BRIDGE To INDIA - India Solar Handbook June 2013

The India Solar Handbook
June 2013 edition

A complete industry overview for solar energy in India
BRIDGE TO INDIA, 2013
The India Solar Handbook

June 2013 edition
A complete industry overview for solar energy in India
Visit our website www.bridgetoindia.com
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BRIDGE TO INDIA
June 2013 edition
THE INDIA SOLAR HANDBOOK

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2012 BRIDGE TO INDIA Energy Pvt. Ltd. All rights reserved June 2013, New Delhi Authors Dr. Tobias F. Engelmeier Mohit Anand Jasmeet Khurana Tanya Loond Prateek Goel Cover Illustration Dwarka Nath Sinha Design & Layout Ragini Ahluwalia This report is owned by BRIDGE TO INDIA and is protected by Indian copyright and international copyright/intellectual property laws under applicable treaties and/or conventions. The user agrees not to export any report into a country that does not have copyright/intellectual property laws that will protect BRIDGE TO INDIAs rights therein. BRIDGE TO INDIA hereby grants the user a personal, non-exclusive, non-refundable, non-transferable license to use the report for research purposes only pursuant to the terms and conditions of this agreement. BRIDGE TO INDIA retains exclusive and sole ownership of each report disseminated under this agreement. The user cannot engage in any unauthorized use, reproduction, distribution, publication or electronic transmission of this report or the information/forecasts therein without the express written permission of BRIDGE TO INDIA. No part of this report may be used or reproduced in any manner or in any form or by any means without mentioning its original source. The information contained in this report is of a general nature and is not intended to address the requirements of any particular individual or entity. BRIDGE TO INDIA aims to provide accurate and up-to-date information, but is not legally liable for the accuracy of such information.
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CONTENTS
Is India the right market for solar?

High solar irradiation in India One of the fastest growing solar markets globally
01 01 04 11 13 13 13 13 13 13 13 14 15 15 26 29 30
What is the expected demand? Overview of the market segments

Feed in Tariff (FiT) RPO (REC) RPO (SP) RPO (thermal captive) Commercial captive Telecom towers Diesel captive and diesel backup
What currently drives solar in India?

Policy based demand Parity Based Demand
Project trends Financing trends
What is the future of the Indian solar market? 33 Glossary

34
IS INDIA THE RIGHT MARKET High solar irradiation in India FOR SOLAR?
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Over 1.7 GW of installed PV capacity
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Source: BRIDGE TO INDIA
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Status of projects
The total installed capacity in India as on May 2013 stands at 1.7 GW.
It is expected that more than 45% of the Indian states will achieve commercial parity by 2016.
two of the NSM (2013-2017) also targets a deployment of 1,000 MW of rooftop solar PV projects. The newly Until 2012, the main drivers for incorporated Solar Energy Corporation capacity addition in India had been of India (SECI), that will be responsible the Gujarat Solar Policy and phase for the implementation of phase two one of the National Solar Mission of the NSM, has already carried out (NSM). Projects under these two rooftop allocations for 5.5 MW and policies still account for over 70% of announced an additional allocation of Indias installed capacity as of May 11.1 MW since the beginning of 2013. 2013. Capacity additions grew at an impressive pace in the rst half of 2012 These projects are to be installed across nine cities in India. but had more or less stalled in the latter half. During the rst half of 2013, Another major market developing in we have seen the capacity additions India is the parity based market. This pick up. The new capacity addition market is largely driven by the fact is largely backed by the projects that solar is approaching parity with under batch two of phase one of the the commercial tariff being paid by NSM, a single large 125 MW project consumers in Delhi, Maharasthra and in Maharashtra and over 70 MW of Kerala2. It is expected that more than projects under the Renewable Energy Certicate (REC) mechanism. The total 45% of the Indian states will achieve commercial parity by 2016. Some initial installed capacity in India as on May projects have already come up for 2013 stands at 1.7 GW. direct sale of power to commercial and industrial consumers. Such projects In the second half of 2012 and in the depend on additional viability enablers rst quarter of 2013 several states such as the REC mechanism, tax came out with their solar policies and benets and the subsidy mechanism. allocation processes. This includes Going forward, these projects are new policies in states such as Kerala, expected to be almost completely Uttar Pradesh, Andhra Pradesh driven by parity. and Tamil Nadu and new allocation processes in Rajasthan and Karnataka. The allocation process for the NSM has also begun with the release of the draft Request for Selection (RfS) document. The key change in the NSM allocation process is the introduction of Viability Gap Funding (VGF)1, and limiting of the domestic content requirement (DCR) to just 300 MW out of the 750 MW planned allocation capacity. Other than the NSM and state policies that typically allocate utility scale projects, several states came out with solar specic policies and allocations. Kerala has announced a policy for 10,000 rooftop installations of 1kW each. The suppliers for this policy have already been empaneled. Gujarat announced a 25 MW rooftop policy, under which projects have been allocated in ve cities. Phase
One of the fastest growing solar markets globally

The markets that led the solar revolution in the world are now approaching maturity. These markets are now cutting incentives and focusing on parity driven demand. It is the emerging markets such as India, China and Middle Eastern and North African (MENA) countries that are expected to see high growth and present expansion opportunities to suppliers in the market. Finally, newer solar markets such as Chile and South Africa have also recently announced aggressive targets that will provide new opportunities for global players.
---------------------1 Read the October 2012 edition of the India Solar Compass to read BRIDGE TO INDIAs analysis on the subject 2 Read an analysis of the parity based markets in India in the April 2013 edition of the India Solar Compass
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USA
MOROCCO EGYPT
SAUDI ARABIA
JAPAN
CHINA THAILAND

Stable markets Rising markets Nascent markets

CHILE
SOUTH AFRICA
Stable markets
The United States of America (US) The US had an installed capacity of 7,221 MW until the end of 20123. The market has primarily been driven by utility scale projects where eight out of the ten large-scale solar projects under construction were completed in the year 2012. The US solar market was propelled by state-wise solar developments with over 11 states installing over 50MW each in 2012. There is no national level obligation to produce solar. However, over 30 states in the country have Renewable Purchase Standards. Each state offers different solar incentives and energy off-take mechanisms. Through 2013, there has been a surge in the third-party ownership model in the residential sector. Over 50% of all new residential installations were installed through this model, with Arizona topping with 90%. This trend is likely to continue. Germany Germany had an installed capacity of 32,411 MW until the end of 2012, which is the highest in the world4. With this installed capacity, solar PV fullled around 4.7% of the countrys electricity
Over 50% of all new residential installations in the US were installed through this model.
needs. The German market has been driven by generous national level Feedin-Tariff (FiT) offered over the years. However, the FiT has been reduced by the government since January 2012 to maintain a steady growth of 2.5 GW to 3.5 GW of installations per year. The FiTs as of May 2013 range between ` 6.5 to ` 9.75 ( 0.10 to 0.15/$ 0.13 to $ 0.19)/kWh. Solar projects for commercial buildings are one of the main drivers of the German solar market and account for around 50% of the cumulative installed solar PV capacity as of 2012. Going ahead, the market is expected to a see growth in storage with the launch of the new subsidy program that subsidizes PV systems with battery storage by 30%. Spain Spain had an installed capacity of 5,100 MW by the end of 20125. It witnessed a boom in 2008 that was followed by a bust due to the economic slow-down and the burden of the generous FiTs. Spain retracted the support for solar by way of FiTs in 2012 which curtailed the demand for solar in the country. Early this year, retroactive cut back of FiTs and 7% electricity tax charged on all electricity producers (including renewables) has created an unreliable climate for investment in the country.
---------------------3 IEA; PVPS report - A Snapshot of Global PV 1992-2012 4 Ibid. 5 Ibid.

