sector, the budget remained short of expectations, with some positives over the last time. Given the increased focus on promoting renewable energy, a little more was expected from the budget. ■

T R E N D S & D E V E LO P M E N T S

“

Industry speak

Anish De, Partner, Infrastructure and Government Services, KPMG India Laying emphasis on renewable energy and revising the MNRE target upwards to 175 GW by 2022, comprising 100 GW of solar, 60 GW of wind and 15 GW of other technologies, is not adequate to make capacity creation happen in reality. Prima facie, we have not seen any concrete measures for renewable energy in the budget. Unlike rail and roads, tax-free bonds have not been specifically proposed for renewable energy. Therefore, any funds from tax-free bonds will now have to come out of the general pool of infrastructure bonds. Further, proposals for the utilisation of funds from the increased coal cess are yet to be spelt out. It would have been better to propose specific allocations and measures for renewable energy, especially on the availability of low-cost funds for the renewable energy sector. Tobias Engelmeier, Founder and Director, BRIDGE TO INDIA The government wants to build 100 GW of solar and 60 GW of wind power capacity in the next seven years. These are very ambitious goals and there is absolutely nothing in the budget that suggests how this might be achieved. The budget does not define a clear financing plan for renewables. There was much talk about initiatives such as currency hedging support, interest rate subvention and classification of renewables as a priority sector. However, none of these measures has been taken. Given that transmission lines take around three years to build, the government needs to start working on it now. However, there is nothing in the budget related to this. Overall, there is little in this budget to suggest how India is to grow to a 10 GW-a-year solar market. This year’s budget is a disappointment, especially when measured against the huge expectations people had from this government. The bigger picture of building a healthy economy (driving power demand), building a healthy power sector (pricing) and enabling solar to occupy a large share (grid access) have not been satisfactorily addressed. Rahul Gupta, Director, Rays Power Experts We believe that the inclusion of a solar target of 100 GW by 2022 in the budget is a big and encouraging step for the solar industry. Further, the proposed National Investment and Infrastructure Fund (NIIF) with an initial corpus of Rs 200 billion, which can be leveraged by infrastructure companies, is a welcome step. However, points like giving priority sector status to solar energy and reduction in MAT, which have not been addressed in the budget, could have given a boost to the industry. On the other hand, the mention of 1,000 MW of solar energy projects in the railway budget was very encouraging. Pashupathy Gopalan, President, Asia Pacific, SunEdison While the budget has been visionary and has laid out the tar-

”

gets clearly, the details of how the government proposes to achieve these targets need to be developed further. To help achieve the ambitious target of 100,000 MW of solar capacity by 2022, the industry has been advocating a range of measures such as bringing the solar sector under the ambit of priority sector lending with a separate sectoral cap, allowing tax-free infrastructure bonds for solar, implementing an interest subvention scheme to support solar-related manufacturing and power projects, and reducing the hedging cost for solar external commercial borrowings. Although none of these proposals has been accepted in the current budget, we hope that the government will give due consideration to these in order to make the ambitious targets achievable. Vineet Mittal, Vice Chairman, Welspun Renewables The infrastructure sector has been facing funding challenges and some of the measures introduced in the budget will surely help this situation. By doubling the cess on coal to Rs 200 per tonne, the government is creating an additional corpus of funds for clean energy projects. The finance minister has provided much-needed clarity on capital gains tax on the sponsors at the time of offering the assets to the Infrastructure Investment Trust (InvIT), and waiving it. This was one of the issues that had prevented the implementation of the InvIT. The move will help this vehicle to take off and will attract billions of dollars of foreign investment into India. The NIIF will encourage equity investments in infrastructure finance companies, which can further fund renewable energy projects at competitive prices. This could be used to develop a sizeable infrastructure development fund (IDF) to finance the huge capital outlays required to achieve the target of 175 GW by 2022. The IDF can make a substantial contribution to infrastructure development and can attract investors by providing tax breaks. Tulsi Tanti, Chairman, Suzlon Group The budget reiterates the mission and vision of the government to achieve affordable sustainable energy for all, a lowcarbon economy, energy security and a long-term sustainable economy and jobs. The government’s commitment to green India manifests in some additional measures such as increasing the coal cess from Rs 100 to Rs 200, thereby providing an impetus to clean energy. We appreciate the focus on providing a thrust to the Make in India campaign by giving clarity on taxes, defining measures to ease doing business in India and encouraging domestic and foreign direct investment. However, in my opinion, an interest rebate should be given in order to stimulate further investments in captive renewable power by manufacturing units, which will also ensure the success of the Make in India campaign.

March 2015 ● Renewable Watch ● 25

T R E N D S & D E V E LO P M E N T S

Renewed Focus MNRE issues draft policies for geothermal and SHP By Shambhavi Sharan

n the past few years, solar and wind energy have attracted significant attention from policymakers and industrialists alike for large-scale deployment. In contrast, industry interest in other renewable energy sources such as small-hydro and geothermal has remained limited. While small-hydro has failed to achieve largescale commercial success, geothermal has remained in the research and development (R&D) phase for several years. As a result, there still remains a significant untapped potential in the small-hydro power (SHP) and geothermal energy space. To provide an impetus to both these segments, the Ministry of New and Renewable Energy (MNRE) has recently drafted the National Policy on Geo-Thermal Energy and the National Mission on Small Hydro. A look at the key features of these draft policies…

Draft National Policy on Geo-Thermal Energy Various resource assessments carried out by the Geological Survey of India, the United Nations Development Programme and the National Geophysical Research Institute have estimated India’s geothermal potential at 10,600 MW (thermal) or 1,000 MW

(electrical). This potential has been estimated on the basis of over 340 hot springs across 11 states. The major geothermal reservoirs are situated at Puga in Jammu & Kashmir and in the Tatapani fields along the Narmada river in Chhattisgarh. The vision of the policy is to realise this potential and establish the country as a global leader in geothermal power. In the initial phase, the policy targets the implementation of an aggregate geothermal capacity of 1,000 MW (thermal) by 2022. The policy has also laid emphasis on research, design, development and demonstration (RDD&D) projects related to power production and geo-exchange pumps. The resource assessment for the same will be conducted in 2016-17. The following are the salient features of the draft national policy. z Geo-exchange pumps/Ground source heat pumps (GSHPs): GSHPs use the earth’s relatively constant temperature between 16 °Celsius and 24 °Celsius at a depth of 20 feet to provide heating, cooling and hot water for homes and commercial buildings. GSHPs are effective in different climate zones and can, therefore, be deployed across the country. Under the national policy, the

MNRE considers initiatives in the RDD&D of such geothermal technology specifically for the purpose of cooling, drying, space heating, greenhouse cultivation, industrial processes, cold storage, poultry and fish farming, mushroom farming and horticulture. The MNRE is also collaborating with the Bureau of Energy Efficiency for increasing the efficiency of conventional heating, ventilating and air-conditioning systems by more than 50 per cent by retrofitting or replacing the cooling towers by Energy Star-certified GSHPs. MNRE funding: Under the draft policy, MNRE funding will be available for geothermal projects to both the public and private sectors. Support will be offered to organisations as well as universities to undertake research and industry-led projects to develop and test geothermal energy capture devices and systems. The actual funding level will depend on the detailed evaluation of the project with regard to administrative and technical compliance, ability to overcome technical barriers and other issues, contribution to the development of an indigenous geothermal industry, environmental compatibility, and project management capability.

Draft National Mission on Small Hydro In 2000, the total installed SHP capacity stood at 1,275 MW. Thereafter, the sector witnessed continuous and steady growth, with an overall increase of about 150 per cent in the installed capacity during 200010. During the Ninth Plan, a total capacity of 269 MW was added, which increased to 536 MW during the Tenth Plan and to 1,419 MW during the Eleventh Plan period. The sharp increase in the installed SHP capacity during the Tenth and Eleventh Plans can be largely attributed to the participation of the private sector. However, this situation has changed in the past few years. During the Twelfth Plan period, only 408 MW of small-hydro capacity was added till March 2014. The decline in capacity addition was primarily due to increasing project costs and less attractive tariffs for

26 ● Renewable Watch ● March 2015

T R E N D S & D E V E LO P M E N T S SHP power. Low average pooled power purchase rates in hydro-rich states and the non-sale of renewable energy certificates in the open market are some of the other reasons for the declining interest in the segment. The objective of the National Mission on Small Hydro is to address the issues responsible for this decline and to regenerate private sector interest in the segment. The mission targets 500 MW of capacity in the next two years and 4,500 MW in the subsequent three years. It has also expanded the scope of the SHP segment by including a target of 1,000 MW for projects on canal drops, dam outlets and water outfall structures. The development of 5,000 micro hydro projects on watermills in hilly regions has also been discussed, with the aim of providing off-grid power supply linked to economic activities in remote and rural areas. Further, while old SHP projects will be re-evaluated under this mission with the aim of improving their efficiency, new potential sites and their feasibility would also be assessed. Timeline: The National Mission on Small Hydro is proposed to be launched on April 1, 2015. Phase I of the mission will span two years, during which policy issues concerning the slow pace of development in the small-hydro sector will be addressed. State-owned old SHP projects will be reviewed and detailed project reports prepared for their renovation, modern-isation and uprating (RMU). Technology development work will be initiated for low- and ultra-low head canal-based SHP projects. Further, networks to set up watermills, individual systems and micro hydro projects in remote and rural areas through entrepreneurs will be established and the process of identifying new potential sites in the country will be initiated. Phase I will put in place the policy framework necessary for achieving the objectives of the National Mission on Small Hydro by 2019. The mission will involve state governments, regulators, power utilities and local bodies to ensure that the policies

In-principle subsidy for geothermal projects Category/Description RDD&D projects (power): Include RDD&D projects of new technologies for the deployment of geothermal energy including its hybridisation with other renewable energy technologies

Industrial projects (power): Include projects comprising power production and distribution to state utilities with revenue generation Public good projects (direct heat): Include projects for thermal applications such as space heating,

In-principle subsidy (a) 50 per cent of the first parametric drilling cost for the magnetotellurics study (maximum support Rs 10 million per MW); (b) 50 per cent of the commercial well cost (maximum support Rs 6 million per MW); in case of failure, it will be converted into a grant subject to the development of the site as direct use geothermal heating/cooling; (c) 30 per cent of the capital cost of power production 30 per cent of capital cost (maximum support Rs 90 million per MW) 30 per cent of system cost (for running circulation pumps); (maximum support Rs 50,000 per tonne of refigeration)

greenhouse cultivation, cooking Ground source heat pumps Source: MNRE

being laid out can be implemented effectively. Since most state governments already have an SHP policy in place, the mission will draw up a suitable transition framework to enable a revival of the segment.

been drafted essentially to address the issues being faced by private developers. As a result, the mission has specified policy changes and fiscal facilitations rather than direct financial benefits.

Financing: The Twelfth Plan has earmarked a total budget of Rs 8.25 billion for SHP development. During 2012-13, 2013-14 and 2014-15, the budget for the SHP programme was Rs 1.59 billion, Rs 1.37 billion and Rs 1.42 billion respectively. The remaining Rs 3.86 billion has been earmarked for 2015-16 and 2016-17. The draft mission has assessed that the financial requirements of Phase I of the mission, which is more of a preparatory phase to Phase II, can be met through the Twelfth Plan allocations for the SHP programme.

Looking ahead

The funds required for Phase II will be worked out in the second year of Phase I and be included in the Thirteenth Plan budget of the SHP programme. The mission has specified that no direct subsidy to private sector projects is envisaged in Phase II, but support may be provided to public sector projects and RMU of old projects, and survey and R&D work may be carried out with the provision of financial assistance. The National Mission on Small Hydro has

In sum, the draft missions envisage the setting up of 1,000 MW of geothermal capacity and 5,000 MW of SHP capacity. While these documents are set to facilitate development activities in these two renewable energy segments, they are likely to act as a stepping stone rather than a catalyst for the large-scale development of geothermal and SHP projects. The draft National Policy on Geo-Thermal Energy outlines capacity addition, but stresses on the R&D related to it rather than on commercial deployment. On the other hand, the draft National Mission on Small Hydro aims to analyse the issues leading to the decline in capacity addition; it does not outline the subsidies and other financial benefits that may be necessary for private developers to achieve commercial success in their SHP deployments. Therefore, both the draft documents have their shortcomings. That said, the drafting of such policies in itself has encouraged the industry to revisit these two renewable energy segments, which is likely to boost their uptake in the country. ■ March 2015 ● Renewable Watch ● 27

T R E N D S & D E V E LO P M E N T S

Bid Success Punjab solar tender attracts major players By Mridula Pandey

unjab is considered one of the prosperous states in the country, owing mainly to its agricultural sector. However, as it prepares to move towards greater industrialisation, the state is finding it difficult to meet the growing energy demand. The current installed power generation capacity in Punjab stands at 7,036 MW. As per estimates, the power demand in 2014-15 (as of December 2014) went up to more than 46,516 MUs, while the energy available from all sources was 42,964 MUs. The state government has been making concerted efforts to fill this gap by installing additional generating capacity, with an emphasis on employing renewable energy sources. In December 2014, the Punjab Energy Development Agency (PEDA) issued tenders for developing 250 MW of solar capacity for the direct sale of generated

28 â&#x2014;? Renewable Watch â&#x2014;? March 2015

power to Punjab State Power Corporation Limited (PSPCL) under Phase II of the programme for the development of gridconnected solar photovoltaic (PV) projects. The agency released the request for proposal (RfP) document in December 2014 and the bids were opened on January 30, 2015. The tender attracted bids from small and large developers and capacity across all three categories was oversubscribed. The successful bidders were announced on February 10, 2015.

Tender details The total capacity under the tender was divided into three categories: A, B and C. Under Category A, the bids could be for projects ranging from 1 MW to 4 MW, with the total target capacity fixed at 50 MW. Category B had a target capacity of 100 MW under which bidders could opt for 5 MW to 24 MW projects. Category C also

had a target capacity of 100 MW with the minimum and maximum project size being 25 MW and 50 MW respectively. The maximum capacity that each developer could bid for under the three categories was fixed at 5 MW, 24 MW and 50 MW respectively. Each developer was required to submit an earnest money deposit of Rs 2 million per MW along with its response to the RfP.

Results The bidding process was carried out online and 230 MW of capacity was allocated. The highest number of projects was allotted to Crocus Infra Realty (part of the Indiabulls Group), which secured three projects with a cumulative capacity of 44 MW. Under Category A, it secured a 4 MW project at a tariff of Rs 7.45 per kWh, while under Category B and Category C, it secured two 20 MW projects at Rs 7.42 and Rs 7.56 per kWh respectively. ACME Solar, meanwhile, secured two projects with a combined capacity of 74 MW, winning 24 MW and 50 MW at Rs 7.16 and Rs 7.06 per kWh respectively. Solairedirect won two projects of 30 MW and 24 MW, both at Rs 6.88 per kWh, and Azure Power secured two projects of 24 MW and 4 MW at Rs 7.19 and Rs 7.33 per kWh respectively. A

T R E N D S & D E V E LO P M E N T S total of 33 MW was allotted under Category A against the targeted capacity of 50 MW. One of the major developers to win a project under this category was Welspun Solar Punjab Private Limited. The company won the 4 MW project at Rs 7.71 per kWh. The project developers will now be required to sign power purchase agreements (PPAs) with PSPCL and commission plants within 10 months of the signing dates. The PPAs will be valid for 25 years from the date of project commissioning. The developers will also have to ensure that the projects are designed for interconnection with PSPCL at voltage levels of 11 kV (for projects up to 2.5 MW capacity), 66 kV (for projects of capacities ranging from 2.5 MW to 25 MW) and 132 kV (for projects above 25 MW). In addition, the developers have to arrange financing for projects within 60 days of the PPA signing date.

Punjab’s solar bid results Company

Capacity allotted (MW)

Tariff offered (Rs per kWh)

Category A Magnificent Power Private Limited

7.29

Nextgen Solux Power Private Limited

7.29

Azure Power

7.33

Aster Solar Power Private Limited

7.37

Purshot AM Industries

7.39

Vivaan Solar Energy

7.40

Crocus Infra Realty

7.45

Continental Engineering and Power

7.48

Allianze Eco Power Private Limited

7.57

Durable Ceramics Private Limited

7.58

TR Energy and Agro Private Limited

7.59

JSSK Energy Private Limited

7.63

International Switch Gears Private Limited

7.65

Abundant Energy Private Limited

7.68

Welspun Solar Punjab Private Limited

7.71

Oasis Contractor and Consultants Private Limited

7.72

Total

–

Solairedirect

6.88

ACME Solar

7.16

The right steps

Azure Power

7.19

The success of the tender is indicative of the fact that Punjab is fast emerging as a promising destination for solar development. In March 2013, PEDA had invited RfPs for setting up 300 MW of solar PV projects (Phase I). Under this, projects worth 250 MW were allocated to various developers. They are being developed with an estimated investment of Rs 25 billion-Rs 30 billion and their commissioning is scheduled for March 2015. As of November 2014, 39 MW of projects had already been commissioned under Phase I.

Allianze Eco Power Private Limited

7.37

Crocus Infra Realty

7.42

Total

–

Solairedirect

6.88

ACME Solar

7.06

Crocus Infra Realty

7.56

Total

100

–

Grand total

230

–

With conventional power facing high costs and uncertain availability, the state is betting big on solar energy. The state government had launched the New and Renewable Sources of Energy Policy, 2012 with the aim of harnessing and utilising its renewable energy potential to ensure energy security. The policy had targeted an increase in the share of renewable energy sources to 10 per cent of the total installed capacity. However, certain challenges still remain.

Category B

Category C

Source: Media reports

For instance, there was a delay in the signing of PPAs with the 26 developers that were selected by the state government under the above-mentioned 300 MW tender. This was mainly on account of

The success of the tender is indicative of the fact that Punjab is fast emerging as a promising destination for solar development.

certain regulatory issues, and it resulted in the state adding only 7.5 MW of solar power capacity in 2013-14. Despite such issues, increased activity can be expected in Punjab’s solar segment in the future as it tries to augment its generation from renewable energy sources. With 210 MW of solar power projects at various stages of development as of December 2014, the state is targeting a solar capacity addition of 1,000 MW by 2022. Adequate policy support and a clear roadmap for dealing with regulatory challenges will help it reach this goal. ■ March 2015 ● Renewable Watch ● 29

T R E N D S & D E V E LO P M E N T S

Long-term Benefits Suzlon’s stake sale to free up capital for expansion By Rahul Jain

n January 22, 2015, wind equipment manufacturer Suzlon Group announced that it had signed an agreement with US-based private equity firm Centerbridge Partners for selling 100 per cent of its stake in its Germany-based subsidiary, Senvion. The all-cash deal has been valued at Euro 1 billion (Rs 72 billion). Suzlon will also receive an additional amount of Euro 500 million. As per the deal, it is to give Senvion its S111-2.1 MW licence for the US market, while the latter will give Suzlon its offshore technology licence for the Indian market. The deal is expected to be concluded by March 2015. Suzlon has stated that the proceeds from the deal will mainly be used for deleveraging its balance sheet. This is in line with the company’s strategy to significantly pare its debt over the next few years. The funds that are left over will be used for the company’s expansion in India and other high-growth markets.

Background Starting from 2007, Suzlon had been buying stake in Senvion (formerly REpower) in tranches. The cost of the entire acquisition was Euro 1.5 billion and this had been financed mainly through debt funds as they were easily available then at low interest rates. However, as the rates shot up and orders reduced in the next few years on account of the slowdown in mature wind markets, Suzlon found itself in a debt trap. Its debt burden ballooned from Rs 4.5 billion in 2006 to Rs 14 billion in 2012. The situation worsened when Suzlon was not granted permission to use Senvion’s cash resources, in accordance with existing German laws. It was also denied 30 ● Renewable Watch ● March 2015

was affecting its ability to secure contracts. During the quarter ended December 2014, Suzlon serviced volumes of only 35 MW, as against 106 MW in the corresponding quarter in 2013. In the near future, the company expects volumes to grow significantly as a result of its improved liquidity position. By March 2016, Suzlon has to complete an order book of 1,147.5 MW worth Rs 72.5 billion. Lower interest expenses and higher revenues from the order book are expected to improve the company’s bottom line.

Market reaction

access to the subsidiary’s patented technologies as both companies happened to be competitors in the German market. The pressure on Suzlon to sell its assets increased as a result of outstanding debt repayments and defaults on principal and interest payments. Suzlon had to thus begin exploring the option of raising funds by selling its stake in Senvion.

Debt reduction The company intends to use Rs 60 billion towards the repayment of high-cost domestic debt to 19 lenders, including the State Bank of India. This will lessen its debt burden from about Rs 160 billion at present to Rs 100 billion, thereby reducing the interest outgo by Rs 6 billion. A less leveraged balance sheet will also enable Suzlon to bring about stability in its capital structure. The debt reduction will also free up capital to finance Suzlon’s expansion plans. The company is increasing its focus on the Indian market, keeping in mind the wind segment’s revival on account of the accelerated depreciation benefit and generation-based incentive scheme being reinstated. Suzlon will also be able to use the freedup capital for keeping up with its order book. Earlier, due to liquidity constraints, the company had been unable to meet its order book requirements on time, which

While industry experts agree that the stake sale will be beneficial for Suzlon as it will help deleveraging of its balance sheet, the company could still struggle on the revenue front. In 2013-14, about 65 per cent of its total revenue was contributed by Senvion. The sale will put severe pressure on Suzlon’s top line in the short term and also affect its ability to service interest expenses. On the positive side, the existing debt will not mature in the next three years, which will provide some relief as far as principal repayments are concerned. Industry experts also believe that Senvion should not have been sold at a discounted price as the company’s valuation commands a premium on account of its strong operational and financial performance. Suzlon, however, contends that the loss from the sale of Senvion was marginal as the euro had strengthened vis-à-vis the rupee over the past few years.

