SUMMER INTERNSHIP PROJECT REPORT

ON
Indian Solar Market Analysis Policy, Business Models and Stakeholders for an
International Investor
&
Study of Green Corporate Social Responsibility (CSR) Solutions

Under the guidance of
Dr. Manisha Rani, Fellow, NPTI
&
Mr. Alok Tripathi, Director, Power Plus Consultants

At
Power Plus Consultants, New Delhi


Submitted by
KALYAN VERMA
Roll No: 105
MBA (POWER MANAGEMENT)
2012-2014



Sector-33, Faridabad 121003, Haryana

(Under the Ministry of Power, Govt. of India)

Affiliated to




MAHARSHI DAYANAND UNIVERSITY, ROHTAK

AUGUST, 2013
ii


TRAINING COMPLETION CERTIFICATE
iii

DECLARATION

I, KALYAN VERMA, Roll No. 105 , Registration No. 12NPTIF0092 student of MBA
- Power Management (2012-14), XI
th
Batch at National Power Training Institute, Faridabad
hereby declare that the Summer Training Report entitled Indian Solar Market Analysis
Policy, Business Models and Stakeholders for an International Investor & Study of Green
Corporate Social Responsibility (CSR) Solutions is an original work and the same has not
been submitted to any other Institute for the award of any other degree.

A Summer Internship Presentation & Report was Presented and submitted on
__________________ and the suggestions as approved by the faculty were duly
incorporated.





___________________ ______________________
Signature of the Guide Signature of the Candidate



Countersigned
Director/Principal of the Institute
iv

ACKNOWLEDGEMENT

I express my gratitude to the management of Power Plus Consultants who have shown
confidence on me and bestowed upon me this valuable task.
I take this opportunity to express my sincere thanks to Mr. Alok Tripathi (Director,
Power Plus Consultants) for his support and guidance throughout the course of the project.
I also thank Mr. S.K. Choudhary (Principal Director), Mrs. Manju Mam (Director),
Mrs. Indu Maheshwari (Dy. Director), for providing me such a nice opportunity to work
with this organization. My internal project guide Dr. Manisha Rani (Faculty) provided me
constant support and motivation during the course of the internship. She also helped me
in structuring this project report and also on various other aspects of the study. I am very much
thankful to her for her support. I thank all members of CAMPS rendering kind help during the
project work.
Last but not the least; I am grateful to my family, friends & seniors at CAMPS, NPTI.
Thank you all for being there for me always.

KALYAN VERMA
ROLL NO: 105
MBA (POWER MANAGEMENT)
v

EXECUTIVE SUMMARY

The Project work in the first phase required preparing a pre-feasibility report for an
international investor for setting up a solar power plant. The investor being totally unfamiliar
with the Indian power sector scenario had to be briefed right from Indias energy mix to drivers
for solar power in India and how solar power fits in the Indian scenario. India has a very good
GHI (5.1) and large no. of sunny days (330 approx) per year in most parts of the country. With
support from the Government in the form of policies and subsidies, it will not take long for solar
power to achieve parity with other sources of energy generation.
We targeted the following six states for our analysis Rajasthan, Gujarat, Andhra
Pradesh, Punjab, Madhya Pradesh and Maharashtra. We collected data about the different states
performance in terms of the four major parameters for establishing a solar power plant i.e.
radiation levels, ease of land acquisition, ease of Governmental clearances and local support.
Analysis of the Regulatory framework and the historical growth of the solar sector in
India gave us an overview of the sector. A Comparative, in-depth study was then carried out for
JNNSM and the target states solar policies. A market study in the form of leading developers,
module manufacturers, EPC players , inverters (technology and manufacturers) and viable
business models to sell the solar power was then carried out to get exact statsitics required for
making an investment.
The second phase of the project was studying the various Green CSR methods which the
companies can implement as part of their mandatory CSR spending and also how CSR can be
implemented as a business strategy. The new companies bill mandates large sized corporations to
spend 2% of their net profits on Corporate Social Responsibility (CSR) activities. A large part of
this potential fund can be channelized for sustainable development. Sustainable development
forms one of the nine verticals which qualify under CSR. Green CSR can be implemented
through Renewable Energy based CSR interventions, Energy Efficiency and Renewable Energy
Certificates.