Italy is one of the few markets that will witness an early transition to post-FiT phase.
Italy Italy had 16,250 MW of solar, the second highest capacity of solar installed until the end of 20126. Financial support through FiTs is expected to be phased out in 2013. However, schemes like scambio sul posto (similar to net metering) and tax rebates are expected to keep up the momentum in the market for a steady growth. Italy is one of the few markets that will witness an early transition to post-FiT phase.
driven by utility scale projects however the country is paying increasing attention to distributed generation as well. Moreover, solar is becoming nancially viable for commercial and industrial consumers in some states with rising costs of conventional power. With solar becoming increasingly competitive in many parts of the country, the Indian solar market is geared for accelerated growth.
The power decient southern states of India such as Tamil Nadu and Kerala are gradually shifting to solar to nd long-term solutions for their power needs.
China China had an installed capacity of 7,000 MW by the end of 2012.8 The Chinese Australia government announced its ambitious Australia had an installed capacity plan of adding 10 GW in the year 2013 of 2,400 MW by the end of 2012. and increased the overall renewable Residential consumers have largely target to 50 GW by 2020. With a nationdriven the Australian market. wide FiT, subsidies at the provincial State level FiTs provide nancial level and completion of large-scale support to consumers however the pilot projects under the Golden Sun volatility of such state policies has program, China is expected to witness affected investor condence. With PV penetration reaching as high as 90% in accelerated growth. China is planning some areas of the country saturation to cut subsidies under the Golden Sun program given the declining costs of levels will be reached among the solar systems. However, the country residential consumers. This may restrict growth in this market; however, plans to shift focus from one-time it will encourage installers to focus on upfront subsidies to subsidies provided commercial consumers and segments over the life of the project in order to encourage a more sustainable of the residential market such as development of solar. rented spaces and apartments. Japan Japan had an installed capacity of 7,000 MW by the end of 20129. It India introduced a nation-wide FiT last year India had an installed capacity of 1,250 to accelerate the growth of renewables MW by the end of 2012 and the capacity in the country, especially at the utility stands at over 1,700 MW as of May scale. The FiT has been reduced by 20137. The nation-wide solar policy, 10% from ` 23.9 to ` 21.5 ( 0.37 to National Solar Mission (NSM), targets 0.33/$ 0.47 to $ 0.43) this year to to install 22 GW of solar by 2020. The accommodate the reducing costs of growth in the Indian solar market is solar equipment but it still remains driven by central and state incentives one of the highest tariffs offered in and individual solar policies rolled out the world. The Japanese solar market by states. The power decient southern has been primarily driven by the states of the country such as Tamil residential sector until now. But, with Nadu and Kerala are gradually shifting the introduction of the FiT, utility scale to solar to nd long-term solutions projects will witness a surge. for their power needs. Until now, the Indian solar market has been primarily
Rising markets
---------------------6 IEA; PVPS report - A Snapshot of Global PV 1992-2012 7 BRIDGE TO INDIA market model 8 IEA; PVPS report - A Snapshot of Global PV 1992-2012 9 Ibid.
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Saudi Arabia has thus launched an ambitious plan to install 16 GW of solar PV and 25 GW of CSP by 2032.
South Africa plans to install 1,450 MW of solar PV by the end of 2016.
Middle Eastern and North African countries (MENA) MENA countries receive some of the highest levels of irradiation in the world and are hence geared to exploit the vast untapped potential for solar. Morocco is in the process of building a total of 2,000 MW of solar at ve sites by 2020 to meet 38% of its electricity requirements10. The rst project, a 160MW solar power plant in the southern Moroccan town of Ouarzazate is already under construction and is expected to be completed by 2015. Moroccan Agency For Solar Energy (MASEN) will be dedicated to overlook the entire implementation process. Saudi Arabia, the worlds leading exporter of oil, has announced solar targets as a part of its shift to renewables. Saudi Arabia is the largest consumer of oil among the MENA countries. With an expected increase in electricity demand in the coming years, the country wants to become energy secure. It has thus launched an ambitious plan to install 16 GW of solar PV and 25 GW of CSP by 2032. The country has recently completed the construction of its rst large scale project, a 3.5 MW solar plant in Riyadh. Egypt plans to meet 20% of its electricity needs from renewables by 2020 where 8% comes from solar and hydro. Egypt's New and Renewable Energy Authority (NREA) has a 100 MW solar thermal plant and two 20 MW PV plants planned for development, however, political/social disturbance could delay such projects. Thailand Thailand had an installed capacity of 360 MW by the end of 2012 including a 73 MW solar park.11 The market in Thailand has been driven by adder premiums (similar to feed-in tariffs) offered at the national level that led to a surge in utility scale projects. The country aims to install 2,000MW of solar by 2022 under the Alternative Energy Development Plan (AEDP).
Nascent markets
South Africa With increasing electricity demand and abundant solar resource, South Africa is viewed as one of the emerging markets in the world. Under the Renewable Energy Independent Power Producer Program (REIPP), South Africa plans to install 1,450 MW of solar PV by the end of 2016. With the second round of projects obtaining nancial closure and the program gearing up for the third round of bidding this year, the country has proven its commitment to renewables and gained investor condence. The solar market in South Africa has thus taken-off with the announcement of the utility scale projects under the REIPP. Chile Chile aims to meet 10% of its electricity needs from renewables by 2024. With plentiful solar resource and demand for solar from the mining sector, utility scale projects are expected to drive the Chilean solar market. Currently the country has around 3.5 MW of solar installed and around 68 MW under construction. A Chilean mining and steel company, CAP and Sun Edison, are also planning a 100 MW power plant on the Atacama Desert. The Chilean solar market, though at a nascent stage, is witnessing a lot of new activity.
Why India?
Among all the prominent solar markets, India is one of the most attractive markets for the development of solar. Unlike many of its counterparts, India is an energy decient country, which requires an immediate solution that caters to its energy needs. The power decit in India continues to increase with every passing year. India has abundant solar resource and capacity addition using
---------------------10 EPIA; Global Market outlook for Photovoltaics 2013-2017 11 IEA; PVPS report - A Snapshot of Global PV 1992-2012
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India has an aggressive nation-wide policy in place and states have been pro-active in promoting solar.
solar power can be the fastest among all other alternatives. It provides the optimum solution to Indias power problems. The country has an aggressive nation-wide policy in place and states have been pro-active in promoting solar by way of separate state-level policies and incentives. Such strong support from the government has created condence among banks such that they can offer nancing options for solar power
projects. Moreover, India is also one of the few markets that are moving away from a policy driven to a parity driven scenario. With increasing costs of conventional power, solar is already viable for certain consumers in many parts of the country. Hence, with a robust framework of solar policies and an environment conducive to the development of solar, the Indian solar market provides a huge untapped potential for solar.
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Overview of the international markets

FiT / Other incentives Tax incentives and subsidies Quota obligation or green certicates State level RPS obligation Sate level Market largely driven by utility scale projects. Increased demand from commercial consumers also added to the capacity. Market is driven by the FiTs Commercial and residential consumers are the key drivers of the market. Market is largely driven by residential consumers. Nation wide FiT will encourage greater demand for utility scale projects. Cut back of FiT/ support for new PV systems has curtailed demand With the launch of a 30% subsidy for PV with batteries, A market for storage will be developed. Surge in utility scale projects with the introduction of FiT Surge in 3rd party 37 GW owned residential rooftop installations Net metering Market characteristics and key drivers Future trends Market potential projected for 2016
Average solar resource/ Irradiation
Solar target
Installed capacity (as on December 2012) Sate level Yes FiT
Mature markets
U.S.A.
4.68
Different RPS for 7.2 GW states
Germany
2.9
52 GW by 2020 32 GW (35 % and 80% of electricity from renewables by 2020 and 2050, respectively) National level FiT Yes No (replaced by FiT in 2012) No
National level FiT
Yes
No
No
52 GW
Japan
3.63
33 GW by 2020 source
7 GW
18 GW
Spain
4.75
7.25 GW by 2020
5 GW
National level FiT (Suspended) National level FiT No No Yes for system <200 kW starting January 2013 Yes
No
No
No
7.8 GW
Italy
3.81
23 GW by 2017
16 GW
30 GW
Australia
4.16
20% by 2020
2.4 GW
State level FiT
Yes
Yes
Market largely driven by residential consumers
Demand from the resi- 11.3 GW dential market could be saturated by 2017. RPO (not enforced) State level Market driven by utility scale projects. Push provided by solar policies rolled out by different states. 12.8 GW
Emerging markets State level FiT Yes
India
5.1
20 GW on grid 2 GW off grid by 2022
1.2 GW
09
solar will become competitive with increased cost of conventional power and the REC market will take off
Average solar resource/ Irradiation National level FiT Yes No No Market largely driven by utility scale projects. National wide FiT law and incentives at the provincial levels were instrumental in creating a push. Market largely driven by utility scale projects Adder premium program along with supporting solar policies have created investor condence in the country. 30 GW
Solar target
Installed capacity (as on December 2012)
FiT / Other incentives
Tax incentives and subsidies
Quota obligation or green certicates
Net metering
Market characteristics and key drivers
Future trends
Market potential projected for 2016
China
3.61
50 GW by 2020
7 GW
Thailand
4.95
25% of overall energy from renewables by 2022; 2GW solar by 2022 Egypt Yes Morocco No; Saudi Arabia -No; Egypt - Yes No No Market mainly driven by government aided utility scale projects. Announcement of policy targets for solar by the governement has genetrated investor interest.
360 MW
National level "adder" premiums
Yes
No
No
3.6 GW
MENA (Morrocco , Saudi Arabia, Egypt)
Morocco5.4; Saudi Arabia 5.7; Turkey -4.45
Morocco 2 GW by 2020; Egypt plans to fulll 8% of elecrticity needs from solar and hyrdo by 2020; Saudi Arabia 16GW solar PV and 25GW CSP by 2032 National level FiT Yes No No
N/A
7 GW (Total MENA)
Nascent markets Newly announced governement projects have generated investor interest. Energy decieny of 5.2 GW the country will further drive the market. Proposal of carbon tax, if implemented, may create demand among commercial consumers. No No Growing energy needs of Proposal of carbon tax the mining industry and may push demand for high prices of convensolar tional energy has created a demand for solar. 1 GW
South Africa
5.92
3.27 GW from renewables by 2016 ; 1.450 GW of solar PV
N/A
Chile
4.62
10% of electricity 3.6 MW by RE by 2024
No
No
Installed capacity : IEA; PVPS report - A Snapshot of Global PV 1992-2012 Market potential: EPIA; Global Market Outlook 2016, May 2012 Irradiation data: Surface meteorology data and solar energy data provided by RETS screen and NASA satellite data Policies: IEA/IRENA ; Renewable Policies and Measures Database and REN21 Renewables 2012 Global Status Report BRIDGE TO INDIA research and analysis
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WHAT IS THE EXPECTED 12.8 GW of solar PV by 2016 DEMAND? Expected installed capacity for solar in India till 2016
(Year on year in MW)
Installed Capacity (MW)
1500 1000 500 0
1,174
1,252
2012
2013
2014 Year
2015
2016
We are seeing a gradual shift from policy driven incentive based projects to parity driven projects.
The solar industry in India has gone from a mere 22 MW of installed capacity in 2010 to over 1.7 GW as of May 2013. Most of this growth has been driven by central and state solar policies that offer a FiT that is typically arrived at using a competitive process. The demand created by these policies might be predictable but is not continuous. This acts as a hindrance for companies to operate on a sustainable basis in India. The Indian solar market has been in a ux for the past one year. A lack of project development opportunities for the greater part of 2012 led most of the project developers to look at alternate off-takes. However, most of these planned projects with off-takes outside the policies have not been able
to move into their execution phases due to the existing regulatory hurdles. Due to uncertainties with allocations in Tamil Nadu and Andhra Pradesh, project developers have continued to look at alternate off-takes. Solar power is increasingly becoming nancially viable in many states that have higher commercial and industrial tariffs. Despite the ux in the market, we are seeing a gradual shift from policy driven incentive based projects to parity driven projects. Going forward, policy based projects will continue to play their part but the share of installations based on commercial parity, industrial parity, diesel parity and RPO/REC projects will continue to increase.
The solar industry in India has gone from a mere 22 MW of installed capacity in 2010 to over 1.7 GW as of May 2013.
5000 4500 4000 3500 3000 2500 2000 2,834 3,522
Total: 12,850MW MW
4,023
Telecom towers Diesel-parity (backup) Diesel-parity (captive) Grid-parity (commercial) RPO (thermal-captive) RPO (SP) RPO (REC) FiT driven (non-policy based) FiT driven (policy based)
Current opportunities - Expected projects in 2013 (in MW) Policy based capacity additions
Policy Expected allocations in 2013 Total planned capacity addition Phase 1: 1GW (2010-2013) Jawaharlal Nehru National Solar Mission 750 MW Phase 2: 9GW (2013-2017) Phase3: 11GW (2017-2022) Karnataka Solar Power Policy Gujarat Solar Policy (allocations done) Rajasthan Solar Policy (allocations done) Madhya Pradesh Solar Policy Uttar Pradesh Solar Power Policy (allocations under process) Andhra Pradesh Solar Policy (Allocations carried out with a target for 1,000 MW) Tamil Nadu Solar Policy (Allocations carried out with a target for 1,000 MW) Chhattisgarh Solar Policy Punjab Solar Policy (Under process) Kerala Solar Policy 130 MW 25 MW Not announced 75 MW Phase II 400 MW till 2017 200MW 200 MW 500 MW by 2017 300MW 2,000 MW 690 MW 3,000 MW by 2015 No allocation likely in 2013 300 MW 1,000 MW by 2022 No allocation likely in 2013 500 MW by 2017 , 1,500 MW by 2030 500 MW to 1,000 MW by 2017 800MW (4 solar energy parks with 200 MW each) 40MW capacity addition every year.
Other expected capacity additions (As per the BRIDGE TO INDIA market model)
Segment Expected additions in 2013 Total expected additions by 2016 RPO (SP) - 460MW REC projects - 1,403 MW Thermal Captive RPO 1,018 MW 2,342MW 889 MW
RPO/REC driven projects 497 MW (RPO Solar Power (SP), RPO on thermal captive consumption, REC driven projects) Commercial segment (grid connected) Diesel parity
92MW 45MW
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OVERVIEW OF THE MARKET Feed in Tariff (FiT) SEGMENTS This segment has provided the viable
A total of 10 Indian states have already announced their respective solar policies.
project development opportunities in the market until now. FiT based capacity addition in India has been driven by the NSM and various state solar policies. With over 800 MW installed, Gujarat has been the largest contributor of Indias total installed capacity. A total of 10 Indian states have already announced their respective solar policies. More than 200 project developers have been allocated projects under preferential FiT in India. Welspun, Azure Power, Mahindra Solar, Lanco, Green Infra, Sai Sudhir and Sun Edison are among others some of the leading project developers in India Projected market size till 2016 is 4.8 GW.
working on projects planned in Uttar Pradesh, Odisha, Madhya Pradesh and Andhra Pradesh. Mahagenco has recently installed a solar project in Maharashtra with a capacity of 125 MW to meet the states RPO. Projected market size till 2016 is 460 MW
RPO (thermal captive)