Conclusion Net, net, the deal seems to be a positive one for Suzlon, despite the fact that Senvion’s valuation could have been higher. The stake sale will aid Suzlon’s debt reduction and improve its liquidity position. Even though its revenues could take a hit in the short term, Suzlon’s focus on streamlining operations and focusing on India and other emerging markets will help grow its order book. This will go a long way in turning around a company that had been written off by the industry. ■

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COMPANIES

CLP India Expanding its green portfolio to minimise risks By Rahul Jain

ince venturing into the Indian wind energy segment in 2009, CLP India has cemented its position as a market leader. A wholly owned subsidiary of the CLP Group, a China-based energy company, it has a wind project portfolio of over 1 GW across India. The company has been increasing its focus on the wind energy segment to drive revenue growth as its conventional power business has taken a hit on account of regulatory and operational issues like inadequate coal supply. By entering the wind energy market CLP India has been able to diversify its portfolio and minimise risks. The diminished dependence on coal-based power plants is also in line with its parent company’s commitment to bring about a 75 per cent reduction in its global carbon emissions from its 2007 levels, by 2050. The CLP Group’s carbon emissions stood at 0.84 kg CO2 per kWh in 2007. It is also aiming to generate 30 per cent of its power from renewable energy and nuclear energy sources by 2020.

with another 360 MW of wind power projects at various stages of development. Wind projects now account for about onethird of its total installed capacity in India. The major-ity of them are spread across Rajasthan, Tamil Nadu, Gujarat, Maharashtra and Karnataka, states that are rich in terms of wind resources. This has enabled the company to operate its wind power plants at capacity utilisation factors (CUFs) as high as 29 per cent, with the minimum CUF being 23 per cent.

Operations and performance

Issues and challenges

At present, CLP India has an installed wind energy capacity of about 730 MW,

One of the biggest issues faced by CLP India has been the limited availability of

The power generated from these projects is sold to the state discoms at preferential tariffs under long-term power purchase agreements rather than to third-party customers that prefer shortterm contracts. Revenue from the power sales is enhanced by the benefits received under the generation-based incentive (GBI) scheme. As a result, CLP India’s project cash flows are more certain and predictable, facilitating credit appraisals by lenders.

grid infrastructure in Tamil Nadu, where its Theni I and Theni II projects are located. Due to this obstacle, the CUF of the Theni I project fell from 32.2 per cent in 2012 to 25.3 per cent in 2013, while that of Theni II declined from 30.6 per cent to 23 per cent. The excessive delay in the payment of dues by the state discoms was another important issue, primarily in Tamil Nadu and Rajasthan. The company contends that the duration of delays was as much as 12 months in some cases, which affected project cash flows significantly. The state discoms had not been able to make timely payments on account of the mismatch between revenues and expenses caused by the non-revision of tariffs. For several years, the conventional power tariffs for state discoms did not increase, while procurement costs rose significantly, thereby resulting in losses. However, there has been a considerable improvement in discom payments since then, particularly in Rajasthan.

Financial improvisation Earlier, funds for almost all of CLP India’s wind projects were secured through project financing, wherein lenders had the security of fixed assets only to the extent of a project’s cash flows. Lenders usually assess returns from wind projects on the basis of forecasts, but the actual power generated is often significantly less on account of unpredictable weather conditions. This leads to lenders being wary of providing funds as the risks with single projects are fairly high. To address these concerns, CLP India decided to pool together all its operational wind project assets against which it could raise funds. The cash flows from these projects would accordingly be pooled and be available to all lenders. Consequently, debt repayment would not be affected even when a project did not perform well or if a discom payment was delayed during a particular period. The company has faced this situation in Tamil Nadu and Rajasthan. Under this scheme, the company also intends to pool together all wind projects

32 ● Renewable Watch ● March 2015

COMPANIES

CLP India’s wind power project portfolio Project

Capacity (MW)

Location

Commissioning status

CUF in 2013 (%)

CUF in 2012 (%)

Power offtaker supplier

Turbine Enercon

Samana I

50.4

Rajkot, Gujarat

Fully operational

21.0

23.5

Torrent Power Limited

Samana II

50.4

Jamnagar, Gujarat

Fully operational

23.8

26.2

Gujarat Urja Vikas Nigam Limited

Enercon

Saundatti

72.0

Belgaum, Karnataka

Fully operational

24.1

23.1

Bangalore Electricity Supply Company Limited

Enercon

Khandke

50.4

Ahmednagar, Maharashtra

Fully operational

26.6

24.1

Maharashtra State Electricity Distribution

Enercon

Company Limited Theni I Theni II

49.5

Theni, Tamil Nadu

Fully operational

25.3

32.2

Tamil Nadu Electricity Board

Vestas

49.5

Theni, Tamil Nadu

Fully operational

23.0

30.6

Tamil Nadu Electricity Board

Vestas

Andhra Lake

106.4

Pune, Maharashtra

Fully operational

24.8

21.4

Maharashtra State Electricity Distribution

Enercon

Harapanahalli

39.6

Davanagere, Karnataka

Fully operational

28.7

29.7

Bangalore Electricity Supply Company Limited

Vestas

Sipla

50.4

Jaisalmer, Rajasthan

Commissioned

–

Jodhpur Vidyut Vitran Nigam Limited

Enercon

Sipla II (Bhakrani) 102.4

Jaisalmer, Rajasthan

101.6 MW commissioned;

–

Enercon

Commissioned

–

Gamesa

Company Limited

0.8 MW under construction Jath Tejuva

60.0 100.8

Mahidad

50.4

Yermala

148.8

Sangli, Maharashtra Jaisalmer, Rajasthan

Under construction

–

Suzlon

Rajkot, Gujarat

Commissioned

–

Yermala, Osmanabad

Under construction

–

and Solapur, Maharashtra Source: CLP India

that are currently under development. However, they will only be included once they are commissioned. So far, about 267.5 MW of wind power projects have been pooled, and another 452.8 MW of wind capacity is soon likely to be included. The company has signed definitive agreements with Standard Chartered Bank, IDBI Bank and IDFC. CLP India believes the scheme will attract significant interest from lenders because of the mitigation of debt repayment risks. Another debt financing option being explored by the company is corporate bonds. The company is of the view that this route makes economic sense for developers with large project portfolios. Since CLP India has developed a portfolio of over 1 GW, it is now in a better position to raise capital in the domestic bond market. “Given the volatility in the foreign currency market and high hedging cost, CLP is currently focusing on the domestic market.” says Mahesh Makhija, Director, Business Development (Renewables), CLP India.

Investment plans CLP India is planning to add 200-300 MW of wind power projects each year to grow its portfolio. It intends to focus on states that have good wind sites, a stable policy and regulatory environment, financially healthy discoms, and strong grid infrastructure. Over the past year, CLP India has awarded contracts to Gamesa for setting up wind projects aggregating 100 MW in Madhya Pradesh. The equipment manufacturers will provide end-to-end solutions, supply and install wind turbines, and provide long-term maintenance services. The company will have to invest Rs 12 billion-Rs 18 billion per annum for meeting its capacity addition targets, but securing funds for capex should not be an issue given its cash-flush parent company and high domestic credit rating. CLP India is also considering entering the solar energy segment. The company had been following a wait-and-watch approach as it believed that the Indian solar

industry was not mature and the tariffs discovered through the competitive bidding process were not viable. It is now reconsidering its decision with stabilisation on the tariff front. However, it is more inclined to set up solar power projects under the government’s National Solar Mission than under state solar policies.

Conclusion Being one of the largest independent power producers (IPPs) in the wind segment, CLP India is well positioned to gain from the industry’s improved market outlook. The reintroduction of the accelerated depreciation benefit and the GBI scheme has revived investor interest in the segment. Like other IPPs, CLP India will derive major benefits from the GBI scheme as it will aid revenue growth and improve the internal rate of return of projects. In addition to this, increased regulatory clarity will make lenders more forthcoming when it comes to providing credit to wind developers. This will support CLP India’s plans for its project portfolio expansion. ■ March 2015 ● Renewable Watch ● 33

COMPANIES

Mytrah Energy Strong player in wind power segment By Meera Bhalla

ith the government’s increased thrust on the wind power segment, Mytrah Energy (India) Private Limited (MEIL), a wholly owned subsidiary of Mytrah Energy Limited (MEL), an Alternative Investment Market-listed company, is geared up to rapidly increase its installed capacity. The company reportedly has a project development pipeline of around 3,500 MW. At the RE-INVEST event organised by the government in February 2015 with the aim to attract investment in renewable energy sector, the company signed an MoU with the Andhra Pradesh government to set up 220 MW of wind projects. The company is exploring various sources and models to secure funds for these projects. In February 2015, it signed long-term loan agreement of Rs 8.5 billion with an Indian bank to set up 150 MW of wind energy projects before the next wind season. In November 2014, MEL raised Rs 4.3 billion from US bank Merrill Lynch International and affiliates of Apollo Global Management to refinance the company’s existing debt and finance new wind power projects. Of the total amount, Rs 3.98 million will be raised through non-convertible bonds issued by MEIL and the rest through a loan to MEL. The funds will be used primarily to refinance an existing Rs 900 million mezzanine facility provided by the Infrastructure Development Finance Company (IDFC) and for the development of new wind power projects to increase the company’s wind portfolio. The financing also contains a greenshoe option to extend the bond by a further Rs 1.58 billion and the loan by $2 million, which would bring the total to approximately $98 million. 34 ● Renewable Watch ● March 2015

With the strong regulatory push to harness solar energy, MEIL is planning to explore this segment. At present, it is evaluating the various opportunities available on this front but is not planning to foray into this segment before the end of next year due to its heavy dependence on subsidy. In this regard, Vikram Kailas, managing director, Mytrah Group, explains, “Investing in projects based on government subsidy is very risky as there is always uncertainty regarding the ability and willingness of the government to continue disbursing the subsidy amount for 25 to 30 years for a project, when other less costly options for procuring power (like coal, wind, etc.) are available in the market.”

Progress so far The company entered the Indian wind energy segment in 2010, at a time when the wind energy segment had reached grid parity and started moving towards performance-based incentives with the announcement of the generation-based incentive scheme by the government in December 2009. After 2010, there was a large-scale entry of independent power producers into the wind energy segment. Their business model was based on revenues from the sale of power.

Within a short period of four years, MEIL has established a wind energy portfolio of around 550 MW, spread across 10 projects in six states. Its installed capacity is expected to reach 850 MW during the next six to seven months and cross the 1,200 MW mark during the next two years. The company followed organic ways to gain strong expertise in setting up projects in various parts of the country. The majority of MEIL’s current wind portfolio is located in Andhra Pradesh, Karnataka and Tamil Nadu. It has also developed projects in Maharashtra, Rajasthan and Gujarat. Of the total installed capacity, 21 per cent is located in Rajasthan. However, the company has installed its largest wind energy project in Tamil Nadu under the group captive model. Due to issues related to the limited implementation of the open access regime across states, the company preferred to sign long-term power purchase agreements with state discoms that have financial credibility. The open access facility is available in many states, but the state discoms are not willing to implement this regime, fearing a loss of industrial and commercial consumers. The high tariffs collected from these consumers help in offering subsidised tariffs to residential and agricultural consumers. According to Kailas, “Rising power tariffs for industrial and commercial consumers and weak implementation of the open access regime are likely to affect the success of the Make in India initiative, as it will affect the cost of production for investors setting up manufacturing facilities under this initiative.” MEIL has not set up any project under the renewable energy certificate mechanism yet and, given the stagnant condition of this market, is not planning to do so in the near future either. The company is operational in the wind energy segment through its subsidiaries, Bindu Vayu Urja Private Limited, Mytrah Vayu (Pennar) Private Limited, Mytrah Vayu (Manjeera)

COMPANIES

“We plan to increase an annual capacity addition to 500-600 MW in future” Interview with Vikram Kailas, Managing Director, Mytrah Group Which states are performing well in the wind energy segment? Last year, Maharashtra took the lead in terms of installing wind energy capacity. Madhya Pradesh is also growing rapidly on the renewable energy front, including wind. Apart from strong regulatory support, the sound financial health of the state discoms in Maharashtra, Madhya Pradesh, Gujarat and Karnataka is helping the wind energy segment flourish. Rajasthan had also been performing well; however, slow decision-making resulted in a decline in the growth rate of projects in the state. Moreover, the state discoms lost their credibility with banks due to their inability to meet the loss reduction and tariff increase targets set while debt restructuring. The financial health of the state discoms of Tamil Nadu is also poor; however, the state has managed to set up a strong open access framework, which makes it viable for wind power developers to set up captive or group captive projects. What are your views on the offshore wind energy segment? Given the current scenario, the offshore wind energy segment is likely to take time to become commercialised in India. At present, the government should focus on the wind energy resources available on land, before exploring offshore opportunities. As the latter is going to be experimental and therefore expensive, it would require large development funds. Over the next few years, the government will have to adopt a wait-and-watch policy to identify various issues related to the development of offshore wind projects and to find ways to resolve them in order to develop a strong case for private players. What are you expectations from, and recommendations to, the National Wind Energy Mission? The recent setting of the 60 GW wind capacity addition target comes under the purview of the National Wind Energy Mission. The Renewable Energy Act is also being talked about in this respect. We are discussing the mission with the government on three key fronts:

improving the project allocation structure; solving infrastructure-related problems like providing grid connectivity, simplifying the land allocation process, etc.; and facilitating financing for these projects. The capital cost requirement for wind projects is very low in India but the high interest costs affect the financials of the project. We have suggested that if the regulators adopt a 30-year time period for tariffs and a 25-year span for lending, the tariffs and interest rates will come down. How has your experience been in terms of securing funds for wind projects? We have sourced funds for our wind projects from commercial banks and non-banking financial companies. Public sector banks are currently unable to provide loans on reasonable terms for wind projects due to the increase in the number of non-performing assets (NPAs). Steps are required to recapitalise these banks and write off NPAs. In fact, the time is right for taking such measures, as the country does not have any current account deficit due to the declining oil prices. The government should raise new capital and write off NPAs in order to inject funds into emerging sectors like renewable energy. In your view, how realistic is the government’s recently announced wind capacity addition target of 60 GW by 2022? Is the country ready to achieve this? As things stand now, it would be impossible to achieve the wind capacity addition target. However, if the issues mentioned earlier are resolved, the target can be achieved. I think it is important to keep re-evaluating the outlook for the wind energy segment with regard to the willingness of the regulators and various stakeholders to achieve the target, the direction of the segment, as well as the regulatory framework.

“The government should raise new capital and write off NPAs in order to inject funds into emerging sectors like renewable energy.”

What is your vision for Mytrah? Currently, our annual capacity addition is around 400 MW, which we plan to increase to 500-600 MW in the future. However, given the growing push for wind and solar energy in the country, we may double the target.

March 2015 ● Renewable Watch ● 35

COMPANIES

Operational wind power plants of MEL State

Location

Capacity (MW)

Andhra Pradesh

Burgula

37.4

44x0.85 MW, Gamesa G58; hub height 65 m

Wind turbines

Andhra Pradesh

Vajrakarur

63.0

30x2.1 MW, Suzlon S88; hub height 80 m

Gujarat

Mahidad

25.2

12x2.1 MW, Suzlon S88; hub height 80 m

Gujarat

Jamanwada

52.5

25x2.1 MW, Suzlon S95; hub height 90 m

Karnataka*

Savalsung

100.3

Maharashtra

Sinnar

12.6

6x2.1 MW, Suzlon S95; hub height 80 m

Maharashtra

Chakla

39.0

26x1.5 MW, Suzlon S82; hub height 78.5 m

118x0.85 MW, Gamesa G58; hub height 65 m

Rajasthan

Kaladongar

75.6

36x2.1 MW, Suzlon S95; hub height 90 m

Tamil Nadu*

Vagarai

100.5

67x1.5 MW, ReGen V87; hub height 85 m

Rajasthan

Mokal

42.0

20x2.1 MW, Suzlon S88; hub height 80 m

Total

548.1

*As of July 2014, 87.55 MW capacity of Savalsung project and 90 MW capacity of Vagarai project was commissioned. Source: MEL

Private Limited and Mytrah Vayu (Krishna) Private Limited (MVKPL).

Project financing The two key sources of finance for wind energy projects are commercial banks and non-banking financial companies (NBFCs). MEIL has also secured funds from both the sources for its wind energy portfolio through various models. For the majority of its projects, the company has secured debt from NBFCs (like IDFC, Larsen & Toubro Limited and the Rural Electrification Corporation). It has also obtained funds from the International Finance Corporation. In June 2011, the company received the first tranche of $78.5 million of mezzanine financing, in the form of preference shares with a six-year term, from The Indian Infrastructure Fund managed by IDFC Project Equity Company Limited. In August 2011, the company secured the

second tranche of $33.5 million mezzanine financing from IDFC for a four-year term. In December 2011, MEIL secured a further tranche of mezzanine funding worth $20 million from PTC India Financial Services Limited for a term of four years. In August 2013, the company raised $17.5 million through mezzanine financing in the form of non-dilutive unsecured Series B preference shares, taken up by Bindu Urja Infrastructure Limited and Mytrah Wind Developers Private Limited. In November 2014, the company raised another $70 million through the issue of non-convertible bonds and loans.

Financial performance In 2013, MEL’s revenue stood at $51 million, around 65 per cent higher than that in the previous year. Gross profit and earnings before interest, taxes, depreciation and amortisation (EBITDA) registered a growth of 67 per cent and 32 per cent

MEL’s financial performance ($ million) Particulars

2012

2013

January-June 2014

Revenue

30.92

50.92

29.43

Gross profit

25.60

42.68

24.50

EBITDA

35.12

46.51

28.00

Profit/(Loss) after tax

11.97

6.90

2.71

Source: MEL's annual report

36 ● Renewable Watch ● March 2015

respectively during 2013. However, the company’s net profit declined to $7 million in 2013 from $12 million in 2012. During the first six months of 2014, the company earned $29.43 million in revenues and $2.71 million in net profit.

Future plans With the changing dynamics of the wind energy market, the emergence of large and efficient wind turbines (suitable even for low wind sites) and the shift towards performance-based incentives, the company plans to increase its total installed capacity to 1,200 MW by 2016. To meet this target, in June 2014, it announced plans to add more than 300 MW of windbased capacity in Andhra Pradesh, Maharashtra and Rajasthan, at an estimated capex of Rs 20 billion-Rs 21 billion. Of this, majority is likely to be raised through bank loans and the rest will be sourced from its internal cash flows. Of the total 300 MW of capacity, 105 MW will be installed in Andhra Pradesh, for which a turnkey contract has been awarded to Suzlon; 50.4 MW will be set up in Rajasthan; 50.4 MW in Maharashtra, which will be developed using Suzlon’s S97 wind turbine generators of 2.1 MW each; and 101.4 MW in Telangana. So far, the company has adopted only the organic route to develop its wind portfolio; however, for the planned capacity, it intends to adopt the inorganic route as well. The company is well positioned to leverage the new opportunities being thrown up by the government in its efforts to promote renewable energy. In the recent budget, the government set a highly ambitious wind capacity addition target of 60 GW by 2022. The state governments are also announcing tenders for various large-scale wind energy projects, which will further provide an opportunity for MEIL to scale up. Overall, the company has performed well so far and seems to be poised for achieving a higher growth rate in the coming years. ■

COMPANIES

Interview with Anne McEntee “We intend to maximise the efficiency of wind farms” On a recent visit to India, Anne McEntee, chief executive officer (CEO), renewable energy, GE Power and Water, spoke to Renewable Watch about the emerging technology trends in the wind power market globally as well as in India. Excerpts... How does India figure in GE’s global strategy? India is an important market for us. In 2014, we launched the GE 17103, the highest capacity wind turbine in the region, and have since successfully sold around 200 MW of these turbines. We also recently inaugurated our multimodal manufacturing facility in Pune. We are pushing hard for localisation efforts, not just from a material standpoint but for overall design as well. In terms of installed capacity, we have a significant base here and are working towards doubling our orders this year. Overall, we are very motivated by the government’s announcement of achieving 60 GW of wind energy by 2022. It shows real commitment by the government for promoting renewable energy in the country. How achievable is the 60 GW target? We are here to support the government’s vision of installing 60 GW of wind capacity by 2022. Many of our customers, including developers, are very excited about the target and what lies ahead. The key challenge for us is to be able to ramp up operations and provide the most economical and competitive turbines through advanced technology, which will allow us to create the right economics to achieve the target volume. We will soon be announcing a new turbine with bigger blades, a taller tower and larger rotor. The key to driving the growth is providing the lowest levellised cost of energy. What steps are needed to bring down project costs and turbine prices? Over the past 10 years, we have consistently improved the viability and capacity factor of the wind turbines that we manufacture. We are going to continue to make these modifications for the next couple of

years. For instance, the GE 17103 turbine was designed for India, in India and with assistance from Indian engineers. It is such a great design that we now sell it throughout the world. We are going to announce another turbine soon, which will focus on the capacity factor. We intend to maximise the efficiency of wind farms and optimise operations and maintenance costs. These factors together are going to drive the cost of energy down over a period of time. Some of the technologies that we are working on are materials and architecture for bigger blades and the use of data to optimise the performance of turbines. We have been very successful in increasing the efficiency of our installed base by 5 per cent by using a product called “Power Up”, and intend to employ this strategy at our new units as well. We are also taking steps to improve the integration of wind turbines with the grid. We are exploring features like low voltage ride-through and zero-voltage ride-through. Further, we are also getting into power prediction by using algorithms to predict the power of a turbine over 15 to 20 minutes. We have a pilot running to test that technology in India and we are very encouraged by what we see in terms of the accuracy of predictions. What are the new technology trends globally? The internet of things is becoming increasingly important. We are doing much more with our applications like Power Up, getting more output out of the farm. About 5 per cent more power means up to 20 per cent

more revenue for the customer. We are also getting into more predictive capabilities to anticipate when components may reach a certain critical point and anticipate events that may hamper turbine performance. We are moving towards becoming more savvy with our main-tenance schedule. We are developing big data algorithms to be able to better optimise performance at the farm level. This is the trend that continues to grow in the industry, that is, to focus less on the individual turbine and more on the farm level. How is GE positioned in the offshore market? In the offshore segment, we are present mainly in the components space. We provide converters and generators to the offshore segment. We are very active in the onshore segment, with a global installed base of 25,000 turbines, totalling 40 GW. Which countries are looking up in terms of wind power installations? China is a very big market, with installations of 20 GW last year. The US still continues to be a stable market. Brazil is showing continuous growth with 2.5 GW per annum and so is India, which is looking good with 2.53 GW per year. Europe registered 9-10 GW capacity addition last year. What technology trends can be expected in the Indian wind power market? Turbines are going to get bigger and towers taller. There will be a shift in focus to the farm level, with developers looking to optimise the energy production of a wind farm for the entire life cycle. ■ March 2015 ● Renewable Watch ● 37

PERSPECTIVE

Investing in India Exploring opportunities in renewables The government is taking significant steps to make India an attractive investment destination for renewable energy in order to meet its target of 15 per cent renewable energy generation by 2020. At the plenary session of RE-INVEST 2015, “India – The New Investment Destination for Renewable Energy”, eminent speakers discussed the country’s renewable energy potential and the upcoming investment opportunities. The following are key excerpts from the session… Piyush Goyal

Michael Bloomberg

An investment destination can only be attractive if we make it easier to do business. Businesses will be able to operate with ease when we have consistent policies to assure investors that the country is a good place to do business in. We must also have bankable power purchase agreements and a rule of law that prevails.

