Bridge To India - India Solar Compass January 2013

INDIA SOLAR COMPASS
January 2013 Edition

Market Dashboard A snapshot of the markets fundamentals Latest Market In-sights An analysis of the policies, projects, industry and finance A Key Question Answered What will be the impact of antidumping duties in India? Outlook Quarterly projections for the Indian solar PV market
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BRIDGE TO INDIA, 2013 Illustration by Kavya Bagga
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BRIDGE TO INDIA relies on interviews with key industry professionals and government officials to gather primary information on the market. We analyze this information in an unbiased and systematic manner based on our expertise and analytical models developed in-house. The opinions and analyses expressed in this report are those of BRIDGE TO INDIA, and do not, in any way, unless specifically mentioned, convey or include the opinions of the sponsors of this report.
BRIDGE TO INDIA, 2013
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CONTENTS
1. 2.
Overview Market Dashboard

2.1. Market Compass 2.2. Indian Solar Market Prices 2.3. Installed Capacity in India
01 03 03 03 04 05 07 07 09 11 12 13 15 15 15 18 20 22 22 22 23 25
3. 4.
Key Findings Policies

4.1. Jawaharlal Nehru National Solar Mission: Draft of Phase II guidelines 4.2. Tamil Nadu Solar Policy: 3 GW by 2015 4.3. Rajasthan Solar Policy: Re-release of the request for proposal 4.4. Andhra Pradesh solar policy: Request for selection for 1,000 MW 4.5. Chhattisgarh Solar Policy: up to 1,000 MW by March 2017
5.
Projects
5.1. New Installations Grid Connected 5.2. Status of on-going projects (PV) 5.3. Status of On-going Projects CSP
6. 7.
Financing Upstream Industry Analysis

7.1. PV Manufacturing in India 7.2. International Module Supply Analysis 7.3. Inverter Supply Analysis
8.
Key Question: What will be the impact of anti-dumping duties in India?

8.1. Background 8.2. Impact on international manufacturers 8.3. Impact on the Indian manufacturers 8.4. Impact on project developers 8.5. Our take
25 28 29 29 30 32 32 33 34 36 36
9.
Outlook
9.1. Current Quarter 9.2. Long-term Outlook
10. Guest Article: Leoni 11. Annexure

10.1. Glossary of terms
LIST OF FIGURES
Figure 4-1: Targeted capacity addition through central schemes in phase two of the NSM Figure 4-2: Specifications of the 1,000 MW tender by Tamil Nadu Figure 4-3: Specifications of the RfP under the Rajasthan solar policy 2011 Figure 4-4: Specifications of the Andhra Pradesh RfS Figure 5-1: Grid connected solar projects installed in the previous quarter October 1st to December 20th 2012 Figure 5-2: Details for NSM batch two phase one projects that are leading in construction timelines (by December 2012) Figure 5-3: List of allocated projects that have not yet been commissioned in Gujarat Figure 5-4: Grading of solar project development proposals made to BREDA Figure 7-1: Tentative list of inverter supplies to ongoing projects under batch two of phase one of the NSM Figure 8-1: List of interested parties as part of the anti-dumping investigation Figure 8-2: Indicative module prices for various module types before and after anti-dumping duties Figure 9-1: Projected quarterly PV installations in India 07 10 12 13 15 16 17 18 23 26 27 32
1. OVERVIEW
The National Solar Mission (NSM) has proposed a target of 6.3 GW of PV installations as part of its phase two draft guidelines until 2017.
The previous quarter (October to December 2012) has seen a flurry of new solar policy announcements. The states of Tamil Nadu, Andhra Pradesh and Chhattisgarh have announced policies targeting a cumulative 5 GW of solar photovoltaic (PV) installations over the coming years. In addition, the National Solar Mission (NSM) has proposed a target of 6.3 GW of PV installations as part of its phase two draft guidelines until 2017. The announcements totalling 11.3 GW of PV by 2017 mark a significant departure from the state of the market in 2011 and the first three quarters of 2012. There was a slump in project opportunities in the Indian market after close to 1.1 GW had been allocated before December 2010. With the new announcements, government sponsored PV in India appears to be set for maturity. This is crucial for component suppliers and Engineering, Procurement and Construction (EPC) players looking for new project opportunities, especially in the face of a significant fall in demand in Europe. It is also important for a large pool of project developers and investors who have built their capacities in the early stages of the market and are now ready to expand their portfolios towards achieving scale.
expected to rely on the respective state distribution utilities for the off-take. The utilities of both these states are mired with large financial losses that will challenge the bankability of their Power Purchase Agreements (PPA). In addition, up to 1.5 GW worth of projects under the NSM may be offered Viability Gap Funding (VGF) under which they will have to find alternatives to the payment security backed PPA that was offered by the NTPC Vidyut Vyapar Nigam (NVVN) in the first phase. Such projects too might face bankability issues in the absence of a secured PPA. Another key development in the last quarter has been the launch of an investigation into the alleged dumping of cells and modules into India by manufacturers from China, the US, Taiwan and Malaysia. If conclusive evidence of dumping is found in the next six months, it could result in the imposition of anti-dumping duties of up to 20% on imports from the countries under investigation.
While anti-dumping duties are largely perceived as a necessity for the survival of Indian manufacturing, their benefit will be limited to a handful of Indian cell manufacturers.
Manufacturers from the countries under investigation have supplied up to 70% of the modules used in the Indian market so far. If imposed, antidumping duties are bound to decrease their competitiveness vis--vis manufacturers from India and those from countries outside the scope of the However, the market needs to be investigation. Project developers will approached with measured optimism. face higher system costs as they will Up to 5.3 GW of the announced capacity no longer be able to import cheaper relies on the Renewable Purchase modules from abroad. This in turn Obligation (RPO) targets set by states. will dent their ability to offer solar Further, the policies of Chhattisgarh energy at prices that can compete with and Tamil Nadu specifically target the commercial and industrial prices of Renewable Energy Certificate (REC) electricity across some states in India. mechanism as an off-take. With no clear RPO enforcement mechanisms While anti-dumping duties are largely at the state level yet and challenges perceived as a necessity for the with the bankability of REC projects, survival of Indian manufacturing, their there is a significant question mark benefit will be limited to a handful of on how much of the planned capacity Indian cell manufacturers. A majority addition will actually translate into of Indian module manufacturers rely projects. Further, Feed-in-Tariff (FiT) on imported cells. They will face based projects under the Tamil Nadu an increase in the prices of their and Rajasthan solar policies are modules as they will have to bear the
BRIDGE TO INDIA, 2013 01
import duty on cells. Anti-dumping duties are likely to create a distorted market where certain Indian players will enjoy exceptional advantages. Indian cell manufacturers justify this as a move needed to correct the alleged advantage that international manufacturers have enjoyed in India so far. However, BRIDGE TO INDIAs opinion is that some international manufacturers have been able to
sell at prices lower than their Indian competitors because of their scale and technology advantages under conditions of global over-supply. Anti-dumping duties will restrict Indian projects from capitalizing on cheaper international imports while doing little to improve the fundamental competitiveness of Indian manufacturers.
02
2. MARKET DASHBOARD 2.1 INDIA MARKET COMPASS
MA T
RE U
NA S
NT CE
NG
IN
ER M
Key drivers for the direction of the market

Regulatory Environment Execution Challenges Financing Viability
Source: BRIDGE TO INDIA
2.2 INDIAN SOLAR MARKET PRICES

PV Lowest FiT Interest Rate Average Capex c-Si modules (China, Taiwan) Thin Film modules (US and Malaysia) c-Si modules (Japan, Europe) Thin Film modules (Japan) *$ rate has been used to avoid effect of currency fluctuations All prices are for a reference 10MW project All prices are without duties and taxes
` 7/kWh ` 68/W $ 0.63/W* $ 0.57/W* $ 0.70/W* $ 0.65/W*

13%
GI
GR
OW
2.3 INSTALLED CAPACITY IN INDIA

ALL INDIA
41%
7.8MW
PV
HARYANA
CSP
25%
PUNJAB
75% PV 8 MW
3 MW
UTTARAKHAND
PV
PV 1,096.5 MW
25% 2% 3%
8% 4%
5 MW
12%
RAJASTHAN 5% 18%
5% 5% 16%
10%
2.5 MW
CSP
DELHI
PV
58%
1%1% 4%
45%
PV 12 MW
2 MW
42%
PV 219.5 MW
CSP 5.5 MW
55%
46%
UTTAR PRADESH
1%
2 MW
PV
WEST BENGAL
PV 730.31 MW
61%
38%
58%
16 MW
PV
GUJARAT
16%
PV
PV 12 MW
JHARKHAND
42%
ODISHA
26%
PV 19.2 MW
58%
4 MW
CHHATTISGARH
36%
7.25 MW
PV
28%
72%
MAHARASHTRA
64%
MADHYA PRADESH
47% 44%
PV 14 MW
33%
PV 22.5 MW ANDHRA PRADESH
KARNATAKA
33%
PV 15 MW
33%
TAMIL NADU
9%
Note: Circle sizes are only indicative and do not represent the actual difference in installed capacity.
KEY
Gujarat Solar Policy Phase 1 Migration Gujarat Solar Policy Phase 2 NSM Batch 1, Phase 1
Generation Based Incentive NSM Batch 2, Phase 1 Demo Project RPSSGP REC Mechanism
Direct RPO Project
04
3. KEY FINDINGS
3.1 POLICY
1. The draft guidelines for phase two of the NSM were published by the Ministry of New and Renewable Energy (MNRE) on December 3rd 2012. 2. The MNRE is aiming to add 6,300 MW of PV and 2,700 MW of Concentrated Solar Power (CSP) to the energy mix in India between April 2013 and March 2017. 3. The MNRE will be conducting the bidding for both the 800 MW of projects receiving a FiT and the initial 750 MW receiving a VGF simultaneously under phase two batch one - this may lead to a lack of interest in the bidding for projects receiving VGF. 4. The south Indian state of Tamil Nadu announced its solar energy policy in October 2012 - it targets 3 GW of solar power by 2015. 500 MW of this target is to be achieved through the fulfilment of newly instated Solar Purchase Obligations (SPOs). 5. BRIDGE TO INDIA expects that only around half of the targeted capacity addition through the SPO mechanism will be fulfilled. 6. Project developers might find it difficult to obtain financing under a PPA with TANGEDCO as the utility has been suffering financial losses in the past. 7. On November 20th 2012, Rajasthan re-released its RfP for 200 MW of PV and CSP projects under phase one of the state solar policy - the new RfP includes an amendment, which states that the Rajasthan Renewable Energy Corporation Limited (RRECL), the nodal agency, will be the PPA signing authority. 8. The change in the PPA signing authority from the state DISCOMS to the nodal agency for the solar policy has not translated into a strong payment security scheme, backed by a pool of funds dedicated to paying project developers. 9. The southern Indian state of
Andhra Pradesh also released its solar power policy on September 26th 2012. 10. The central Indian state of Chhattisgarh is the eighth Indian state to have published a solar power policy - Project developers have the option of either utilizing the REC mechanism as an off-take or waiting until the state DISCOM releases a competitive bidding based tender for the purchase of solar power.
3.2 PROJECTS (PV)