Captive thermal power producers have a solar specic RPO requirement. Requirements for thermal captive power producers are enforced by the state regulators. Industries like mining, chemicals and cement have large captive power generation capacities. Vedanta Aluminum, Jindal Stainless, SAIL, Aditya Birla Group, National Aluminum Company Ltd (NALCO) and Bharat Aluminum Company Ltd. (BALCO) among others are the largest obligated entities in India. Projected market size till 2016 is 1.0 GW.
RPO (REC)
This segment consists of projects that will generate Solar Renewable Energy Certicates (RECs) and sell them on the power exchange. Such projects are driven by Renewable Purchase Obligations (RPOs) of states and are thus termed as RPO (REC). This segment is yet to take off because of a lack of nancing for such projects. The biggest hurdle has been the demand for these certicates at current levels and clarity on revenue beyond 2017. The countrys rst solar RECs were issued on 24th May, 2012 to M&B Switchgear. The total installed capacity under the REC mechanism as of May 2013 is over 70 MW. Projected market size till 2016 is 1.4 GW.
Commercial captive
Commercial tariffs in some states of India are as high as ` 10 ( 0.15/ $ 0.20)/kWh in certain states. Solar power has already reached commercial parity in states such as Maharashtra, Kerala and Delhi. As per BRIDGE TO INDIA analysis, this market is poised to take off from 2014 onwards as Renewable Energy Service Companies (RESCOs) start selling power with this business model. By 2016, it is expected that thirteen Indian states would have achieved commercial parity. Projected market size till 2016: 2.3 GW.
Mahagenco has recently installed a solar project in Maharashtra with a capacity of 125 MW to meet the states RPO.
RPO (SP)
Each state has a yearly RPO. This is guided by the aim to source 3% of the total power through solar by 2022. Instead of allocating projects through a policy, states may set up their own plants to generate solar power in order to meet this requirement. BRIDGE TO INDIA terms such projects as RPO Solar Power or RPO (SP). NTPC is
Telecom towers
India will have 550,000 telecom towers by 2015. 33% of the currently installed towers are completely off-grid and 23% of them are situated in regions with less than 14 hours of grid supply on average. Based on the current costs of diesel generated units of electricity
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The LCOE for solar power is already lower than diesel and it makes nancial sense for these consumers to adopt solar power.
and the Levelized Cost of Energy (LCOE) of solar PV-generated units, there already exists a signicant gap between the costs per unit generated from the two sources. This happens to be the case for both off-grid tower sites as well as the grid-interactive sites with poor grid supply. This has made the telecom tower segment a front-runner among diesel-parity based market segments for solar PV solutions. Further, the Department of Telecom (DoT) has brought in Renewable Energy Technology (RET) targets for telecom towers. Under this obligation, 50% of the telecom sites in the rural areas and 20% telecom sites in urban areas need to switch to a renewable technology by 2015. Projected market size till 2016 is 1.9 GW.
Diesel captive and diesel backup

Large parts of India are still off the grid or suffer from signicant power cuts. Many consumers in such areas use diesel based captive power generation for activities ranging from agricultural pumps to running industrial and commercial establishments on completely or partially on diesel based captive power production. The LCOE for solar power is already lower than diesel and it makes nancial sense for these consumers to adopt solar power. Projected market size for replacement/ augmentation of diesel captive till 2016 is 217 MW (over and above the telecom tower segment).
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WHAT CURRENTLY Policy based demand government of India, through DRIVES SOLAR The the Central Electricity regulatory IN INDIA? Commission (CERC) has introduced
By 2020, at least 3% of power consumed in India has to be sourced from solar power.
RPOs on all power consumption, as per the requirements of the National Action Plan on Climate Change (NAPCC). As per the RPO requirements, 15% of all power in the country has to be sourced from renewable energy sources by 202012. For solar power in particular, the RPO requirements has a carve out of 3%. This implies that by 2020, at least 3% of power consumed in India has to be sourced from solar power. As of the end of March 2013, solar accounted for a little over 0.60% of the overall installed capacity in the country. Distribution companies (DISCOMS) both public and private, open access consumers and captive consumers with a capacity of over 1MW are obligated entities, who have to fulll a solar RPO. Currently all states except Arunachal Pradesh and Sikkim have
declared a solar RPO, which are set at an average of 0.35% by March 2013. This implies that a distribution utility that distributes 1 million of electricity in a year, is under an obligation to source 3,500 kWh of it from solar energy. An obligated entity can fulll its solar RPOs by setting up its own solar power plant or by purchasing power directly from the producer by signing a Power Purchase Agreement (PPA). Alternatively, it can fulll its RPO by purchasing Solar RECs.
Renewable Energy Certicate Mechanism

The potential to generate solar power is not distributed evenly amongst all states, yet they all have a solar RPO of 3% to fulll by 2020. The REC is a market mechanism that was introduced in 2010, through which an obligated entity can fulll their RPO. RECs can be traded between states thus making them an instrument in
Status of solar RPO in selected states (April 2012- March 2013)
As of the end of March 2013, solar accounted for a little over 0.60% of the overall installed capacity in the country.
States Gujarat Rajasthan Andhra Pradesh Maharashtra Jharkhand Tamil Nadu Karnataka Odisha Uttar Pradesh Haryana Punjab Madhya Pradesh Uttarakhand Chhattisgarh New Delhi West Bengal Total
RPO Target 1.00% 0.50% 0.25% 0.25% 1.00% 0.25% 0.25% 0.15% 1.00% 0.75% 0.07% 0.60% 0.05% 0.50% 0.15% 0.25%
Target in MW 475 222 210 338 162 47 92 34 463 483 11 220 4 76 30 130 2,997
Target Achieved (March 9th 2013) 824 442 23 19 16 17 14 13 12 8 9 5 4 3 2 1,416

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---------------------12 Renewable energy sources consist of Wind power, Solar power, Bio Energy and Small-Hydro power.
addressing the mismatch of resources between states. A developer is eligible to receive one REC, for every MWh of solar power that is fed into the grid at the Average Pooled Purchase Cost (APPC) of the relevant distribution utility or for every MWh sold to a third-party consumer at a pre decided tariff. Solar power plants that currently receive or have previously received preferential tariffs to sell solar power to the grid are not eligible to receive RECs. Even though the REC mechanism was introduced in 2010, the rst project registered for solar RECs was M&B Switchgears in May 2012. As of May 2013, a capacity of 129 MW has been registered under the REC framework, of this 111 MW has been registered in the last six months.
As of May 2013, a capacity of 129 MW has been registered under the REC framework, of this 111 MW has been registered in the last six months.
term prices of solar RECs. The CERC has xed the oor (minimum) price of RECs at ` 9,300 ( 149/$ 143) per REC and the forbearance price at ` 13,400 ( 206/$ 268) per REC only till 2017. After 2017, the CERC can make changes in the oor and forbearance prices of solar REC. This is resulting in the project developers being unable to raise nancing for REC projects, as they are unable to project their long term returns accurately. The prices for solar RECs are certain only for the next four years while the typical period within which a loan must be repaid in India is typically 12 years. The pricing for solar RECs has been healthy until now. Non-solar RECs on the other hand have been trading at the oor price for several months now. The healthy price discovery of solar RECs can largely be attributed to low supply volumes. The price discovery for solar RECs is expected to fall towards the oor prices as the supply of RECs increases. Additionally, a key concern for REC based projects is that whether these projects will be able to sell all the RECs produced.
Registered capacity of solar REC projects as of May 29th 2013

States Registered Capacity (MW)13 69 29 20 5.8
The price discovery for solar RECs is expected to fall towards the oor prices as the supply of RECs increases.
Rajasthan Madhya Pradesh Maharashtra Andhra Pradesh
National Solar Mission
The Jawaharlal Nehru National Solar Mission (NSM) was launched Tamil Nadu 1 in January 2010, and since then has Source: BRIDGE TO INDIA BRIDGE TO INDIA, 2013 been one of the key drivers of the solar industry in India. The NSM, Although there has been an increase in regulated by the Ministry of New and activity in the REC market, we expect Renewable Energy (MNRE), is targeting the market to slow down primarily an installed capacity of 20 GW for grid due lack of long term demand in connected solar power by 2022, spaced the coming years and due to lack out over three phases. of predictability regarding the long
Targets for the three Phases of the NSM