As a company that connects businesses to banks and the capital market, we are very bullish on the Indian market. Part of our work in India is devoted to the idea that lies at the heart of the prime minister’s agenda of sustainable growth, which is driven by innovation and measured by data.

There should be a system wherein the government understands business and participates as a facilitator of business. In this context, the Indian government has very proudly announced that while we are pro-poor, we understand that businesses also have to be successful and contribute to the welfare of the poor in the country. We are pleased that the renewable energy industry is participating in our goal of reaching the 300 million people who lack access to electricity. We hope to organise such events in the future to learn from business leaders to facilitate business and make India a power-surplus country. The present government will work overtime to make sure that investments in India are protected and encouraged. Should these plans come to fruition, we can scale up the targets beyond the 100 GW that we have currently planned.

38 ● Renewable Watch

While countries with the longest history of development have the greatest burdens to bear in dealing with climate change, all countries have an equal stake in this struggle because our citizens’ health and economic well-being are at risk regardless of our history. The Indian government is showing that confronting climate change can go hand in hand with smart economic policies. In my opinion, the Indian prime minister is correct in making cities the central focus of his work. The city population in India is projected to grow from 340 million in 2008 to 600 million in 2030. While people are moving to cities in search of opportunities, cities are also where most of the carbon emissions come from. These emissions come from buildings, transportation, waste, etc. Cities can be made better places to live in by making these activities energy efficient. The most effective economic policies are those that

improve people’s health and quality of life. People want to live where businesses want to invest, and businesses want to invest where people want to live. Therefore, the more India invests in cities, the more sustainable they will become. Part of my work at the UN involves encouraging governments to partner with cities to meet the climate change target. The Indian government understands the importance of cities and the importance of powering them with clean energy. It has set an ambitious target of achieving 175 GW of renewable energy capacity by 2022. In fact, there is no large country in the world that is better positioned to capitalise on solar power than India (it gets about 70 per cent more solar radiation than Europe). If India is able to realise its goal of providing electricity to all its citizens, it will send a strong signal to the world. It will be a success story told and copied around the world. As ambitious as the government’s targets may be, they are achievable. This is because the market is moving in the right direction. While the potential costs of climate change are steadily rising, the cost of clean power is falling continuously. This

Piyush Goyal

Michael Bloomberg

Uwe Beckmeyer

Minister of State

UN Secretary-

Parliamentary State

(Independent

General’s Special

Secretary (Deputy

Charge) for Power,

Envoy for Cities and

Minister), Federal

Coal and New and

Climate Change,

Ministry of Economics

Renewable Energy,

and Founder,

and Energy, Federal

Government of India

Bloomberg LP

Republic of Germany

●

March 2015

PERSPECTIVE year, for the first time, the solar contracts signed in India are cheaper than the contracts for power produced from imported coal. The cost of wind power has also become comparable to the cost of power produced from imported coal. By 2020, coal may cost considerably more than wind and solar power, and come with even greater risks.

renewables in our electricity consumption has been on the rise continuously. It has now reached around 28 per cent of the gross electricity consumption. We have set a target of increasing the share of renewable energy to 80 per cent by 2050. Meanwhile, we are trying to cut carbon emissions by 80 per cent and reduce primary energy consumption by 50 per cent.

Pollution from burning coal causes more than 100,000 deaths in India every year. It is an avoidable tragedy, which places a heavy burden on the health care system. Clean energy investments also produce knowledge-intensive jobs that Indians are well prepared to take up. In India, business leaders are increasingly recognising the opportunities that are available to them. For instance, Mahindra has recently committed to tripling its investment in domestic solar power. US-based SunEdison has decided to partner with India’s Adani Enterprise to build a $4 million solar photovoltaic manufacturing plant in India. These investments can serve as a model of sustainable development for other countries.

The second pillar of our energy reforms is energy efficiency. The German government has approved the National Energy Efficiency Action Plan, which comprises short- and medium-term measures to reduce carbon emissions by 2020. The targets that we have set for ourselves are very ambitious. India has also set an ambitious target of achieving 175 GW of renewable energy by 2022. Both countries have a wealth of experience that can be shared to ensure that this cooperation benefits the industry as well as the climate.

Uwe Beckmeyer Germany and India have a tradition of close partnership. Our bilateral trade has been expanding rapidly. Fortunately, India’s economic indicators are pointing upwards. We believe that the Make in India campaign is the right instrument to attract investments. The dynamic nature of the Indian population and the vast markets in the country augur well for this initiative. Renewable energy has always been high up in the agenda in Germany and the country has succeeded in breaking the link between energy consumption and economic growth. Since 2000, the share of

Baroness Sandip Verma I am here to encourage Indian industries investing in the country’s renewable energy sector to explore the UK’s financial market. India is increasing its investments in renewable energy to achieve energy security and generate electricity at a faster rate so as to fulfil the promise of providing 24x7 electricity to all households by 2019. The country’s current renewable energy vision will pave the way for inclusive economic development, energy security and lower carbon emissions. The renewable energy capacity in the UK has more than doubled since 2010. On our journey towards a low-carbon economy, we have learnt a number of things, which I would like to categorise as the three “Fs” – framework, financing and

firm – and the UK is happy to support India on all these fronts. I would like to discuss the three “Fs” one by one beginning with framework. In the UK, we are delivering a package of electricity market reforms, including a radical new market design to provide stability and certainty to investors for investing in a lowcarbon economy. This will help the country in dealing with the massive power challenges that it is expected to face and in insulating consumers from volatile fossil fuel pricing. To attract private investments and provide adequate government support, we have prioritised the setting up of a competitive market. In this regard, the country has adopted a “contracts for difference” model, which is a kind of a guaranteed feed-in tariff designed to provide stability and predictive incentives to companies planning to invest in low-carbon generation. It eliminates electricity price risks. In addition, a levy control framework has been introduced to ensure funding for new projects up to 2021, which will ultimately be financed by consumers. We are also keen to cut the cost of lowcarbon technologies. We are making different technologies compete for subsidies in order to conduct technology-neutral auctions. Unlike fixed subsidies, competitive bidding captures technological innovation and incentivises low-carbon generation, at a low cost. Over time, as technology matures and carbon prices rise, we expect these technologies to gain a larger market share and subsidies to be phased out altogether. This brings me to financing. Along with technologies, innovative financing techniques are required to secure the neces-

Baroness Sandip Verma

Adnan Z. Amin

Ajay Shriram

Director General,

President,

Minister of

International

Confederation of

Energy and Climate

Renewable

Indian Industry

Change, UK

Energy Agency

March 2015

●

Renewable Watch ● 39

PERSPECTIVE

Dr Jyotsna Suri

Rana Kapoor

Tulsi Tanti

President, FICCI

Managing Director

Chairman and

and Chief Executive

Managing Director,

Officer, YES Bank

Suzlon Group of Companies

sary investments. For this, the UK has set up the Green Investment Bank with £3.8 billion public funds. The bank’s role is to invest in profitable green projects in a way that mobilises additional private sector capital. The bank has so far committed more than £1.3 billion through a mix of debt, equity and funding investments, and has mobilised a further £3.3 billion of private sector money. In addition to the above, the UK has strong firm power that has delivered impressive results on the wind (offshore as well) and solar fronts. It also has firms with a strong presence in the domains of investment, engineering, banking, advisory, legal services, etc. In sum, the UK is looking forward to working with India on all the three “Fs”. India’s current targets will help support inclusive economic development, achieve energy security and reduce carbon emissions.

Adnan Z. Amin We have seen a historic change in the global energy system. A global energy transformation is currently under way. Renewable energy has become the principal capacity contributor in the total energy mix worldwide. To secure large investments, a country requires ambitious targets, government support and commitment, and private sector participation. In India, all three are present. The country has set an ambitious target of 100 GW for solar and 60 GW for wind for the next seven years, and has expressed strong regulatory determination to achieve these targets. The country’s private sector has also committed an investment that is more than double of 40 ● Renewable Watch

●

March 2015

what the government has committed. This dynamism and vision of the private sector needs to be congratulated. Investments in renewable energy make economic sense as they provide employment, income, prosperity and, most importantly, a sustainable power system to fuel future growth of the economy. However, there are certain issues related to the policy and regulatory framework in India that need to be resolved for a bright future. For instance, there is a need to mitigate the distortion in the Indian solar product manufacturing market. There is also a need to reduce the risks associated with investments in renewable energy in the country, especially due to high interest rates. While improving our lifestyle, we should not neglect our target of providing electricity to the poor living in remote areas. We are a reliable partner and are ready to offer our resources to India to achieve these targets.

Ajay Shriram India has made substantial progress in the areas of renewable energy and energy efficiency. Today, the installed renewable energy capacity in the country stands at over 32 GW and accounts for over 13 per cent of the fuel mix and about 6 per cent in energy terms. Financing is central to renewable energy development. While the market has responded well to the commercial interventions that have been put in place, financial institutions need to respond more aggressively. The government is targeting solar parks and solar rooftops, repowering wind farms and mechanisms to ease doing business, including the provision of a single-window clearance mechanism. It is also in the process of putting in place crit-

ical policy levers, including amendments to the Electricity Act, 2003, whereby stringent penalties will be imposed for not complying with renewable purchase obligations. A renewable obligation is also being considered for conventional power generation. The Confederation of Indian Industry (CII) has been working in a collaborative manner to attract investments to the country. We have been partnering with various states as we have seen the emergence of competitive federalism. Many states are creating platforms for interfacing with investors. In addition, CII has been working with various departments in the central government to create an appropriate forum and has been messaging investors in India and abroad. Companies such as Mera Gao Power and SELCO Solar have done tremendous work in bringing electricity to Indian villages. As for biogas, the energy capability is derived principally from agricultural residues and cow dung from India’s 200 million-plus cattle. Biogas technology can fulfil several end-uses. The gas is useful as a fuel substitute for firewood, kerosene and diesel. Biogas systems also provide a rich residue for organic fertilisers. I would urge institutions and investors to take a relook at the international arrangements that can be ensured for wider adoption of these technologies.

Dr Jyotsna Suri Renewable energy in India has never received as much attention and significance as it is currently receiving. Motivated to achieve the target of 15 per cent renewable energy generation by 2020, the government, policymakers and the industry are racing ahead. The government is

PERSPECTIVE clearly committed to incentivising the use of clean energy and creating a competitive domestic production base for renewables. Investors, equipment manufacturers, project developers and other stakeholders are aware that the sector is here to drive the engines of the Indian economy. However, to attain this aspirational energy goal, we have to undertake meticulous planning and strengthen strategic relations with key partners. Some issues that the Federation of Indian Chambers of Commerce and Industry has been highlighting and that need to be addressed are opening the floor to capitalise renewable energy by removing regulatory impediments for the sector; facilitating long-term funds and innovative financing; speedy implementation of simple policies; along with a conducive tax regime and business environment. In addition, the government needs to promote the off-grid segment in remote areas as well as strengthen the supply chain within the country.

Rana Kapoor While a large quantum of financing is required for the renewable energy sector, developers can be assured that there is enough vigour and velocity amongst Indian banks. There are, however, a few things that need attention. In this context, I have the following recommendations: z Renewable energy financing should be declared as priority sector lending and be carved out from the overall sectoral limit available for the power sector. z A powering India green fund should be created because invariably, as we make this quantum leap, equity gaps will be there and some viability gap funding will be warranted. z Infrastructure investment trusts have been recommended by the Securities and Exchange Board of India. For this budget, I had recommended, and so had the Associated Chambers of Commerce of India, that we should finetune the tax residual issues in order to create infrastructure green investment trusts, which are an important and sig-

nificant mechanism to sell down postcompletion risks. Creating an international market for green investment trusts in India can naturally attract lowercost capital, which is the need of the hour in this particular sector. Akin to sunrise sector financing in many countries, we need credit guarantees and partial insurance policies. It is a matter of time before such product developments will create credit enhancement and the ability to bundle and sell down risk, which is mission critical. There is a need among investors, especially international debt and equity investors, for some hedging control over their investments. A special allocation or a small facility can be created for this at a predetermined cost of 2.5-3 per cent, which can put a cap on the overall foreign currency risk manifested in such investments. India has not done anything on the green bonds front as of now. However, a beginning has been made with Yes Bank launching the first green infrastructure bond in the country.

Tulsi Tanti The government has set an ambitious target for industries and we hope that they are well equipped to install the required capacities and build the projects within the time frame. At present, the total wind capacity in India is 24,000 MW and the manufacturing capacity aggregates 9,000 MW. Manufacturers are providing end-toend solutions, a model not prominent in other parts of the world. Also, the cycle time of investments in projects is less than 12 months. These factors give major comfort to investors. Today, more than 10 million people are working to build renewable capacity.

Highly reliable world-class technology has been established and considerable supply chain and manufacturing capability is available. In the past 10 years, India has exported more than 6,000 MW of wind turbines to about 30 countries. On the technology front, we are well equipped, competitive and established. We also have an excellent testing and certification system. We would like to see a fair number of wind-solar hybrid projects in the future as these would lead to infrastructure optimisation. Andhra Pradesh has already announced a wind-solar hybrid policy. India will also see a revolution in the offshore wind energy space in the near future and I foresee 10,000 MW of offshore wind energy projects coming up in the next five years. At present, we believe it is very expensive, but once we build scale, it will be very competitive. In the context of the Make in India initiative, if we draw a comparison between China and India, our manufacturing base is not very competitive in the global market. There are two reasons for this. First, our energy cost is very high and second, the financial cost of capital investment is very high because of which manufacturing is not competitive. Today, we have an excellent opportunity to invest in India and we have a few suggestions that can accelerate capacity addition. A five-year long-term policy and tariff for onshore and offshore wind projects is a must. The banking sector should provide debt not just for 10-15 years but for 20-25 years. Further, banks should provide 80 per cent debt and not 70 per cent, as in the current structure. If we see in the last 20 years, most of the projects are paying on time and there are almost nil non-performing assets. To ensure the success of the Make in India initiative for the captive energy requirements of small and medium enterprises, we should bring a Finami policy. This will give a 5 per cent interest rebate to projects while a 60 per cent local content requirement will provide competitiveness to the manufacturing capacity. â&#x2013; March 2015

â&#x2014;?

Renewable Watch â&#x2014;? 41

PERSPECTIVE

Interview with Vineet Mittal “Investor sentiment has changed for the better” At the recently concluded summit on renewable energy held in Delhi, RE-INVEST 2015, Welspun Renewables announced that it has planned to set up 11 GW of solar and wind energy projects across the country. This will comprise 8.66 GW of solar and 2.34 GW of wind power projects. In an interview with Renewable Watch on the sidelines of the event, Vineet Mittal, vice-chairman, Welspun Renewables, spoke in detail about the company’s plans and expressed his views on the need for renewable energy development and the challenges associated with it. Excerpts...

Vineet Mittal Vice Chairman, Welspun Renewables

“The euphoria created by the central government on renewable development should transmit to the state level as well. Power is a concurrent subject, and the centre alone cannot drive the sector.” 42 ● Renewable Watch

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What was the idea behind the company’s entry into the renewable energy segment? When I shut down my BPO, which was a fairly large-sized business, the basic intent was to run a foundation that could give back to society. I became part of a few NGOs and started working with them. In 2009, I was travelling in Madhya Pradesh and Chhattisgarh, and it was at this time that I became aware of the acute poverty in these places. I decided I had to run a business that would serve society and also have a commercial purpose. We looked at various industries and the infrastructure industry in particular so that we could serve remote areas. Renewable energy turned out to be one such industry. I felt this business could fulfil both my aspirations: of growing in life and giving back to society. With our 15 MW solar plant in Gujarat, we became one of the first companies to enter the utility-scale solar power segment. We also placed one of the lowest tariff bids for a 55 MW project in Rajasthan under the Jawaharlal Nehru National Solar Mission. At that time, it was the largest solar project in Asia and it inspired us to bid for larger projects. We subsequently got projects in Uttar Pradesh and Madhya Pradesh. Our efforts have been recognised by the government. By the beginning of 2016, we will have an operational capacity of 1,000 MW in the solar and wind power segments. At present, we have about 400 MW of operational capacity and another 150 MW will be commissioned shortly. Although wind power currently comprises a small share of our portfolio, we plan to increase it to around 20 per cent by end-2015.

March 2015

Welspun has signed green certificates for 11 GW of renewable power capacity. How do you plan to fulfil this commitment? Before taking on any commitment, a lot of discussions take place at the board level, where we decide if the proposed targets are realistic and achievable. We assess them on the basis of various factors like land availability and financial support, along with our own skill sets and scale for achieving a particular target. At present, we have the groundwork ready for 2,500 MW of capacity across various states. Once the power purchase agreements (PPAs) are signed, we can go ahead with project construction. We hope to acquire land permits and other related permissions for 5,000 MW by March 2016. This target has given us the confidence to fulfil our commitments as 45 per cent of our committed capacity would be achieved by then. The single biggest challenge relates to the pricing and bankability of PPAs. We also need to look into the track record of discoms where payments are concerned, so that we face no delays in commissioning. When one commits to a large-value project, the government also needs to extend support. Therefore, the euphoria should transmit to the state level as well. Power is a concurrent subject, and the centre alone cannot drive the sector. On the positive side, states are getting better visibility, and I believe that we will be able to fulfil our commitments with this change in approach. How has investor sentiment changed in the past year? Investor sentiment has changed for the better and the outlook for the country seems opti-

PERSPECTIVE mistic. Based on my interactions with various stakeholders, the negativism about the country’s growth has gone. This needs to lead to more investments, and the economic cycle will pick up in the coming year. But then, we have to look at the next challenge of skill shortage, and address it. What has been your experience with the discoms so far? At present, apart from one state, all the discoms are paying us on time. Having said that, discom health is still an issue as the financial restructuring package signed by the government has not been implemented fully. Some states like Uttar Pradesh have billing and collection problems, which eventually create pressure on the entire power system. If Andhra Pradesh can bring down its transmission and distribution losses to only 10 per cent, why can’t other states do the same? Apart from these issues, the difficulties in the coal market mean that the power sector will face significant challenges over the next three to four years. What level of investments are you looking at for fulfilling the stated commitments? At this stage, it is difficult to quantify the investments as the industry is growing very fast. In the wind segment, the cost of capital expenditure is increasing while in the solar segment, the same is stabilising. Our existing projects are providing us cash flows and we, as promoters, are putting more capital into the sector. We believe capital will not be an issue if we continue to get quality PPAs at the right prices. But what happened in the thermal segment, where developers quoted a certain tariff and then approached the Central Electricity Regulatory Commission for tariff revisions, should not happen in solar. The adventurous bids being made by some companies lead to wrong aspirations for the industry as a whole. As a result, if the segment comes out with a few non-performing assets, banks will become reluctant to lend. They have become cautious after what happened in the thermal segment.

What is your view on moving from the competitive bidding route to the feed-in tariff route for solar projects? A lot of new technologies are being brought into the market. So the government cannot fix tariffs for five years, which was what many were demanding. If costs decline two years later, the utilities will feel cheated. But the pricing curve has matured now to an extent and the government should fix tariffs for 18 months at a go. This can aid huge capacity additions in a short period of time. The government is driven by transparency and price discovery. We would like it to hold discussions, even with the opposition, while announcing new policies or tariffs. Another thing we want is for the solar segment to be treated as part of the farming industry and make a constitutional amendment for this. Once the land required for solar gets converted into farming land, it will get the advantage of priority sector lending. Which states is the company keen to invest in? Right now, I am indifferent. Wind energy cannot be produced in many states because there are only six where it makes a strong business case, and we have a presence in all of them. For the solar segment, we are not particular about any one state and will be doing projects across the country, including in the Northeast. There are challenges with every project but being an entrepreneur, we cannot keep highlighting the problems. The good part is that the government is keen on resolving them. What are your views on promoting decentralised power generation? It is very essential and will be a game changer. In the same way the telecom sector reached the last mile, the renewables sector can reach remote areas through the off-grid route. Solar rooftop development should not be given much importance, except at places where it is commercially viable. There should be a greater emphasis on off-grids, mini-grids and microgrids for providing connectivity. We also need to work on better power

storage equipment and devices. In the coming years, the MW-per-hour cost of storing power will come down to $250,000. We will witness improvements in grid stabilisation and the setting up of more wind energy farms with greater technological advancements. We have already done some commercial solar rooftop projects at IIT Kanpur, Vedanta Medical College, and several government institutes. We will also be announcing mini-grid projects that would empower 1,400 families in some of the remotest areas of the country. What is your vision for the company? Our vision is to be known as more than a solar and clean energy entity. We tell our employees that we need to think about the higher value of life and about making a positive difference to society. The eventual question is, “Who will cry when you die?”, and we as a company do think about this. We want to become the largest clean energy player in the country and also a company that is admired by society. All in all, we have two objectives: the first is commercial and the other, ensuring social returns on our investment. We are building an internal matrix for the latter. Our goal is that if the government comes out with a large tender, we have the capability to execute the same by 2019. If the PPAs are not in place as planned, the time period can then be extended to 2022-23. But, as of today, the targets look like they can realistically be achieved by end-2019. How do parks fit into these strategies? We not only have a presence in solar parks but also in large solar engineering, procurement and construction plants. We are the owners and developers of some of these plants. We also have a third company that focuses completely on operating and maintaining these plants and ensuring a healthy revenue stream. Does the company have any plans to enter the manufacturing segment? As of today, no. There is a lot of spare capacity around the world at present and there is no point in reinventing the wheel. ■ March 2015

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Renewable Watch ● 43

PERSPECTIVE

Renewables Roadmap New initiatives and policies needed to tap resources This article highlights the recommendations of the “Report on India’s Renewable Electricity Roadmap 2030” led by NITI Aayog, undertaken by the Shakti Sustainable Energy Foundation, the Regulatory Assistance Project (RAP) and the Confederation of Indian Industry (CII).

ndia’s renewable electricity potential is vast, with recent estimates indicating the country’s solar potential to be more than 10,000 GW and the wind potential to be more than 2,000 GW. Biomass and small-hydro power also offer significant opportunities. Renewable electricity brings with it enormous benefits: zero fuel costs for most resources, electricity prices free from volatility and external influence, reduced imports, and dramatically reduced pollution and water use. Tapping these resources will, however, require India to raise the necessary capital and make arrangements to manage their special characteristics and challenges, like intermittency, biomass collection, siting and clearances. Implementing

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March 2015

frameworks that operate over a wider geographical footprint will require new initiatives from the central and state governments that go beyond existing policies and programmes and support the engagement, participation, and new behaviour of the power sector. To help policymakers identify these new initiatives, in November 2013, the Government of India initiated a stakeholder-driven analysis of the opportunities and barriers in the way of rapid renewable electricity deployment. This process was led by NITI Aayog (the erstwhile Planning Commission of India) in conjunction with its role as co-leader of the 21st Century Power Partnership

(21CPP), a multilateral effort of the Clean Energy Ministerial, which serves as a platform for advancing the large-scale deployment of renewable energy. The process was guided by a steering committee led by then member (energy), Planning Commission of India, B.K. Chaturvedi. Other members included secretaries from key ministries (power, new and renewable energy, finance, and environment and forests), chairpersons from central-level agencies (the Central Electricity Authority and Power Grid Corporation of India Limited), and secretaries (energy) from two states (Tamil Nadu and Rajasthan). The Planning Commission’s operating agent for the 21CPP, CII, and

PERSPECTIVE the knowledge partners, Shakti and RAP, constituted the Renewable Electricity Roadmap team. The outcome was published at the RE-INVEST 2015 event as the “Report on India’s Renewable Electricity Roadmap 2030”. The analysis and recommendations presented in the report were based on conversations conducted by the Roadmap team with over 250 stakeholders across 13 states, as well as extensive reviews with international experts. Apart from the steering committee members, chairpersons and members of central and state electricity regulatory commissions, and state energy secretaries, the stakeholders included managing directors of gencos, transcos and discoms, grid operators, power planning agencies, and members of civil society, industry, finance, and bilateral and multilateral institutions. All conversations were conducted under the Chatham House Rule, where remarks were noted but not attributed. This allowed for frank and robust conversations. The draft report was commented upon by over 100 domestic and international experts through 2014.