1. In the last quarter (October to December 2012), only 46 MW of solar PV capacity has been added. 2. The capacity addition of 46 MW in the last quarter is significantly lower than the first two quarters of the year, i.e., 315.8 MW in the first quarter of 2012 and 360.42 MW in the second quarter of 2012. 3. In Gujarat, 21.5 MW of capacity has been commissioned last quarter, taking the states total installed capacity to 730.31 MW. 4. If we look at projects in Gujarat that are currently under execution, we estimate that out of the 968.5 MW capacity that was originally allocated in two phases, around 850 MW will ultimately be installed in Gujarat and the remaining capacity of around 118.5 MW is likely to be cancelled. 5. Odisha has allocated 25 MW in December 2012 through a bidding process. 6. The state of Bihar is looking to allocate projects based on a grading mechanism - the Bihar Renewable Energy Development Agency (BREDA) had received applications for 776 MW and completed its final evaluation on December 10th 2012.
3.3 PROJECTS (CSP)

1. Of the 500 MW of CSP projects due to be completed in February and
05
imports from China, the US, May 2013, only a third may be ready Malaysia and Taiwan. on time. 2. The margin of dumping will depend 2. According to the MNRE, three of on the price differential that existed the 10 projects are unlikely to be for a period of 18 months starting built. January 1st 2011. 3. Based on the information submitted by the complainants, 1. Delayed financial closures have they are expecting anti-dumping strained execution timelines for duties of more than 20%. numerous PV projects in India in 4. Developers are generally against the past two years. the duties as it will make modules 2. In such a scenario, bridge financing more expensive, increase the LCOE for the construction period has of solar in India. become a norm in the market. 5. Indian manufacturers will profit the most. 6. Contract manufacturing for cells and modules in India can help international suppliers to avoid duties and also allow them to 1. In the last quarter (October sell into projects under DCR - December 2012), Indian restrictions (e.g. NSM). manufacturers continued to struggle with the oversupply in the 7. International module suppliers can also look to circumvent the duties global market. by procuring cells from any country 2. Most Indian developers are outside of the countries in question expecting unreasonable prices or supply from any such facility that at which suppliers are unable to might be their own or contracted. make any profits. 8. According to BRIDGE TO 3. Due to low margins and the INDIA, trade barriers such as looming possibility of anti-dumping anti-dumping duties create duties, many international module insulated zones of limited suppliers are currently pessimistic competition, allowing higher-cost about their opportunities in India. manufacturers to survive, driving up the cost of solar power.
3.4 FINANCING
3.5 UPSTREAM ANALYSIS
3.6 KEY QUESTION: VIABILITY GAP 3.7 OUTLOOK FUNDING 1. The coming quarter is expected to
1. The Indian Solar (PV) Manufacturers Association on behalf of three Indian cell manufacturers, namely, Indosolar, Websol Energy Systems and Jupiter Solar has filed a dumping complaint against cell and module
see up to 290 MW of projects being commissioned. 2. The year 2013 is going to see around 4,400 MW PV capacity allocated in India.
06
4. POLICIES
As a part of this phase, the MNRE is aiming to add 6,300 MW of PV and 2,700 MW of Concentrated Solar Power (CSP) to the energy mix in India between April 2013 and March 2017.
4.1 NATIONAL SOLAR MISSION: EXPECTATIONS FOR PHASE TWO

The draft guidelines for phase two of the NSM were published by the Ministry of New and Renewable Energy (MNRE) on December 3rd 20121. Comments and recommendations on the draft were accepted by it till December 15th 2012. BRIDGE TO INDIA expects the final version of the guidelines for phase two of the NSM to be published in January 2013. As a part of this phase, the MNRE is aiming to add 6,300 MW of PV and 2,700 MW of Concentrated Solar Power (CSP) to the energy mix in India between April 2013 and March 2017. Of the 9,000 MW of total capacity addition, 3,600 MW will be allocated under central schemes, and will receive monetary aid from the central government in the form of FiTs, Generation Based Incentives (GBI) or VGF. The remaining 5,400 MW is to be added through state schemes and initiatives, driven by the RPO requirements of every state. The solar policies of states like Tamil Nadu, Andhra Pradesh, Chhattisgarh and others could potentially contribute to this capacity addition.
Of the 3,600 MW under the central government, the MNRE will be allocating 3,400 MW of utility scale solar power projects, both PV and CSP (see table below for split), in two batches through a reverse bidding process. The remaining 200 MW will be in the rooftop and small solar installations space, supported by schemes such as the Rooftop PV and Small Solar Power Generation Programme (RPSSGP). In phase two, 76% of the solar projects allocated by the MNRE will receive VGF. In the October 2012 edition of the INDIA SOLAR COMPASS,BRIDGE TO INDIA had already predicted that a significant portion of the capacity addition incentivized by the central government would receive VGF2. FiTs will be offered to only 800MW of solar power projects (24% of all utility scale projects). In phase one of the NSM, solar power has been bundled with power from conventional sources of energy in order to reduce the gap between the cost of solar power and the Average Pooled Purchase Cost (APPC). In phase two, however, the Ministry of Power (MoP) is only able to provide adequate unallocated power3 to the MNRE to bundle 800 MW of solar power in the ratio of 1:24.
In phase two, 76% of the solar projects allocated by the MNRE will receive VGF.
Figure 4-1: Targeted capacity addition through central schemes in phase two of the NSM
2013-14 Rooftop and small solar Utility scale PV PV CSP PV CSP 100 MW 800 MW 750 MW 0 MW 1,650 MW 0 MW Bundling (FiT) PV VGF 2014-15 100 MW 0 MW 770 MW 1,080 MW 870 MW 1,080 MW Total 800 MW 1,520 MW 1,080 MW 2,520 MW 1,080 MW
200 MW
Total
Source: MNRE
--------------------1 Draft guidelines for phase two of the NSM 2 Please refer to October 2012, INDIA SOLAR COMPASS by BRIDGE TO INDIA for further analysis 3 Unallocated power is the reserve set aside by the central government for various uses, such as allocating a part of it to a state with a power deficit 4 Please refer to October 2012, INDIA SOLAR COMPASS by BRIDGE TO INDIA for further analysis
As per the current draft of the NSM, the MNRE will be conducting the bidding for both the 800 MW of projects receiving a FiT and the initial 750 MW receiving a VGF simultaneously under phase two batch one.
As per the current draft of the NSM, the MNRE will be conducting the bidding for both the 800 MW of projects receiving a FiT and the initial 750 MW receiving a VGF simultaneously under phase two batch one. This may lead to a lack of interest in the bidding for projects receiving VGF. The primary reason for this is that under the FiT scheme the project developer sells the power produced form its solar plant under the NSM to the NVVN through a PPA signed directly with them. Under the VGF, the project developer will be required to sign a PPA for sale of power directly with a state distribution company (DISCOM). NVVN is considered a strong (read: bankable) PPA partner as it is a wholly owned subsidiary of the government owned National Thermal Power Corporation (NTPC) and because it is a stably profitable business5. On the other hand all the state utilities barring seven (those of Andhra Pradesh, West Bengal, Gujarat, Maharashtra, Goa, Meghalaya and Chhattisgarh) suffered losses in FY 2009-10 (more recent data unavailable)6. The total RPO of the seven profitable state DISCOMS is 1,089 MW. These states cumulatively have already allocated 1,564 MW of solar power projects, of which 769 MW has already been commissioned7. Gujarat has the maximum commissioned projects amongst all states with 708 MW by the first half of 2012. Thus, in phase two batch one of the NSM, it will primarily be the loss making state DISCOMS that will be looking to sign a PPA with solar project developers for the 750 MW of VGF based projects to fulfil their RPOs.
In order to counter the lack of interest that can be expected for VGF-based projects, the MNRE could allow the project developers to choose an offtaker other than a state DISCOM. In such a case, project developers can sign PPAs with other obligated entities such as captive consumers and open access consumers of conventional power, as well as commercial consumers whose tariff is already higher than the price of solar power. Potential off-takers could also include telecom towers and other users of diesel power.The levelized cost of energy (LCOE) for diesel is between ` 8 ( 0.12) to ` 20 ( 0.31)/kWh8 (and in some cases significantly higher), whereas that for solar power is between ` 7 ( 0.11) to ` 9 ( 0.14)/ kWh9. This would allow project developers to choose from a larger pool of prospective off-takers. Additionally, developers can reduce their PPA risk by signing an agreement for sale of power with a profit making entity with no record of delayed or deferred payments. They have the option of choosing a company as an off-taker that has a triple A financial rating internationally from rating companies such as Moodys or Standard & Poor. Finally, the tariff that a captive consumer, open access consumer and especially commercial consumers and telecom towers who are primarily consumers of diesel power will be willing to pay for solar power will be much higher than that paid by a DISCOM. This is because the cost of procurement of conventional power for a DISCOM can be as low as ` 2.3 ( 0.03)/kWh10 while commercial power tariffs that private consumers pay can be between ` 4.7 ( 0.07) and ` 10.45
In order to counter the lack of interest that can be expected for VGF-based projects, the MNRE could allow the project developers to choose an off-taker other than a state DISCOM.
--------------------5 The NVVN had a profit of ` 295 m ( 4.53 m) between April 2009 and March 2010 (FY 2009-10), which went up to ` 301 m ( 4.62 m) between April 2010 and March 2011 (FY 2010-11) and then to ` 1 billion ( 15 m) between April 2011 and March 2012 (FY 2011-12). This can be accessed here. 6 Planning Commission, Government of India; Annual Report 2011-12; The working of state power utilities and electricity departments. 7 Annual Report 2010-2011, Central Electricity Authority; BRIDGE TO INDIA analysis 8 BRIDGE TO INDIA analysis 9 Ibid 10 Average of long term Average Pooled Purchased Costs (APPC), which are between ` 1.9 ( 0.03) and ` 2.7 ( 0.04)/kWh.
As per the SPO mechanism, solar power has to comprise of 3% of the energy mix of obligated entities by December 31st 2013 and 6% from January 1st 2014 onwards.
has limited the obligation of adding solar power capacity to those entities that are already paying a high tariff for conventional power. All HT consumers pay a tariff of between ` 4.5 ( 0.07) and ` 9.5 ( 0.15)/kWh, of which approximately 52% of the consumers pay a high commercial tariff of ` 7 ( 0.11)/kWh, which is close to the LCOE of solar power in India. By 2015, the LCOE of solar power is expected to fall by a further 40% to almost ` 4.2 ( 0.06)/kWh13. This means that purchasing solar power would The south Indian state of Tamil Nadu be commercially viable for all HT announced its solar energy policy in consumers by 2015. The SPO thus October 2012. It targets 3 GW of solar merely pre-empts and accelerates the power by 2015. 500 MW of this target is commercial case. to be achieved through the fulfilment of newly instated Solar Purchase BRIDGE TO INDIA expects that only Obligations (SPOs). around half of the targeted capacity ( 0.16)/kWh, where several states, such as Tamil Nadu, Maharashtra, Kerala and others are already paying a higher price for power than the average current cost of solar power. Also, the LCOE of diesel is already much higher than that of solar power without storage.
4.2 TAMIL NADU SOLAR POLICY: 3 GW BY 2015
BRIDGE TO INDIA expects that only around half of the targeted capacity addition through the SPO mechanism will be fulfilled.
As per the SPO mechanism11, solar power has to comprise of 3% of the energy mix of obligated entities by December 31st 2013 and 6% from January 1st 2014 onwards. Obligated entities under this mechanism differ from those under the national RPO mechanism. They include all consumers who receive power from a DISCOM at more than 11kV through high tension lines (HT). HT consumers in the state are: Special Economic Zones (SEZ), telecom towers, all consumers paying commercial tariffs for power, residential schools and all colleges (both private and government-owned), factories registered under the Indian Factories Act (1984), government owned hospitals, IT parks, places of worship, textile factories, tea estates, railway traction, all industries guaranteed with 24/7 power, lift irrigation12 cooperative societies and all buildings with a builtup space of 20,000 square meters or more. For these solar projects, the state is not bearing any financial burden. It
addition through the SPO mechanism will be fulfilled. This is because the state policy does not yet mention any penalty structure that will be followed in case an entity fails to fulfil its SPO. As a result, obligated entities whose power tariffs are yet to reach parity with the LCOE of solar will avoid the purchase of solar power. In order to ensure close to a 100% success rate in the implementation of the SPO the policy needs to be accompanied by a strictly enforced penalty for defaulters. In addition to the SPO scheme, Tamil Nadu floated a tender for 1,000 MW of solar projects on December 5th 2012. This is the largest tender floated by any state for solar projects in India so far. The off-taker for the solar power under the policy is the state DISCOM, the Tamil Nadu Generation and Distribution Company (TANGEDCO). The Tamil Nadu tender has no cap on the maximum plant size that a single entity can bid for. The size is, however, limited by the ability of local substations to evacuate the solar power. Depending on the district,
--------------------11 RPOs v/s SPOs in Tamil Nadu Whose obligations are they anyway? from the BRIDGE TO INDIA blog. 12 Lift irrigation is a method by which water for irrigation is lifted with the help of pumps or other such means which use electricity. 13 BRIDGE TO INDIAs INDIA SOLAR DECISION BRIEF on The REC Mechanism: Viability of Solar Projects in India.
Figure 4-2: Specifications of the 1,000 MW tender by Tamil Nadu