Segment Phase I April 2010 March 2013 Capacity (cumulative)
Phase II April 2013 March 2017 10,000 MW
Phase III April 2017 March 2022 20,000 MW
1,100 MW
---------------------13 Source: www.recregistryindia.nic.in

MNRE had planned to allocate 800 MW through a bundling of power mechanism (as in phase one of the NSM), and 750 MW through a Viability Gap Funding (VGF) mechanism in 2013.
As part of phase one of the NSM, the MNRE announced that it would allocate 500 MW of PV and Concentrated Solar Power (CSP) projects each, in its attempt to equally encourage both technologies. Allocations of projects in phase one of the NSM was carried out in two batches. As a part of phase one batch one the MNRE received bids from 333 project developers, amounting to bids worth 1,815 MW for just 150 MW of solar PV projects. In order to impartially allocate these projects, the MNRE initiated a process of reverse bidding to allocate the projects. As per this process the developers with the lowest bid amount (the highest discount upon the initial tariff of ` 17.91 ( 0.27/$ 0.3)/kWh) would be allocated projects under phase one of the NSM. The average tariff for 150MW of solar PV projects allocated under phase one batch one was ` 12 ( 0.18/$ 0.24)/kWh. Allocations of projects for batch two of phase one were carried out in December 2011, for which 350 MW were allocated, while PPAs were signed for only 340 MW. The average tariff under this batch was ` 8.2 ( 0.12/$ 0.16)/kWh. As on 20th May 2013, a capacity of 290 MW has been commissioned. The draft guidelines for phase two of the NSM were released in December 2012. According to the draft guidelines for phase two of the NSM, MNRE had planned to allocate 800 MW through a bundling of power mechanism (as in phase one of the NSM), and 750 MW through a Viability Gap Funding (VGF) mechanism.
For a large part of the rst quarter of 2013 (January to March), MNRE has tried to arrange for unbundled power from the Ministry of Power (MoP) to carry out the tariff based bidding component of allocations. However, as there is only a limited amount of unbundled power available and all the states in India demand access to it, the MoP has been unwilling to provide this. Consequently, MNRE has now decided to go ahead only with the allocations for 750 MW based on VGF. Under this mechanism, a standard tariff will be provided by the power distribution companies. This would typically be higher than their standard price of procurement as this would allow them to also meet their RPOs. The developers would be required to bid for the upfront funding required to make their projects viable at the given tariff. The minimum project capacity for a single bid is to be 10 MW and the maximum capacity is to be 50 MW. Projects are to be allocated in multiples of 10 MW. The allocation process, signing of PPAs and disbursement of VGF will all be coordinated by the SECI. According to the draft, a xed tariff ` 5.45 ( 0.08/$ 0.11)/kWh will be awarded to projects not availing accelerated depreciation and a xed tariff of ` 4.95 ( 0.07/$ 0.10)/kWh will be awarded to projects availing accelerated depreciation. Over and above this, VGF will be provided with an upper limit of 30% of the project cost or ` 25m ( 0.38m/$ 0.5m)/MW. The exact quantum of VGF will be determined by a reverse bidding mechanism.
MNRE has decided to go ahead only with the allocations for 750 MW based on VGF.
Targeted capacity addition under phase two of the NSM

2013-14 Rooftop and small solar Utility scale VGF Total
2014-15 100 MW 0 MW 770 MW 1,080 MW 870 MW 1,080 MW
Total 200 MW 800 MW 1,500 MW 1,080 MW 2,520 MW 1,080 MW
PV PV CSP PV CSP
100 MW 800 MW 750 MW 0 MW 1,650 MW 0 MW
Bundling (Fit) PV
17
The state is already fullling its RPO and is currently a power surplus state.
The guidelines envisage 25% payment at the time of delivery of at least half of the major equipment at the site, 50% on completion of the plant and the rest after one year of operations and meeting the requirements of generation.
State solar policies