vi

LIST OF FIGURES:

Figure 1 : Solar Power Capacity Requirement by 2022 ................................................................................ 2
Figure 2 : Sources of Research ..................................................................................................................... 4
Figure 3 : India - State-wise Wastelands Distribution .................................................................................. 7
Figure 4 : India's Energy Mix (As of 31.07.2013) ...................................................................................... 10
Figure 5 : YOY INCREASE IN SOLAR INSTALLED CAPACITY (MW) ............................................. 13
Figure 6 : JNNSM (Phase I, Batch I) Projects Status ................................................................................. 16
Figure 7 : JNNSM (Phase I, Batch II) Projects Status ................................................................................ 17
Figure 8 : Rajasthan Solar Policy (Projects Status) .................................................................................... 19
Figure 9 : Gujarat (Solar RPO Target) ........................................................................................................ 21
Figure 10 : Gujarat (Projects Status) ........................................................................................................... 21
Figure 11 : Andhra Pradesh (Projects Status) ............................................................................................. 24
Figure 12 : Maharashtra (Solar RPO Target) .............................................................................................. 26
Figure 13 : Punjab (Projects Status) ............................................................................................................ 27
Figure 14 : Punjab (Tariff Discovered) ....................................................................................................... 27
Figure 15 : Madhya Pradesh (Projects Status) ............................................................................................ 29
Figure 16 : Developers break up State-wise ............................................................................................... 32
Figure 17 : Existing EPC Models ............................................................................................................... 33
Figure 18 : Preferred Technology ............................................................................................................... 35
Figure 19 : Preferred Technology (NSM Phase I, Batch I) ......................................................................... 36
Figure 20 : Module/Cells supply break-up ................................................................................................. 36
Figure 21 : Inverter break up in Indian Solar Domain ................................................................................ 37
Figure 22 : APPC + REC Business Model ................................................................................................. 38
Figure 23 : Pseudo Captive Business Model .............................................................................................. 40
Figure 24 : Segmentation of Corporate Social Responsibility .................................................................... 47
Figure 25 : Spending on CSR Activities by 100 Profitable Companies in India 2012 ............................... 48
Figure 26 : Segment wise CSR Spending by Organizations in 2012 .......................................................... 49
Figure 27 : Sectors Contributing in CSR Activities in 2012 ....................................................................... 50
Figure 28 : Boundaries Defining Green Energy CSR ................................................................................. 51
Figure 29 : All India Generating Capacity (In MW as of 31.07.2013) ....................................................... 52
Figure 30 : Source wise and YOY Targets set during 12th Plan Period (MW) .......................................... 52
Figure 31 : Renewable Energy Initiatives under CSR Activities ................................................................ 54
Figure 32 : Planned Installed Capacity from Solar (MW) .......................................................................... 55
Figure 33 : Solar powered cell charging stations ........................................................................................ 57
Figure 34 : Off-Grid RE Capacity (MW) .................................................................................................... 58
Figure 35 : Concept of Renewable Energy Certificates .............................................................................. 58
Figure 36 : Registered Capacity under REC Mechanism (MW) ................................................................ 60
Figure 37 : Various Energy Efficiency Measures ....................................................................................... 64
Figure 38 : Electrical Energy Savings in Terms of Equivalent Avoided Capacity (MW) .......................... 65

vii

LIST OF TABLES:

Table 1 : Incremental Solar Capacity (MW) - YOY ..................................................................................... 2
Table 2 : State-wise Irradiation ..................................................................................................................... 5
Table 3 : State-wise Distribution of Wastelands ........................................................................................... 7
Table 4 : Solar Potential in India .................................................................................................................. 8
Table 5 : Performance of States on parameters vital for Solar Plant Installation ....................................... 9
Table 6 : PV VS CSP (COMPARATIVE ANALYSIS) ............................................................................. 12
Table 7 : Total Installed Capacity (Solar Power As of 31.07.2013) ........................................................... 14
Table 8 : JNNSM Overall Targets (GW) .................................................................................................... 15
Table 9 : JNNSM Achievements (Phase I) ................................................................................................. 15
Table 10 : Tariff Discovered (Jnnsm Phase I,Batch II) .............................................................................. 18
Table 11 : Rajasthan Solar Policy (Tariff Discovered) ............................................................................... 20
Table 12 : Gujarat (Feed in Tariff) .............................................................................................................. 22
Table 13 : Andhra Pradesh (Tariff Discovered) .......................................................................................... 24
Table 14 : Key Developers in India (Solar Power) ..................................................................................... 31
Table 15 : Market Potential Estimation of Unrestricted Voluntary REC Market in India (INR Crore) ..... 62




viii

LIST OF ABBREVIATIONS:

JNNSM JAWAHARLAL NEHRU NATIONAL SOLAR MISSION
NAPCC NATIONAL ACTION PLAN ON CLIMATE CHANGE
GHI GLOBAL HORIZONTAL IRRADIANCE
APPC AVERAGE POWER PURCHASE COST
CUF CAPACITY UTILIZATION FACTOR
MNRE MINISTRY OF NEW AND RENEWABLE ENERGY
CEA CENTRAL ELECTRICITY AUTHORITY
CERC CENTRAL ELECTRICITY REGULATORY COMMISSION
RPO RENEWABLE PURCHASE OBLIGATIONS
REC RENEWABLE ENERGY CERTIFICATES
PAT PROFIT AFTER TAX
DCR DOMESTIC CONTENT REQUIREMENT
RFP REQUEST FOR PROPOSAL
RRF RENEWABLE REGULATORY FUND
IREDA INDIAN RENEWABLE ENERGY DEVELOPMENT AGENCY LTD.
ABT AVAILABILITY BASED TARIFF
PV PHOTOVOLTAIC
CSP CONCENTRATED SOLAR POWER
EPC ENGINEERING, PROCUREMENT AND CONSTRUCTION
CSR CORPORATE SOCIAL RESPONSIBILITY
ASSOCHAM
ASSOCIATED CHAMBERS OF COMMERCE AND INDUSTRY OF
INDIA
NGO NON-GOVERNMENTAL ORGANIZATION
FMCG FAST MOVING CONSUMER GOODS
VGF VIABILITY GAP FUNDING
DNI DIRECT NORMAL IRRADIANCE



ix

TABLE OF CONTENTS:

Indian Solar Market Analysis Policy, Business Models And Stakeholders For An
International Investor & Study Of Green Corporate Social Responsibility (CSR) Solutions

TRAINING COMPLETION CERTIFICATE .............................................................................................. ii
DECLARATION ......................................................................................................................................... iii
ACKNOWLEDGEMENT ........................................................................................................................... iv
EXECUTIVE SUMMARY .......................................................................................................................... v
LIST OF FIGURES: .................................................................................................................................... vi
LIST OF TABLES: ..................................................................................................................................... vii
LIST OF ABBREVIATIONS: ....................................................................................................................viii
TABLE OF CONTENTS: ............................................................................................................................ ix
INDIAN SOLAR MARKET ANALYSIS POLICY, BUSINESS MODELS AND STAKEHOLDERS
FOR AN INTERNATIONAL INVESTOR .................................................................................................. 1
CHAPTER-1 ................................................................................................................................................. 1
INTRODUCTION ........................................................................................................................................ 1
1.1 KEY DRIVERS OF SOLAR ENERGY IN INDIA .................................................................. 1
1.2 HOW SOLAR FITS IN ........................................................................................................... 1
1.3 OBJECTIVE OF THE PROJECT ......................................................................................... 3
1.4 ABOUT THE ORGANIZATION ............................................................................................ 3
1.5 RESEARCH METHODOLOGY ............................................................................................ 4
CHAPTER-2 .................................................................................................................................................... 5
SCENARIO OF SOLAR POWER IN INDIA ......................................................................................................... 5
2.1 STATES WITH HIGHEST IRRADIATION ............................................................................ 5
2.2 LAND AVAILABILITY .......................................................................................................... 6
2.3 COMPARISON OF TARGET STATES BY EASE OF LAND ACQUISITION ..................... 8
2.4 INDIAS ENERGY MIX ......................................................................................................... 9
2.5 LITERATURE REVIEW ...................................................................................................... 10
2.5.1 REGULATORY FRAMEWORK ENABLING GROWTH OF SOLAR SECTOR ...................................... 10
2.6 PV V/S CSP : INDIAN SCENARIO ................................................................................... 11
x