Commencement of sale of tender Date of Pre-bid meeting December 5th 2012 at 11:00 Hours December 19th 2012 at 16:00 hours TANGEDCO headquarters in Chennai January 4th 2012 at 14:00 hours January 4th 2012 at 14:30 hours 90 days from the date of opening Open tender- two part system ` 10,000 ( 153.84) ` 10,500 ( 161.544) ` 700,000 ( 10,769) 1 MW 20 years February 4th 2013 December 1st 2013 receiving payments from TANGEDCO. TANGEDCO offered the standard one year, Letter of Credit (LoC), which has also been issued to all wind power plant owners in the state. This payment security is insufficient for most promoters and lenders. In the rooftop space, Tamil Nadu allows net metering at voltage levels of 240 V, 415 V and 11 KV. Net metering is a mechanism by which the owner of a rooftop installs two power meters along with a solar system, one which calculates the units of conventional power consumed by the owner of the system from the grid and another which calculates the units of solar power fed back into the grid from the rooftop PV system. The owner of the rooftop system ultimately only pays for the differential in the power consumed by him that is the net of the energy consumed minus that which is fed back into the grid by him. The policy targets to add 300 MW on the rooftops of government buildings and 50 MW on the rooftops of private buildings. In addition to being allowed to install a net metering system, private rooftops also receive a GBI for
Project developers might find it difficult to obtain financing under a PPA with TANGEDCO as the utility has been suffering financial losses in the past.
Venue of Pre-bid meeting Last date for submission of bid Opening of bid Validity of offer Method of submission of tender Cost of tender specification (delivered in person) Cost of tender specification (delivered by post) Earnest Money Deposit Minimum project capacity Validity of PPA Issuance of LOI Commissioning of project
Source: TANGEDCO; BRIDGE TO INDIA analysis
this ranges typically from 10-50 MW. TANGEDCO has made available a list of substations and the evacuation capacity14. Project developers might find it difficult to obtain financing under a PPA with TANGEDCO as the utility has been suffering financial losses in the past. Its net internal loss was estimated to be as high as ` 500 billion ( 7.7 billion) up to the financial year ending in March 201215. It also has a history of delaying and defaulting on its payments to wind farm operators in the state. It currently owes approximately ` 35 billion ( 538m) to 400 members of the Indian Wind Turbine Manufacturing Association (IWTMA)16. The policy currently does not have a payment security scheme to counter this risk and boost the bankability of a PPA with the state DISCOM. On November 23rd 2012,the Tamil Nadu Energy Development Authority (TEDA) held a consultation meeting with all the prospective bidders and stakeholders under the policy. One of the primary topics of contention at this meeting was the uncertainty of
--------------------14 The list can be accessed here. 15 Up in the air, Business world. 16 Ibid.
The policy targets to add 300 MW on the rooftops of government buildings and 50 MW on the rooftops of private buildings.
On November 20 2012, the state re-released its RfP for 200 MW of PV and CSP projects under phase one of the state solar policy.
th
six years from the day of installation of the solar system as long as their system is installed before March 31st 2014 and is a part of the first 50 MW of domestic rooftop solar systems installed in the state. In the first two years they receive a GBI of ` 2 ( 0.03)/ kWh, which then reduces to ` 1 ( 0.02)/KWh for the next two years and finally to ` 0.50 ( 0.01)/kWh for the last two years of the GBI.
any direct legal obligations to pay a tariff to the project developers for the sale of solar power. The change in the PPA signing authority from the state DISCOMS to the nodal agency for the solar policy has not translated into a strong payment security scheme, backed by a pool of funds dedicated to paying project developers. With the RRECL as the new PPA signing authority, the only payment security a project developer has is a LoC and a default escrow account to back the PPA in the case of a default in payment. There is no mention of a payment security fund or any grant that will contribute towards the payments to project developers. The DISCOMS will pay a tariff and a trading bonus of ` 0.2 ( 0.003)/kWh to the RRECL as per the PPA between them for every kWh of solar power supplied. This tariff along with ` 0.15 ( 0.002)/kWh from the trading bonus17 paid to the RRECL forms the fund from which project developers are paid their tariffs as per the PPA signed by them with the RRECL. Therefore, even though the project developers will no longer be signing a PPA directly with the state DISCOMS for the sale of power, their payment depends indirectly on the timely payments made to the RRECL by the loss making state DISCOMS. However, the role of the RRECL as the sole PPA signing authority makes it easier for the project developers to take legal action in the eventuality of their payments not being met. As per the earlier RfP, there were three joint signatories for a single PPA, namely the Jaipur, Jodhpur and Ajmer DISCOMS. A legal notice for the delay of payment to be made to the project developer would have to be served to all three DISCOMS in their different jurisdictions. With the RRECL as the only PPA signing authority, the project developer has to serve a legal notice only to one entity under a single jurisdiction, if payments are not made on time or terms of the PPAs are violated.
4.3 RAJASTHAN SOLAR POLICY: RE-RELEASE OF THE REQUEST FOR PROPOSAL

The state of Rajasthan had already published its solar policy as far back as April 2011, through which it had planned to install 100 MW of ground mounted solar PV projects, 100 MW of CSP projects and 50 MW of small solar power plants of 1 MW capacity each by March 2013. Since April 2012 however, the state has postponed its Request for Proposal (RfP). In our July 2012 edition of the INDIA SOLAR COMPASS, BRIDGE TO INDIA had suggested that the reason behind the delay would likely be the high losses of ` 112 billion ( 1,724 m) incurred by the state utilities, who, as per the initial RfP were also the off-takers and the PPA signing authorities for the projects under the state solar policy. On November 20th 2012, the state re-released its RfP for 200 MW of PV and CSP projects under phase one of the state solar policy. The new RfP includes an amendment, which states that the Rajasthan Renewable Energy Corporation Limited (RRECL), the nodal agency, will be the PPA signing authority. Projects are to be allocated through reverse bidding. The RRECL will in turn be signing a Power Sale Agreement (PSA) with the DISCOMS of Rajasthan for the sale of solar power generated from the plants set up under the policy. Thus, the DISCOMS as per the amended RfP will not have
The change in the PPA signing authority from the state DISCOMS to the nodal agency for the solar policy has not translated into a strong payment security scheme.
--------------------17 ` 0.05 ( 0.0007)/kWh from the trading bonus is fed into the Energy Conservation Fund of the state.
Figure 4-3: Specifications of the RfP under the Rajasthan solar policy 2011
Notice for RfP November 20th 2012 December 5th 2012 December 7th 2012
Andhra Pradesh, which has a solar RPO of 314 MW by 2017, has released a request for selection for 1,000 MW of ground mounted solar projects.
Response on RfP Pre-bid meeting
Clarification on issued RfP and issue of December 12th 2012 revised RfP Date of downloading of RfP Last date and time of submission of electronic bid Opening of non-financial bid Evaluation of RfP Approval of SLSC foe opening of financial bid Opening of financial bid Issue of Letter of Intent November 20th 2012 (10:00 hours) to January 11th 2013 (11:00 hours) January 11th 2013 (11:00 hours) January 11th 2013 (15:00 hours) January 31st 2013 February 4th 2013 February 11th 2013 (11:00 hours) March 11th 2013
PPA signing date and submission of bid March 15th 2013 bond amount commissioning of 5/10 MW projects Cost of RfP Processing fee of RISL Processing fee of RRECL Earnest money deposit Validity Deposit of cost of RfP, processing fee for RISL and RRECL and earnest money deposit Benchmark tariff
Source: RRECL; BRIDGE TO INDIA analysis
March 15th 2014 ` 5,000 ( 76.92) ` 1,000 ( 15.38) ` 10,000 ( 153.85)/MW 180 days after opening of RfP January 11th 2013 (11:00 hours)
` 2 m ( 30,769)
The PPA signing authority for the RfS for 1,000 MW of utility scale projects is the Andhra Pradesh Transmission Company (APTRANSCO).
` 8.42 ( 0.13)/kWh
4.4 ANDHRA PRADESH SOLAR POLICY: REQUEST FOR SELECTION FOR 1,000 MW
The southern Indian state of Andhra Pradesh also released its solar power policy on September 26th 2012. The state which has a solar RPO of 314 MW by 2017, has released a request for selection for 1,000 MW of ground mounted solar projects. There is no break-up given for PV and CSP project allocations. The policy included incentives in the form of exemption from wheeling and transmission charges, exemption from cross subsidy charges and electricity duty and a refund on Value Added Tax (VAT) on
plant components, stamp duty and registration charges for all projects commissioned by June 2014. In addition to these incentives, a solar plant was also eligible to receive RECs under the policy. However, as per the Central Electricity Regulatory Commission (CERC) regulations for the REC mechanism, a plant which avails of benefits such as electricity duty exception, or concessions on wheeling and transmission charges cannot be issued with RECs. The PPA signing authority for the RfS for 1,000 MW of utility scale projects is the Andhra Pradesh Transmission Company (APTRANSCO). The states utility had the highest internal net profits of all Indian state utilities with ` 11,260 m ( 173 m). This would make projects under the state policy more
bankable than in most other states, as payments to generators can be expected in a time bound manner.
Plants which can be of a maximum size of 20 MW have to be commissioned within six months of signing the PPA or eight months of issuance of the LoI, whichever date is earlier.
However, the plants which can be of a maximum size of 20 MW have to be commissioned within six months of signing the PPA or eight months of issuance of the LoI, whichever date is earlier. These deadlines will make it very difficult to commission plants on time. A 20 MW plant in India requires a minimum of three months for the acquisition of land. An EPC company requires at least two months after the land has been identified to test the site and design the plant. After this, a bank may take two months or more to sanction a loan to a project. Finally, the construction of a 20 MW plant takes at least three months after accounting for minor delays. This suggests that even if the land has been identified by the project developer before signing the PPA, the commissioning of a 20 MW plant within a six month time frame will be challenging.
4.5 CHHATTISGARH SOLAR POLICY: UP TO 1,000 MW BY MARCH 2017

The central Indian state of Chhattisgarh is the eighth Indian state to have published a solar power policy. It is aiming to encourage grid connected solar power plants. Previously, the Chhattisgarh State Renewable Energy Development Agency (CREDA), with the aid of the subsidy offered by the MNRE through its Remote Village Electrification Scheme (RVE), installed mini grid systems that electrified 500 villages. With the new solar policy it is attempting to add up to 1 GW of gridconnected solar power in the state. The exact timelines and targets for the execution of the policy, however, have not been finalized, nor has the state released an RfS or tender for the bidding of projects.
Figure 4-4: Specifications of Andhra Pradesh RfS
Even if the land has been identified by the project developer before signing the PPA, the commissioning of a 20 MW plant within a six month time frame will be challenging.
Notice for RfS Pre-bid meeting Last date of submission of bid Opening of non-financial bid Opening of financial bid Evaluation of bidders Issue of Letter of Intent Communication of acceptance of LOI by successful bidders PPA signing date Financial closure Commissioning of PV projects Commissioning of CSP projects PPA duration Maximum capacity an entity can bid for Processing fee Earnest money deposit Net worth
December 5th 2012 December 14th 2012 January 19th 2013 January 21th 2013 January 21th 2013 February 5th 2013 February 20th 2013 March 2nd 2013
March 18th 2013 May 14th 2013 6 Months from PPA signing date or 8 months from date of signing LOI, whichever is earlier 13 Months from PPA signing date or 15 months from date of signing LOI, whichever is earlier 20 MW ` 200,000 ( 3,077) ` 200,000 ( 3,077)/MW ` 10 m ( 153,846)/MW
25 years
Source: BRIDGE TO INDIA analysis; Transmission Corporation of Andhra Pradesh limited.