Gujarat Solar Policy The state of Gujarat introduced a solar power policy in the state in 2009, even before the introduction of the NSM. The current policy is in operation till 2014 and had an initial target of 500 MW. But ultimately, 958.5 MW of solar power projects were allocated in the state. Only 14% of the allocated capacity was commissioned by the completion deadline of December 31st 2011. However, as of May 2013, a capacity of 824.09 MW has been commissioned under the Gujarat policy. This has largely been possible due to the workable tariffs and government support for nancial closures of projects.
led by the REC mechanism. But the REC mechanism as it currently stands with its short term price visibility might not be the most viable option for the state which is only looking at solar from a long term perspective. Thus, as per BRIDGE TO INDIA, the phase three allocations under the policy would take place, if at all, only after the amendments for RPO enforcement and REC mechanism are undertaken. Gujarat had also launched a 5 MW pilot project in Gandhinagar to demonstrate the working of grid connected rooftop solar power generation. As per the public private partnership (PPP) agreement, the Gujarat government had appointed the private project developers Azure Sun Energy India Private Ltd. and Avantha Solar Power Maharashtra Private Ltd. (SPV of SunEdison India) to build, nance, own, operate and maintain grid connected rooftop solar PV systems on approved rooftops of government buildings (4 MW) and private residences (1 MW). The developers feed the power into the grid at a pre-determined FiT of ` 11.21 ( 0.17/$ 0.22)/kWh for Azure and ` 11.78 ( 0.18/$ 0.23)/kWh for Avantha Solar. The project developer will pay a green incentive of ` 3 ( 0.05/$ 0.06) /kWh, as rent to the rooftop owners. The duration of the PPA is 25 years.
GDP (2011-12) % of total GDP of India
92.98 billion
7.3%
GUJARAT
Population (2011)
60 million
Energy Consumption in MU
Gujarat is the only policy in the country which has a xed tariff, and does not follow the reverse bidding mechanism. In its tariff order released in January 2012 it xed different tariffs for the next three years. The tariffs decrease every year as compared to the previous Upon success of this rooftop program year. it has been further expanded across 5 cities. A capacity of 25 MW is expected The state is already fullling its RPO and is currently a power surplus state. with a 5 MW project each at Vadodra Thus, the state has no immediate plans and Mehsana, a 6.5 MW project at to announce new allocations. Any new Rajkot, a 3.5 MW project at Bhavnagar and a 5 MW project at Surat. projects under a new policy would be
65,176
Gujarat tariffs for the new control period starting April 1st 2013
Proposed Tariff in `/kWh Megawatt scale PV projects With AD Without AD Without AD Solar thermal projects With AD Without AD
12 years 9.13 10.30 NA NA
13 years 7.00 7.50
Levelized* (8.63) (9.64) (10.36) (11.57) (11.55) (12.91)
Kilowatt scale projects With AD
* Levelized tariff is not applicable for MW scale projects ; only applicable for KW scale projects Source: BRIDGE TO INDIA
18
71.62 billion 5.6%
K A R N A T A K A
Population (2011)
61 million
50,403
Karnataka Solar Policy Karnataka announced its solar power policy in July 2011, with a target of 350 MW by 2016. The state had called for bids worth 80 MW on August 9th 2011, consisting of 50 MW of solar PV and 30 MW of CSP. However the allocations were made for only 20 MW of CSP, due to the lack of valid bids and 60 MW of PV. The lack of interest in the CSP projects can be attributed to the fact that a 10 MW ceiling on every CSP project was too low to attract developers interest. The lowest successful bid for ` 7.94 ( 0.12/$ 0.16)/kWh was submitted for a 10 MW PV project by Helena Power private Limited, while the highest successful bid of ` 8.50 ( 0.13/$ 0.17)/kWh was for a 7 MW PV project by Welspun Solar AP private limited. The state has also removed all wheeling charges for the transmission of solar power within the state to encourage investment in the sector. The Karnataka solar power policy has no DCR. We can expect the 80 MW of projects to be commissioned within 2013. In its second round of allocations, the state has invited bids for 130 MW. This time however no demarcation has been made for PV and CSP. The minimum size of a project is 3 MW and maximum 10 MW. A bidder can bid for any number of projects but the total allocation would be limited to 10 MW per bidding group. The objectives are to meet the RPO for the state and the off taker will be the local electricity supply company. Due date for the submission of bids was 26th April 2013. Rajasthan Solar Power Policy The Rajasthan solar policy was launched in July 2011. It had a target to allocate 12 GW of solar power in the state by 2022. Even though the earlier bidding process in May 2012 was indenitely postponed, in November 2012 Rajasthan invited bids for 100 MW solar projects under the reverse bidding process. The reference price set was ` 8.42 ( 0.13/$ 0.17)/kWh. A total of twenty ve bids for 200 MW were submitted. The lowest bid was
` 6.45 ( 0.1/$ 0.13)/kWh by Essel Mining and Industries Ltd. The highest bid was ` 8.25 ( 0.13/$ 0.17)/ kWh by Patnaik Minerals Pvt. Ltd. The state expected all developers to meet the lowest bid in order to get the allocation. However only seven companies were allocated projects totaling 75 MW at this lowest tariff. Madhya Pradesh Solar Policy The policy for implementation of solar power based projects in Madhya Pradesh (MP) came into effect in July 2012. It is expected that the state will allocate 800 MW of solar power under the policy over four years. The projects will be divided into four solar parks of 200 MW each A capacity of 225 MW had been allocated in Madhya Pradesh in the second quarter of 2012. Projects were awarded to Acme Telepower (25 MW), Alpha Infra Properties (20 MW), MK Solar (25 MW), Moser Baer (25 MW) and Welspun (25 MW and 105 MW). As per the deadlines, the projects with capacities up to 25 MW have to be commissioned by June 2013 and the 105 MW project of Welspun by June 2014. Based on the latest information, interest for 350 Mw has been received. Andhra Pradesh Solar Policy The Andhra Pradesh state solar policy was released on September 26th 2012. The operating period of the policy extends to 2017 and applies to all grid connected solar projects that sell directly to a third party or through the REC mechanism. In order to incentivize projects, the state has removed all wheeling and transmission charges and allowed banking within the time frame of a year (except between February and June or within a single day). The policy also includes exemption from Cross Subsidy Surcharges and Electricity Duty, and a refund on Value Added Taxes (VAT) on all components of the plant and on stamp duty and registration charges on the purchase of land. RECs can be availed under the policy over and above the other incentives.
19
49.79 billion
3.9%
RAJASTHAN
Population (2011)
68 million
44,041
103.96 billion 8.1%
ANDHRA PRADESH
Population (2011)
85 million
65,278
97.70 billion
7.7%
Andhra Pradesh invited bids for 1,000 MW projects shortly after releasing its solar power policy. The time durations for nancial closure were increased to 210 days from 60 days and the plant commission deadline was extended to 12 months from signing the PPA instead of the original six months. Bids were received from 184 applicants who submitted proposals for a total capacity of 1,340 MW. The lowest price offered was ` 6.49 ( 0.1/$ 0.13)/kWh by Sunborne energy. The projects were to be allocated based on lowest bids at each interconnection location. However, in a sudden change in policy after the allocation process, the state has decided to only offer the lowest tariff across the state. This new tariff would be applicable to all the developers interested in setting up the solar plants. This tariff might not be accepted by many project developers as it is low and has been deemed unworkable by several project developers. The tariff offered in the neighboring state of Tamil Nadu policy is ` 6.48 ( 0.1/$ 0.13)/kWh but with an annual tariff escalation of 5% for the rst ten years. This policy instability and sudden change in process in Andhra Pradesh is expected to severely impact the outlook on new capacity addition as well as the investor condence in the state. Tamil Nadu Solar Policy The Tamil Nadu Solar Policy 2012 was announced in October 2012. The policy aims to achieve an ambitious installation target of 3 GW by 2015. The policy aims to achieve this capacity addition from: 350 MW of rooftop installations, 1,500 MW of utility-scale projects and 1,150 MW of projects under the REC mechanism. In a rst-of-its-kind state policy, Tamil Nadu will provide a Generation Based Incentive (GBI) for rooftop solar power through net-metering in which power producers will have to install a separate meter to measure power generation. A capacity of 50 MW is proposed to be added through this process. The remaining 300 MW under the rooftop installations is expected to
come from government buildings and other government schemes for rural and urban lighting. For a target of 1,500 MW of utility scale projects till 2015, the policy targets an installation of 1,000 MW from the fulllment of SPO. These obligations have been mandated at 3% till December 2013 and 6% from 2014 onwards on various power consumers such as Special Economic Zones (SEZs), IT parks, industrial consumers guaranteed with 24/7 power supply, colleges, telecom towers, residential schools and all buildings with a built up area of more than 20,000 square meters. Obligated entities can fulll their SPOs by doing one of the following: generate own solar power, buy solar power from a third party within Tamil Nadu, buy RECs or buy solar power from the state distribution companies at the solar tariff. The realization of this target is dependent on the enforcement of these SPOs by the local authorities. Any provision of penalty for not meeting such obligations is not highlighted in the policy document. The remaining 500 MW of utility scale projects is expected to come up using a GBI based on a reverse bidding process. The guidelines for the process are expected to be released separately. There is also a provision for solar parks to come up in 24 districts of the state in a phased manner to accommodate these utility scale projects. The remaining 1,15 MW of the policy target is expected to come up using the existing REC mechanism. Unlike the recently announced Andhra Pradesh solar policy, the Tamil Nadu solar policy does not provide any signicant incentive for REC projects to come up in the state. These installations are expected to be driven in sync with the national REC. Tamil Nadu issued an expression of interest for 1,000 MW on January 4th 2013 and received 92 applications for 104 projects, totaling a capacity of only 499 MW. This was the rst time a public tender for FiT based allocation
20
TAMIL NADU
Population (2011)
72 million
25,796
50.26 billion
3.9%
K E R A L A
was under-subscribed in India. The key reasons were: poor bankability of Tamil Nadu Generation and Distribution Corporation (TANGEDCO) as an offtaker, absence of a comprehensive payment security fund to back the PPA, absence of the PPAs approval from the Tamil Nadu Electricity Regulatory Commission (TNERC), complicated L1 based tariff determination process and the hasty allocation process pursued by the state. The lowest bid was ` 5.97( 0.09/$ 0.12)/kWh (at an annual escalation of 5% for the rst 10 years of the 20 year PPA). As this was deemed unworkable by many project developers the state decided to provide a workable tariff of ` 6.48 ( 0.10/$ 0.13)/kWh (at an annual escalation of 5% for the rst 10 years of the 20 year PPA) at which developers would be comfortable singing a PPA. At this tariff, a capacity of 690 MW has been tied up for. New interests that have come in after the bidding process have helped take the capacity up to this level. The key reason for the unexpected increase in capacity is the new interest for two projects of 100 MW each. Kerala Rooftop Solar Policy The south Indian state of Kerala has published a draft solar policy on February 27th 2013. Under the draft policy, Kerala has set itself a target of an installed capacity of 500 MW by 2017 and 1,500 MW by 2030. This policy focuses primarily on residential, commercial off grid systems, grid connected small scale systems, installation of oating solar arrays over canals, reservoirs among others. To facilitate these installations the government has proposed a GBI/ FIT instead of a capital subsidy. Bank nancing will be given at attractive rates. Other incentives include, no open access charges, no wheeling and T&D charges for captive consumers, exemption of electricity duty.
Until now, all state and central solar policies have emphasized utility scale projects. Keralas new policy is unique in its focus largely on distributed power generation. Unlike the off-grid capital subsidy scheme under the NSM, the state will incentivize distributed solar through FiTs. Net-metering and a focus on grid interaction protocols will help tackle the grid stability issues. Under this rooftop policy, each applicant can register for only a 1KW off grid system, thus the target audience for the policy are only households and small cottage industries. Under the policy, the states renewable energy department estimates the cost of a 1 kW solar PV system with storage to be ` 250,000 ( 3,846/$ 5,000). For the installation of such a system, the state will provide nancial support of 39,000 ( 600/$ 780)/kW. In addition to this, the system is eligible to receive a 30% nancial subsidy or nancial support of ` 81,000 ( 1,246/$ 1620)/kW from the MNRE, whichever is lower. The state has already empaneled the installers and the residential consumers can directly contact these installers to avail the subsidies on the given system types. Uttar Pradesh Solar Policy In the beginning of 2013, the state of Uttar Pradesh released its solar power policy. The policy aims to allocate 500 MW of solar in the state by 2017. The energy generated from solar power is to be sold to distribution utility Uttar Pradesh Power Corporation Limited (UPPCL) or to third party or for captive use. Shortly after announcing the policy, the state also announced the bidding process for 200 MW of solar PV capacity. The minimum capacity of project was 5 MW and maximum 50 MW with multiples of 5 MW. A key differentiator of this policy is that the PPA is only for 10 years. As the initial 10 years covers a typical debt
Population (2011)
33 million
17,932
104.01 billion
8.2%
UTTAR PRADESH
199 million
Population (2011) Energy Consumption in MU
63,579
21
repayment period the projects should not face any difculty achieving nancial closure. The bids were supposed to be opened on 10th May 2013.
for a single developer is 30 MW. The allotment of project capacities in this category will be in the multiples of 5 MW. The benchmark tariffs for the bidding process had been xed at ` 8.75 ( 0.13/$ 0.18)/kWh for companies not availing accelerated depreciation and ` 7.87 ( 0.12/$ 0.16)/kWh for companies availing accelerated depreciation. The process allows a period of six months for achieving a nancial closure and 13 months for commissioning from the date of signing the PPA. Chhattisgarh Solar Policy The Chhattisgarh solar policy was released on 20th November 2012. It will be operative till 31st March 2017. This policy aims to achieve a target solar power generation capacity between 500 MW to 1000 MW by March 2017. This will be achieved through three routes: grid connected projects for captive use, through the REC mechanism or for electricity sale to DISCOM to fulll RPO.
39.91 billion 3.1%
PUNJAB
Punjab Renewable Policy Punjab released a renewable energy policy in December 2012 that covers solar, wind, biomass and small-hydro power. Punjab has set a target of 1,000 MW of solar power generation by 2022. As part of that of the phase one of the policy, the state announced a bidding process for 300 MW solar PV capacity allocations. The project allocation had been divided into two categories: A total of 50 MW was to be allotted for newly incorporated or existing companies that have no experience in setting up and operating solar projects. The minimum capacity of the project has been set at 1 MW and the maximum capacity at 4 MW. The allotment of project capacities in this category will be in the multiples of 1 MW.
Population (2011)
27 million
12,788
Power generation is envisaged to be incentivized using interest subsidy, A total of 250 MW was to be allotted xed capital investment subsidy, to experienced companies that have exemption from electricity and stamp installed and commissioned at least duty. Details on these incentives and one project with a capacity of 5MW or the states plan or methodology to higher anywhere in the world which is provide such incentives have not been in operation for at least one year before provided. No allocation process for this the last date of submission of e-bid policy has been announced as of May anywhere in the world. The minimum 2013. capacity of the project can be 5 MW and the maximum capacity allowed
22
Overview of policies
Policy NSM Target 20GW till 2022 Off-taker SECI Financial incentives Viability Gap Funding (VGF) based on reverse bidding Preferential tariff based on reverse bidding. (For a part of the target) Preferential tariff based on reverse bidding None Exemptions Will depend on the state in which the project is being executed No exemption Other key benets Will depend on the state in which the project is being executed - Single window clearance - GBI for residential consumers Evacuation infrastructure construction by the state - Banking of power permitted with fee. DCR DCR on 350 MW out of the 750 MW to be allocated None
Tamil Nadu Solar Policy
3GW till 2015
- Obligated entities (as dened by the state) - State distribution company State distribution companies - Thirdparty power consumers - Obligated entities State distribution companies State distribution companies
Uttar Pradesh Solar Policy
500 MW till 2017
Exemption on wheeling/ transmission charges Exemption on wheeling/ transmission charges Exemption only for policy based projects No exemption
None
Andhra Not driven by Pradesh Solar target Policy
None
Karnataka Solar Policy Rajasthan Solar Policy
200MW till 2016 750MW till 2017
Preferential tariff based on reverse bidding Preferential tariff based on reverse bidding
None
None
- Availability of None government land at a low lease price - Cost of transmission line to be borne by the government Exemption on land stamp duty Solar parks to be created for policy allocations Exemption from electricity and stamp duty Solar park infrastructure provided None
Punjab Solar Policy
1 GW till 2022
State distribution companies State distribution companies State distribution companies State distribution companies
Preferential tariff based on reverse bidding Preferential tariff based on reverse bidding Not known Preferential tariff
No exemption
Madhya 800 MW Pradesh Solar (timeline not Policy provided) Chhattisgarh Gujarat 500 MW to 1000 MW by 2017 Target exceeded
No exemption
None
No exemption No exemption
None None