Recommendations The new policies and programmes would be useful in formulating a comprehensive national law or policy framework for renewable electricity; finding willing and creditworthy buyers for renewable electricity; ensuring a smoother project development environment; and updating grid planning and operations. The five core principles discussed below must be at the heart of any new efforts in this regard: z Treat renewable electricity as a resource of national and strategic importance z Mandate renewable electricity as a significant component of the power sector z Take an integrated approach to power sector planning, including generation, transmission and distribution z Make buyers indifferent in the choice between conventional and renewable electricity resources until grid parity is achieved z Accord equal priority to small-scale/dis-

Renewable energy grid integration and efficient grid operation strategies Strategy

Impact on uncertainty

Impact on variability

Grid technology upgrades

Minimise

Manage

Grid operation protocol upgrades

Minimise

Manage

Expansion of balancing areas

Minimise

Minimise and manage

Upgrade of grid planning practices

Minimise

Manage

One time

Ongoing Balancing resources: estimation, procurement, dispatch

tributed renewable electricity and largescale/centralised renewable electricity. These principles are the foundation for an integrated policy strategy for rapid renewable electricity implementation, which would complement existing and planned conventional power projects. Such a policy strategy should include: z A comprehensive law and/or policy z Support mechanisms to ensure timely implementation z Grid reforms to ensure the smooth integration of renewable electricity z Energy access and off-grid renewable electricity considerations.

National renewable electricity law and/or policy A comprehensive, transparent, long-term and definitive legislative and policy framework needs to be implemented for renewable electricity. Some essential features of such a framework include: z Targets: All states should be equally responsible for meeting a national uniform target. The rationale for setting targets should account for the various

A comprehensive, transparent, longterm and definitive legislative and policy framework needs to be implemented for renewable electricity.

benefits and costs described above. Financial support for achieving targets: The law/policy should clearly identify the source, level and distribution mechanism of financial support for reducing the incremental cost of renewable electricity (including both generation and integration costs) to the ultimate buyers, as compared with the already subsidised fossil fuel-based generation. Integrated energy resource planning: Comprehensive and analytically sophisticated planning exercises should be routinely undertaken in order to assess the benefits and costs of various aspects of the electricity sector, including supply-side resources, transmission and distribution networks and their operation, and demand-side resources. Programmatic approach: An enforceable renewable purchase obligation mechanism is needed, which incorporates a mandatory national uniform obligation for all bulk buyers (that is, discoms and open access consumers); and a mandatory net metering/feed-in tariff for behind-the-meter renewable electricity generation (for instance, rooftop photovoltaic) applicable to all distribution service providers.

Support for compliance and timely implementation The government, at the central and state levels, will need to support compliance with mandatory requirements for renewable electricity through the following functions: z One-stop shop for standardised contracting: A new Central Electricity ReguMarch 2015

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Renewable Watch ● 45

PERSPECTIVE

latory Commission (CERC)-regulated intermediary institution that centrally procures renewable electricity from developers and sells to bulk buyers. This would lead to a significant reduction in contracting-related transaction costs and project risks. Financial support and disbursal mechanism: A uniform and simple financial support system and disbursal mechanism targeted at buyers for ensuring that bulk buyers do not differentiate between new renewable electricity and new conventional generation. Streamlined project development: The centre and states need to coordinate with each other and facilitate the process of reducing soft costs in project development (for instance, siting, permitting and support infrastructure) with technical and logistical support from the intermediary institution mentioned above. Low-cost financing: Finance costs for any country are driven by multiple factors. As a result, it is neither desirable nor possible to make inroads into financial markets. Such attempts thus have to be sector specific, in this case for renewable electricity. The cost of capital should be reduced through interventions at multiple stages, thereby de-risking the renewable energy sector and increasing the quantum of money available.

Grid integration Technically, renewable electricity is typically described as an intermittent source of electricity. Intermittency consists of two distinct aspects: z Uncertainty: This refers to the lack of accurate knowledge about future renewable electricity generation, which is not very different from that of fossil fuel-based generation/transmission systems (for instance, an unforeseen failure of a fossil-based generator or transmission line). z Variability: The known natural variation in renewable electricity generation (for instance, the peaking of wind during monsoon), just as that which exists on the demand side at present (low demand at midnight and high demand 46 ● Renewable Watch

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March 2015

during late afternoon). Internationally, various changes to grid design, technology and its operation have been implemented for minimising and/or managing variability and uncertainty. Many of these strategies are inherently useful for improving the overall efficiency of grid operations, irrespective of whether renewable electricity accounts for a large share of the generation mix or not. Some of these are one-time changes while others would evolve over time with the change in load shapes and the resource mix. These strategies can be classified into the following sub-categories: z Grid technology upgrades: System operators at all levels (state, regional, national) should have grid status visibility of neighbouring balancing areas as well as the ability to coordinate with them. z Grid operation protocol upgrades: Various aspects of system operations need to be updated, such as grid codes and scheduling and dispatch operations. Grids where scheduling and dispatch are implemented over short durations (for example, five minutes) have significantly lowered overall costs for consumers. z Expansion of balancing areas: At the global level, it has been seen that larger balancing areas (or the ability to coordinate among them) have significantly lowered overall costs. A single nationallevel load dispatch centre (LDC) that is not-for-profit, independent, and regulated by the CERC is sufficient for managing the entire national grid.

The cost of capital should be reduced through interventions at multiple stages, thereby de-risking the renewable energy sector and increasing the quantum of money available.

Promotion of flexible demand and supply resources: Power systems, especially those with a high renewable electricity share, require access to sufficient flexible resources to ensure grid stability. The LDC should be made responsible for procuring ancillary services to ensure this stability.

Energy access and off-grid renewable electricity The scope of this report did not include an extensive consideration of the challenges of energy access or off-grid renewable electricity. However, stakeholders concerned with these issues indicated that renewables could rapidly bridge India’s energy access challenge in a cost-effective manner, and put forward some policy approaches for the same. Yet, there was general agreement that these issues required an independent in-depth analysis. In addition to the government’s grid extension programmes, state utilities and state governments should be actively engaged and held responsible for: z The immediate provision of stand-alone off-grid systems in remote rural areas for home lighting and running other basic appliances. Over time, these systems could play the same role as that of rooftop systems in urban areas. z The parallel development of districtand block-level plans to providing electricity through the deployment of microgrids or mini-grids using renewable electricity resources.

Conclusion Conventional fossil fuel power plants have been at the core of power systems around the world for many years. These systems had particular engineering and technical characteristics and, for decades, operating and governance institutions were created, designed and operated with the aim of supporting them. But renewable sources are different. For India to fully capture their benefits, there needs to be a rethinking and re-engineering of institutions, redefinition of policies, retuning of power grids and systems, and the replacement of old habits with new ones. ■

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FINANCE

Top Lines Tumble Renewable energy firms report losses on the back of higher costs By Deepmala Pokhriyal

isted Indian renewable energy companies have reported negative financial results for the quarter ended December 2014. Despite an increase in revenues on account of the higher utilisation of installed capacity and the upward revision of tariffs in a few states, higher finance costs and rising operating expenses affected the bottom line of most renewable energy companies. Going forward, positive policy developments and a continued push to the adoption of solar and wind energy will enable such companies to improve their top line and bottom line.

Orient Green Power Limited Orient Green Power Limited (OGPL) reported a loss of Rs 1,125.41 million for the quarter ended December 2014, up from the loss of Rs 753.54 million it had recorded in the quarter ended December 2013. This was on account of a 53.42 per cent growth in its expenditure, which rose from Rs 420.39 million for OctoberDecember 2013 to Rs 644.98 million for October-December 2014. Meanwhile, its revenues grew by only 10.67 per cent, from Rs 751.87 million to Rs 832.12 million, for the period under consideration. Consequently, the company’s operational earnings before interest, taxes, depreciation and amortisation (EBITDA) declined from Rs 331.48 million for the quarter ended December 2013 to Rs 187.14 million for the corresponding period in 2014. In the wind energy segment, OGPL’s total operational capacity increased from 405.46 MW as of end-December 2013 to 421.7 MW as of end-December 2014. The plant load factor (PLF), meanwhile, declined from 9.38 per cent to 8.05 per cent over the same period, on account of the 48 ● Renewable Watch ● March 2015

lower-than-expected wind availability in Tamil Nadu. This translated into a reduction in OGPL’s average gross realisation, from Rs 5.59 per unit to Rs 5.50 per unit. On the upside, grid availability in Tamil Nadu increased due to the state government’s initiatives to evacuate more wind energy during the quarter under review.

upcoming 20 MW cogeneration plant will improve due to the bagasse cogeneration tariff increasing to Rs 6.27 per kWh in Maharashtra. OGPL will also benefit from the improved tariff of Rs 6.53 per kWh for biomass-based units in Maharashtra during the off-season.

OGPL’s operational capacity in the biomass energy segment stood at 78 MW as of end-December 2014, reporting a 13.8 per cent increase from 68.5 MW as of endDecember 2013. The average realisation of its biomass operations also increased from Rs 5.68 per unit in October-December 2013 to Rs 6.75 per unit in OctoberDecember 2014. During the quarter ended December 2014, two OGPL plants in Tamil Nadu benefited from an increase in tariff. The Tamil Nadu Electricity Regulatory Commission hiked the power tariff in the state by 15 per cent, effective December 12, 2014. At the same time, the company’s unit in Madhya Pradesh recommenced operations with lower feedstock prices, which was reflected in its PLF in January 2015. Meanwhile, all of OGPL’s biomass projects in Rajasthan benefited from the 10 per cent tariff hike made by the Rajasthan Electricity Regulatory Commission. In the near future, the rate of return for the company’s

For the quarter ended December 2014, Indowind Energy reported profits of Rs 1.16 million , as against the loss of Rs 9.85 million it had registered for the quarter ended December 2013. This was primarily because of an increase of over 200 per cent in its other income, which rose from Rs 8 million in October-December 2013 to Rs 29.56 million in October-December 2014. However, the company posted a decline in its net profits from ordinary activities before exceptional items, from Rs 2.14 million in October-December 2013 to Rs 1.16 million for the period under review. Indowind Energy had reported extraordinary items worth Rs 11.29 million in OctoberDecember 2013, which had led to a net loss. Meanwhile, the company’s revenues decreased by 40 per cent, from Rs 33.09 million for the quarter ended December 2013 to Rs 19.83 million for the corresponding quarter in 2014. However, its net expenses increased from Rs 27.36 million in October-December 2013 to Rs 31.61 million in October-December 2014.

Indowind Energy

Indosolar Indosolar reported a reduction in its net losses from Rs 313.16 million for the quarter ended December 2013 to Rs 105.2 million for the quarter ended December 2014. Its revenues increased from Rs 27.9 million to Rs 1,043.55 million during the same period. At the same time, the com-

FINANCE pany’s expenditure grew from Rs 144.37 million for the quarter ended December 2013 to Rs 910.88 million for the corresponding quarter in 2014. As of December 2014, Indosolar had net short-term liabilities of Rs 5.47 billion. It also had outstanding foreign currency liabilities for the purchase of material and capital goods totalling Rs 136.63 million. In addition, an amount of Rs 2.15 billion had become repayable by the company as of December 31, 2014, with another Rs 1.44 billion repayable by March 2015 under its corporate debt restructuring package. Meanwhile, due to continuing liquidity issues, the company has approached bankers for a second corporate debt restructuring package on which a decision is still awaited.

Ujaas Energy Ujaas Energy reported a decline of 81.85 per cent in its profits, which came down from Rs 31.86 million for the quarter ended December 2013 to Rs 5.78 million for the quarter ended December 2014. This was mostly due to a fall in its net revenues from Rs 351.9 million to Rs 70.3 million during the same period. Meanwhile, Ujaas’s total expenses also reduced to Rs 1.47 million for the quarter ended December 2014 from Rs 308.42 million during the corresponding quarter in 2013. There was a significant decline in the company’s net profits on account of a substantial decrease in the income of its solar power system manufacturing business, which dropped from Rs 73.6 million in October-December 2013 to Rs 3.02 million in October-December 2014. Meanwhile, the company’s solar plant operations witnessed an increase in profits from Rs 11.82 million to Rs 60.61 million during the same period.

Suzlon Suzlon reported an increase in losses for the quarter ended December 2014 on account of the sale of its profitable Germanybased subsidiary Senvion. The sale was undertaken to pare its debt. For the quarter under review, the company reported a net

Financial performance of select renewable energy companies Company

Revenue (Rs million) Quarter ended December 2013

Net profit (Rs million)

Quarter ended December 2014

Growth (%)

Quarter ended December 2013

Quarter ended December 2014

Growth (%)

Indosolar

27.90

1,043.55

3,640.32

(313.60)

(105.23)

–

Indowind Energy

33.95

19.83

(41.59)

(9.85)

1.16

–

Suzlon Energy

50,522.00

49,771.80

(1.48)

(10,752.00)

(65,386.80)

–

OGPL

751.87

832.12

10.67

(753.54)

(1,125.41)

–

Ujaas Energy

351.90

70.32

(80.02)

31.86

5.78 -81.86

Sources: Companies’ quarterly reports

loss of Rs 65.38 billion, as against a loss of Rs 10.75 billion for the quarter ended December 2013. During the quarter ended December 2014, Suzlon registered a loss of Rs 5.99 billion due to goodwill impairment and Rs 5.93 billion on account of infrastructure development charges. The company also reported a decline of 1.48 per cent in its revenues on a consolidated basis, from Rs 50.52 billion in OctoberDecember 2013 to Rs 49.77 billion in October-December 2014. Suzlon, however, posted a positive EBITDA at Rs 2.95 billion for the quarter ended December 2014. Its EBITDA margin improved from 2.7 per cent for the quarter ended December 2013 to 6 per cent for the corresponding quarter in 2014. At the operating level, Suzlon reported lower volumes of 35 MW in October-December 2014 against 106 MW in the corresponding quarter in 2013 on a stand-alone basis. This can be attributed to the company’s constrained liquidity situation. Suzlon continues to have a significant debt burden on a consolidated basis. As of December 2014, Suzlon Wind had a domestic debt of Rs 89.01 billion, while its foreign currency-denominated debt included $436 million of convertible bonds, $647 million of credit-enhanced bonds and $115 million worth of miscellaneous working capital and other facilities. Therefore, it took various initiatives to deleverage its balance sheet. Suzlon plans to convert $140 million of its convertible bonds into equity at a price of Rs 15.46 per share. It is of the view that the move will enable a debt

reduction of Rs 25 billion. Meanwhile, the company has signed a binding agreement with Centerbridge Partners LP, USA, to sell 100 per cent of its stake in Senvion in an all-cash transaction. The deal is worth Euro 1 billion, with a future earn-out of up to an additional Euro 50 million. As part of the deal, Senvion will give Suzlon its licence for offshore technologies for the Indian market, while Suzlon will give Senvion the S111-2.1 MW licence for the US market. The deal is in line with Suzlon’s strategy to reduce debt and focus on domestic and other potential markets. Suzlon has also raised Rs 18 billion through the allocation of 1 billion new preferential shares to Dilip Shanghvi Family and Associates (DSA), giving the latter an equity ownership of 23 per cent in the company. A new 450 MW wind farm joint venture is also being contemplated, with a 50 per cent investment each from Suzlon Wind and DSA within the next two years. DSA will provide credit enhancement to Suzlon’s lenders for additional project-specific working capital, which, in turn, will help Suzlon get financing support for its projects. Given the initiatives to reduce debt and maintain liquidity, the outlook for Suzlon seems positive. In the short term, the company will benefit from its current order book and pipeline orders worth Rs 72.5 billion for 2016. The company is also likely to benefit from the recovery of the wind energy segment, driven by the reintroduction of schemes like accelerated depreciation and generation-based incentives. ■ March 2015 ● Renewable Watch ● 49

STATE FOCUS

Slowing Down Lack of policy initiatives hinder renewable energy growth in Gujarat By Meera Bhalla

ujarat continues to be one of the largest contributors to India’s total installed renewable energy capacity. The state’s renewable energy portfolio consists of about 930 MW of solar capacity (the highest in the country) and 3,550 MW of wind capacity (the third highest in the country). As a result, it is one of the few states in the country with surplus power. However, the rate at which renewable energy is being developed in the state has reduced significantly over the past few years due to its low wind tariffs and limited policy initiatives for expanding solar energy capacity. During the period 201011 to 2013-14, the state’s renewable energy capacity rose at a compound annual growth rate of more than 28 per cent. However, the majority of this investment took place during 2011-12, with the addition of about 1,500 MW. Following this, a significant decline was seen in the growth of the state’s renewable energy sector, with only 704.72 MW being added during 2012-13 and 2013-14. As of January

50 ● Renewable Watch ● March 2015

2015, the state’s total installed renewable energy capacity stood at 4,430.2 MW. The incentives offered by the Gujarat government in the past to attract solar power developers led to large solar installations in the state. But the high tariffs offered by the state government for 25 years have now become a burden for the state discom, Gujarat Urja Vikas Nigam Limited (GUVNL). In the rush to offer investors the best deals, the state regulator overestimated the capital cost of projects at Rs 165 million per MW instead of the actual cost of Rs 110 million-Rs 120 million per MW. GUVNL filed a petition with the Appellate Tribunal for Electricity (APTEL) to reduce the rate paid to solar power developers under the State Solar Policy, 2009. However, in August 2014, APTEL rejected the application, stating that the state discom’s claim of tariff redetermination on a cost-plus basis violated the doctrine of promissory estoppel. The burden of high solar tariffs has also discouraged GUVNL from announcing any new tenders for solar

projects. Gujarat’s solar policy expired on March 31, 2014, and it has not announced any plans for its third phase till date. As far as wind is concerned, Gujarat is among the states that offer low tariffs in the segment. The last revision took place in July 2013, with the wind tariff being set at Rs 4.52 per kWh without the accelerated depreciation benefit. As a result, the majority of the state’s wind capacity is captive in nature. The limited addition to the state’s renewable energy portfolio has also affected the discoms’ ability to meet their renewable purchase obligation (RPO) targets. During 2013-14, no state discom was able to comply with the targets. GUVNL managed to achieve more than its solar RPO target of 1 per cent, but could not comply with its nonsolar RPO target of 6 per cent during 201314. Torrent Power’s RPO compliance level was also short by 24 per cent and 30 per cent for non-solar and solar sources respectively during 2013-14. Another dis-

STATE FOCUS com, MPSEZ Utilities Private Limited, was among the poorest performers and could not meet its RPO targets even partially. In response, the Gujarat Electricity Regulatory Commission (GERC), in August 2014, asked the state discoms to submit reasons for non-compliance and stated that it would take strict action in the event of their inability to furnish convincing reasons for non-compliance. However, in its recent order dated January 16, 2015, GERC gave the discoms some relief in this regard. It allowed GUVNL to adjust its excess purchase of solar energy against its unfulfilled non-solar RPO requirements, and permitted Torrent Power to revise its RPO targets for the year against what it had actually achieved. The commission also exempted MPSEZ Utilities from the applicability of RPOs for 2013-14. This decision, which was taken despite the availability of a huge amount of non-solar and solar renewable energy certificates in the market, has been criticised by industry experts. In March 2014, the state regulator also disallowed short-term open access due to transmission network constraints in several parts of the state caused by the growing power demand. This has restricted the choice of several private industries in southern and central Gujarat, forcing them to purchase electricity either from the state discoms or via on-site captive power plants. This has affected their operations and they have filed a petition in the high court against the move to disallow short-term open access.