As per the policy, the state will not be bearing any financial obligation in the form of financial incentives such a FiTs, GBIs, VGF or capital subsidies paid to the project developers for setting up projects. The only incentives offered by the state are exemption of the VAT paid on all inputs used in a solar power plant and cross-subsidy charges. Apart from this, wheeling charges, transmission and open access charges have not been waived or discounted.
Project developers looking to take advantage of this policy have the option of either utilizing the REC mechanism as an off-take or waiting until the state DISCOM releases a competitive bidding based tender for the purchase of solar power. In the absence of an enforcement mechanism for the RPO, it is unclear if and when the DISCOM will seek to purchase solar power from large MW scale projects or if the REC mechanism will prove to be a viable off-take.
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of 46 MW in the last quarter is significantly lower than the first two quarters of the year, i.e., 315.8 MW in the first quarter of 2012 and 360.42 MW in the second quarter of 2012.
5.1 NEW INSTALLATIONS The capacity addition GRID CONNECTED

Figure 5-1: Grid connected solar projects installed in the previous quarter October 1st to December 20th 2012
5. PROJECTS
GUJARAT
Size - 5 MW Technology - PV Off-take - Gujarat Phase 2 Developer - APCA Power Size - 5 MW Technology - PV Off-take - Gujarat Phase 2 Developer - Taxus Infrastructure & Power Project
RAJASTHAN
Size - 2.5 MW Technology - PV Off-take - REC Mechanism Developer - Kanoria Chemicals Ltd. Size - 17 MW Technology - PV Off-take - NSM Phase 1, Batch 2 Developer - Green Infra Size - 5 MW Technology - PV Off-take - NSM Phase 1, Batch 2 Developer - Fonroche
The deadline for commissioning of most projects under batch two of phase one of the NSM is March 5th 2013.
In the last quarter (October to December 2012),only 46 MW of solar PV capacity has been added. The largest capacity addition of 24.5 MW took place in Rajasthan, of which 22 MW is under batch two of phase one of the NSM and NSM phase one 2.5 MW is under the REC mechanism. The remaining capacity of 21.5 MW The deadline for commissioning of has been added by delayed projects in most projects under batch two of Gujarat. phase one of the NSM is March 5th 2013 (the date for commissioning may The capacity addition of 46 MW in the vary depending on the date of signing last quarter is significantly lower than of the PPA). On most project sites, the the first two quarters of the year, i.e., civil work is under way and structures 315.8 MW in the first quarter of 2012 are being erected. Only the projects by and 360.42 MW in the second quarter Essel Infrastructure (20 MW project, of 2012 (refer to the April 2012, July using NexPower modules and with 2012 and October 2012 editions of an EPC contract shared between Visa the INDIA SOLAR COMPASS for more Ecotech and Belectric) and Enfield details). Infrastructure (10MW project by Sonthalia Group, using modules and
5.2 STATUS OF ONGOING PROJECTS (PV)
As of December 12th 2012, Fonroche (5 MW project out of the two projects of 5 MW and 15 MW allocated), Green Infra (17 MW out of the total 25 MW allocated) have already notified NVVN for partial commissioning.
EPC services of its own group company with Lahmeyer as technical consultant) are known to be behind schedule as of Decemeber 2012. Projects by developers such as Fonroche, Green Infra and SolaireDirect are among the frontrunners for commissioning. As of December 12th 2012, Fonroche (5 MW project out of the two projects of 5 MW and 15 MW allocated), Green Infra (17 MW out of the total 25 MW allocated) have already notified NVVN for partial commissioning. The remaining capacity for these projects is expected to come up by January 2013, which continues to place them well ahead of schedule. The construction for these projects has been completed in less than four months. EPC for the 5MW project by Fonroche has been undertaken by Mahindra EPC. With over 50 MW under contract, Mahindra EPC has emerged as the largest player by orders under batch two of phase one of the NSM (to read more about the contracts for batch two projects, refer to the October 2012 edition of the India Solar Compass). Green Infra, which was one of the first developers to commission their projects in Gujarat, has again chosen Juwi as the EPC partner for their project.
been commissioned last quarter, taking the states total installed capacity to 730.31 MW. This capacity addition is running behind schedule by almost a year and was originally scheduled to be commissioned by December 31st 2011. Three projects in Gujarat have been commissioned this quarter: TaxusInfrastructure & Power Projects (5 MW), APCA Power (5 MW) andAstonfield Solar (11.5 MW). A capacity of 238.1 MW is still not commissioned. The projects that are yet to be commissioned are supposed to pay daily fines of ` 10,000 ( 154) per MW for the first 60 days and ` 15,000 ( 231) per MW thereafter until commissioning. Project developers have submitted bank guarantees worth ` 5,000,000 ( 76,923) per MW that will be en-cashed if the projects are not installed. As an example, a 1 MW project that is commissioned after January 1st 2013 will have to pay at least ` 4,710,000 ( 72,461) as fines. As per the PPA, the transfer of majority shareholding is not permitted for five years from the date of commissioning. Many project developers in Gujarat have either sold minority stakes to investors and/or sold majority shares through Compulsory Convertible Debentures (CCD) or agreements that allow for the future transfer of a majority shareholding.
In Gujarat, a capacity of 238.1 MW is still not commissioned.
Gujarat
In Gujarat, 21.5 MW of capacity has
Figure 5-2: Details for NSM batch two phase one projects that are leading in construction timelines (by December 2012)18
Developer Green Infra (two projects were allocated: 5 MW and 20 MW) Capacity constructed 17 MW EPC Juwi Module First Solar Inverter SMA
SolaireDirect (one project was allocated: 5 MW)
5 MW
SolaireDirect Webel Solar Schneider (contract Electric manufactured for SolaireDirect)
Source: BRIDGE TO INDIA --------------------18 The projects had only completed construction at the time that this section of the report was written. Commissioning of the projects is expected by the end of 2012.
Fonroche Energie Group 5 MW (two projects were allocated: 5 MW and 15 MW)
Mahindra EPC
First Solar
Schneider Electric
Despite the lower tariffs and lost security, some of the projects are still expected to be completed.
If the delayed projects are commissioned before March 31st 2013, they will get a tariff of ` 11.25 ( 0.17)/kWh for the first 12 years and ` 7.5 ( 0.12)/ kWh for the subsequent 13 years as opposed to ` 15 ( 0.23)/kWh for the first 12 years and ` 5 ( 0.07)/kWh for the subsequent 13 years that they were initially offered. Beyond March 31st 2013, they will get a tariff of ` 10.30 ( 0.15)/kWh for the first 12 years and ` 7.5 ( 0.12)/kWh for the subsequent 13 years. Despite the lower tariffs and lost security, some of the projects are still expected to be completed. These projects will mostly be backed by new investors, where the original shareholders have agreed to carry a large part of the loss incurred on fines. If we look at projects in Gujarat that are currently under execution, we
estimate that out of the 968.5 MW capacity that was originally allocated in two phases, around 850 MW will ultimately be installed in Gujarat and the remaining capacity of around 118.5 MW is likely to be cancelled. However, it is important to note that the status of most left over projects is largely unknown. For example, one of the projects that is yet to be commissioned is by Tatith Energy. The project was earlier reported to have agreed to buy SolarWorld modules and secured a soft approval for financing from the US Exim bank. The application for availing the Clean Development Mechanism (CDM) benefits was also filed in January 2012. However, the project is not yet commissioned. On being contacted, the company declined to comment on the status of the project.
Figure 5-3: List of allocated projects that have not yet been commissioned in Gujarat19
Organisation/Project/Bidder Aatash Power Pvt. Ltd. Ambit Advisory services Private Limited Avatar Solar Cargo Motors Claris LifeScience Ltd Common Wealth Business Technologies (UK) Corner Stone Energy Private Limited Driesatz My Solar Euro Solar Private Ltd India Solar Ray Power Private Limited Inspira Solar Mi My Solar Monnet Ispat & Energy Limited Responsive Sutip Limited S J Green Park Energy Private Limited Saumya Construction Pvt. Limited Tatith Energy Toss Financial Services Pvt. Limited Ujjawala Power Private Limited Yantra eSolarIndia Private Limited Zeba Solar Gujarat Pvt Ltd Total
Source: BRIDGE TO INDIA --------------------19 This information is not comprehensive. It is the result of our industry interactions. To add to or correct this information, please contact us on contact@bridgetoindia.com
Size (MW) 5 5 5 25 2 10 5 15 5 10 15 15 25 25 5 2 2 25 5 10 221

Odisha Odisha has allocated 25 MW in December 2012 through a bidding process.