BRIDGE TO INDIA,
2013
23
STATUS OF THE STATES

STATE SOLAR POLICY STATUS PV PROJECTS
PPAs/MoU's Signed* (MW) GUJARAT State Solar Policy under execution Rooftop scheme for 25 MW in 5 cities announced RAJASTHAN State Solar Policy announced in April 2011 Base FiTs announced Project allocations for 75 MW carried out NSM batch I NSM batch II Migration projects State Policy RPSSGP GBI REC mechanism RPO (private) 105 295 36 75 12 10 69 100 100 285 35.75 0 10 10 68.9 40 State Policy Rooftop scheme 968.5 30 Commissioned (MW) 824.09 0
TOP PERFORMERS
KARNATAKA
State Solar Policy announced in July 2011 Allocations announced in April 2012 for 60 MW solar PV and 20 MW solar thermal) Deadline for commissioning October 2013
NSM batch I GBI State Policy "State allocations (bidding)" Direct allocations RPSSGP REC Mechanism NSM batch I NSM batch II State Policy RPSSGP MoU Direct RPO Captive GBI REC Mechanism
10 9 60 125 100 5.25 29 15 20 350 10.5 100 100 20 2 5.8 690 7 5 5 1 5 25 11.2 5 150 8.5 3
24
5 9 0 0 0 5.25 6.5 11.4 0 0 9.75 0 0 20 2 0 0 6 5 5 1.055 5

MADHYA PRADESH
Allocation through reverse bidding - not guided by a policy State Solar Policy announced Deadline for commissioning is Jun 2013 for projects up to 25 MW and June 2014 for projects greater than 25MW
ANDHRA PRADESH
Andhra Pradesh carried out bidding for 1,000 MW. Interest in signing of PPAs is not yet known.
POTENTIAL RISERS
TAMIL NADU
Tamil Nadu carried out bidding for 1,000 MW. It is expected that interest for 226 MW has been shown
State Policy RPSSGP NSM Batch 1 GBI REC Mechanism
MAHARASHTRA
Broad Renewable Energy Policy - no policy specic to solar energy New tender for allocation of 75 MW likely (50 MW new and 25 MW left over from previous allocation
NSM batch I NSM batch II Migration projects RPSSGP RPO (State discoms) REC Mechanism RPO (private)
5 11.2 5 125 8.5 3
BRIDGE TO INDIA,
2013
STATE
SOLAR POLICY STATUS
PV PROJECTS
PPAs/MoU's Signed* (MW) Commissioned )MW) 5 8
ODISHA
Allocation through reverse bidding - not guided by policy. Deadline for commissioning for 25 MW allocated earlier this year is August 2013 - project under litigation and likely to miss deadline New allocation for 25MW carried out
NSM batch I RPSSGP
5 8
POTENTIAL RISERS
State allocations
50
BIHAR UTTAR PRADESH
State policy was declared and 150 MW allocated State policy was declared and 200 MW capacity is being allocated through a bidding process
State Policy NSM batch I RPSSGP RPO State policy MoU
150 5 8 5 200 50 300 8.5 1 7 8.8 5 2 4 14 16 2.5 5 No development so far No development so far No development so far No development so far No development so far No development so far No development so far No development so far No development so far No development so far No development so far No development so far No development so far
0 5 7 5 0 0 0 6 1.325 2
* We do not expect that all projects that have been allocated or have signed MoUs will be constructed and commissioned
PUNJAB
State policy was declared and 300 MW capacity is being allocated through bidding
State Policy RPSSGP Demo project Migration projects
HARYANA UTTARAKHAND
Broad Renewable Energy Policy, No policy specic to solar energy Existing Broad Renewable Energy Policy No state solar policy New solar policy announced but no allocation process has been announced No state solar policy No solar policy yet, notied their RPO requirments. Solar rooftop policy expected. NTPC has set up a project Rooftop solar policy and draft solar policy announced No state solar policy (Rooftop projects initiated by MIREDA) Draft Solar Policy (Not formalized) Draft Solar Policy (Not formalized) No state solar policy. Experimenting with smart grid. No state solar policy No state solar policy No state solar policy No state solar policy No state solar policy No state solar policy No state solar policy Only central renewable energy policy
RPSSGP RPSSGP GBI RPSSGP RPO (private) RPSSGP RPO (private) RPO
7.8 5 2 4 14 16 2.5 5
SLOW MOVERS NON -MOVERS
WESTBENGA CHATTISGARH JHARKHAND DELHI ANDAMAN & NICOBAR KERALA MANIPUR TRIPURA MIZORAM PUDUCHERRY ASSAM HIMACHAL PRADESH ARUNACHAL PRADESH NAGALAND MEGHALAYA SIKKIM GOA UNION TERRITORIES
RPO (private): projects initiated to fulll RPO obligations of private DISCOMs RPO (state): projects initiated directly by state to fulll RPO obligations of state DISCOMs MoU - Memorandum of Understanding (MoU) signed between states and private developers Rooftop scheme: Gandhinagar rooftop scheme NSM: rst batch of projects allotted under phase-1 of NSM (includes the migration projects) RPSSGP: rooftop & small solar power generation program under NSM GBI: projects under MNRE GBI scheme BRIDGE TO INDIA, 2013
Total
4432.55
1718.02
25
Parity Based Demand

Rising grid electricity prices, frequent power interruptions, costly diesel backup electricity and falling costs of solar energy, have made solar PV an attractive technology.
Parity based projects have already begun to take shape in India and this segment promises to provide a stable growth in capacity additions going forward. India is facing an acute energy decit of 10-13%. Industrial and commercial electricity prices have risen by nearly 11% p.a. from 2000 to 2010 while agricultural electricity prices have remained more or less constant as a result of cross-subsidies. Rising grid electricity prices, frequent power interruptions, costly diesel backup electricity and falling costs of solar energy, have made solar PV an attractive technology.
ii) Industrial power consumers, i.e., manufacturing facilities, that are charged the industrial tariff, which is usually the second highest and can be over to ` 8 ( 0.12/$ 0.15)/ kWh in certain locations iii) Residential power consumers are usually charged less than industrial and commercial consumers and the tariffs can be as high as ` 7 ( 0.10/$ 0.13)/kWh in certain locations iv) Agricultural power consumers usually receive subsidized tariffs. These are amongst the lowest in all segments and in some locations power is even free.
The case for parity for commercial consumers
Commer cial tariff (INR)
Solar power is already cheaper than grid power for commercial consumers in Maharashtra, Delhi and Kerala even without the capital subsidy.
Based on BRIDGE TO INDIAs analysis (refer to the graph), solar The power consumption market in power is already cheaper than grid India can broadly be categorized into power for commercial consumers four segments: in Maharashtra, Delhi and Kerala even without the capital subsidy. i) Commercial power consumers, i.e., Commercial consumers in other consumers such as malls, ofce states like Andhra Pradesh, Odisha, spaces and retail outlets paying Tamil Nadu, Gujarat, Karnataka, West a commercial tariff as high as ` Bengal, Uttar Pradesh, Rajasthan and 11 ( 0.17/$ 0.20)/kWh in certain Madhya Pradesh can also reduce their locations (the highest amongst all energy costs if they go through the segments) subsidy route.
Case for commercial parity across different states in India

16.0 14.0 12.0 10.0 8.0 6.0 4.0 2.0
Maharashtra (MSEDCL) Delhi Kerala Andhra Pradesh Odisha Tamil Nadu Gujarat (PGVCL/DGVCL) Karnataka West Bengal (Kolkata CESC) Uttar Pradesh Rajasthan Madhya Pradesh Punjab Haryana (except Gurgaon) Sikkim Uttaranchal Bihar Goa Tripura Arunachal Pradesh Mizoram Manipur Assam Jharkhand Meghalaya Nagaland Jammu & Kashmir Himachal Pradesh Chhattisgarh
0.0
Parity without subsidy Parity with subsidy No parity Solar LCOE without subsidy Solar LCOE with subsidy LCOE for diesel gen-set

For consideration of LCOE calculation, it has been assumed the investment in solar would be compared against any other investment that would yield a equity IRR of 13+%.
26
The parity for residential and agricultural consumers has not yet been achieved in any of the states and these markets will still take a few years to take off without any policy support.
Further, if diesel is used as a backup the cost per kWh of electricity increases drastically. Cost of energy for diesel based generation is more than ` 14 ( 0.21/$ 0.28)/kWh and is set to increase in the future. Solar can be used as a tool to replace or offset the operating load of the diesel gen-set which will eventually lead to savings on diesel.
The parity for residential and agricultural consumers has not yet been achieved in any of the states and these markets will still take a few years to take off without any policy support. Viability enablers Apart from the parity, there are other incentive driven mechanisms that will make the business case stronger for such projects. Capital subsidy Government of India (MNRE) provides up to 30% of capital subsidy on the roof top systems (off-grid) with project sizes up to 500 kW. This can be signicant nancial driver for smaller projects. As shown in the graphs above, many more states achieve commercial or industrial parity if a capital subsidy of 30% is available for such systems. REC mechanism
The case for parity for industrial consumers

Industrial tariffs are typically 1015% lower than commercial tariffs. Due to this reason, the industrial segment might scale up later than the commercial segment. However, as most mid-sized industries are located outside city limits and not necessarily in designated industrial areas, power failures are frequent; increasing the viability of using solar power. Also, industrial complexes often have a high load requirement and ample rooftop space, making them good sites for solar power.
The MNRE provides up to 30% of capital subsidy on the roof top systems (off-grid) with project sizes up to 500 kW.
As described in the obligation based demand section, project developers can sell the renewable component of As per BRIDGE TO INDIAs analysis the power as RECs to obligated entities (refer to the graph), states like Delhi, Maharashtra, Odisha, Gujarat and West through an exchange. Bengal are fairly close to being viable In order to provide some certainty on destinations for the use of solar power REC prices, the CERC has xed a oor by industrial consumers without the and forbearance price for the period subsidies and it already makes sense 2012 to 2017 between which the RECs to use solar power with subsidies in can be traded. these locations.
Case for industrial parity across different states in India