Innovative models Even though the development of largescale renewable energy projects is slow at present, the state regulators have adopted various models for developing innovative projects like canal-top and rooftop systems across the state. After commissioning a 1 MW canal-top solar project in 2012, the state recently commissioned a 10 MW canal-based solar project along the Narmada river’s branches. The Rs 1.2 billion project covers a distance of 5.5 km

State-wise growth in solar capacity addition (MW) State

March 31, 2013

March 31, 2014

December 15, 2014

Total capacity addition

Gujarat

857.90

916.40

929.05

71.15

Rajasthan

551.15

730.10

839.50

288.35

Madhya Pradesh Maharashtra Andhra Pradesh

37.32

347.17

353.58

316.26

100.00

249.25

286.90

186.90

23.15

131.84

234.86

211.71

Tamil Nadu

17.05

98.36

104.20

87.15

Total India

1,684.44

2,631.90

3,002.66

1,318.22

Source: MNRE

from Vishwamitri Siphon to Railway Siphon. It comprises 33,000 to 36,000 solar panels and has been designed in a manner that will enable the panels to sustain a wind velocity of 150 km per hour. The plant will produce 16.2 MUs of power in the first year and save a significant amount of water from evaporating from the canal. For setting up these canal-top solar projects, the state regulator adopted the engineering, procurement and construction model. It awarded a 1 MW project to SunEdison and a 10 MW project to Hyderabad-based Megha Engineering and Infrastructure Limited. The state has also successfully adopted the public-private partnership (PPP) model for setting up solar rooftop projects. Under this, developers lease rooftop space for installing solar projects and sell the power generated to the state utility at a specified feed-in tariff, while paying rent to the rooftop owners. The 5 MW Gandhinagar solar rooftop project has been installed atop residential buildings, schools and hospitals, providing better access to power for an estimated 10,000 people. The pilot PPP project attracted private financing of approximately $12 million. However, the regulator and developers had to face various challenges during its implementation, including the lack of grid connectivity and issues in designing the lease and power purchase agreements as per the existing regulations and business conditions. The success of these two projects has

paved the way for the wider roll-out of these models, and they have been adopted by several other states as well. The Gujarat government is also expanding the scope of both projects at the local level. On similar lines to the “rent-a-roof” model, a 25-year concession has been awarded to Madhav Solar Private Limited for setting up a 5 MW solar rooftop project in Vadodara city. The project is expected to receive private investment of $8 million. In addition, the International Finance Corporation is helping four cities in Gujarat – Bhavnagar, Mehsana, Rajkot and Surat – to set up solar rooftop projects based on a similar model, which is being explored by other states as well. The Gujarat Energy Research and Management Institute is supporting the Odisha government in developing similar projects in the latter state. Karnataka has launched a multicity solar rooftop programme, while Bihar, Delhi and Madhya Pradesh are also working towards the same. At the central level, the Solar Energy Corporation of India, under Phase IV of its Large-Scale Grid-Connected Rooftop Solar Power Generation Scheme, has allotted projects worth 9 MW based on the resco (renewable energy service company) model. Looking at the success and benefits of canal-top projects, the Ministry of New and Renewable Energy (MNRE) announced its Pilot-cum-Demonstration Project for Development of Grid Connected Solar PV Power Plants on Canal Banks and Canal March 2015 ● Renewable Watch ● 51

STATE FOCUS Tops programme in December 2014. The aim of this programme is to set up 100 MW of solar canal-top projects along canal banks and on vacant government land under the National Solar Mission (NSM) in various states.

Upcoming investments Not much additional renewable energy capacity is expected to come up in Gujarat given the limited state government support. As per Vineet Mittal, president, Solar Power Developers Association, “Considering the current state policy initiatives, not more than 200-300 MW of solar capacity is expected to come up in the state over the next two to three years.” However, he also cited the central government’s plan to set up solar parks in the state, which could significantly increase capacity installations. The MNRE is currently seeking comments on its Draft Scheme for Development of Solar Parks and Ultra Mega Solar Power Projects, which aims to set up 25 solar parks of 500-1,000 MW capacity in various states. This means a targeted solar installed capacity of around 20,000 MW. The centre has also planned a 4 GW solar ultra mega power project in the state, which is expected to be constructed by five or six companies. However, no development has taken place on this front so far.

With strong sector fundamentals and a conducive business environment, the state still manages to maintain its appeal among investors. During the recent Vibrant Gujarat Summit, the government was able to attract significant amounts of renewable energy investments. Adani Enterprises signed an MoU with US-based SunEdison to set up an integrated solar photovoltaic panel manufacturing facility in the state with an investment of about Rs 250 billion. This will be the world’s largest integrated solar manufacturing facility with a capacity to produce low-cost 27,000 metric tonnes of polysilicon and 2,000 MW capacity equivalent of crystals capable of producing electricity at similar costs to power generated by using traditional fuels. The facility will be established in Mundra over a period of three years. During the first half of 2015, SunEdison and Adani will conduct a comprehensive analysis of the opportunity and business plan before beginning construction of the facility. During the summit, Welspun Renewables also committed to setting up 500 MW of wind capacity and 600 MW of solar capacity for selling power to GUVNL. The company will set up the solar projects under the NSM. It will invest about Rs 83 billion in set-

Growth in wind capacity in Gujarat (MW) 789.9

3,500.0

3,454.7

3,174.9

2,966.6 279.8 208.3 45.3 2011-12

2012-13

2013-14

2014-15 (As of January, 2015)

Source: MNRE

52 ● Renewable Watch ● March 2015

Cumulative capacity

Capacity addition

ting up renewable energy capacity of about 1 GW in the state. Suzlon Energy has also announced its plans to invest Rs 240 billion in wind energy projects in Gujarat over the next five years. Though the development of on-ground wind projects has slowed down, efforts are on for setting up an offshore wind project on the Gujarat coast. In November 2014, an MoU was signed for setting up a joint venture (JV) company to undertake this offshore wind power project. The MoU was signed by the MNRE, the National Institute of Wind Energy, and a consortium of partners consisting of NTPC Limited, Power Grid Corporation of India Limited, the Indian Renewable Energy Development Agency, the Power Finance Corporation, the Power Trading Corporation, and Gujarat Power Corporation Limited. The JV will undertake a detailed feasibility study based on inputs received from prefeasibility studies and take the necessary steps for implementing the 100 MW project. It is expected to provide key lessons for taking further steps in exploring the country’s offshore wind potential.

Outlook The short-term outlook of the state’s renewable energy sector does not seem very bright, considering the declining interest of the state regulator in attracting investments. However, in the long term, the large-scale projects proposed under various central policies are expected to significantly expand the installed capacity. Other states are stepping up their efforts to attract renewable energy investments, particularly in the solar segment. The Gujarat government needs to do the same so that it can keep up. Mittal points out that the state regulator should start considering the setting up of solar projects as farming activity, as per the guidelines of the Ministry of Environment and Forests. Some other steps the state must take include announcing the third phase of its state solar policy, as well as revising solar and wind tariffs. ■

PRODUCT RELEASE

New Products in the Market Raychem RPG launches solar inverter and string combiner box at RE-INVEST 2015 Raychem RPG, a 50:50 joint venture of US firm TE Connectivity (formerly Tyco Electronics) and RPG Enterprises, India, has launched solar inverters (of up to 750 kW) and string combiner boxes for commercial and utility-scale applications in a technical collaboration with Italian manufacturer Fimer SPA. The inverters on offer are R1500TL, R2000TL, R2500TL, R3000TL, R4500TL, R5000TL, R6000TL, R6800TL and R7500TL. According to the company, these inverters have advanced modularity features that enable higher redundancy and protection against energy loss. In addition, the lower temperatures at which the electronic components work also mean the inverters have a longer product life. They also enable more power generation due to a wider maximum power point tracking window, allowing them to work for a longer time (with early starts and late sleep). The inverters are capable of operating in higher efficiency zones for longer durations as compared to other inverters. Raychem RPG’s solar inverters will be assembled at the company’s plant in Chakan, near Pune. Panasonic launches solar module for European market Based on the success of its N240 and N245 solar modules, Panasonic Electric Works Europe has announced the launch of the N285, the latest addition to the company’s list of HIT product offerings. The N285 features a reduced module length designed specifically for the European residential and commercial rooftop markets. By integrating the com-

pany’s HIT technology into a shorter panel design, the more compact size of the N285 reportedly makes it possible to install an additional module row on a conventional small- or medium-sized rooftop, thereby significantly increasing the output of a photovoltaic (PV) system. The N285 is optimally suited for the UK market and the country’s 4 kWp residential feed-in tariff (FiT). Given the rooftop space required by the average UK residential solar PV system of 3 kWp, a comparable N285-based array will have an installed capacity of 3.99 kWp, thus aligning it with the FiT requirements and maximising the energy and earnings for the typical UK homeowner. The announcement of the N285 follows the recent launch of Panasonic’s virtual solar platform for the UK market, which enables homeowners to make informed decisions about utilising solar energy. The service allows users to virtually design a solar system on their roofs, and provides an estimate of the extent to which the system can power day-to-day activities as well as the financial earnings they can expect from a Panasonic solar system. The platform is designed to give consumers a free, realistic and accurate quote from a regional approved Panasonic Premium Installer, ultimately helping them through the entire process of installing a fully operational HIT solar system. Tigo Energy unveils MLPE TS4 platform US-based firm Tigo Energy has announced the certification of its TS4 platform, which, according to the company, is the world’s first universal junction box

(JBox) solution. The TS4 platform enables module manufacturers and installers to standardise a single JBox design that can feature any number of module level power electronic (MLPE) capabilities, such as Rapid Shutdown Safety. It also aids monitoring within a standardised platform, reducing inventory and labour costs compared to traditional solar PV installations. The TS4 platform is made up of a two-piece solution, the TS4 base (JBox base), which is mounted to the solar module, and a TS4 cover, a plug-andplay MLPE that can easily be swapped in and out. The platform is immediately available in five offerings: diodes, monitoring, safety, optimisation, and longer strings. Installers and system owners can choose the features according to any given project or budget while using the same PV module. For instance, those installing the system can choose to use it for safety and monitoring, to meet the NEC 2014 Rapid Shutdown Safety requirements, or for optimisation. They can also opt for a traditional module that can be easily upgraded later. The TS4 universal JBox platform enables plug-and-play functionality for any solar module. It features a common base plate that any number of functional electronic covers can be plugged into. This base plate provides a single interface for addressing any number of functions or budgets, as well as any range of project goals. The TS4 platform can be upgraded according to changing needs, allowing for maximum system flexibility. The TS4-D (diodes) modules are the equivalent of traditional modules and are priced at the current JBox costs, thus adding zero cost to TS4equipped PV modules. The shipment of TS4-based modules will start at the end of March 2015. ■

March 2015 ● Renewable Watch ● 53

SPOTLIGHT

BoS & BoP FOR SOL AR PL ANTS

Market Promise Ambitious solar capacity addition target likely to boost BoS demand By Meera Bhalla

he amount of energy generated at solar plants depends not only on the efficiency of its solar panels but also on the other components covered under its balance of systems (BoS) and balance of plant (BoP). Ensuring the quality, compatibility and robustness of its BoS and BoP components is essential, as their improper selection can cause project failures. Thus, engineers must also factor in the design, efficiency and costs of these systems while designing solar power plants. BoS comprises all the non-modular components of a photovoltaic (PV) system, spanning both hardware and soft elements. The hardware components include inverters, mounting structures (fixed-tilt and seasonal-tilt), tracking technology (single-axis and dual-axis), cables and connectors, string combiner boxes, performance monitoring systems (weather stations, and local monitoring through supervisory control and data acquisition and remote monitoring systems), and evacuation systems. The soft cost components include engineering and design, project management, civil work, financing,

54 â&#x2014;? Renewable Watch â&#x2014;? March 2015

logistics, insurance, administration and labour costs, as well as performance and payment bonds. BoP, on the other hand, comprises cooling towers, heat exchangers, thermal storage, water and air treatment systems, and pressure valves for concentrated solar power projects. Although the solar PV cell and module manufacturing segment in India is mainly dominated by foreign players, the situation is mixed in the case of BoS segment components. The PV inverter market is served entirely by foreign suppliers despite the presence of several Indian companies in the conventional power equipment market. By contrast, in the tracking and mounting structure market, a number of small domestic companies are successfully meeting the requirements of project developers. Domestic players have a strong presence in the cables, connectors and junction box manufacturing market. However, they face stiff competition from large, well-established foreign players, who continue to introduce new products and capture a

higher market share. Recently, Switzerlandbased TE Connectivity launched its Helicase TM solar junction box specifically for the Indian market. The junction box has been tested and certified by TUV Rheinland for the highest degree of safety as per EN 50548:2011+A1 and appropriate IEC Standards. With the expanding domestic solar market, opportunities in the BoS segment are also growing significantly. This is opening up new avenues for domestic and foreign players, and also facilitating domestic players in tie-ups with experienced foreign firms with an expertise in manufacturing high-quality products. The local manufacture of high-quality solar products helps control production costs while leaving room for better standardisation and customisation according to site requirements. Some players have already taken steps in this direction. For instance, wind turbine manufacturer ReGen Powertech has diversified into MW-scale solar inverter manufacturing in collaboration with German partner Vensys. Tata Power Solar has also partnered with Transphorm, Inc., for manu-

BoS & BoP FOR SOL AR PL ANTS facturing solar inverters using the latTM ter’s patented EZ-GaN technology. Several foreign players have also set up manufacturing facilities in India to provide better BoS products suited to local market conditions. For instance, AEG, ABB and Schneider Electric are among the companies that manufacture their inverter series in India. Renewable Watch takes a look at the current market scenario and opportunities for BoS component manufacturers for solar PV systems in India, as well as existing and upcoming technologies, the prevailing issues and challenges, and the demand outlook…

Solar inverter market Inverters are the heart of solar PV systems and their efficiency is vital for the proper functioning of plants. While inverters account for only 7-8 per cent of capital costs, they play a crucial role in maintaining sustainable operations. Globally, it has been observed that inverters are susceptible to frequent breakdowns, and even Indian companies have reported instances of inverter failure. The main reason for the rising number of failures in India is the non-suitability of imported inverters to local conditions. Like most solar manufacturing segments in India, the solar PV inverter market is entirely dominated by foreign suppliers. The key reason for domestic inverter manufacturers failing to gain as much traction as their foreign counterparts is the difference in efficiency levels (93-95 per cent for the former and 97-98 per cent for the latter). Moreover, domestic solar project developers prefer to source inverters from foreign players due to the latter’s vast technical expertise and experience. Nonetheless, a few domestic players like Su-Kam and Luminous have been able to cater to the rooftop and off-grid domestic market. Among the three types of inverters available in the Indian market – central, string and micro – it is the first category that has been seen to dominate due to the pres-

Key players in the inverter market (%) FRONIUS: 4

KACO: 8

Others: 19

Advanced Energy: 21

Delta: 25

SMA: 23

Source: BRIDGE TO INDIA

ence of a large number of utility-scale solar projects. Another key reason for this trend is the fairly price-sensitive domestic solar market. However, central inverters have a limited lifecycle of 10-12 years, as compared to the 25- to 30-year lifecycle of solar projects. This poses a challenge for developers since they have to invest in setting up new inverters halfway through a project’s lifecycle. In the case of string inverters, some modules in a series can be connected to one inverter. This helps in reducing BoS costs as the majority of the power transmission network is set up at the AC level as compared to central inverters, where DC cables have to be installed to transfer the power generated by each panel to a central location, where it is converted into AC. With the expansion of the solar rooftop and off-grid segments, the demand for micro and string inverters has also started picking up.

Mounting structures and trackers Another key component in the BoS of solar PV systems is the mounting structure, which accounts for around one-third of the total system cost. Aluminium and galvanised iron are most frequently used to construct these structures, while the choice of material is based on the soil, wind and weather conditions of the site. These structures can either be fixed-tilt or have tracking systems. A solar tracking system ensures higher module efficiency by tracking the sun’s movements over a

SPOTLIGHT single or double axis and increasing the quantum of direct normal irradiation, especially in high-isolation areas. The choice of tracking system depends on how far the solar project site is from the equator. According to industry experts, as the distance of the single-axis tracker from the equator increases, there is a decline in its capacity to generate additional power. For such projects, dual-axis solar trackers are more viable. The installation of single-axis trackers has been proved to boost generation by up to 25 per cent, while dual-axis trackers help increase generation by nearly 35 per cent. However, the level of adoption of both these technologies is still at a very nascent stage in India, with only 6-7 per cent of the total installed solar capacity using trackers, owing to the high costs of these systems. Experts are of the opinion that the returns from projects that use solar trackers can vary significantly, depending on parameters like the cost of modules and land, as well as the project’s location. The majority of the country’s solar capacity is located in Gujarat and Rajasthan, where the adoption of these tracker systems has remained limited due to the distance of these regions from the equator. However, with the announcement of various stateand central-level policies, a balanced distribution of solar projects has started emerging, which is opening up vast opportunities According to industry experts, the annual deployment of solar trackers in India has risen from 10-12 MW in 2011-12 to 25-30 MW in 2014-15, and is likely to increase further to 50-60 MW in 2015-16.

Cables, connectors and junction boxes Cables are an integral part of solar PV plants as they ensure reliable interconnections between components like junction boxes, inverters and modules. A DC cable is used to transfer current between the modules and the inverter, and an AC cable for establishing a connection between the inverter and the grid. Junction boxes are connected to the back of March 2015 ● Renewable Watch ● 55

SPOTLIGHT the solar PV modules by adhesives or sealants. They are used to aggregate multiple strings from the modules, which, in turn, reduce the number of cables feeding into the inverter. As these components are required to operate in harsh weather conditions and have to withstand extreme temperature variations and high ultraviolet (UV) radiation, they need to be carefully selected. Thus, cables chosen for solar projects should be double-insulated, UV- and ozone-resistant, flame-retardant lowsmoke, rodent and termite resistant, and suitable for direct burial applications. It is also essential that copper cables are used instead of aluminium. But the high prices of the former are causing the majority of developers to invest in the latter kind, which has several shortcomings like poor connectivity, lower bending strength and higher susceptibility to electric contacts. The junction boxes should have proper cooling properties to maintain the temperature of the bundled strings, and also be resistant to water and dust. In the past, solutions like silicone adhesives have been used due to their strong bonding characteristics with glass, metals and plastic. Innovations to reduce the curing time of silicone RTV adhesives have also been introduced, with the launch of fastfixture adhesives like Henkel Corporation’s Loctite silicone, which ensures fixture strength in two to three minutes. Other solutions used for mounting junction boxes are adhesive tapes like polyethylene foam tapes and acrylic foam tapes, which, unlike liquid adhesives, do not require investments in dispensing technology or curing time. One of the major issues with PV connectors is the lack of standardisation.

Soft costs The costs associated with project designs also come under the purview of BoS. In order to minimise the cost of a solar project, it is important to investigate the soil conditions of the site. Owners can keep the risk premium at a minimum by carry56 ● Renewable Watch ● March 2015

BoS & BoP FOR SOL AR PL ANTS ing out a professional soil investigation, including driven pile load testing, and beginning the grid integration process early. Land and transportation costs also account for a significant part of the soft costs of solar power projects. Land is becoming scarce with the emergence of large-scale renewable energy projects, especially solar, and this has been progressively pushing its costs upwards.

cent of the total production cost. In addition, many of these industrial units do not receive 24x7 grid power supply, which disrupts manufacturing operations and increases operational costs.

Issues and challenges

Lack of R&D and skilled manpower: While research and development (R&D) has been a priority for the Ministry of New and Renewable Energy, it has not really taken off in India. The lack of competent R&D is expected to be even more damaging for the PV industry in the long run, given that it affects price reduction and efficiency. Another related issue is the acute shortage of manpower at various levels of research and engineering, which market experts attribute to the lack of solar power-oriented training institutes.

Lack of a complete value chain: For the majority of components and raw materials, the Indian solar market depends heavily on foreign suppliers, which not only affects the production costs of these projects, but also makes the domestic market highly vulnerable to global market fluctuations.

Lack of policy support for manufacturing: Although the Jawaharlal Nehru National Solar Mission had envisaged the development of the local manufacturing industry, it failed to provide the expected impetus to domestic manufacturers.

Another key challenge for engineering, procurement and construction contractors is related to the poor logistics infrastructure at the majority of remote project sites, which also results in increasing solar project costs.

Lack of low-cost, long-term financing options: Domestic financial institutions provide funds to solar equipment manufacturers at an interest rate of over 13 per cent, which can go up to 17 per cent for firms with low creditworthiness. In comparison, foreign manufacturers can avail of loans with longer repayment schedules at interest rates of around 5 per cent, which allows them to price their products at lower rates. Moreover, the majority of domestic financial institutions are not comfortable providing debt to the solar segment on a long-term basis due to the associated risks. Higher electricity tariffs: Manufacturing plants are classified under the industrial category of power consumers and hence have to bear the cross-subsidisation costs of residential and agricultural customers. At present, industrial users have to pay a tariff of over Rs 8 per kWh, while the tariff for their foreign counterparts is less than Rs 6 per kWh. Thus, power usage charges account for around 25 per

Market opportunities The announcement of vast solar capacity addition targets by the central government has set up immense opportunities for the BoS market. In the latest Union Budget, the government has announced an ambitious target of around 175 GW of renewable capacity addition by 2022. Solar power is supposed to be the key contributor to this vision, with an envisaged addition of 100 GW. The growing shift towards the harnessing of rooftop and off-grid solar energy provides greater opportunities to players manufacturing related components. These markets are likely to be the biggest growth drivers for the domestic manufacturing of solar generation system components. The central government’s “Make in India” initiative, which aims at making India a global manufacturing hub, is also likely to help the domestic market attract better technologies and experienced players. This, in turn, will help bring down the cost of BoP components. ■

5th Conference on

Wind Power in India May 2015, New Delhi

8th Annual Conference on

S LAR P WER

In India

Late June 2015, New Delhi For more information on how to participate contact: Kanan Kumar, Conference Cell, India Infrastructure Publishing Pvt. Ltd., B-17, Qutab Institutional Area, New Delhi-110016. Tel: 011-4103 4615, 4103 4610, 9891210461. Fax: 011-2653 1196 E-mail: conferencecell@indiainfrastructure.com

SPOTLIGHT

BoS & BoP FOR SOL AR PL ANTS

Cost Cutbacks Increasing focus on downsizing BoS capex By Bhavya Laul

apital cost reductions in the solar photovoltaic (PV) segment have been driven primarily by the declining costs of solar PV modules. The global prices of these modules are estimated to have fallen by around 75 per cent between 2009 and 2014. This has led to a reduction in the share of modules in overall solar PV system costs, thereby creating a need to reduce the balance of system (BoS) costs. The need for focusing on BoS for future cost efficiencies is compounded by the fact that module prices have stabilised to an extent in 2013 and 2014 with demand picking up in the global market. BoS costs of a solar PV system involve all the non-module installation components. They can be further categorised into hardware costs and soft costs. The former include structural system costs like those related to installation, racks and site preparation; electrical system costs like those of inverters, transformers, wiring and monitoring equipment; and land costs. In the case of off-grid systems, the cost of batteries or other storage systems also needs to be factored in. Soft costs of system development, meanwhile, include costs of customer acquisition, planning, permissions, inspections, insurance, and labour for installation and interconnection.