2.6.1 KEY ISSUES IN CSP ...................................................................................................................... 11
2.7 CURRENT STATUS OF PROJECTS .................................................................................. 13
CHAPTER-3 ............................................................................................................................................... 15
SOLAR POLICIES ANALYSIS ................................................................................................................ 15
3.1 NATIONAL SOLAR MISSION JNNSM ............................................................................ 15
3.2 NATIONAL SOLAR MISSION JNNSM (PHASE I, BATCH I) ......................................... 16
3.2.1 ASSUMPTIONS............................................................................................................................ 16
3.2.2 LESSONS LEARNT ........................................................................................................................ 17
3.3 NATIONAL SOLAR MISSION JNNSM (PHASE I, BATCH II) ....................................... 17
3.3.1 ASSUMPTIONS............................................................................................................................ 18
3.3.2 LESSONS LEARNT ........................................................................................................................ 19
3.4 RAJASTHAN SOLAR POLICY ............................................................................................ 19
3.4.1 KEY FACTS ................................................................................................................................... 20
3.5 GUJARAT SOLAR POLICY ................................................................................................ 21
3.5.1 KEY FACTS ................................................................................................................................... 22
3.6 ANDHRA PRADESH SOLAR POLICY ............................................................................... 23
3.6.1 KEY FACTS ................................................................................................................................... 24
3.7 SOLAR POWER IN MAHARASHTRA ................................................................................ 25
3.7.1 KEY FACTS ................................................................................................................................... 26
3.8 PUNJAB SOLAR POLICY .................................................................................................. 26
3.8.1 KEY FACTS ................................................................................................................................... 28
3.9 MADHYA PRADESH SOLAR POLICY .............................................................................. 28
3.9.1 KEY FACTS ................................................................................................................................... 29
CHAPTER-4 ............................................................................................................................................... 31
STAKEHOLDERS ANALYSIS ................................................................................................................ 31
4.1 KEY DEVELOPERS ............................................................................................................ 31
4.2 EPCs .................................................................................................................................... 33
4.2.1 SOLAR PROJECTS DIFFERENT MODELS EXISTS ........................................................................ 33
4.2.2 SOLAR EPC MARKET SPACE ........................................................................................................ 34
4.3 BUSINESS MODELS FOR SOLAR PLANTS : FINANCIAL VIABILITY ........................... 37
4.3.1 APPC + REC ................................................................................................................................. 37
xi