16.0 14.0
Industrial tariff (`)
12.0 10.0 8.0 6.0 4.0 2.0

Delhi Maharashtra (MSEDCL) Odisha Gujarat (PGVCL/DGVCL) West Bengal (Kolkata CESC) Uttar Pradesh Punjab Andhra Pradesh Tamil Nadu Karnataka Haryana (except Gurgaon) Bihar Madhya Pradesh Rajasthan Uttaranchal Goa Meghalaya Sikkim Manipur Kerala Mizoram Tripura Arunachal Pradesh Assam Jharkhand Jammu & Kashmir Nagaland Himachal Pradesh Chhattisgarh
Parity with subsidy No parity Solar LCOE without subsidy Solar LCOE with subsidy LCOE for diesel gen-set
0.0

27
Solar REC price projections14

(2012-2017) Floor Forbearance Floor ` 2,200 ( 33/$ 44) (2017-2022) Forbearance ` 4,000 ( 61/$ 80) 0 (2022 onwards) Floor Forbearance 0
A company can claim 80% accelerate depreciation in the rst year of installation under section 80 IC of the Indian Income Tax code
` 9,300 ( ` 13,400 ( 143/ $186) 206/$ 268)

BRIDGE TO INDIAs REC pricing model shows that projected REC oor and forbearance prices for the control period 2017-2022 are as shown above. There are several issues with regards to the bankability of RECs. To read more about such issues, refer to BRIDGE TO INDIAs decision brief called REC Mechanism - Viability of Solar Projects in India
Tax holiday and accelerated depreciation

A company can claim 80% accelerate depreciation in the rst year of installation under section 80 IC of the Indian Income Tax code, leading to savings on income tax and overall prot. This benet can be claimed by both commercial and non-commercial entities. Tax holiday is provided on 10 years of revenue of a solar project. During this period only Minimum Alternate Tax (MAT) is to be paid.
Installation and use of solar power is considered to be a CSR activity and expenditure incurred to procure solar power can be shown as such.
companies to spend 2% of their operating prots of CSR activities. Till date, this is not mandatory and corporates are asked to submit and publish their CSR spending. Most of the reputed corporates in India do show this spending. Installation and use of solar power is considered to be a CSR activity and expenditure incurred to procure solar power can be shown as such. Buying solar power not only allows companies to meet their objectives of energy cost reduction and energy security but it also allows them to fulll their CSR obligations. The government of India is planning to make CSR spending a compulsory provision for all corporates in the future. For a detailed analysis of the parity markets and the future scenario, read the April 2013 edition of the India Solar Compass.15
Corporate Social Responsibility (CSR)

Under the Companies Bill of India, there is a provision that asks
---------------------14 Source: BRIDGE TO INDIA analysis 15 BRIDGE TO INDIAs April 2013 edition of the India Solar Compass
PROJECT TRENDS
If a capacity of 800 MW comes up in Andhra Pradesh and Tamil Nadu, it will be a signicant shift of project locations from the West to the South of India.
Until now, the Indian solar market has almost completely been driven by policy based projects. Most of these projects have been concentrated in Rajasthan and Gujarat and they account for 80% of Indias installed capacity. Announcement of policy based allocations in Tamil Nadu and Andhra Pradesh promised a shift of the focus in the Indian market to the southern states. However, both policies have had uncertainties with regards to the allocation process. Both Tamil Nadu and Andhra Pradesh planned to allocate 1,000 MW each. In Tamil Nadu, a capacity of 690 MW is expected to come up after several rounds of investigations and the situation in Andhra Pradesh is not yet clear. However, If a capacity of 800 MW comes up in Andhra Pradesh and Tamil Nadu, it will be a signicant shift of project locations from the West to the South of India. We observe a trend in the Indian solar PV project development space towards bilateral, open access contracts (often under the 'captive' or 'group captive' models) for sale of power to commercial and industrial consumers. These projects typically rely on the REC mechanism to become nancially attractive. However, given its uncertainty, most developers have planned for only a portion of the RECs to be sellable. For example, while calculating a projects nancial viability, a developer may consider a sale of only 50% of the RECs generated by 2017. Based on such assumptions, developers have been able to offer a tariff of ` 4 - ` 8 ( 0.06 - 0.12/$ 0.08 - $ 0.16)/kWh to industrial consumers. A focus is on states such as Madhya Pradesh and Andhra Pradesh, where the open access charges for solar power have either been waived off or are below ` 1.50 ( 0.02/$ 0.03)/kWh. Since, there are signicant risks associated with supplying power to a single customer and building a system directly at a clients location. To mitigate this risk, many developers
are more comfortable with providing power through the grid to multiple offtakers located in industrial clusters. The plant would be set up nearby. This is called a 'group captive' model. Under this model, in case of a dispute with one or more of the off-takers, a developer can easily nd another offtaker for that share of power, making the model more bankable. It can also give a developer some exibility to sign short-term PPAs, opening up a new customer segment. Along with the exibility and bankability, this model also provides scale (project sizes are typically 10 MW and above), which can help bring down the tariff, if the scale effect is larger than any additional grid charges.
Outlook
A capacity of 1.7 GW has already been installed and close to 1.5 GW of PV is currently under development in India. Projects that are now achieving nancial closure and are nalizing vendors are mostly from states like Madhya Pradesh and Karnataka. New projects in Tamil Nadu and Rajasthan are starting the project development process and are looking for debt nancing options. BRIDGE TO INDIA expects a capacity of over 1 GW to be installed in 2013. Going forward, a lot of momentum is building up for capacity additions in 2014. Projects under the second phase of the NSM and in states like in Tamil Nadu, Andhra Pradesh, Madhya Pradesh, Karnataka, Rajasthan, Punjab and Uttar Pradesh are all expected to be commissioned next year. By our estimates, 2014 will see a capacity addition of around 2 GW. Many international companies had dropped India from their group of focus-countries in 2012, which was a slow year. They should now reconsider and take a look at India again as the market is poised to pick up. In addition to increased demand this year, we expect convergence towards more sustainable prices in the market.
29
Given its uncertainty, most developers have planned for only a portion of the RECs to be sellable.
FINANCING Financing overview TRENDS

Interest rates in India have been at an alltime high. This has a signicant downside on the margins for project developers who are already working with some of the lowest solar FiTs in the world.
Financing of solar projects in time continues to be a critical challenge for project developers. Banks show concerns over factors such as: bankability of PPAs, lack of experience in the sector, uncertainty on implementation of regulatory mechanisms such as RPOs and the REC mechanism and absence of reliable irradiation and plant performance data among other factors. For Indian banks, lending to solar projects is part of their overall lending to the power sector. With a limit on the exposure a bank can have in a particular sector, most Indian banks consider solar projects to be too small and also risky to even be considered for power sector lending. Interest rates in India have been at an all-time high. This has a signicant downside on the margins for project developers who are already working with some of the lowest solar FiTs in the world. These reasons have prompted many project developers to look for cheaper and more reliable sources of project nance internationally. Developers such as Azure Power, Green Infra, Mahindra Solar and Kiran Energy among many others have nanced their projects using international nancing sources in the past. Overall, with an installed capacity of over 1.7 GW, much more clarity is
emerging on the process and structure of debt nancing for solar projects in India. For projects under the batch two of phase one of the NSM, most project developers were able to achieve nancial closure for project capacities as large as 50MW within eight months. This shows the level of maturity that has developed in the market since batch one of phase one of the NSM, where many developers had to show an internal nancial closure through pure equity funding for project capacities of 5MW. The improvement can be attributed to the large size of the companies in terms of their balance sheets and also prior solar project development experience.
Financing options
There are various sources for debt nance available in the Indian solar market. They vary with respect to speed, cost (interest rate), lending criteria, risk perception and motivation. Finding the right source of debt nancing is one of the key competitive advantages in an increasingly commoditized solar market.
Some of the rst banks to nance solar projects in India have been the Bank of Baroda, Axis Bank, ICICI Bank, State Bank of India, IDBI Bank and Yes Bank.
Indian commercial banks

The majority of solar projects in India have been nanced by Indian commercial banks. Some of the rst banks to nance solar projects in India have been the Bank of Baroda, Axis Bank, ICICI Bank, State Bank of India, IDBI Bank and Yes Bank. Almost all of the disbursed loans in India so far have been backed by the promoters balance sheets.
Financing details for Indian commercial banks

SBI, ICICI Bank, Axis Bank, Yes Bank, IDBI Bank
10.25% (RBI Base)16 + 2.75 - 4.25% (Margin) =13-14.5%
30:70
9 12 years
Approx. 1.40 3 months
---------------------16 The base rate is as of 25th January 2013 and subject to change. In most likelihood, the rates are to be revised downward from here.
Prominent banks nancing the sector
Interest rates
Debtequity ratio
Loan tenure
DSCR Timeexpectation line
Financing details for NBFCs

Prominent NBFCs nancing the sector
Interest rates
Non-bank nancial companies (NBFCs) are nancial institutions that provide banking services without meeting the legal denition of a bank, i.e. they do not hold a banking license.
L&T Infrastructure Finance Company, PFC, SBICAPS, IL&FS Financial Services, Mahindra Finance
10.25% (RBI Base) or + 2.50%-2.75% (Margin) =12.75-13.00%
30:70
9 15 years
Approx 1.35
2-3 months
Non-banking nancial companies