Factors influencing BoS costs In the present-day scenario, BoS costs account for about half the total system installation costs. The share, however, varies considerably across regions (across countries as well as within a country), project categories and technologies. Local conditions and regulatory environments can significantly affect costs in a region. For example, solar system costs in 58 ● Renewable Watch ● March 2015

BoS costs for utility-scale ground-mounted systems are lower than others on account of economies of scale and the higher negotiating power of developers. These costs can increase sustantially with the deployment of better technologies and mounting structures – for instance, with the use of tracking systems.

Market dynamics the US are significantly higher as compared to Australia or Germany, even when the differential is not much in terms of modules and other hardware costs. A study conducted by the Lawrence Berkeley National Laboratory examined the considerable cost differential between a residential German solar system and a residential US solar system and attributed it to soft costs. As per the study, the maximum cost differences were due to customer acquisition and installation labour, which cost more in the US. In the context of project categories and market segments, small residential rooftop projects are likely to have higher BoS costs than large rooftop installations. The costs could be even higher for complicated arrangements like canal-top and floating solar PV systems. Meanwhile,

While cost reductions on the module front have been massive over the past seven to eight years, the same cannot be said for that of BoS components. The International Renewable Energy Agency, in its report, “Renewable Power Generation Costs in 2014”, has highlighted that inverter costs declined by 29 per cent between 2011 and 2014. Other hardware costs fell by 20 per cent, while the costs of racking and mounting PV systems reduced by 12 per cent. The reduction in soft costs has been fairly dismal, with installation, engineering, procurement, construction and development costs and other service costs declining merely by around 1 per cent over the same period. Overall, the prices of most electrical and structural components fell by 10-30 per cent. Among electrical components, the most

SPOTLIGHT

BoS & BoP FOR SOL AR PL ANTS predictable cost reductions are for inverters. These prices typically decline by about 10 per cent every year, and the trend is likely to continue with the increasing competition in international markets. On the structural front, there is considerable pressure on solar racking and mounting companies to reduce prices by downsizing components, introducing design efficiencies, encouraging advances in raw material use, etc. These costs are often overlooked but industry estimates suggest they can easily be reduced by 40-50 per cent. As far as off-grid systems are concerned, BoS costs are expected to decline considerably with the increasing focus on research and innovation in the storage solutions space, particularly in lithium-ion batteries. Overall, BoS prices are also critically dependent on the prices of raw materials like copper, steel and cement. These are, in turn, linked to their global prices. According to market experts, raw material prices are only expected to rise. Therefore, cost reductions of hardware components can be achieved mainly through engineering efficiencies. Further, there needs to be an emphasis on streamlining processes and procedures for providing grid interconnections, training and skill development of manpower, etc. Several industry experts believe that soft costs will be a major driver for BoS cost reductions, particularly in countries like the US.

Scenario in India As per the assumptions made by the Central Electricity Regulatory Commission (CERC) in its order for the determination of benchmark solar PV capital costs for 2014-15, the share of BoS components in overall system costs turns out to be around 47 per cent. The following is a snapshot of the costs considered by CERC for select components: Land: The land acquired for setting up solar power projects is mostly arid or barren and of no commercial use. However, the increase and diversity in land costs in

Break-up of CERC’s benchmark capital cost norm for solar PV projects for 2014-15 Cost component

Capital cost considered (Rs million per MW)

Modules

36.58*

Degradation

1.13

Land

2.50

Civil and general works

6.00

Mounting structures

5.00

Power conditioning units (inverters)

5.00

Cables and transformers

6.00

Preliminary and operative expenses, intangible drilling costs, etc.

6.90

Total

69.11

* Based on an exchange rate of Rs 62=$1 and assuming a module price of $0.59 per Wp Source: CERC

different states needs to be factored in. The commission has decided to consider the land cost as Rs 2.5 million per MW, assuming a land requirement of 5 acres per MW. It has also recognised that the land requirement for crystalline PV projects has reduced with the increase in average module efficiency. Mounting structures: The commission has assumed a cost of Rs 5 million per MW for mounting structures. Some stakeholders have suggested higher costs ranging from Rs 6 million to Rs 11.5 million per MW, mainly due to the increasing prices of raw materials like iron and steel. Civil and general work: Civil work costs include soil testing; preparation of soil/ground with earthmoving, digging holes for foundations/pilings and levelling; land fencing; development of approach roads and cable trenches; and water supply arrangements in solar farms and control rooms. General work costs include solar farm security, setting up of power backup generators, yard lighting and earthing kits. The commission had proposed a cost of Rs 4 million per MW following stakeholder suggestions regarding the terrain and soil quality in certain parts of the country. However, the cost was finalised at Rs 6 million per MW. Inverter: The commission fixed the cost of

inverters at Rs 5 million per MW, including all taxes and duties as well as major overhaul costs during the 12th or 14th year of operations. Some developers suggested an additional cost of Rs 1.2 million-Rs 1.5 million on account of additional components like supervisory control and data acquisition system and monitoring system for scheduling and forecasting purposes. Evacuation costs: This includes costs of DC cabling between solar PV panels and inverters, including junction boxes, AC cabling between inverter and substation, low tension panels, high tension panels, earthing arrangements, step-up outdoor type transformers, breakers, current transformers, potential transformers, auxiliary transformers, control cables, isolators, lightning arresters, protection relays and time-of-day meters/tariff meters, peripheral lighting, and the telemetry system.

Conclusion Going forward, module prices are expected to fall only marginally on account of efficiency improvements rather than market dynamics. Therefore, BoS components are expected to remain the focal point of cost reduction efforts. This will bring forth a new set of challenges, since a diverse range of components will have to be considered, rather than just modules involving a number of different participants. ■ March 2015 ● Renewable Watch ● 59

SPOTLIGHT

BoS & BoP FOR SOL AR PL ANTS

Project Economics Benefits of BoP innovations for STE plants By Shambhavi Sharan

alance of plant (BoP) forms a critical part of solar thermal electricity (STE) plants. It includes raw water and wastewater treatment, cooling water, compressed air, dosing and sampling equipment, and electrical components. Much recent global research has gone into making these systems more efficient while reducing water consumption as most of the STE plants are situated in arid regions. In this context, KIC InnoEnergy has recently released a report, “Future Renewable Energy Costs: Solar-thermal Electricity”, which discusses the upcoming technological advancements in BoP systems for STE plants as well as their likely impact on the levellised cost of energy (LCoE) over the next 12-15 years. Central to this report is a cost model, developed by BVG Associates for KIC InnoEnergy, which has estimated the impact of a range of technological innovations on STE plants. These plants are representative of the European market and have been defined in terms of the applied technology type – parabolic trough collector (PTC), central receiver (CR) and linear Fresnel reflector (LFR). Each type is analysed at three points in time at which the project reaches its final investment

decision (FID) – 2014 (baseline year), 2020 and 2025. Further, the plants’ lifetime has been assumed to be 25 years for the purpose of cost calculations. The innovations in BoP have been analysed on three parameters – commercial readiness, market share and the estimated impact. The first parameter relates to how much of the technical potential is commercially ready for deployment in a project of the scale defined in the baseline, taking into account not only the supplier offering the innovation for sale but also the customer’s appetite for purchase. The second parameter pertains to the market share of an innovation for a given technology type for projects reaching FID in a given year. The last parameter, the estimated impact, has been calculated taking into account the baseline costs and operational parameters. The report estimates that innovations in BoP are anticipated to reduce the LCoE by 1.4-2.1 per cent between 2014 and 2025. The expected savings will be dominated by improvements in the annual energy production (AEP) while there may be an increase in the values of capital expenditure and operational expenditure.

The following are the three key innovations in BoP systems that are expected to gain traction in the coming years…

Efficient dry-cooling systems In present practice, cooling is used to remove waste heat from the steam coming from the turbines, utilising the Rankine cycle. In many conventional power plants, cooling is often achieved by either evaporating water or wet cooling. On the other hand, dry cooling uses large heat exchanger surfaces to cool down the steam to almost ambient temperature, lowering water consumption significantly. Both wetcooling (Gemasolar project, Spain) and dry-cooling (Ivanpah project, US) systems are already in use by commercial STE plants in the 1 GW range. Although drycooling systems offer the advantage of lower water consumption, they are outperformed in terms of efficiency by wet systems and therefore suffer from high LCoE. Despite this, reducing water consumption offers significant benefits both for the environment and for the commercial deployment of STE plants in arid countries that have high solar radiation. Improving the efficiency of dry-cooling systems will, therefore, make it possible to utilise STE in areas where water is already a scarce resource. The development of such systems is likely to increase power plant costs, which will negatively impact the LCoE. Commercial readiness: The report estimates that solar PTC and LFR projects with FID in 2020 will be able to use 75 per cent of the potential while projects with FID in 2025 will be able to use 90 per cent of the potential. For CR projects, 50 per cent of the benefit will be available for projects with FID in 2020 and 80 per cent of the benefit for projects with FID in 2025. Market share: As the efficiency of drycooling systems is usually lower than that of wet-cooling systems, their market is expected to be found in regions where water is a scarce resource. Therefore, the market share for dry-cooling systems in PTC and LFR projects is expected to be only 10 per cent for projects with FID in

60 ● Renewable Watch ● March 2015

SPOTLIGHT

BoS & BoP FOR SOL AR PL ANTS

Anticipated impacts of BoP innovations

2020 and 30 per cent for projects with FID in 2025. For CR power plants, it is assumed that 30 per cent of projects with FID in 2020 and 45 per cent of projects with FID in 2025 will use this innovation.

Advanced power cycles with higher efficiencies The majority of the active commercial STE plants in Europe work on a Rankine cycle technology, operating with superheated steam. Other power cycles that are currently deployed include the organic Rankine cycle process for smaller facilities, and the open Brayton cycle, which are the main subjects of demonstration projects that are currently under way. The report suggests that new power cycles such as closed Brayton cycles should be considered for upcoming STE plants while new technological approaches should be developed to improve overall plant efficiency. By using supercritical carbon dioxide as a heat transfer fluid, it is possible to operate the STE plant in a closed Brayton cycle with high efficiencies. The use of the Brayton cycle within a combined cycle process can also help maximise the power output of an STE plant. Commercial readiness: For all technology types, the available benefit of this innovation is anticipated to be 20 per cent for projects with FID in 2020 and 40 per cent for projects with FID in 2025. For a plant with FID in 2025, the expected impact of this innovation is a 7.7 per cent reduction in the LCoE for PTC, a 2.1 per cent reduction in the LCoE for CR and a 6.8 per cent

reduction in the LCoE for LFR technology. Market share: The market penetration of the closed Brayton cycle will be limited as it involves several challenges and risks. Only 10 per cent of PTC plants and LFR plants, each with FID in 2020, will see the deployment of this technology, which may increase to 25 per cent for projects with FID in 2025. Meanwhile, for CR technology, 20 per cent of projects with FID in 2020 and 35 per cent of projects with FID in 2025 will see the use of this technology.

Supercritical Rankine cycle The use of supercritical steam in commercial STE plants has not yet been implemented; however, researchers at Australia’s Commonwealth Scientific and Industrial Research Organisation generated supercritical steam in a solar concentrator for the first time in June 2014. The efficiency of conversion cycles within an STE plant usually increases with higher temperature and pressure levels, which can be witnessed in supercritical conventional power plants. Supercritical operations require improved design of the overall STE plant in order to allow the plant equipment to operate at a minimum temperature of 600 degrees Celsius and a pressure of 25 MPa. Under ideal conditions, operation at this temperature and pressure will allow a thermal conversion efficiency of 45-50 per cent, while typical values for subcritical systems range from 40 per cent to 45 per cent. Hence, the application of supercritical steam cycles in

STE plants will result in an increase in capex and opex as well as in AEP, bringing an overall positive impact on the LCoE. Commercial readiness: Only 20 per cent of the benefit of these innovations is anticipated to be available for projects with FID in 2020, rising to 40 per cent for projects with FID in 2025. For a single plant with FID in 2025, the impact of this innovation is expected to bring a 2.3 per cent reduction in the LCoE for LFR technology. Market share: The market penetration of this innovation is anticipated to be 15 per cent for projects with FID in 2020, which can further increase by 15 per cent for projects with FID in 2025.

Conclusion Overall, the study demonstrates the potential for high long-term cost reductions, which can be achieved through STErelated technological developments, particularly BoP innovations. Besides technical considerations, market evolution has to be taken into account. The evolution of the market structure will also see the emergence of new challenges linked to parameters that have been studied in this report. These include the adaptability of STE technology to new geographical and climatic conditions, and the availability of the necessary infrastructure, including grid and skills required in construction and operation. These can also be addressed by simplifying design and construction processes, thereby improving plant reliability and automated operations. ■ March 2015 ● Renewable Watch ● 61

TECHNOLOGY FOCUS

OPERATIONS & MAINTENANCE

Efficient Upkeep Importance of O&M in increasing plant life

he highest costs for wind and solar power projects are typically the initial capital costs associated with development, construction and installation. However, operations and maintenance (O&M) costs also constitute a sizeable share of the total annual costs of wind farms and solar power systems. O&M costs for a new onshore turbine are estimated to make up 20-25 per cent of the total levellised cost per kWh produced over the lifetime of the turbine. While the share may be 10-15 per cent initially, it rises to 20-35 per cent in the later years of the turbine’s operation. Similarly, in the case of solar power projects, O&M costs are estimated to make up 10-15 per cent of the total levellised cost per kWh over the lifetime of the system. O&M also has a strong bearing on the

62 ● Renewable Watch ● March 2015

optimisation of energy output as it affects the amount of energy produced and the long-term return on capital investment. It has, therefore, become a key focus area for developers as well as engineering, procurement and construction (EPC) companies. Equipment manufacturers too are doing their part to lower O&M costs by developing new turbine and panel designs that require fewer service visits, and have greater efficiencies and less downtime.

Key trends and practices The norm for independent power producers (IPPs) and other project developers is to contract the original equipment manufacturers (OEM) or EPC contractors to undertake the maintenance of projects and for third-party maintenance contractors to maintain other components such as the substation. This is primarily

because OEMs have direct access to spare components, which means that repairs and replacements can be carried out much more quickly than by an independent maintenance provider. Using EPC contractors for O&M has many advantages, as they are likely to be intimately familiar with the system they designed and built. The EPC contractor has access to the key personnel that built the system and can therefore identify the appropriate person for troubleshooting a problem. It is likely that many items discovered during routine system inspections will be covered by the installer’s warranty, which would allow for a speedy resolution of the problem upon discovery. Another key trend is the growing role of IT in effective O&M. A plethora of new O&M technologies and software spanning pre-

TECHNOLOGY FOCUS

OPERATIONS & MAINTENANCE dictive maintenance, data analysis, lifetime extension and asset optimisation have come into the market in the past five years.

Key elements of a good O&M strategy z

Issues and challenges Both solar and wind energy face a similar set of issues and challenges pertaining to O&M works, most of which are associated with the location of the plant site. O&M activity can be particularly expensive for solar plants located in arid areas. At such sites, the cleaning of dust layer from solar panels has to be carried out at regular intervals, but the availability of water to clean panels is low. A few companies are adopting measures such as rainwater harvesting to optimise the consumption of water, while new cleaning machines that consume less water but are more efficient in cleaning modules are also being deployed.

ties and emergency services. z

Documentation is another important aspect of O&M activities. In many plants, there is no robust remote monitoring system; instead, they operate with a basic supervisory control and data acquisition (SCADA) system, which provides real-time information but does not log events, alarms and other maintenance issues. In cases where very little documentation is undertaken, O&M personnel are unable to identify, diagnose and trace the problems

Regular site inspections: While modern data systems have eliminated the need for a full-time presence at a site, regular and thorough inspection of the site and equipment is a must. This includes inspection of the gates, fences, access tracks, signages, met masts and electrical infrastructure.

Right technology: This includes conditioning monitoring systems, remote monitoring and SCADA.

Rapid response to alarms: O&M providers need to guarantee response times to alarms, 24 hours per day, seven days a week. In some instances, a local or remote reset of equipment may be necessary while sometimes a technician may have to visit a site to diagnose the problem.

Scheduled maintenance: This is essential for any proactive O&M plan to work. It involves the contractor or inhouse service team performing all servicing and repairs of turbines in the case of wind farms and panels in the case of solar systems.

Ability to deal with non-scheduled repairs: This should be carried out swiftly and preferably in times of low wind, in order to minimise production losses. The maximum response time for diagnosis and repair must be stipulated in all service contracts.

Spare parts planning: To reduce the potential for extended downtime due to lead times in obtaining spares, an inventory of spare parts on site should be maintained. This is especially important for projects in remote locations.

Another important aspect that is related to the location of a plant is the availability of skilled labour. According to developers of both solar and wind energy plants, there is a significant lack of trained manpower to address the problems that arise in the systems. The manpower not only needs to be trained to handle O&M activities, but also relocated to the plant sites, which are often situated in remote areas. Due to this issue, it becomes difficult to retain qualified staff at plant sites. Many developers have now started focusing on training the local population to handle day-to-day cleaning activities at plant sites. While this facilitates the economic development of local communities, in some cases, local unions demand higher wages, which leads to an escalation in O&M costs.

Good liaison: An operations manager should preferably be appointed to act as a conduit for communication between the project owner, equipment manufacturer, maintenance contractors, inspectors, landowners, neighbours, authori-

Reporting: Thanks to modern SCADA systems and other equipment, an enormous amount of data is collected from solar and wind farms, and the operations manager must extract what is most relevant to the farm owner and present the information in a concise, readable form. It is imperative to prepare monthly and annual reports covering production (in MWh and monetary terms) versus budget, scheduled and non-scheduled servicing, availability, capacity factors, alarms, downtime, expenditure and any other information of interest to the project owner.

associated with the parts of the plant. Even if a proper monitoring system is in place, poor communication infrastructure at the plant site poses a challenge. Most of the remote monitoring systems require internet connectivity, and in the absence of a reliable connection, data logging cannot be undertaken for long periods of time, which also causes issues in the diagnosis and timely rectification of problems. Finally, inventory management at the plant site is also critical, since it helps decrease O&M costs, as well as the working capital requirement. It facilitates the timely com-

O&M has a strong bearing on the optimisation of energy output as it affects the amount of energy produced and the long-term return on capital investment.

pletion of various maintenance activities. Inventory management is also important in light of the theft of material, which is a common occurrence. This can be prevented only by having a good security system in place, along with an efficient inventory management system.

Outlook O&M services have emerged as a big opportunity for OEMs and EPC contractors in the wind and solar power segments respectively. Players in this space are, therefore, keen to invest in research and development related to cost-effective and simplified O&M tools. With the renewed focus on renewable energy, primarily solar and wind, and the majority of new capacity being set up by IPPs for whom project performance is key, the market for O&M is poised to grow at a rapid pace. Further, once the scheduling and forecasting norms are in place, the demand for O&M services is likely to increase further. â&#x2013; March 2015 â&#x2014;? Renewable Watch â&#x2014;? 63

TECHNOLOGY FOCUS

OPERATIONS & MAINTENANCE

Monitoring Machinery O&M challenges and solutions in solar plants The rapid growth in solar power deployment across the country has led to an increased requirement for operations and maintenance (O&M) activities. Developers now have to maintain several large-scale solar photovoltaic (PV) power plants, which bring with them a new set of issues and challenges. These can range from the maintenance of equipment to the regular cleaning of modules to ensure plant efficiency. The industry is, therefore, adopting varying practices to cater to the O&M requirement of plants while also looking into the deployment of improved monitoring systems to facilitate the rectification of problems in a timely manner. Renewable Watch provides an industry perspective on the role of O&M in the solar power segment, the key trends and challenges, as well as the best practices and technologies adopted by developers for plant maintenance… How critical is the role of O&M in ensuring efficient and sustainable solar plant operations over a project’s life?

A.S. Kapur I relate O&M work with the word “nurture”. Solar power plants are installed in the open and directly face the vagaries of the weather. It is necessary to maintain and keep a plant in the best of conditions so it can give the designed output. If a plant is not in the best shape, power generation can be affected. Just one layer of sand on the module is sufficient to reduce generation by 50 per cent. Likewise, heavy bird droppings, a blown fuse in the string, or an unclean inverter room can cause loss of efficiency due to the restricted flow of cool air. Short circuit cables can also cause havoc. Since we envisage a plant’s life to be 25 years, it is necessary to maintain it through a regular system. A plant has to be attended to by trained engineers every day and during the night as well.

Vikalp Mundra Solar PV power plants are not maintenance-free. They require a regimen of continual monitoring, periodic inspection,

scheduled preventive maintenance, and service calls. An effective O&M strategy has to incorporate a number of different elements that are aimed at reducing costs while improving availability and increasing productivity. Ujaas Energy Limited (UEL) attaches great importance to O&M and we have hence opted for an internalised O&M function to maintain our plants. An inhouse trained team can do PV asset management in a more integrated and economical way over the long term. Ensuring comprehensive O&M of both central and distributed solar-based generation demands the best O&M practices to minimise plant downtime, prompt greater output, and realise faster investment returns in a cost-effective manner.

nance of solar PV projects for decades. This is where O&M plays a crucial role. The primary focus should be on the O&M of inverters, which are the heart and soul of solar PV plants. Developers will require O&M providers to have certified inverter service personnel to ensure the competence and protection of a plant. O&M in solar plants entails regular monitoring and inspection as well as preventive maintenance and servicing. These actions address unplanned outages, and repair and restart requirements. Various kinds of O&M activities are needed to enhance long-term uptime, performance and economic viability. What are the best practices currently being adopted for O&M in the solar power segment? What are the emerging trends?

Sudhir Verma

A.S. Kapur

The mushrooming of solar PV plants is expected to increase, particularly with the kind of targets set by the government for 2020. Power purchase agreements signed with regulators, discoms or private industrial consumers demand the mainte-

The best practice is to construct the plant in a proper manner, strictly following its design. The equipment supplier’s instructions and guidelines regarding all technical aspects should be studied and followed. The emerging trend is to post a four-per-

A.S. Kapur

Vikalp Mundra

Sudhir Verma

Head, O&M,

Joint Managing

Chief Operating

Rays Power Infra

Director,

Officer,

Private Limited

Ujaas Energy

ACME Solar Energy

Limited

Private Limited

64 ● Renewable Watch ● March 2015

OPERATIONS & MAINTENANCE

TECHNOLOGY FOCUS

“It is necessary to maintain a plant in the best condition so it can give the designed output.”