4.3.2 PSEUDO CAPTIVE MODEL .......................................................................................................... 39
4.3.3 Third Party Sale + REC ................................................................................................................ 40
4.3.4 BIDDING IN STATE POLICIES/ NSM ............................................................................................. 41
CHAPTER-5 ............................................................................................................................................... 42
RESULTS ................................................................................................................................................... 42
5.1 PSEUDO CAPTIVE MODEL : WIN WIN SITUATION FOR ALL .................................. 42
5.2 OPEN ACCESS + REC ....................................................................................................... 43
5.3 PROJECTS UNDER SOLAR POLICIES AN OPPORTUNISTIC MARKET FOR LOCAL
DEVELOPERS .......................................................................................................................... 44
5.4 BUSINESS MODEL WHERE VIABILITY DEPENDS ON REC ARE NOT BANKABLE APPC +
REC ............................................................................................................................................................. 45
CHAPTER-6 ............................................................................................................................................... 46
CONCLUSIONS ........................................................................................................................................ 46
STUDY OF GREEN CORPORATE SOCIAL RESPONSIBILITY (CSR) SOLUTIONS ....................... 47
CHAPTER-7 ............................................................................................................................................... 47
7.1 INTRODUCTION TO GREEN CSR .................................................................................... 47
7.1.1 ORGANIZATION SPENDING ON CSR ACTIVITIES ......................................................................... 48
7.1.2 SEGMENT WISE CSR SPENDING ................................................................................................. 48
7.1.3 SECTORS CONTRIBUTING IN CSR ACTIVITIES ............................................................................. 49
7.1.4 FOCUSSING ON ENVIRONMENT AND SUSTAINABILITY ............................................................. 50
7.2 GREEN CSR INITIATIVES ................................................................................................. 51
7.2.1 RENEWABLE ENERGY INVESTMENTS ......................................................................................... 51
7.2.3 OFF-GRID SOLUTIONS ................................................................................................................ 56
7.2.4 RENEWABLE ENERGY CERTIFICATES (REC) ................................................................................. 58
7.2.5 ENERGY EFFICIENCY MEASURES ................................................................................................ 63
7.3 WAY FORWARD FOR GREEN ENERGY BASED CSR INITIATIVES .............................. 65
BIBLIOGRAPHY ....................................................................................................................................... 67


1

INDIAN SOLAR MARKET ANALYSIS POLICY, BUSINESS MODELS
AND STAKEHOLDERS FOR AN INTERNATIONAL INVESTOR
CHAPTER-1
INTRODUCTION

1.1 KEY DRIVERS OF SOLAR ENERGY IN INDIA
Energy Deficit of 12% of peak demand
If India continues to grow at an average rate of 8% for the next 10 years, the countrys
demand for power is likely to soar to 315 to 335 GW by 2017 which will require a
generation capacity of 415 to 440 GW (Mckinsey Report)
About 68.1% of Indias energy generation capacity is from fossil fuels with coal
accounting for 58% of Indias total energy consumption (Central Electricity Authority)
High dependence on imports for energy requirement , total imports represents 13% of the
total primary energy supply ( Energy Statistics Report 2013)
Rising price of electricity based on coal and gas
Environmental concerns
1.2 HOW SOLAR FITS IN
High Solar Irradiation (annual average GHI of 5.1) in most of the parts of country
Large number of sunny days available (apprx. 330 )
Availability of large area of land at comparatively low costs
High solar potential near main load areas in country (Western and Southern India)
Support from Government under NAPCC and Renewable Purchase Obligation (RPOs)
In parity with other resources of energy generation with costs still going down

2


Figure 1 : Solar Power Capacity Requirement by 2022



Table 1 : Incremental Solar Capacity (MW) - YOY
FY
Energy
Requirement
(MU)
Solar RPO
(%)
Solar Energy
Requirement
(MU) for RPO
compliance
Solar Capacity
Requirement (MW) at
19% CUF
Incremental
Solar Capacity
(MW)- YoY
2011-12 929111 0.25% 2323 1396

2012-13 1001922 0.25% 2505 1505 109
2013-14 1080438 0.50% 5402 3246 1741
2014-15 1165108 0.75% 8738 5250 2004
2015-16 1256413 1.00% 12564 7549 2299
2016-17 1354874 1.25% 16936 10175 2627
2017-18 1450982 1.75% 25392 15256 5081
2018-19 1552008 2.25% 34920 20981 5725
2019-20 1660783 2.50% 41520 24946 3965
2020-21 1778109 2.75% 48898 29379 4433
2021-22 1904861 3.00% 57146 34334 4955