Odisha has allocated 25 MW in December 2012 through a bidding process. Quoting a tariff of ` 7.28 ( 0.11)/kWh, ACME Bikaner Solar Power Pvt Ltd has emerged the winner. Among the other bidders were Welspun Renewable (with a bid of ` 9.40 ( 0.15)/kWh) and Essel Mining and Industries Ltd (Aditya Birla Group venture in solar with a bid of ` 9.50 ( 0.15)/kWh).
Bihar
The state of Bihar is looking to allocate projects based on a grading mechanism. Under this mechanism, projects are graded based on aspects such as technical criteria, financial criteria, possession of land, distance from sub-station and the obtaining of a No Objection Certificate (NOC) from the pollution board, etc. The Bihar Renewable Energy Development Agency (BREDA) had received applications for In the previous bidding that took place 776 MW and completed its final evaluin early 2012, Alex Solar had accepted ation on December 10th 2012. Some of 5 MW from the 25 MW bidding that took the developer applications that have place in Odisha. Alex Solar is a part received a high grading are: of the Shree Ganesh Jewellery House (SGJH) from Kolkata that is backed by As of now, the total capacity that will Credit Suisse PE Asia. Apart from the move ahead and sign a PPA with the 5 MW project in Odisha, their project state is unclear. Also the tariff for such portfolio includes a 5 MW project una PPA is not known at this stage. A der batch one of phase one of the NSM similar process was followed by Gujaand a 25 MW project under phase two rat for allocations but Bihar has been allocations in Gujarat. They have also more transparent and has allowed signed Memorandums of Understand- various rounds of grading to be pubing (MoU) for 125 MW in the states of lished before finalizing the grades22. Uttar Pradesh and Bihar. Recently, the board of SGJH has decided that the group is not looking for any further investments in solar power20. Out of the 25 MW that was allocated in early 2012, 20 MW was allocated to Seashore Group. The license for Seashore Group was alleged to have misrepresentation of facts21. With an individual petition in the Standing Committee of the Odisha Assembly,placing the project under litigation, there is a significant chance of cancellation of this project.
5.3 STATUS OF ON-GOING PROJECTS CSP

NSM
The state of Bihar is looking to allocate projects based on a grading mechanism.
Of the 500 MW of CSP projects due to be completed in February and May 2013, only a third may be ready on time. According to the MNRE, three of the 10 projects are unlikely to be built. Five projects, with 320 MW of capacity, have been delayed. Accord-
Figure 5-4: Grading of solar project development proposals made to BREDA

Developer Response Renewable Energy, Kolkata Moser Baer Solar, New Delhi Avantika Contractors, Hyderabad Alex Green , Kolkata Diwakar Solar Projects, Hyderabad
Capacity requested (MW) 25 85 5 50 15
Grading score (out of 100) 100 100 97 95 85
Source: BREDA --------------------20 Shree Ganesh to exit solar power business, The Hindu Business Line 21 According to industry sources 22 Click here for the complete grading document
ing to industry sources, the primary reason for this is the faulty evaluation of Direct Normal Irradiation (DNI) during the planning stages of the projects. Another reason cited for the delays is the unavailability of the Heat Transfer Fluid (HTF). Globally, only two companies from the US are known to produce plant grade HTF (refer to the October 2012 edition of the India Solar
Compass to read more). According to statements made by MNRE officials, it is likely that penalties for delays in CSP projects will be put off to allow the projects to complete. The new allocations under phase two of the NSM have been pushed back to 2014 as by then a more clear picture will emerge on the challenges, benefits and lessons learnt for a next wave of projects.
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6. FINANCING
Bridge financing for the construction period has become a norm in the market.
Delayed financial closures have can severely strain liquidity for the strained execution timelines for nudeveloper, in which case using a merous PV projects in India in the past short-term debt instrument to get two years. Actual disbursement of the access to the required fundsmight debt amount can vary, based on project be preferred. execution factors such as the time tak- 2. Pre-financing by EPC companies: en for acquisition of land, selection of Pre-financing by EPC companies is suppliers, technical design of the projprevalent in Europe but has hardly ect and required due diligence of the been used in India. Pre-financing in lender. International financing instituEurope and the US is done by EPC tions are able to offer cheaper debt but companies that provide constructhe disbursement from such institution finance. Even in these regions, tions can take anywhere between five construction finance is provided to ten months. This is a significant only by certain EPCs that are large issue as commissioning deadlines for in size and only to customers that PV projects cannot accommodate such have a low risk profile. In India, no timelines. As an example, the recently EPC company is known to provide announced allocation for 1,000 MW of pre-financing for construction. This solar in Tamil Nadu provides for just may be because of lower margins of 10 months for commissioning and the EPCs in India. allocations for 1,000 MW in Andhra 3. Construction finance from a finanPradesh provide for just six months for cial institution: Bridge financing is commissioning. usually available from most lenders at a higher interest rate. The In such a scenario, bridge financing for differential is usually of about 100 the construction period has become a basis points and the disbursement norm in the market. It is proving to be for such finance is much quicker. To vital to help keep the projects on track access such finance, the developer with regards to timelines, help smaller nonetheless needs to be in possesdevelopers to offer procurement terms sion of the land for the project and a comparable to those of larger competiLoIfrom an EPC company willing to tors and allow developers enough time construct the project. Banks require to look for sources that can offer them EPC companiesto have a buy-in to optimum terms of finance. Apart from the project by spending resources delayed disbursement under internaon the design and planning of the tional finance, bridge financing is also plant before short-term debt can be used in any situation where liquidity sanctioned. is required so that procurement and/ 4. Suppliers credit: Suppliers credit or construction can begin before the is not a debt instrument but is used scheduled disbursement of debt. to ease a strained cash flow situaFurther, as the risk of a commissioned tion for developers. Due to the overproject is significantly lower than a supply of modules in the market, project under development, better suppliers credit has been made terms of debt with respect to interest available by almost all suppliers at rates can be achieved if the debt is interest rates of around 8%. This disbursed after plant commissioning. is usually backed by a LoC but can also be backed by a corporate guarBridge financing for construction can antee in some cases. The credit can be of the following types: be offered for as long as 18 months at mutually agreed terms. Banks 1. Equity: A developer may invest equsually want to hypothecate it with uity to meet the entire requirement the loan so that preference is given of funds. However, such an option to their interest payment.
Bridge financing is usually available from most lenders at a higher interest rate.
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5. Term loan that allows for easy refinance: Some project developers take a Rupee Term Loan (RTL) with the sole intent to refinance it at a later stage through international finance. The key terms that are negotiated for such an arrangement includea longer moratorium period and a lower refinance fee. This pro-
vides more security and time for the developer to look for an optimum source of finance. To read more about bridge financing, please read BRIDGE TO INDIAs INDIA SOLAR DECISION BRIEF on debt-financing for solar projects in India, due to be released in February 2013.
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7. UPSTREAM 7.2 INTERNATIONAL INDUSTRY 7.1 PV ANALYSIS MANUFACTURING IN MODULE SUPPLY

INDIA
ANALYSIS
Contract manufacturing for international module suppliers is proving to be another source of revenue for Indian manufacturers.
In the last quarter (October - December 2012), Indian manufacturers continued to struggle with the oversupply in the global market. In spite of their current underutilized capacities and poor financial health, they are largely hopeful about 2013. Two key factors for their optimism are the possibility of a Domestic Content Requirement (DCR) under the NSM and a possible imposition of anti-dumping duties (refer to the key question section to read more)23. In the last quarter (October - December 2012), for projects under batch two of phase one of the NSM, international shipments for most projects are expected to have been dispatched/ received from international suppliers such as First Solar (US), Solar Frontier (Japan) and MiaSol (US) (refer to the October 2012 edition of the India Solar Compass to know about the supply contracts).
Most Indian developers are expecting unreasonable prices at which suppliers are unable to make any profits.
In BRIDGE TO INDIAs interaction with international suppliers, especially the Companies like Vikram Solar, Webel leading Chinese suppliers, a key point Solar, HHV Solar and Sonthalia Solar that has been made is that most Indian that received orders under batch two of developers are expecting unreasonable phase one of the NSM, have manufac- prices at which suppliers are unable to tured the modules and as of December make any profits. Moreover, according 2012, have delivered or are starting to to them, the expectations for supplideliver the modules to plant locations ers credit and financing support are (refer to the October 2012 edition of unrealistic. International suppliers see the India Solar Compass to read more the strategic importance of India and about their contracts). understand the possibility of achieving high sales volumes here. However, Contract manufacturing for internadue to the lower price expectations tional module suppliers is proving to of the developers, suppliers are often be another source of revenue for Indian required to sell at a loss which they manufacturers. Companies like Rene- are increasingly unwilling to do. At the Sola (China), SolaireDirect (France) Renewable Energy Expo, New Delhi in and IBC Solar (Germany), have forNovember 2012, one of the senior repmally announced that they contract resentatives of a prominent Chinese manufacture in India. All three have supplier was quoted as saying Indian partnered with Websol Energy Sysdevelopers ask for 10 cents below the tems. ReneSola plans to manufacture market price. When $ 0.80/Wp was 250 MW over the next two years and is the market price, Indian developers known to have already secured orders expected $ 0.70/Wp. Now, when the for 17 MW from two Indian solar power price is $ 0.70/Wp, developers expect developers. SolaireDirect is expected $ 0.60/Wp. Apart from this, they expect to use these modules for their own suppliers credit for up to 18 months. projects. Both ReneSola and IBC Solar Some suppliers can provide modules provide their own product guarantees. at that price as they need to clear their At least one other international manu- inventories. But, this is not a sustainfacturer from China is known to have able market environment". entered into such a contract but has not made any public announcements Many other suppliers have also raised yet. similar concerns. Due to low margins
--------------------23 More information can be found at the BRIDGE TO INDIA blog at the following links: - India begins anti-dumping investigation on module imports from China, US, Malaysia and Taiwan - Will the MNRE change the DCR for the upcoming second phase of the NSM?
22
The Indian market is almost completely dominated by central inverters.
and the looming possibility of antidumping duties, many international module suppliers are currently pessimistic about their opportunities in India.
7.3 INVERTER SUPPLY ANALYSIS

Inverter supply to projects in India is mostly from international companies as there is limited manufacturing capacity within India and unlike in modules, there is no DCR. The Indian market is almost completely dominated by central inverters. The key reason for this is their lower cost as compared to string inverters(by 6-10%). Due to the price competition in the Indian market, many developers go to the extent of buying these inverters without a part of the display panels and also without the in-built transformer to cut costs further. While international manufacturers like SMA, Bonfiglioli and AEG have been the key suppliers in the Indian market, Schneider Electric has been the most successful newcomer. The company was able to
capture over 100 MW (30% share) for projects under the batch two of phase one of the NSM after introducing its new series of central inverters in India in the second quarter of 2012. Key reasons for this may be their established manufacturing base for such inverters in India and their overall presence in the Indian market as a group company that will help them provide the necessary after sales support. According to a statement by the company, Schneider Electric is providing integrated solutions to its customers including the PV Box, array boxes, monitoring & control, and the grid connection substations. The PV Box contains two Conext Core XC inverters, a DC combiner box, a step-up transformer, medium voltage switch and other accessories and is adapted to meet the local installation conditions. This enables customers to reduce construction lead time, lower the costs of commissioning and enhance the uptime". None the less, SMA has been able to retain its position as the largest supplier under batch two of phase one of the NSM with a supply of around 125 MW.
SMA has been able to retain its position as the largest supplier under batch two of phase one of the NSM with a supply of around 125 MW.
Figure 7-1: Tentative list of inverter supplies to ongoing projects under batch two of phase one of the NSM24
Developer Solaire Direct Welspun Project SPV Pokaran Solaire Energy Pvt. Ltd. Welspun Solar AP Welspun Solar AP Welspun Solar AP Azure Power Sai Sudhir Energy Azure Power India Ltd. Azure Power India Ltd. Sai Sudhir Energy VS Lignite Power (KSK Sai Maithili Power Company Pvt. Energy Ventures) Ltd. Symphony Vyapar Jakson Power Symphony Vyapar Pvt. Ltd. Jakson Power Jakson Power
Source: BRIDGE TO INDIA --------------------24 This information is not comprehensive. It is the result of our industry interactions. To add to or correct this information, please contact us at contact@bridgetoindia.com
Size Inverter (MW) supplier 5 20 15 15 20 15 20 10 10 10 10 AEG