“Operations and maintenance strategies have to be a part of the overall costs of a plant.”

“The best technology to enable the monitoring and maintenance of a plant’s units is SCADA.”

A.S. Kapur

Vikalp Mundra

Sudhir Verma

son team for the O&M work of a 1 MW capacity plant. This team would undertake monitoring during the day and plan for its maintenance from sunset till sunrise. O&M formats have now taken very good shape and if they are followed regularly, plants will work at maximum efficiency.

Preventive maintenance entails routine inspections and the servicing of equipment to prevent breakdowns and unnecessary production losses. Such regimes are becoming increasingly popular because of their perceived ability to lower the probability of unplanned downtime. Tools like thermal imagers, precision DC clamp meters and soiling monitoring stations are very helpful in this regard. For larger PV plants (more than 100 MW), thermal imagers fitted in the drone are available for solar panel monitoring.

applicable regulations (for instance, those set forth by the grid operator or environmental governance bodies), etc.

Vikalp Mundra It is a well-established fact that efficient and predictive maintenance can help energy producers better manage resources, take the necessary precautionary measures, and improve overall productivity. UEL’s IT-backed O&M services enable our engineers to make value-based decisions that are supported by the continuous evaluation of real-time, historical and weather data generated directly from the site through the proprietary monitoring system, which assists in its virtual monitoring. These IT-based O&M services for field operations cater to solar resource assessment, real-time active performance monitoring, advanced analytics and, most importantly, reporting and forecasting. The on-site personnel are all UEL’s in-house technicians who are experienced in carrying out installations and maintenance.

Sudhir Verma Even though PV O&M practices are still evolving, a number of utilities and thirdparty service providers are trying to develop a cost-benefit equilibrium for the maintenance of systems. Several major approaches now exist for handling the O&M of solar PV systems, which differ according to system efficiency and the lifespan trade-off of components. However, the basic objective of these systems is to reduce costs while improving availability and increasing productivity.

Corrective or reactive maintenance addresses equipment breakdowns and mitigates unplanned downtime. This “breakfix” method allows for low upfront costs but brings with it a higher risk of component failure and increases costs on the back end (putting a premium on negotiating beneficial warranty terms). Condition-based maintenance uses realtime data to prioritise and optimise maintenance and resources. An increasing number of third-party integrators and turnkey providers are developing such regimes to offer greater O&M efficiency. The increased efficiency, however, comes with a high upfront price tag, given the requirements for communication and the monitoring of software and hardware. Moreover, the relative novelty of conditionbased maintenance can produce challenges that are caused in part by monitoring equipment malfunctions and/or erratic data connections. O&M in the solar segment is aimed at the optimisation of plant production for increased asset revenue, optimal auxiliary consumption, risk reduction for asset owners and investors, protection of asset value and its longevity, compliance with

What is the role of monitoring and control in ensuring optimal plant performance? What kinds of technologies and software are being deployed for this?

A.S. Kapur Monitoring is normally done by supervisory control and data acquisition (SCADA) systems, but direct monitoring by engineers is still needed during the day. Some questions studied by O&M engineers are: How strong was the sun? What was the ambient temperature? Depending on these observations, how much energy was generated? Was it as per the design considerations based on Meteonorm and PVSyst software? How clean are the modules; is any termination getting redhot? Are the inverter room cooling fans working? Is the room temperature below 45 0Celsius? At what time did generation start after sunrise and what time did it stop? What is the string current when the sun is at its peak? In this way, O&M engineers are provided with a complete monitoring questionnaire, which they fill in through the day. It is then analysed and actions are taken to set things right. Only if monitoring is done in a proper manner and actions are taken based on the observations can plants give a good output. SCADA and remote sensing cameras are musts for monitoring a plant. The software consists of very common tabulatory formats of overall observations, containing an entire range of aspects like generation records, irradiance records, string voltages and currents, and water washing periodicity. The O&M team should have proper electrical tools for doing this work. March 2015 ● Renewable Watch ● 65

TECHNOLOGY FOCUS

OPERATIONS & MAINTENANCE

Vikalp Mundra

In UEL’s O&M practice, IT-enabled services help the company derive business growth, enhance revenue and increase operational efficiency. The software has cloud capabilities and is built on open standards with mobile solutions to increase power generation capacity. The present system is meant to help the company effectively manage and use the vast amounts of data generated by power plants.

O&M strategies have to be a part of overall plant costs. The implementation of systems and resources for the plant should not be considered as overhead costs and instead be seen as central to profits.

The data analytics capability thus provided helps gather valuable insights and ensures an integrated view of operations so that proactive measures can be taken. Using this system of mobile technology, the company has been able to provide complete information to its ground staff on their handsets so they can be alerted well in advance. This ensures smarter operations with higher efficiency and greater utilisation. As a registered operator of more than 100 MW of utility-scale PV power plants, we communicate regularly with the grid authorities and provide various reports over multiple time scales to utilities and grid operators, thus increasing the predictability of our PV power plants.

Sudhir Verma A plant needs to run at an optimal capacity utilisation factor (CUF) with minimal depreciation to remain in an extant condition over a longer period. Its components also need to function efficiently throughout its lifetime. The best technology to enable the monitoring and maintenance of a plant’s units is SCADA. This can monitor real-time efficiency and continuously compare it with its theoretical efficiency for assessing if the system is operating optimally. What are the most challenging aspects in a solar plant’s operations?

A.S. Kapur The most challenging task is to maintain the plant ration and CUF as per the design. 66 ● Renewable Watch ● March 2015

Once the proper resources and systems are in place, the preventive maintenance focus will be on predicting failures, maintaining equipment and ensuring that the site’s tasks are performed on time for the effective management of time and capital. Preventative maintenance work must be conducted to ensure that the maximum energy output is generated from the system. All its components are inspected and crucial adjustments or replacements made to prevent the possibility of an outof-service installation. Corrective maintenance focuses on responding to incoming alerts to evaluate and, if need be, restore a site to its optimal working conditions, thus maximising financial and energy returns. Infrared imaging is a crucial diagnostic tool for maintaining the electrical performance, efficiency and reliability of electrical equipment. Infrared light is used to analyse and measure the thermal energy emitted by PV modules and inverters. Ineffective cells produce high levels of heat, which are detected as hot spots in the IR thermal imaging system. By detecting these anomalies, corrective action can be taken before

costly system failures can occur. At our solar farms, we use water for cleaning modules. The company is committed to the continuous optimisation of water consumption through process modification and the adoption of new technologies. We have introduced automated cleaning machines that mix air with water and pressure and use less water clean modules at a quicker pace. We also ensure replenishment of water by undertaking rainwater harvesting at our main and local control rooms, which helps recharge groundwater. Proper slopes and rain pits are being made to further strengthen our commitment. Plant installations require the clearing of land, which disturbs a region’s ecology. To address this displacement, the company has adopted a plantation programme. The local population is trained to take up activities in the day-to-day operations of plants to ensure sustainable development of the local area.

Sudhir Verma O&M issues can be broadly classified into the following categories: Fluctuating grids: It is a challenge to maintain a balance between generation supply and stable grid availability. To understand emerging technologies on smart grids and grid reliability requires thorough background research. Location dependence: In solar PV plants, generation must be co-located with the resource itself, and these locations are often far from the grid substation where power is ultimately to be delivered and distributed. New transmission capacity is often required to connect solar resources to the rest of the grid. Land availability, engineering features, grid connection, contractor selection, extreme weather events, data acquisition, security, housekeeping, environment, health and safety, and stakeholder management are some of the other challenges. ■

India Infrastructure Research

Solar Power in India 2015 Report India Infrastructure Research (a sister division of Power Line and Renewable Watch magazines) is currently developing and will soon release the sixth edition of “Solar Power in India” report, the most comprehensive and up-to-date study of the solar power sector in India. The report will have 3 distinct sections: Section A: Overall Sector Scenario z

Executive Summary

State Solar Policies and Programmes

Key Trends

Financing

Recent Developments

Economics of Solar Power

New Government Policy and its Impact

Domestic Manufacturing

JNNSM Update

Future Outlook and Projections (till 2019)

epor

r new

Section B: Segment Analysis z

Solar Parks and UMSPPs

Captive Solar Segment

Utility-Scale Projects

Focus on Off-grid

Solar Rooftop Projects

Section C: Player Profiles z

Leading Developer Profiles: This section will cover current portfolio, operational performance, financials, project pipeline, future plans, etc. of the major developers in the country.

The report will be available along with a presentation in PDF format. The report is priced at Rs 50,000 (plus 12.36 per cent service tax) for a Site Licence and Rs 75,000 (plus 12.36 per cent service tax) for an Enterprise Licence. The report will be released in March 2015.

To order a copy, please send a cheque or draft payable to “India Infrastructure Publishing Pvt. Ltd.” and mail to: Aayushi Lahoti Information Products Tel: +91-11-46038153(D), +91-11-41034600/01(B), Fax: +91-11-26531196 Mobile: +91-7838751085 Email: aayushi.lahoti@indiainfrastructure.com

TECHNOLOGY FOCUS

OPERATIONS & MAINTENANCE

Optimising Output Strong focus on O&M to boost wind plant efficiency Traditionally, the wind industry had focused more on turbine manufacturing and wind farm development, with fewer resources being spent on project operations and maintenance (O&M). However, the trend has changed with the entry of independent power producers (IPPs). O&M has become a key focus area, as it plays a major role in maximising returns. Project developers and experts share their views on the role and importance of O&M, monitoring, and control in efficient plant operations; emerging trends; key issues and challenges; and best practices... What role does O&M play in the efficient operations of wind power plants? What are the emerging trends in this regard?

A.S. Karanth O&M plays a major role in a projectâ&#x20AC;&#x2122;s lifecycle. The anticipated returns are largely dependent on O&M. Emerging trends show that a good supervisory control and data acquisition (SCADA) system, troubleshooting manual, condition monitoring, etc. are required for the efficient functioning of turbines. To optimise performance, easy and timely availability of spare parts is also essential. With wind forecasting, periodical and scheduled maintenance can be timed to take advantage of low-wind conditions. Emerging trends show that with the coming up of large-scale advanced turbines, management, repair and replacement centres are being set up for these machines. The importance of the periodical upkeep of turbine blades by cleaning the surface, for a small additional percentage of power generation, is also being taken seriously.

Dr N.R.N. Reddy O&M of a wind farm has a greater bearing on optimising the energy output after the commissioning of the project. It is essential that the wind turbines operate when

there is wind and that the grid is available for evacuating the power generated. O&M activities, which are usually undertaken by the supplier of turbines, involve continuous monitoring of wind turbine performance and rectifying any deficiency in mechanical, electrical or other related problems that may arise in the turbines, DP yard or line and pooling substation. Failures in the wind farm set-up need to be addressed on a real-time basis, as any delay would cause energy loss and the consequent loss of revenue, which might seriously hamper the viability of the project. As in any other business model, there is a continuous evolution in the O&M activity of wind turbines, by way of reducing the time taken for the repairing or replacement of any spares; maintaining sufficient spares, especially with IPPs going for larger farm sizes, which can optimise O&M costs. Another major shift that is being contemplated is the large wind farms promoted by IPPs, which have their own adequately trained and supported O&M team in place. There are also separate business models coming in with exclusive focus on O&M activity, initiated by various experienced corporate or individuals capable of undertaking a wide

range of these activities. All these moves ultimately aim at reducing O&M costs and at the same time, improving the availability of machines and the grid.

S. Venkatachalam Wind and grid availability are not really within our control. Therefore, machine availability, which we can regulate, becomes the most important parameter on which all O&M activities are focused. The endeavour is to achieve outputs in line with the power curve. Proper maintenance of machine components, the switching yard and the transmission line need to be ensured in order to achieve the targeted outputs. The adoption of better technologies leads to project designs suitable for medium- and low-wind regimes. More importantly, MW-scale turbines come with online SCADA monitoring systems, which facilitate the effective monitoring of plants located in remote locations to ensure their smooth operations. Monitoring the performance of major components is also important for the prevention of any major breakdowns. What are your O&M practices for wind projects? What challenges did you face while undertaking O&M activities for these projects?

A.S. Karanth

Dr N.R.N. Reddy

S. Venkatachalam

Wind Energy

Director and CEO,

Managing Director,

Consultant

Jaagruthi Power,

Orient Green Power

Hyderabad

Company

68 â&#x2014;? Renewable Watch â&#x2014;? March 2015

TECHNOLOGY FOCUS

OPERATIONS & MAINTENANCE

A.S. Karanth The best O&M practices can only be sustained when there is an overall hunger for better generation. Understanding the significance of continuous analysis of performance and making small improvements are imperative. All this comes only from the interest of investors, whether it is retail or IPPs. New technologies and MW-scale turbines are seldom maintained by service agencies. Manufacturers are therefore finding it difficult to satisfy their investors. A lot of time is being spent on deliberating how far the developer is from the expectation, and less time is being spent in brainstorming about how certain things can be avoided and how the returns can be improved. Although they are aware of the fact that generation guarantee cannot be provided, people dwell more on the percentage availability than on anything else. There are many avenues to make continuous improvements, many of which are specific to projects, regions, sites, grid connectivity and people (skills and motivation level). The keenness of suppliers to give equal importance to O&M requirements, along with the target plant production, by making the right supply chain available, is debated by investors. Generally, what is indicated at the time of sale and assessment of the internal rate of return of a project seems to be far from the reality.

Dr N.R.N. Reddy At present, our turbine suppliers are entrusted with the O&M responsibility, based on a 10-year contract for the maintenance of turbines, substations and transmission lines. The turbine suppliers have not been able to deploy adequate trained manpower to attend to the problems, causing delays in rectifying the defects. Since wind farms are generally situated in remote locations, the retention of trained personnel at sites is becoming difficult. Another issue relates to the adjustment in the right of way acquired by the developer for a wind project, when materials or spares need to be moved to the site for O&M.

S. Venkatachalam z

For MW-scale machines, we engage

with original equipment manufacturers (OEMs) on a long-term basis, as this ensures turbine upkeep and the timely availability of spares, proprietary components and software. For kW-scale turbines, we engage with specialised third-party service providers with good technical manpower. Sourcing of spares is done from local vendors, which could be an area of concern. Local challenges are being faced by wind developers while performing O&M of their projects, but we resolve them locally as and when they arise.

What role do monitoring and control play in ensuring optimal plant operation? What are the issues faced in undertaking these activities?

A.S. Karanth We still need to master conditional monitoring, which is a science that evolves with adequate knowledge of the turbine (design, construction and components). Merely adding the system and carrying out data acquisition do not suffice. Continuous analysis of the data is also necessary for its future use. In some turbines, the suppliers of components like bearings, gearboxes and generators provide independent systems to go with the turbines. Even though there is a cost burden, it is better to use them for learning and analysing the real situation of failures so as to prevent them, which can then be integrated into one system for future projects.

Dr N.R.N. Reddy Continuously monitoring wind farms and controlling any problems that might arise, either in the turbine or in the DP yard/line and substation, will help in increased machine availability and grid connectivity. This, in turn, will help in improving and optimising the performance of the project. All wind farms are now connected with and controlled through SCADA, which helps the O&M team diagnose the problems in real time and resolve them instantly. However, the real challenge remains in accessing spares during emergencies and in ensuring the availability of trained personnel to attend to issues on priority.

S. Venkatachalam z

For MW-scale turbine with SCADA connectivity, monitoring the operation of these machines is achieved through their timely resetting and restoration. Performance of the turbine is analysed through power curve assessment by the OEM service providers and the owners. Performance of turbine components like the gearbox and generator can be effectively monitored round the clock. Issues related to connectivity for the SCADA system is a challenge.

What are the best practices for efficient O&M, and monitoring and control of wind projects?

A.S. Karanth It is difficult to conclude whether developers have adopted the correct or best O&M practices. However, a few factors that are important in this regard are, z Turbine knowledge, skill enhancement and an analytical mind-set. z Continuous evaluation of the project, including factors like the variable year-toyear wind pattern, authenticated by reliable data measurement for all projects. z Openness in understanding regarding what is happening, and maintaining mutual respect for sharing knowledge (between investors and suppliers). z Knowledgeable representation at the project site on the part of the investor, starting from his availability ahead of the project’s commissioning and continue throughout the life.

Dr N.R.N. Reddy The best practices include: Adequate deployment of trained manpower, maintaining inventory of spares, efficient SCADA for timely diagnosis and detection of problems, and improving the efficiency of the O&M team by providing sufficient infrastructure and facilities.

S. Venkatachalam Some best practices are periodic inhouse quality audits carried out to ensure efficient O&M by service providers and continuous monitoring from remote SCADA control centres. ■ March 2015 ● Renewable Watch ● 69

UP AND COMING

Up and Coming SEED’s solar dryer

A number of steps have been taken in India to promote electricity generation from solar energy sources. However, there are a number of other applications that can leverage the energy trapped in solar radiation. Food processing is one such area where solar energy can be effectively utilised. Hyderabad-based NGO Society for Energy, Environment and Development (SEED) has developed a solar-powered air dryer that relies solely on solar energy for carrying out an important food processing function. The technology has been patented by SEED, whose research and development team was responsible for designing and developing the dryer. To finance the project, the organisation had received grants sanctioned by the United Nations Development Programme. SEED has now been able to commercialise the technology in India with the financial assistance of the United States Agency for International Development’s Renewable Energy Project Support Office. The solar dryer comprises a metal cabinet made of an anticorrosive aluminium alloy, with a glass window on top to allow solar radiation to pass through. The cabinet’s inner walls have stainless steel trays that hold the products to be dried. The window is oriented towards the sun with a tilt equal to a 15–20 degree latitude so that it can collect the maximum amount of solar radiation. Such an arrangement is necessary for meeting the varying sizes and loading capacities of food products, which can range from 8 kg to 200 kg. The cabinet is also equipped with solar photovoltaic-powered fans arranged on top. The ambient air enters from the bottom of the cabinet and

70 ● Renewable Watch ● March 2015

gets heated with the solar radiation coming in from the top window. As a result, the solar radiation wavelength shifts to the infrared region, causing the greenhouse effect. The hot air passes through the trays, carrying the moisture from the product to the space below the glass. The solar fans ensure a forced circulation of air in the cabinet, which causes moist air to be eliminated. The dryer also has an electrical backup to facilitate drying on non-sunny days and in exigencies. The solar-powered air dryer is available in five variants on the basis of the capacity of food it can process. While the smallest unit can process up to 8 kg of food using a 3.5 W solar panel, the largest dryer has a loading capacity of up to 200 kg and uses an 84 W solar panel. SEED has already installed around 180 solar dryers, both demonstration and commercial models, in 18 states across India. In addition, it has exported a few units to countries like Saudi Arabia, Australia, Malaysia and Mauritius. The organisation has also set up five production-cum-training centres across the country to promote skill development in the food processing industry. SEED has been conducting training programmes at its Hyderabad centre and at its Rural Training Centre in Tholkatta, Andhra Pradesh, for the benefit of entrepreneurs. The solar dryer unit is rain- insect- and rodent-proof. It is fitted with a special blue glass filter to prevent ultraviolet radiation and reduce the solar intensity for special applications like the higher retention of micronutrients. Another benefit is its modular design and the fact that it can be easily transported. It can also be configured according to the availability of open space on the user’s premises. Each unit has a lifespan of up to 10 years, making it a good investment. The solar dryer unit depends solely on solar energy, thus eliminating the use of conventional power for an important farm process. With large swathes of rural India still not connected to the grid, it can prove to be a game changer that will enable localisation in the food processing industry. It can also be instrumental in reducing the wastage of farm produce, an occurrence that continues to plague the Indian agricultural sector. If the government provides its support, the technology can also promote employment in the post-harvest food processing industry.