Non-bank nancial companies (NBFCs) are nancial institutions that provide banking services without meeting the legal denition of a bank, i.e. they do not hold a banking license. Some of the prominent NBFCs that are open to nancing solar projects include: L&T Infrastructure Finance Company (subsidiary of L&T Financing Holdings), Power Finance Corporation (PFC), Mahindra Finance, IDFC, IL&FS and SBI Capital Markets. The procedure, interest rates and expectations with regards to IRR and DSCR for NBFCs is similar to that of the Indian banks.
2. Dedicated power sector nancing: The Power Finance Corporation (PFC) and Rural Electrication Corporation are the two leading public nance companies dedicated to India's power sector. Both are nancing solar projects in India. PFC is Indias largest staterun lender to electricity utilities. 3. Investment banks: Investment banks typically syndicate debt from multiple sources and make it available to the borrower under a single contract. Among Indian investment banks, SBI Capital Markets (SBICAPS) has been a prominent player in nancing solar projects. In most instances, foreign banks that are not comfortable with lending to a developer directly may be open to lending to such Indian investment banks for a portfolio of similar projects. This debt is then passed on to the developers with a margin and a hedging charge.
The procedure, interest rates and expectations with regards to IRR and DSCR for NBFCs is similar to that of the Indian banks.
NBFCs can be of the following types:
1. Infrastructure funds: Infrastructure funds are specialized NBFCs focusing on infrastructure investments. It is useful to categorize them separately as most of them Export Credit Agencies/ are actively involved with solar Investment insurance investments in India. Infrastructure agencies Development Finance Company (IDFC) is a key infrastructure fund that is actively nancing projects in An export credit agency (ECA) or investment insurance agency is usually India.
Financing details for Export Credit Agencies

US EXIM
0.7% (LIBOR17) + 3.5% (350-400 BIPS18) (Margin)+ 6.5% (Hedging) = 10.7%
Up to 9 16 80%based years on value of imports
Approx. 1.45
5-6 months
---------------------17 London Inter Bank Offered Rate 18 Base points 1/100

Prominent Interest rates banks nancing the sector
Debtequity ratio
Loan DSCR tenure expectation
Timeline
Debt equity ratio
Loan tenure
DSCR expectation
Timeline
A primary objective of ECAs is to further the exports (modules, inverters, EPC) from the host country for solar projects in India.
a government-backed institution that supports exporters of a given country by reducing the cost of risk/ debt associated with cross-border transactions. The nancing can take the form of direct debt support and/ or credit insurance and guarantees. A primary objective of ECAs is to further the exports (modules, inverters, EPC) from the host country for solar projects in India. The US EXIM bank has been the most active ECA in the Indian solar market.
Development nance institutions

Development Funding Institutions (DFIs) are multilateral or unilateral
funding agencies, which provide credit in the form of higher risk loans and loan guarantees in developing countries. DFIs have a mandate to provide nance to the private sector for investments that promote development and many DFIs actively provide nancing for solar energy. DFIs sometimes use the same tools as ECAs to carry out their loan disbursement, i.e., through direct lending, nancial intermediary loans and interest rate equalization. IFC, ADB, OPIC and IREDA are some of the prominent lenders in the Indian solar market.
Financing details for Development Finance Institutions
Development Funding Institutions are multilateral or unilateral funding agencies, which provide credit in the form of higher risk loans and loan guarantees in developing countries.
Prominent Interest rates banks nancing the sector IFC, OPIC, ADB, DEG OPIC 2.5% (US Treasury rate) + 2.5 -3% (Margin/ 200 BIPS) + 6.5% (Hedging) = 11.5-12% Some other DFIs 0.7% (LIBOR19) + 3.5% (Margin - 350-400 BIPS20) + 6.5% (Hedging) = 10.7%
Debtequity ratio 25:75
Loan DSCR Timetenure expect- line ation 9 16 years Approx. 1.45 6-7 months
---------------------19 London Inter Bank Offered Rate 20 Base points 1/100

WHAT IS THE FUTURE OF THE STEPS REQUIRED TO INDIAN SOLAR TRIGGER MARKET MARKET? GROWTH
The current regulatory mechanism is not conducive for decentralized generation using solar PV. Conducive regulatory mechanism for decentral generation
Alternatively, adequate incentives can be provided to obligated entities to meet their RPOs (as practiced in countries like the UK and Australia).
Re-adjustment in the REC mechanism
The RPOs are xed and enforced at a state level, and though most states have a solar RPO they are not taking any steps to actively enforce them.
The solar REC mechanism is yet to gain popularity in the Indian Regulations related to power solar market. The primary reasons generation in India have been surrounding this is the lack of RPO formulated with centralized enforcement and the uncertainty generation in mind. This means that surrounding the price of the REC for interconnection to the grid, a beyond 2017. For the REC mechanism power generator must account for to pick up pace in the market, states open access charges, cross-subsidy have to make it mandatory for surcharge, transmission charges, obligated entities to fulll their solar transmission losses, wheeling RPOs. Also, if an aspect of certainty charges, wheeling losses, etc. This is brought into the long term pricing regulatory mechanism is not conducive of RECs, it would be easier to obtain for decentralized generation using nancing for REC projects, thus solar PV. These charges should be inducing more players to enter this removed or minimized for generation sector. Various proposals like providing using solar PV. Also, there needs to more certainty on prices, adoption be uniformity across states for such of vintage RECs, etc. are under levies. For example, cross subsidy consideration. Unless there is visibility surcharge varies from ` 0.53 ( 0.008/$ on prices, investors will continue to 0.01) to ` 2.84( 0.04/$ 0.06) depending be hesitant to invest. The mechanism upon the state, type of consumer in its current form has been unable to and the type of feeder.A regulatory work as expected and a change in the environment that is conducive for mechanism is has become necessary. decentralized generation can help make projects more feasible and Easier access to nance development more streamlined. Availability of nance has been a key Stricter RPO challenge in the Indian solar market. The primary reason for this has been enforcement the bankability of off-takers and One of the key challenges faced by apprehension about actual power the solar power sector in India is the production meeting expectations. Many degree of uncertainty surrounding the projects in India are not performing as enforcements of RPOs. The RPOs are expected and this is a key concern for xed and enforced at a state level, and nancing institutions that are invested though most states have a solar RPO in such projects. Project developers they are not taking any steps to actively need to maintain the quality of projects enforce them. In order to enforce to ensure performance. Availability RPOs effectively, states have to put in of performance data for previously place a stringent penalty structure, executed plants is going to be a key for wherein the penalty is higher than developers to seek future investments the forbearance price of solar RECs. into their projects.
33
GLOSSARY
AEDP Alternative Energy Development Plan APPC Average Pooled Purchase Cost BALCO Bharat Aluminum Company Ltd. CERC Central Electricity Regulatory Commission CSP Concentrated Solar Power CSR Corporate Social Responsibility DCR Domestic Content Requirement DFI Development Funding Institution DISCOM Distribution Company DoT Department of Telecom ECA Export Credit Agency FiT Feed-in Tariff GBI Generation Based Incentive LCOE Levelized Cost of Energy LoI Letters of Intent MASEN Moroccan Agency For Solar Energy MAT Minimum Alternate Tax MENA Middle Eastern and North African MNRE Ministry of New and Renewable Energy MoP Ministry of Power NALCO National Aluminum Company Ltd NAPCC National Action Plan on Climate Change NBFC Non-Bank Financial Company NREA New and Renewable Energy Authority NSM National Solar Mission PFC The Power Finance Corporation PPA Power Purchase Agreement PPP Public Private Partnership PV Photovoltaic REC Renewable Energy Certicate REIPP Renewable Energy Independent Power Producer Program RESCO Renewable Energy Service Company RET Renewable Energy Technology RfS Request for Selection
RPO Renewable Purchase Obligation SBICAPS SBI Capital Markets SECI Solar Energy Corporation of India SEZ Special Economic Zone SPO Solar Purchase Obligations TANGEDCO Tamil Nadu Generation and Distribution Corporation TNERC Tamil Nadu Electricity Regulatory Commission UPPCL Uttar Pradesh Power Corporation Limited VAT Value Added Tax VGF Viability Gap Funding
35
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BRIDGE To INDIA - India Solar Handbook June 2013

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The India Solar Handbook

June 2013 edition

BRIDGE TO INDIA, 2013

The India Solar Handbook

Visit our website www.bridgetoindia.com

BRIDGE TO INDIA, 2013

June 2013 edition

THE INDIA SOLAR HANDBOOK

To advertise in future publications, contact Jasmeet Khurana jasmeet.khurana@bridgetoindia.com

BRIDGE TO INDIA, 2013

Is India the right market for solar? 

What is the expected demand?  Overview of the market segments 

What currently drives solar in India? 

Project trends  Financing trends 

What is the future of the Indian solar market?  33 Glossary 

BRIDGE TO INDIA, 2013

BRIDGE TO INDIA, 2013

Over 1.7 GW of installed PV capacity

Source: BRIDGE TO INDIA

BRIDGE TO INDIA, 2013

One of the fastest growing solar markets globally

Source: BRIDGE TO INDIA

Stable markets Rising markets Nascent markets

---------------------3 IEA; PVPS report - A Snapshot of Global PV 1992-2012 4 Ibid. 5 Ibid.

BRIDGE TO INDIA, 2013

South Africa plans to install 1,450 MW of solar PV by the end of 2016.

BRIDGE TO INDIA, 2013

BRIDGE TO INDIA, 2013

Overview of the international markets

Average solar resource/ Irradiation

Installed capacity (as on December 2012) Sate level Yes FiT

Different RPS for 7.2 GW states

National level FiT

BRIDGE TO INDIA, 2013

State level FiT

Market largely driven by residential consumers

Emerging markets State level FiT Yes

20 GW on grid 2 GW off grid by 2022

BRIDGE TO INDIA, 2013

Installed capacity (as on December 2012)

FiT / Other incentives

Tax incentives and subsidies

Quota obligation or green certicates

Market characteristics and key drivers

Market potential projected for 2016

National level "adder" premiums

BRIDGE TO INDIA, 2013

MENA (Morrocco , Saudi Arabia, Egypt)

Morocco5.4; Saudi Arabia 5.7; Turkey -4.45

3.27 GW from renewables by 2016 ; 1.450 GW of solar PV

10% of electricity 3.6 MW by RE by 2024

BRIDGE TO INDIA, 2013

Installed Capacity (MW)

1500 1000 500 0

BRIDGE TO INDIA, 2013

Source: BRIDGE TO INDIA

5000 4500 4000 3500 3000 2500 2000 2,834 3,522

BRIDGE TO INDIA, 2013 11

Source: BRIDGE TO INDIA

BRIDGE TO INDIA, 2013

RPO (thermal captive)

BRIDGE TO INDIA, 2013

Diesel captive and diesel backup

Is India the right market for solar?

What is the expected demand? Overview of the market segments

What currently drives solar in India?

Project trends Financing trends

What is the future of the Indian solar market? 33 Glossary