Schneider Electric Ansaldo
SMA
Schneider Electric AEG Schneider Electric
Developer Shree Saibaba Sugar LEPL Projects SunBorne Energy Sujana Towers Fonroche Energie Group NVR Infrastructure Enfield Infrastructure Essel Infra Sun Edison GAIL Mahindra Solar Kiran Energy Green Infra Lexicon Vanijya
Project SPV Shree Saibaba Green Power Pvt. Ltd. LEPL Projects Ltd. SunBorne Energy Sujana Towers Fonroche Rajhans Energy Pvt. Ltd. NVR Infrastructure Enfield Infrastructure Ltd. Essel Infraprojects Ltd. SEI Solar Power GAIL Mahindra Suryaprakash Pvt. Ltd. Mahindra Suryaprakash Pvt. Ltd. Solarfield Energy Two Pvt. Ltd. Green Infra Solar Projects Ltd. Green Infrastructure Solar Lexicon Vanijya
Size Inverter (MW) supplier 5 10 5 10 15 Schneider Electric Schneider Electric SMA Project cancelled Schneider Electric Schneider Electric Bonfiglioli Not known SMA / Astro Energy Bonfiglioli
Fonroche Saaras Energy Pvt. Ltd. 5 10 10 20 20 5 20 10 20 5 20 10 AEG SMA SMA
SMA
8. KEY QUESTION: 8.1 BACKGROUND market WHAT WILL BE In the last two years, the Indian 1,090 has grown from 22 MW of PV to THE IMPACT OF MW. However, Indian manufacturers ANTI-DUMPING have sold less than 350 MW and have been unable to capitalize fully on the DUTIES IN growth in installed PV capacity. A key inability INDIA? factor for this has been theirin global to compete on falling prices
In line with a new wave of global protectionism in the industry, Indian manufacturers allege that international photovoltaic module suppliers are selling below cost, or dumping in the Indian market.
On November 23rd 2012, DGAD announced that it had found sufficient preliminary evidence of dumping in India.
the Directorate General of Anti-Dumping and Allied Duties (DGAD) at the Ministry of Commerce. On November 23rd 2012, DGAD announced that it had found sufficient preliminary evidence of dumping in India. It will now begin a focused investigation25. The period of investigation has been determined as between January 1st 2011 to June 30th 2012 (18 months). This means, that oversupply conditions. Small producover 600MW of module imports, mostly tion capacities have left them unable to in Gujarat and batch one of phase one compete with the economies of scale of the NSM will be investigated for enjoyed by some of the successful dumping. module suppliers globally. As a result, many of the manufacturers have According to its definition, dumping is beenoperating their units at very low supposed to occur when the export capacity utilization of around 15%. The price of the goods, i.e.the price of cells lower capacity utilization in turn has being exported to India, is less than the made it even more difficult for them normal value of the articles sold in to compete on prices. With hefty loan the domestic market of the exporter, repayments and dwindling company i.e. price of cells being sold by the finances, there has been little or no same international manufacturers in room for investments into upgrading their home country of China, the US, manufacturing capabilities and imTaiwan and Malaysia. The investigation proving competitiveness. now needs to determine the margin of dumping. The margin of dumping The MNRE has tried to protect the refers to the difference between the domestic industry by implementing a normal value and the export price DCR on modules under batch one of and is usually expressed as a percentphase one of the NSM and on both cell age of the export price. and modules under the second batch. This, however, has not really worked as As part of the investigation, any entity most project developers have opted for that is directly impacted in any manthe cheaper thin film modules from in- ner by the duties or the lack of them is ternational suppliers (refer to previous referred to as an interested party. Acreports by BRIDGE TO INDIA). cordingly, an interested party can be any of the following: domestic industry In line with a new wave of global on whose complaint the proceedings protectionism in the industry, Indian are initiated, exporters or the foreign manufacturers allege that internaproducers of the like articles subject tional photovoltaic module suppliers to investigation, importers of the same are selling below cost, or dumping article allegedly dumped into India, in the Indian market. The Indian Solar government of the exporting country/ (PV) Manufacturers Association on countries, trade or business associabehalf of three Indian cell manufactur- tions of the domestic producers or ers, namely, Indosolar, Websol Energy importers of the dumped product. Systems and Jupiter Solar has filed a dumping complaint against cell and The following figure enlists the intermodule imports from China, the US, ested parties or the current investigaMalaysia and Taiwan. This complaint tions of anti-dumping duties. was first reported in January 2012 to
--------------------25 India starts anti-dumping probe into PV imports, Recharge News
25
Figure 8-1: List of interested parties as part of the anti-dumping investigation
The three complainants are all cell manufacturers in India and account for a manufacturing capacity of around 500 MW.
Cell manufacturers that have submitted the complaint
For the duties
Cell and module exporters from Against the duties the US, China, Malaysia and Taiwan and/or their association Project developers and/or their association Domestic module manufacturers and/or their association Against the duties Mostly for the duties (as most of them have earlier imported cells from the said countries, they cannot be a part of the complainants) Manufacturing units that are not classified as export oriented units (EOUs) and wish to continue to import cells from the said countries will be against the duties Against the duties
Governments of the said countries

The interested parties on both sides of the investigation need to put forth their respective cases for the proceedings. The investigation then needs to prove the presence of dumping, calculate the margin of dumping and establish the injury to Indian manufacturers.
Cell manufacturers from the US, China, Malaysia and Taiwan now need to prove that dumping has not taken place in India.
The three complainants are all cell manufacturers in India and account for a manufacturing capacity of around 500 MW. Other cell manufacturers such as Solar Semiconductor, Moser Baer, KL Solar and Euro Multivision and all module manufacturers that do not have cell production capabilities have not participated as complainants. The guidelines for anti-dumping duties specify that producers who are related to the exporters or importers or are themselves importers of the allegedly dumped goods shall be deemed not to form part of the domestic industry (refer)26. Most module manufacturers buy or have bought their cells from exporters under investigation. Hence, they would not be permitted as complainants in the first place.
threatening to cause material injury to the domestic industry. The injury can be defined in terms of a significant increase in volume of the imports of the dumped imports and has adverse financial impact on the domestic industry in terms of decline in output, loss of sales, loss of market share, reduced profits, decline in productivity, decline in capacity utilization, reduced returns on investment, adverse effect on cash flows, inventories, investments and ability to raise capital. The three complainants are expecting the levy of anti-dumping duties on cells from the said countries. Thin film modules and crystalline cells assembled into modules would also be covered under any such imposition of duties.
Cell manufacturers from the US, China, Malaysia and Taiwan now need to prove that dumping has not taken place in India. To be able to do this, they need to show that the price at which they sold their products in their own domestic market was not higher than the price at which they were selling the products in India. For this, the manufacturers have to submit pricing If the margin of dumping is above 2%, details and terms of sale from their the complainants must be able to show domestic markets and the correspondthat the dumping has caused or is ing details for the Indian market.
--------------------26 Click here for the anti-dumping duty guidelines.
A time period of 40 days from the date of the notification (November 23rd 2012), has been provided to furnish such information by the interested parties in a prescribed format.
Developers are generally against the duties as it will make modules more expensive. The Solar Independent Power Producers Association, representing some Indian developers, is likely to be a key interested party in the investigations. The developers will also need to furnish the price and terms of sale at which they have imported the modules.
The complainants have also requested retrospective duties. Due to the text of the initial notification, there is a mistaken conception that retrospective action can be taken on solar cells and modules that have been imported into India in the past months and years. That is not the case. The key purpose of retrospective duties is to avoid large import volumes just before the implementaA time period of 40 days from the date tion of duties. Retrospective duties of the notification (November 23rd cannot go beyond 90 days prior to 2012), has been provided to furnish the date of imposition of provisional such information by the interested duties. Hence, if the provisional duty parties in a prescribed format. The in- is announced, for example, 150 days vestigation can take up to five months. from the beginning of the investigaBefore the end, the market canalready tion, then there can be no retrospecexpect an announcement on a provitive duty (if enforced) on imports sional duty. At the earliest, a provision- before 23rd December 2012. al duty announcement can be made 60 days after the initiation of the investiChina and Taiwan account for over 70 gation and can remain in effect for six percent of solar cell manufacturing months, extendable up to nine months. and almost all of the top suppliers of Given the new policy announcements cells by volume globally are located in in India especially the National Solar thesetwo countries. Globally, a large Mission and the Tamil Nadu Policy part of module manufacturing faciliand their timelines for commissioning, ties are located in the four countries the timing of this announcement will under question. There is no doubt be extremely important. that anti-dumping duties on equip-
Figure 8-2: Indicative module prices for various module types before and after anti-dumping duties27
Module Price before antidumping duties: Spot prices for modules (as of September 2012)28 $ 0.75/Wp $ 0.70/Wp
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Applicability of antidumping duties (if enforced as requested) No Yes No Yes Yes Yes No No
Expected effective price of modules if the duties are enforced as requested (at 20%) $ 0.75/Wp $ 0.75/Wp $ 0.73/Wp
c-Si India (using Indian cells) c-Si India (using cells from China, Taiwan and Malaysia) cSi India (using cells from Singapore and Philippines) c-Si China and Taiwan CdTe (US and Malaysia) c-Si US c-Si Germany and Japan c-Si (Singapore, Philippines and South Korea)
$ 0.73/Wp30 $ 0.58/Wp $ 0.59/Wp $ 0.70/Wp $ 0.86/Wp $ 0.70/Wp
$ 0.70/Wp $ 0.70/Wp $ 0.84/Wp $ 0.86/Wp $ 0.70/Wp
--------------------27 The prices are based on multiple sources and are only indicative. Actual prices vary from company to company and deal to deal 28 Sologico price index and BRIDGE TO INDIA estimates 29 Cell cost considered to be $ 0.35/Wp. Source: PV Insights 30 Cell cost considered to be $ 0.40/Wp
Most Indian module manufacturers that do not have their own cell manufacturing and look to either export modules or sell to utility scale projects (except those under DCR) procure cells internationally.
ment originating from these countries will likely have an impact on overall system costs in India. The margin of dumping will depend on the price differential that existed for a period of 18 months starting January 1st 2011. However, the impact will be on current and future prices. Based on the information submitted by the complainants, they are expecting antidumping duties of more than 20%.
8.2 IMPACT ON INTERNATIONAL MANUFACTURERS