UP AND COMING

Intelizon Energy Over 280 million people in India have no access to electricity, while over 2.7 billion lack access to modern lighting facilities. A significant part of the unserved population is still dependent on hazardous fuels like kerosene for basic lighting needs, which entail severe health and environmental risks. In this context, solar applications are rapidly emerging as a viable option for lighting and as an attractive business proposition for companies. Several small and big companies have ventured into this domain while existing ones are increasing their presence. At the same time, there is an upswing in the market for light emitting diode (LED)-based products. While the demand for these products has been higher in urban areas, rural areas also stand to benefit immensely from such solutions. Hyderabad-based Intelizon Energy combines a lithium-ion battery with solar, LED and advanced electronics technology to provide lighting solutions at affordable prices. The company was started in 2007 by Dr Kushant Uppal, who has over 16 years of experience in developing industry-leading technology products and businesses in Silicon Valley, California. Intelizon Energy’s operations are spread across India and West Africa under the brand name “ZON”. The company also operates through its original equipment manufacturer partners. Talking about the uptake of LED-based lighting products and solutions in the market, Uppal says, “Awareness about LED products has increased tremendously in the past three years. There have been significant cost reductions and performance improvements, leading to higher penetration of indoor and outdoor grid-based LED lights for residential and commercial use.” Intelizon offers a wide range of portable indoor and outdoor, on-grid and off-grid LED products. The company’s indoor product offerings include Zonlite, an LED down-lighter and

fixture, and Zonlite-TL, an LED tube light. The Zonlite-TL grid model is widely used in commercial offices, retail shops and homes. The DC model can be used with solar panels and is designed for the DC application with a remote control for on/off and dimming options. The outdoor products offered by the company include Zonstreet-LI, Zonstreet-LA and Zonstreet-Grid. Zonstreet-LI is widely used on college and commercial campuses to light up gardens and the perimeter area. It can replace a 40 W tube light and has been accepted by gram panchayats for village lighting. Meanwhile, Zonstreet-LA is available from 9 W to 80 W, and is used as a street light in campuses, colonies and wide streets where power outages are frequent. The company also offers portable home lighting products such as the Zonbulb, a multi-purpose light comprising a single solar panel that charges two bulbs; Zonlantern, a solar lantern; and Zonkisan, a solar LED torchlight. It also offers Zonhome, which can charge multiple lights with a single solar panel to create a home lighting system. According to Uppal, the company’s product range and pricing appeal to project developers and commercial users. The company also sells a number of products in rural markets for household as well as community lighting. The company’s design team has always focused on differentiation. However, of late, it has started focusing on the supply chain at the design stage. This helps in integrating suppliers/parts in order to meet market pricing as volumes are ramped up. Since competition in the lighting applications domain is becoming stiff, it is important for companies to market their products adequately. Creating channels to cater to residential markets is one of the key challenges for Intelizon. “This requires funds for sales/marketing as well as for competing with low quality/low-cost products,” says Uppal. Intelizon Energy was incubated by IIT Madras’s Rural Technology and Business Incubator. The seed funding came from the Venture East Tenet Fund and Emergic Capital, which provided angel funding. The company is currently scouting for partners who can help scale up its business in India as well as Africa. In the near term, the company is looking to close a few large-scale projects. However, in the medium to long term, it intends to establish itself as a consumer brand. Net, net, in a market that is flooded with various lighting products and applications, Intelizon Energy stands to benefit on two counts – its operational experience and its technology-based product innovation. ■

March 2015 ● Renewable Watch ● 71

WORLD VIEW

Planning for 2030 European Union finalises climate and energy targets

hile the European Union (EU) is believed to be making noteworthy progress towards meeting its climate and energy targets for 2020, an integrated policy framework for the period up to 2030 was required to ensure regulatory certainty for investors and a coordinated approach among member states. On October 23, 2014, EU leaders agreed on the 2030 Climate and Energy Policy Framework, which was proposed by the

72 ● Renewable Watch ● March 2015

European Commission (EC) in January 2014. Under the 2030 framework, the European Council has set a target of reducing domestic greenhouse gas (GHG) emissions by at least 40 per cent by 2030 as compared to the 1990 levels. The 2030 policy framework will help make the EU’s economy and energy system more competitive, secure and sustainable, and make continued progress towards a low-carbon economy. It also

intends to ensure affordable energy for all consumers, increase the security of the EU’s energy supplies, reduce dependence on energy imports and create new opportunities for growth and jobs. The following are the key features of the policy framework: z Reducing GHG emissions by at least 40 per cent: The framework aims to reduce EU domestic GHG emissions by at least 40 per cent below the 1990 levels by 2030. This target will ensure that the EU is on a cost-effective track towards meeting its objective of cutting emissions by at least 80 per cent by 2050. To achieve the overall 40 per cent target, the sectors covered by the EU Emissions Trading System (EU ETS) will have to reduce their emissions by 43 per cent compared to the 2005 emission levels. Emissions from sectors outside the EU ETS will have to be cut by 30 per cent below the 2005 levels. z Increasing the share of renewable energy to at least 27 per cent: The EC has proposed to increase the share of renewable energy to at least 27 per cent of the EU’s energy consumption by 2030. The European Council has endorsed this target, which is binding at the EU level. z Increasing energy efficiency by at least 27 per cent: The EC has proposed a 30 per cent energy savings target for 2030, following a review of the Energy Efficiency Directive. The proposed targets are based on the energy efficiency achieved so far; for instance, energy consumption has reduced by 50 per cent in new buildings as compared to the 1980 levels and by 19 per cent in industries as compared to the 2001 levels. The European Council, however,

WORLD VIEW

has endorsed an indicative target of 27 per cent, to be reviewed in 2020, in order to increase the target to 30 per cent by 2030. Reform of the EU ETS: The EC has proposed the establishment of a market stability reserve from 2021 onwards in order to address the surplus of emission allowances in the EU ETS that has built up in recent years and to improve the system’s resilience to major shocks. This is aimed at ensuring that in the future the EU ETS is more robust and effective in promoting low-carbon investment at least cost to society. New governance system: The 2030 framework proposed a new governance framework based on national plans for competitive, secure and sustainable energy as well as a set of key indicators to assess progress over time. The European Council agreed that a reliable and transparent governance system should be developed to ensure that the EU meets its energy policy goals.

Proposals for an internal energy market The European Council has stressed that preventing inadequate interconnections of member states with the European gas and electricity networks and ensuring synchronous operations of member states within the European Continental Networks as foreseen in the European Energy Security Strategy will remain a priority after 2020. Targets will be attained through the implementation of projects of common interest and several other initiatives already laid down by the European Council in this context. The EC will take urgent measures to ensure the achievement of a minimum tar-

2030 climate and energy policy framework targets (%)

2020

2030

-20

Greenhouse gas emissions

Renewable energy

Energy efficiency

≤ -40

≥ 27

≥ 27*

Greenhouse gas emissions

Renewable energy

Energy efficiency

New governance system + indicators Source: European Commission

get of 10 per cent of the existing electricity interconnections. It will do so no later than 2020 at least for member states that have not yet attained a minimum level of integration in the internal energy market (including the Baltic states, Portugal and Spain), and for member states for which the existing interconnections constitute the main point of access to the internal energy market. The EC will monitor progress and guide the European Council on all possible sources of financing. In line with the conclusions of the March 2014 European Council meeting, the EC will report regularly to the European Council with the objective of arriving at a 15 per cent target by 2030. It will do so while taking into account the cost aspects and the potential of commercial exchanges in the relevant regions. In the 2030 framework, the European Council encourages transmission sys-

2020

2030

Non-ETS

ETS

Note: ETS includes power and energy sectors; non-ETS includes other sectors like road, transport, housing and agriculture.

Source: European Commission

15 Interconnection

* to be reviewed by 2020, having in mind an EU level of 30 per cent

Emission reduction targets as compared to the 2005 level (%) Sector

10 Interconnection

tem operators and regulatory authorities to include the relevant projects in the upcoming 10-year network development plans. In cases where the implementation of these projects will not suffice to reach the 10 per cent target, new projects will be identified and swiftly implemented. Co-financing by the EU will be made available for these projects and the EC has been invited to propose the best course of action to effectively achieve the targets mentioned above ahead of the March 2015 European Council meeting.

Conclusion In sum, the 2030 targets are projected based on the experience of and lessons learnt from the 2020 climate and energy framework. It takes into account the longer-term perspective set out by the EC in 2011 in the “Roadmap for moving to a competitive low-carbon economy in 2050” and the “Energy Roadmap 2050”. These proposals underline the EU’s goal of reducing GHG emissions by 80-95 per cent below the 1990 levels by 2050 and the collective efforts required from developed countries. Through the 2030 framework, the European Council also comprehensively elucidates its commitment to achieving a fully functioning and connected internal energy market. ■ March 2015 ● Renewable Watch ● 73

PROJECT WATCH

Progress Update Plants of 1 MW and above capacity Project developer

Location

Capacity (MW)

Godawari Power & Ispat

Raipur, Chhattisgarh

20.00

Lakshmi Sugar Mills

Haridwar, Uttarakhand

MRN Cane Power India

Bagalkot, Karnataka

Golden Infracon, a subsidiary of CHD Developers

Udham Singh Nagar, Uttarakhand

Naraingarh Sugar Mills

Ambala, Haryana

25.00

LB Kunjir

Medak, Telangana

2.00

Rays Power Experts

Bikaner, Rajasthan

100.00

NTPC

Telangana

250.00

NTPC

Madhya Pradesh

250.00

Fusion Solar Farms

Mahabubnagar, Telangana

5.00

Vikram Tea Processor

Medak, Telangana

1.50

RKS Techno Vision

Prakasam, Andhra Pradesh

3.00

Northstar Solar Power

Bhatinda, Punjab

4.00

Bagasse/Cogeneration/Biomass

1.75 35.00 6.50

Solar

Wind National Hydroelectric Power Corporation

Jaisalmer, Rajasthan

50.00

Sumeet Industries

–

10.50

Surat Municipal Corporation

Gujarat

Tata Power Renewable Energy

Rajasthan

118.00

Green Infra

Gujarat, Madhya Pradesh and Rajasthan

166.00

74 ● Renewable Watch ● March 2015

6.30

PROJECT WATCH

Progress Update Plants of 1 MW and above capacity Cost (Rs million)

–

Project status

Expected/Actual date of completion

Project put on hold

–

Awaiting environmental clearance

–

Civil works in progress

February 2016

–

Awaiting environmental clearance

March 2016

–

Civil works completed; machinery erection in progress

Mid-2015

–

Power purchase agreement (PPA) signed with the state discoms; civil works completed and

–

620.00

machine erection in progress –

Civil works in progress

March 2016

–

Bids invited for setting up the project

–

Bids invited for setting up the project

–

Civil works in progress

–

PPA signed with Telangana State Power Generation Corporation

–

PPA signed with the Transmission Corporation of Andhra Pradesh

–

PPA signed with the Punjab government

2015

–

Engineering, procurement and construction contract awarded to Inox Wind

7,751.00

Rs 5.77 billion secured from IDBI Bank

July 2015

–

Bids invited for setting up the project

September 2015

–

Turbine supply contract awarded to Inox Wind

March 2016

–

Turbine supply contract awarded to Inox Wind

–

March 2015 ● Renewable Watch ● 75

PHOTOGALLERY

Sector Snapshots

nment, r Enviro f State fo o Goyal, r h s te u is iy in arge); P ekar, M h d a C v New t a n d J e n d ash Coal a ndepen ft) Prak r Power, hange (I ance, fo C ) in (From le e F te r a rg a fo m inister and Cli dent Ch ndepen Forests Union M ; Suresh Jaitley, f State (I o n r dcasting ru a te A ro Vice is ; B y d rg Min n e a n E n gariya, o a le ti ewab ind Pan Informa rv ry d A to n ; a s ic and Ren y d s a r Railw the Vale te Affair Corpora aries at inister fo it M n , ig u d h r b e ar Pra 5 and oth Prabhak EST 201 Aayog; n, NITI f RE-INV o n io s s Chairma Se

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76 â&#x2014;? Renewable Watch â&#x2014;? March 2015

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PHOTOGALLERY

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March 2015 ● Renewable Watch ● 77

PEOPLE

Dr Ajay Mathur Director-General, Bureau of Energy Efficiency

uilding up institutions is something Dr Ajay Mathur enjoys. Throughout his career, he has been involved in creating new institutions, defining their policies, and dealing with the practicalities of getting them up and running. He helped build institutions like the Green Climate Fund and the Bureau of Energy Efficiency (BEE). In the private sector, he has done similar work with green energy company Suzlon. Currently director-general, BEE, Mathur coordinates various national energy efficiency programmes including the Standards and Labelling Programme, the Energy Conservation Building Code, and the demand-side management programme in the buildings, lighting and municipal sectors. Under him, BEE has been instrumental in driving the shift towards star labelled appliances. According to Mathur, this shift has nailed the myth that the Indian consumer is highly price-sensitive and would not pay more even if it saved energy. Yet, within 14 months of the launch of the labelling programme, about 40 per cent of the air condi-

s secretary-general of the Indian Wind Turbine Manufacturers Association (IWTMA), D.V. Giri is responsible for policy advocacy and regulatory intervention on behalf of its members, which include original equipment and component manufacturers in the wind energy space. His responsibilities include promoting wind energy to generate not only power but also as an industry for rural employment and fulfilling corporate social responsibility. Giri has over 45 years of experience in industries as diverse as steel, fertiliser, fibre glass, tyres, tyrecord, aqua culture and wind power. He is of the view that India’s installed wind capacity of about 25 GW is not a mean feat. This has been made possible due to the active role of the private sector and the Ministry of New and Renewable Energy. Besides bringing in policies and regulations to support the sector, the ministry’s partnership with the Danish International Development Agency has sown the seeds of growth in the industry. The government’s target of setting up 60 GW of wind energy by 2022 is an exciting challenge, he notes. The manufacturers’ currently have a capacity of 9,500 MW per year and they are chasing a market of 2,500 MW per year. According to Giri, “Manufacturing is not a problem. Now much depends on the initiatives and policies of the central and state governments.” While Giri has been associated with the wind power industry for long, he counts his contribution to the development of a pilot plant in Jamshedpur for testing the usefulness of basic slag 78 ● Renewable Watch ● March 2015

tioners and 70 per cent of the fridges sold were labelled ones, despite cheaper, non-labelled versions being available. Before joining BEE in 2012, Mathur worked on energy research, financing and implementation. He headed the World Bank’s Climate Change Team in Washington, DC. Prior to this, he headed the energy engineering division of TERI in Delhi. His interest in energy research goes back to his college days at Roorkee in 1979, where he realised how much work still needed to be done in the field. Mathur continued his studies with a master’s and a Ph.D at the University of Illinois. However, he and his wife Geetam (who received a Ph.D in transportation planning there and is now a professor at IIT, Delhi) decided to return to India because, while the cutting-edge technologies were in the US, the really interesting challenges were in India. Mathur believes that since a vast amount of infrastructure still needs to be built in India, the opportunity to incorporate energy saving designs is huge. Mathur’s reading tastes are catholic: everything from thrillers to political philosophy. The family has great wanderlust. Their most spectacular journey was in 2006 when they travelled by train across Russia and China, starting in Moscow and ending up in Almaty, Kazakhstan. They have seen Machu Pichu, the old Roman parts of Spain and Portugal, US national parks, and much more. For the next vacation, they are toying with the idea of driving from Cairo to Cape Town. “There’s never a time when we’re not planning our next holiday,” he says. ■

D.V. Giri Secretary-General, Indian Wind Turbine Manufacturers Association

(waste product in the manufacture of steel) as his most memorable project. As a research associate in Jamshedpur, he was instrumental in setting up the project, which involved getting rid of the mineral-rich slag for the steel industry and using it to neutralise acidic soils. Today, there are over 10 such plants attached to various steel plants in the area. Giri is an economics graduate from Madras University and holds an MBA from XLRI Jamshedpur. He believes in participative management and encourages his colleagues to take initiatives and responsibilities. However, he is of the view that there are times when one has to be a benevolent dictator, as targets are important. He divides his spare time between reading and listening to music. He especially takes interest in non-fiction, philosophy and religion. “Spiritual practice ensures a good balance in demanding times,” he says. Although he has travelled extensively, he still wishes to visit new places. He also cherishes a dream to write a book on renewable energy. ■

PEOPLE

uring a career spanning close to 20 years, Manu Rishi Puri has worked as an operations leader and consultant in multiple industries like utilities, insurance and hospitality. A chartered accountant by qualification, he has worked with various organisations such as EXL and IBM. He joined Accenture in October 2012. As principal–resources group with the company at present, he is responsible for managing clients’ diverse needs for driving efficiencies, mainly in the utility sector. He is also an expert on smart grid solutions and helps large utility clients to design such solutions. A large part of his recent career has been spent working with power utility organisations, advising them on a wide range of initiatives such as enterprise resource planning, smart grids, loss reduction, supply chain optimisation and procurement cost reduction. Puri entered the renewable energy space three years ago, when the sector, especially the solar segment, started gaining larger traction in the country. According to him, “Renewable energy companies grow five to six times faster than a thermal company, as a thermal plant takes five years to set up while a renewable energy plant is up and running in a year and takes less space and resources as compared to the former.” While recalling his most memorable assignment, Puri mentions his experience in helping a solar independent power producer to venture into the solar segment. “The most enjoyable part was that we were setting up a solar company at a time when

Amit Kumar Adjunct Professor, Sustainable Energy, and Coordinator, SE4All Capacity Building Hub, TERI University

mit Kumar is involved in the daunting task of helping India achieve its ambitious renewable energy targets by developing cadres of appropriately equipped human resources at all levels. He holds various positions in the renewable and sustainable energy segments. As adjunct professor, TERI University, he plays a key role in the renewable energy master’s programmes. As coordinator, Sustainable Energy for All (SE4All) Capacity Building Hub, he manages all activities of the global hub, from content development and collaborations to fund-raising and outreach. He is also regional programme adviser, Renewable Energy and Energy Efficiency Partnership, and he oversees its activities in South Asia. A mechanical engineer and gold medallist from IIT, Roorkee, Kumar has been working on the development of renewable energy technological solutions for over 32 years. His experience ranges from policy and programme formulation to project implementation, design and development of technologies, and manufacturing of solar energy devices. His career also includes several internation-

Manu Rishi Puri Principal-Resources Group, Accenture Services Private Limited

such business activity was missing in India. Thus, every achievement in this regard was a new discovery for us.” Some of the other assignments that he enjoyed a lot were handling a billing project for a discom and a project to streamline the operations of a large transmission company. Puri is very optimistic about the opportunities that the renewable energy sector offers, but he feels that more regulatory efforts are required to provide attractive financing options to investors. In this regard, he is working with policy- and decision-makers with the aim of ensuring adequate funds availability to fuel future growth in the sector. According to him, investing in solar rooftop and off-grid projects makes more business sense than concentrating only on setting up large-scale projects to meet the power demand. As a leader, Puri is collaborative and numbers-oriented and relies more on factual information. Outside of work, he enjoys running marathons and listening to music. His family includes his wife, a son and a daughter. ■

al stints. He was involved in projects related to the development of Sri Lanka’s policy framework for renewable resources-based generation and the integrated energy management master plan for Bhutan. He was also a part of the multi-country GEF-supported study to assess solar and wind resources in developing countries. “It is an exciting time in the country’s power sector. While it faces several challenges, it also provides opportunities for us to think differently and in many cases, start de novo. I see a greater role for demand response measures, smart grids and renewable energy in the future,” he says. Kumar’s management style reflects his enterprising approach. He believes in empowering younger colleagues in terms of decision-making, encouraging them to participate in team activities and mentoring them to realise their full potential. His enthusiastic approach towards dealing with challenges has helped him accomplish major assignments. Kumar’s most memorable assignment was the setting up of a 6,000 square metre solar pond in Kutch Dairy, Bhuj. The project was challenging owing to its scale. He recounts that 300 people were involved in the project execution, and dealing with unforeseen problems was a remarkable experience. Outside of work, Kumar likes to spend time with his family, which comprises his wife, Jyotsna, their daughter Anshula, and their son-in-law Nitin. He also enjoys reading, listening to light music, painting and gardening. ■ March 2015 ● Renewable Watch ● 79

DATA AND STATISTIC S

Key Statistics Renewable energy targets and achievements (as of December 31, 2014) Sector

2014-15

Cumulative achievement

Target

Achievement

Grid-interactive capacity (MW) Wind power

2,000.00

1,333.20

22,465.03

Small-hydropower

250.00

187.22

3,990.83

Biomass power and gasification

100.00

0.00

1,365.20

Bagasse cogeneration

300.00

152.00

2,800.35

Waste-to-energy

20.00

1.00

107.58

Solar power

1,100.00

430.67

3,062.68

Total

3,770.00

2,104.09

33,791.74

Off-grid/Captive power (MWeq) Waste-to-energy

10.00

8.54

141.27

Biomass (non-bagasse) cogeneration

80.00

34.32

561.64

Biomass gasifiers (rural)

0.80

0.75

18.23

Biomass gasifiers (industrial)

8.00

6.20

153.40

Aerogenerators/Hybrid systems

0.50

0.13

2.38

60.00

52.77

227.12

Watermills/Micro hydel

4.00

2.00

15.21

Biogas-based energy system

0.00

0.30

4.07

163.30

105.01

1,123.32

Family biogas plants (million)

0.11

0.04

4.80

Solar water heating collector area (million square metres)

0.50

0.53

8.63

Solar photovoltaic systems

Total Other renewable energy systems

Source: Ministry of New and Renewable Energy

80 â&#x2014;? Renewable Watch â&#x2014;? March 2015

DATA AND STATISTIC S

REC Trading on IEX and PXIL Growth between February 2014 and February 2015 Trading summary Particulars

IEX

PXIL

February 2014 Solar Non-solar

February 2015 Solar Non-solar

February 2014 Solar Non-solar

February 2015 Solar Non-solar

Buy bids (no.)

7,816

176,107

26,726

345,184

492

202,718

18,143

402,303

Sell bids (no.)

114,539

2,015,377

987,764

6,025,638

17,527

2,478,331

557,355

5,099,712

Cleared volume (no.)

7,816

176,107

26,726

345,184

492

202,718

18,143

402,303

Cleared price (Rs per REC)

9,300

1,500

3,500

1,500

9,300

1,500

3,500

1,500

Category-wise participation (no.) Participant category

IEX

PXIL

February 2014 Participants

Cleared volume

Participants

81,636

198

83,251

10 –

Cleared volume

Participants

Cleared volume

280,486

197,577

388,786

241

69,951

4,633

140

18,751

19,036

21,473

1,000

12,909

–

30,000

8,000

6,000

3,500

4,000

3,500

5,000

3,500

20,000

3,000

15,000 10,000

2,000 5,000

1,000 0

0 September 2014

October 2014

November 2014

December 2014

January 2015

February 2015

1,500

450,000 400,000

1,400

350,000

1,200

300,000

1,000

250,000 800 200,000 600

150,000

400

Cleared volume (no.)

25,000

7,000

Market clearing price (Rs per REC)

35,000

9,000

1,500

9,300

Price and volume trends (non-solar) 1,600

Cleared volume (no.)

Market clearing price (Rs per REC)

9,300

Price and volume trends (solar) 10,000

February 2015

Participants

1,500

Voluntary buyers

Cleared volume

1,500

Captive consumers

February 2014

1,500

Discoms Open access

February 2015

100,000

200

50,000

0 September 2014

October 2014

November 2014

December 2014

January 2015

February 2015

IEX market clearing price

PXIL market clearing price

IEX market clearing price

PXIL market clearing price

IEX cleared volume

PXIL cleared volume

IEX cleared volume

PXIL cleared volume

Sources: Indian Energy Exchange; Power Exchange India Limited

March 2015 ● Renewable Watch ● 81

EVENT WATCH

Upcoming Events

POWER-GEN India & Central Asia May 14-16, 2015 New Delhi, India

Global Offshore Wind 2015 June 24-25, 2015 London, UK

Renewable Energy India Expo September 23-25, 2015 Greater Noida, India

82 ● Renewable Watch ● March 2015

Intercontinental Wind Power Congress 2015

4th Annual Summit Conference2015 on GREEN

March 31-April 2, 2015 Istanbul, Turkey

Bengaluru, India March-April 2013 Mumbai, India

AWEA Wind Power 2015

Intersolar Europe

May 18-21, 2015 Orlando, USA

June 10-12, 2015 Munich, Germany

World Renewable Energy Technology Congress

International Congress and Expo on Biofuels & Bioenergy

August 21-23, 2015 New Delhi, India

Wind Power in India April 23-25, 2015

August 25-27, 2015 Valencia, Spain

China Wind Power 2015

Intersolar India

Beijing, China October 14-16, 2015

November 18-20, 2015 Mumbai, India