Most Indian module manufacturers that do not have their own cell manufacturing and look to either export modules or sell to utility scale projects (except those under DCR) procure cells internationally. A significant part of this procurement is known to be sourced from the countries under investigation. Prominent manufacturers are JA Solar, China Sunergy, BYD and Goldpoly located in China, Gintech and E-Ton located in Taiwan and BenQ Solar and Q-Cells located in Malaysia. They will stand to lose a part of their cost advantage (up to 20% on cells) in the event of anti-dumping duties being enforced for the said countries. On the other hand, for the sale of cells in India, price competitiveness for sale of cells by manufacturers such as REC Solar from Singapore and Kyocera from Japan will increase. With prices expected to be equalized, quality related aspects of sale criteria are likely to become the key determining factor. Large international module manufacturers (both crystalline and thinfilm) think of India as an emerging, strategically important market. With the imposition of anti-dumping duties against Chinese manufacturers in the US, a stagnating European market and the ongoing anti-dumping proceedings in Europe, leading international module suppliers have been looking to sell more to India. First Solar (US and Malaysia), NexPower (Taiwan), Suntech (China), LDK
(China), Trina Solar (China) Yingli (China), CSUN (China) and Hanwha (China) have been successful in selling to multiple Indian projects, cumulatively accounting for over 400 MW of sales in India. A large number of project supplies under investigation for dumping are using modules from these suppliers. This will make them key interested parties in the investigation. If charges of dumping are proved and action is taken in the form of antidumping duties, these suppliers will stand to lose a part of their competitive advantage. BRIDGE TO INDIAs interaction with Chinese companies shows that plans for aggressive market entry by the Chinese companies in India might go on the backburner if antidumping duties are enforced. International module suppliers from countries outside of the scope of investigation, such as Solar Frontier (Japan), Sharp (Japan and Germany), REC Solar (Singapore), Sunpower (Philippines) and Bosch (Germany) have so far not been as successful as their Chinese or US competitors in India. If anti-dumping duties are imposed, they will be in a good situation to compete for sales in India. If the results of the trade dispute in the US are in any way instructive, it is likely that most Tier 1 players will find ways to adapt to the new rulings, either via contract manufacturing, acquisition or small-scale local manufacturing investments. From experience in the US and preliminary analysis by BRIDGE TO INDIA, the price effect (cost/watt) of the aforesaid strategies can be limited to under 10% of the production cost. Contract manufacturing for cells and modules in India can help international suppliers to avoid duties and also allow them to sell into projects under DCR restrictions (e.g. NSM). Some module suppliers such as IBC Solar (Germany) and ReneSola (China) have already tied up with Websol (one of the complainants) to set up contract manufacturing here (refer to the October 2012 edition of the India Solar Compass to read more about contract manufacturing). If
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If the results of the trade dispute in the US are in any way instructive, it is likely that most Tier 1 players will find ways to adapt to the new rulings, either via contract manufacturing, acquisition or small-scale local manufacturing investments.
If DCR is applicable only to c-Si cells and modules and antidumping duties also come into force, thinfilm manufacturers like Solar Frontier (Japan) and Sharp (Japan) will be the biggest beneficiaries.
anti-dumping duties are imposed, international module suppliers that have tied up for contract manufacturing are expected to benefit. However, it is also important to note that Indian cell manufacturers such as Moser Baer, Tata Power Solar, IndoSolar, Websol, Euro Multivision and Solar Semiconductor, might no longer be interested in leasing out a part of their capacity to international companies once the duties come into play as they will themselves be in a better position to sell own modules and cells to the market.
will even find new international customers who want to buy Indian cells for their modules for export to India, though they would have to significantly ramp up their manufacturing capacities to meet such demand.
Manufacturers that are neither EOUs, EPZs nor are advance license holders, will face duties when importing cells from countries on which dumping has been imposed.
Indian cell and module manufacturers can broadly be categorized as being part of: a domestic tariff area (DTA), an export processing zone (EPZ), a special economic zone (SEZ) or bing an export-oriented unit (EOU). Not all anti-dumping duties are payable on products imported by manufacturing International module suppliers can units in EPZs, by 100% EOUs or manualso look to circumvent the duties facturers that hold an advance license by procuring cells from any country to import products. Almost all the outside of the countries in question or solar manufacturing in India is exportsupply from any such facility that might oriented and many of the manufacturbe their own or contracted. Chinese ers, including the complainant Indosomodule suppliers, for example, are lar, are 100% EOU and hence exempted circumventing the duties in the US by from duties. All such EOUs, EPZs and procuring cells from Taiwan. advance license holders will not be impacted as far as import of cells is If DCR is applicable only to c-Si cells concerned. The imported materials and modules and anti-dumping duties (cells or wafers) in such cases are also come into force, thin-film manusupposed to be processed in India and facturers like Solar Frontier (Japan) the final productsare then exported. and Sharp (Japan) will be the biggest Most of these manufacturers are no beneficiaries, an advantage that has longer dependent on exports and are so far been enjoyed by First Solar (US). looking towards the Indian market for This scenario is unlikely however, as sales. In such a scenario, they will not DCR is likely to be extended to thinbe allowed to avail an exemption on film under phase two of the NSM. duties and will have to look for tie-ups with domestic suppliers or those from other countries that are not a part of the investigation.
8.3 IMPACT ON THE INDIAN MANUFACTURERS
Indian manufacturers will profit the most. Indosolar (a complainant) sellsonly cells to international or Indian module manufacturers. On the other hand, the other two complainants Jupiter Solar and Websol Energy Systems are integrated and also produce own modules. Other manufacturers in India that fall into the same category and are not a part of the complainants group are: Solar Semiconductor, Moser Baer, KL Solar and Euro Multivision. All these companies are likely to benefit if anti-dumping duties are able to create even a partially insulated zone for the Developers in India have largely relied sale of cells within India. Perhaps they on cheap modules from the countries
Manufacturers that are neither EOUs, EPZs nor are advance license holders, will face duties when importing cells from countries on which dumping has been imposed. If the cells with anti-dumping duties are no longer competitive, these manufacturers will either have to import cells from other countries or buy them from Indian manufacturers.
8.4 IMPACT ON PROJECT DEVELOPERS
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Increasingly, project developers are looking to move away from governmentoffered preferential FiTs and towards the strategically important private off-take segment.
under investigation and this has in turn defined the LCOE for solar power in India. The primary effect of anti-dumping duties is to increase the cost of these imports. Hence, the solar LCOE will increase. Based on preliminary calculations, using BRIDGE TO INDIAs financial model, for a developer looking to set up a project in Rajasthan before anti-dumping duties are imposed, while looking to buy crystalline modules from China or thin-film modules from the US, if the project IRR requirement is 12.5%, the developer would bid for a tariff of ` 7.35 ( 0.11)/kWh. (Assumptions: CUF levels of 19%, not availing accelerated depreciation, interest rate of 12%, PPA for 25 years, debt is to equity ratio of 70:30 and with no wheeling and transmission charges, calculations and assumptions based on BRIDGE TO INDIA financial model.) Now under the same assumptions, if the developer buys modules after anti-dumping duties are imposedfrom the next cheapest alternative from the indicative price table (at around $ 0.70/Wp), for a similar requirement of 12.5% IRR, the developer needs to bid for a tariff of ` 7.85 ( 0.12)/kWh. Similarly for a project in Tamil Nadu, a developer looking to buy modules from China before anti-dumping duties are enforced (if the project IRR requirement is 12.5%)offers a tariff of ` 6.2/ kWh31.
anti-dumping duties are enforced from a manufacturer that is the next cheapest alternative from the indicative price table (at around $ 0.70/Wp), for a similar requirement of 12.5% IRR, needs to bid for a tariff of ` 6.7/kWh. Increasingly, project developers are looking to move away from government-offered preferential FiTs and towards the strategically important private off-take segment. Anti-dumping duties, if enforced, are usually applicable for a period of five years. The duties would be a setback in that shift towards commercially viable solar business models.
8.5 OUR TAKE

In terms of the global market scenario, the falling costs in an oversupplied market will allow for a faster consolidation of uncompetitive manufacturers and help achieve a stable pricing regime. Trade barriers such as anti-dumping duties create insulated zones of limited competition, allowing higher-cost manufacturers to survive, driving up the cost of solar power. This slows the overall growth of the solar market and increases the cost to taxpayers or power consumers of generating solar power. The argument in favor of protective measures such as anti-dumping duties and DCR is that a country like India can capture a larger share of the value addition of the industry. Domestic manufacturers are given a better chance to capitalize on a growth in installations by being offered incentives and protection. This puts them on a more equal footing with manufacturers from some other countries especially China who also receive government support.
The duties would be a setback in that shift towards commercially viable solar business models.
(Assumptions: CUF levels of 18%, escalation in tariff of 5% p.a. for the first 10 years, PPA for 20 years, not availing accelerated depreciation, interest rate of 12%, debt is to equity ratio of 70:30 and with no wheeling and transmission charges, calculations and assumptions The argument against such protective measures is that the value addition by based on BRIDGE TO INDIA financial Indian manufacturing is currently low, model.) as current manufacturing capacity is geared to convert wafers to cells and Now, under the same assumptions, modules. Cost of poly-silicon today is if the developer buys modules after
--------------------31 Tamil Nadu Solar Policy: Tariffs could fall to ` 6.2 ( 0.09)/kWh for 1,000 MW of utility scale projects. Read more here.
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$ 20/kg, compared with the peak of $ 400/kg. The poly-silicon manufacturers have seen significant margins disappear and are now (barely) surviving on operating margins after they have depreciated their assets. No new Indian manufacturer can produce poly-silicon to match current prices. Hence, in a protective environment, the domestic industry will continue to be more expensive and this will keep the LCOE of solar power high.
it financially viable without any policy support. Protective measures will increase the price of solar, hindering the ability of solar energy to bridge Indias large power deficit in a commercially self-sustaining manner.
India can develop great strengths further downstream: when it comes to developing intelligent power solutions for rapidly developing economies suffering from weak grid infrastructure. Cells and modules are a global comIn India, the need of the hour is to remodity that should be sourced at the duce the cost of solar energy and make cheapest rates.
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9. OUTLOOK
It is expected that due to the poor performance of RECs on the exchange, availability of new development opportunities and in the absence of no credible support from the government to strengthen the mechanism, many planned REC projects will be shelved.
9.1 CURRENT QUARTER

Figure 9-1: Projected quarterly PV installations in India
The latest information from projects in Gujarat was that large developers have invested further equity into delayed projects to help bring them online.
The coming quarter is expected to see up to 290 MW of projects being commissioned. A majority of this capacity is expected to come from projects under batch two of phase one of the NSM as the March 2013 deadline approaches. In Gujarat, we expected around 80 MW will have been installed by the last quarter of 2012. However, information about commissioning for just 21.5 MW has so far been received. In the absence of policy based allocations for a greater part of 2012, many developers had been planning to set up projects based on the REC mechanism. As many new FiT-based project allocations have recently been announced, it can be expected that many developers and also suppliers will have to re-orient their plans. It is expected that due to the poor performance of RECs on the exchange, availability of new development opportunities and in the absence of no credible support from the government to strengthen
the mechanism, many planned REC projects will be shelved.
NSM
The deadline for the commissioning of projects under the batch two of phase one of the NSM is March 2013. A capacity addition of 340 MW is planned until then and a large part of that is expected to come up in the first quarter of 2013. There are no reports of any of the projects being significantly behind schedule but as some projects have only recently begun the civil work, we assume that at least 35 MW might be pushed into the second quarter of 2013.
Gujarat Solar Policy

The latest information from projects in Gujarat was that large developers have invested further equity into delayed projects to help bring them online. However, there are stringent rules against share transfers above 49% into
32
The year 2013 is going to see large PV capacity being allocated in India.
such companies. There have been several payment issues and litigations for such alleged transfers in companies like Azure Power, Millennium Solar and ESP Urja.
Other projects
Rajasthan 100 MW (ongoing bidding process RfP released) Uttar Pradesh 200 MW (tender to manage bidding process released) Punjab: 500 MW (tender to manage bidding process released)
There will be significant opportunities for project developers looking for allocations under solar policies.
There will be significant opportunities for project developers looking for allocations under solar policies. For Andhra Pradesh and Tamil Nadu, the maximum capacity of a project is limited by the evacuation infrastructure. This means that the capacity per project will be limited to around 20 MW and the total number of projects allocated will be high. As the deadlines for commissioning of these projects under Tamil Nadu and Andhra Pradesh is ten months and six months respectively, we expect these projects to start being commissioned towards the end of the year. There are several reasons related to bankability and timelines due to which we expect that a large number of projects will not be commissioned by the announced deadlines (refer to the policies section of the The year 2013 is going to see large PV report). Therefore, at this stage we are capacity being allocated in India. We assuming only 150 MW to come online expect that around 4,400 MW will be in Tamil Nadu and 200 MW to come allocated in the year across the various online in Andhra Pradesh by December policies. The following is the expected 2013. Some delayed projects in both breakup of the allocations in 2013: states are expected to eventually get NSM: 1,600 MW (expected bidding commissioned backed by new equity process to be completed by April infusion in the project companies 2013) through minority or majority stake Tamil Nadu: 1,000 MW (tender for sale. allocation released) Andhra Pradesh: 1,000 MW (RfS released) In the last quarter (October to December 2012) we expected that towards the end of 2012, 75 MW capacity will come from the long delayed Mahagenco project in Maharashtra. However, this project is still delayed and even though construction work is under way and equipment has been ordered, we believe that due to the slow pace of the project, it will only be completed in the second quarter of 2013. Only 2.5 MW under the REC mechanism has come up in India in the last quarter. We expect to see a capacity addition of about 10 MW in the current quarter (January to March 2013).
9.2 LONG-TERM OUTLOOK
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8. GUEST ARTICLE BALANCE OF
Low quality solar cables and connectors will lead to small increases in resistance and result in higher losses of energy (I2Rt).
Since the differential cost of the high quality cables is insignificant, it makes sense to invest with higher initial cost and reduce the total cost of ownership of a PV plant.
Ageing of cable insulation and jacket material is nothing but a chemical process which is dependent on Thermal Degradation (high temperature) and Photo Degradation (UV).
To determine the thermal ageing effect, the Arrhenius equation is a simple and accurate formula for the temperature dependence of reaction rates. It is used to model many thermally-induced processes/ Energy delivered from a Solar PV reactions. A useful generalization system is not only dependent on the supported by the Arrhenius equation efficiency of the module but also on is that the reaction rate doubles for other system components like DC every 10 degree Celsius increase Cables, Connectors and Junction in temperature. To determine the Boxes. While designing the solar long-term temperature stability of farm, engineers have to factor the an insulation material, the different losses from modules to the inverters ageing times corresponding to to calculate the over-all performance different temperatures are measured ratio of the farm. Low quality solar and recorded in the Arrheniuscables and connectors will lead to Diagram (shown below). A straight small increases in resistance and line is drawn to connect the various 2 result in higher losses of energy (I Rt). recorded points. By extending the The loss of energy already harvested, straight line until it intersects the when calculated over a twenty five 20,000 hours axis, it is possible to year life represents a substantial loss determine the service life or the and would affect the profitability of the temperature index. A 10 C shift in project. temperature will increase or decrease the process by a factor of two. The A high quality Solar DC Cable is temperature index as per IEC 60216 expected to perform for the complete defines the ageing temperature (in lifetime of the installation which is C), at which the material still has about twenty five years. The cost of elongation at break of 50% after 20,000 replacing a defective installed cable hours. TUV rates cable at 120C @ is very high. The replacement costs 20000hrs with working temperature increase when factoring in manpower of -40C to 90C for solar DC cables used for removal, reinstallation and resulting in the life expectancy of testing of the system. In addition, there cables at 90C to be >25 years. are losses in power output and revenue generation. The cost of these cables To reach this rating, solar DC cables and connectors is very small in the are normally treated with irradiation total cost. Since the differential cost of through an electron beam cross linking the high quality cables is insignificant, process resulting in high temperature it makes sense to invest with higher resistance of the insulation and cable initial cost and reduce the total cost of jacket material. Ageing stability ownership of a PV plant. primarily depends on the polymer itself and the additives. The dosage Solar PV installations are subject of energy given to a compound in the to harsh conditions such as high electron beam crosslinking process temperatures, UV radiation, water, determines the degree of crosslinking moisture, dust, etc resulting in the of the polymer. LEONIs cross linked accelerated ageing of the Solar DC BETA-high-performance compounds cables in the field. Ageing of cable fulfill high requirements of solar PV insulation and jacket material is applications. nothing but a chemical process which
SYSTEMS: AN IMPORTANT FACTOR IN PERFORMANCE OF SOLAR PV INSTALLATIONS
is dependent on Thermal Degradation (high temperature) and Photo Degradation (UV).
34
Ageing stability primarily depends on the polymer itself and the additives. The dosage of energy given to a compound in the electron beam crosslinking process determines the degree of crosslinking of the polymer.
Source: LEONI
A solar DC cable must be incorporated with finely dispersed carbon black in jacket materials, resulting in black color outer jacket, for their prolonged outdoor service life.
LEONI first launched UL/TUV dual approved cables in 2005 and invented 1,000 VAC UL and 1,500VDC TUV cables which will be used for solar installations in the future.
Solar DC Cables are exposed to direct sunlight and the effect of this on cables has to be kept in mind. The materials absorb sunlight and heat up. Some materials become hot but others, like plastics, degrade. The UV component of sunlight breaks the bonds of the polymer chains. The broken chains make the material brittle. The material loses mechanical properties, color etc. To prevent, this carbon black is added. It absorbs the UV rays and converts it into heat and this is dissipated. Research and experimental data on some materials has shown that the natural material (no color added) falls below 50% in less than 6 months exposure. This can be compared to carbon black which shows that even after 30 months exposure, the product is still well above the 90% retention value. A solar DC cable must be incorporated with finely dispersed carbon black in jacket materials, resulting in black color outer jacket, for their prolonged outdoor service life. The LEONI group is a leading PV cable supplier. LEONI started electron beam crosslinking in 1984 and supplied beta beam irradiated cables for solar application in the 90s. These are still performing in installations in Europe. LEONI produces and develops
compounds for insulation and jacket materials in-house. With capacity improvements over a period of time, it today has the worlds largest beta beam cross linking facility contributing to the highest production of solar DC cables. LEONI first launched UL/ TUV dual approved cables in 2005 and invented 1,000 VAC UL and 1,500VDC TUV cables which will be used for solar installations in the future. LEONI can supply the complete system from junction boxes for module manufacturing to cable systems and connectors for Solar PV installations from its production facilities all over the world. To support our customers for fast installations of PV power plants LEONI has stocks available in India, Europe and USA. LEONI BETAflam Solar products meet the highest requirements for solar PV system providing the same high expectations that are demanded from the solar modules - which are longevity and high weather resistance. We offer BETAflam Solar DC cables, BETAflam Trafoflex UV cable, BETAsolar Junction Box and BETAsolar PV connectors. For more information, please visit our website www.leoni-solar-windpower. com.
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10. ANNEXURE
10.1 GLOSSARY OF TERMS
APPC Average Pooled Purchase Cost APTRANSCO Andhra Pradesh Transmission Company BREDA Bihar Renewable Energy Development Agency CAPEX Capital Expenditure CCD Compulsory Convertible Debentures CDM Clean Development Mechanism CERC Central Electricity Regulatory Commission CREDA Chhattisgarh State Renewable Energy Development Agency CSP Concentrated Solar Power DCR DomesticContent Requirement DISCOM State Distribution Company DNI Direct Normal Irradiation EPC Engineering, Procurement and Construction FiT Feed-in-Tariff GBI Generation Based Incentive HT High Tension HTF Heat Transfer Fluid LCOE Levelized Cost of Electricity LoC Letter of Credit LoI Letter of Intent MNRE Ministry for New and Energy MoP Ministry of Power MoU Memorandum of Understanding NOC No Objection Certificate NSM Jawaharlal Nehru National Solar Mission NTPC National Thermal Power Corporation NVVN NTPC Vidyut Vyapar Nigam PV Photovoltaic PPA Power Purchase Agreement PSA Power Sale Agreement REC Renewable Energy Certificate RfP Request for Proposal RPO Renewable Purchase Obligation
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RPSSGP Rooftop PV and Small Solar Power Generation Programme RRECL Rajasthan Renewable Energy Corp. RTL Rupee Term Loan RVE Remote Village Electrification Scheme SEZ Special Economic Zone SPO Solar Purchase Obligation TANGEDCO Tamil Nadu Generation and Distribution Company TEDA Tamil Nadu Energy Development Authority VAT Value Added Tax VGF Viability Gap Funding
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Bridge To India - India Solar Compass January 2013

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INDIA SOLAR COMPASS

January 2013 Edition

BRIDGE TO INDIA, 2013 Illustration by Kavya Bagga

BRIDGE TO INDIA, 2013 Photograph courtesy Istock photo

BRIDGE TO INDIA, 2013

BRIDGE TO INDIA, 2013

Overview Market Dashboard

Key Findings Policies

Financing Upstream Industry Analysis

Key Question: What will be the impact of anti-dumping duties in India?

10. Guest Article: Leoni 11. Annexure

BRIDGE TO INDIA, 2013

BRIDGE TO INDIA, 2013

BRIDGE TO INDIA, 2013

2. MARKET DASHBOARD 2.1 INDIA MARKET COMPASS

Key drivers for the direction of the market

Source: BRIDGE TO INDIA

2.2 INDIAN SOLAR MARKET PRICES

` 7/kWh ` 68/W $ 0.63/W* $ 0.57/W* $ 0.70/W* $ 0.65/W*

BRIDGE TO INDIA, 2013

BRIDGE TO INDIA, 2013

2.3 INSTALLED CAPACITY IN INDIA

PV 22.5 MW ANDHRA PRADESH

BRIDGE TO INDIA, 2013

Source: BRIDGE TO INDIA

Direct RPO Project

BRIDGE TO INDIA, 2013

3.2 PROJECTS (PV)

3.3 PROJECTS (CSP)

3.5 UPSTREAM ANALYSIS

BRIDGE TO INDIA, 2013

4.1 NATIONAL SOLAR MISSION: EXPECTATIONS FOR PHASE TWO

4.2 TAMIL NADU SOLAR POLICY: 3 GW BY 2015

Figure 4-2: Specifications of the 1,000 MW tender by Tamil Nadu

4.3 RAJASTHAN SOLAR POLICY: RE-RELEASE OF THE REQUEST FOR PROPOSAL

Response on RfP Pre-bid meeting

4.5 CHHATTISGARH SOLAR POLICY: UP TO 1,000 MW BY MARCH 2017

Figure 4-4: Specifications of Andhra Pradesh RfS

Source: BRIDGE TO INDIA analysis; Transmission Corporation of Andhra Pradesh limited.

BRIDGE TO INDIA, 2013

5.1 NEW INSTALLATIONS The capacity addition GRID CONNECTED

5.2 STATUS OF ONGOING PROJECTS (PV)

BRIDGE TO INDIA, 2013

In Gujarat, a capacity of 238.1 MW is still not commissioned.

SolaireDirect (one project was allocated: 5 MW)

SolaireDirect Webel Solar Schneider (contract Electric manufactured for SolaireDirect)

BRIDGE TO INDIA, 2013

Fonroche Energie Group 5 MW (two projects were allocated: 5 MW and 15 MW)

Size (MW) 5 5 5 25 2 10 5 15 5 10 15 15 25 25 5 2 2 25 5 10 221

Odisha Odisha has allocated 25 MW in December 2012 through a bidding process.

5.3 STATUS OF ON-GOING PROJECTS CSP

The state of Bihar is looking to allocate projects based on a grading mechanism.

Figure 5-4: Grading of solar project development proposals made to BREDA

Capacity requested (MW) 25 85 5 50 15

Grading score (out of 100) 100 100 97 95 85

BRIDGE TO INDIA, 2013

BRIDGE TO INDIA, 2013

BRIDGE TO INDIA, 2013

7. UPSTREAM 7.2 INTERNATIONAL INDUSTRY 7.1 PV ANALYSIS MANUFACTURING IN MODULE SUPPLY

BRIDGE TO INDIA, 2013

The Indian market is almost completely dominated by central inverters.

7.3 INVERTER SUPPLY ANALYSIS

Size Inverter (MW) supplier 5 20 15 15 20 15 20 10 10 10 10 AEG