1505
34334
0
2000
4000
6000
8000
0
10000
20000
30000
40000
Solar Capacity Incremental Solar Capacity (MW)- YoY
~ 33,000 MW
Source : Energy Requirement Data from 18
th
EPS Survey

3

1.3 OBJECTIVE OF THE PROJECT
The basic objective of the Project is to :
1. Exhaustive analysis of the Indian Solar PV market complete value chain which includes
but not limited to policies, stakeholders and business models for an international investor
2. Study of how the companies can implement the Green Corporate Social Responsibility
(CSR) obligations and CSR as a business strategy
1.4 ABOUT THE ORGANIZATION
Power Plus Consultants is a young and dynamic organisation promoted by alumni of
National Power Training Institute (Ministry of Power). Team Power Plus Consultants consists of
young dynamic power managers and retired government officials as mentors to support the
vision of the company. The core expertise of the team of Power Managers lies in Regulatory
advisory and Market analysis. Services offered by Power Plus Consultants include:
Renewable Market Analysis
Renewable Project Development
Regulatory Advisory
Power Sector Analysis
Energy Portfolio Management
Market Intelligence
Strategic Alliances
Power Plus Consultants also maintains the website indianpowersector.com (IPS). In its three
years of operation, IPS has become Indias premier knowledge portal for 360 degree coverage of
power sector getting more than 2.0 million hits every month. The portal provides all knowledge
for free, also reaching the subscribers through daily newsletters. Team IPS believes in educating,
updating, promoting and creating awareness amongst all the stake holders in the energy sector
with the latest national and international news updates and market analysis. In the short period of
4

its existence, IPS has published numerous reports on a number of topics related to power sector.
IPS is leading media partner with all national energy sector conferences and exhibitions.
Power Plus Consultants continues to work for various national and international clients in energy
sector ranging from coal,renewable energy, generation, distribution and smart grid.
1.5 RESEARCH METHODOLOGY
To carry out the research, I have collected data from various associations with various
information organizations. State Energy Development Agencies, Ministry of Power, Central
Electricity Authority, Central Electricity Regulatory Commission are few to name. Most of the
research inputs are obtained from Secondary sources such as Journals, Reports, Publications
and from primary sources like Conferences and telephonic conversation with many
power project developers. The inputs received and the data collected from the various sources is
utilized in the formulation of business solutions and models for setting up a solar power plant.


Figure 2 : Sources of Research


Key
Data
Sources
Industry
Experts
Market
In-house
Expertise
Literature
Review
5

CHAPTER-2
SCENARIO OF SOLAR POWER IN INDIA

2.1 STATES WITH HIGHEST IRRADIATION
Key states like Rajasthan and Gujarat already have a dedicated solar policy in place and
are seeing the highest interest in solar installations. Tamil Nadu, Andhra Pradesh and Madhya
Pradesh have also released their solar policy. Irradiation matches almost directly with the
current solar growth hubs within India.
Table 2 : State-wise Irradiation
States/
Union Territories
Sample
Location
GHI
(kWh/m
2
/
Year)
Rajasthan Barmer Rd 2054
Gujarat Gada Village 2020
Tamil Nadu Salem 2005
Pudducherry Pudducherry 1998
Andhra Pradesh Anantapur 1995
Lakshadweep Lakshadweep 1991
Madhya Pradesh Neemuch 1991
Daman & Diu Daman & Diu 1966
Karnataka Bidar 1957
Maharashtra Dhule 1946
Dadra & Nagar Dadra & Nagar 1905
Goa Bicholim 1897
Chhattisgarh Kunkur 1895
Orissa Deogan 1887
Jharkhand Hazaribagh 1860
Kerala Thodupuzha 1822
6

Haryana Bhiwani 1803
Uttar Pradesh Farrukhabad 1798
West Bengal Durgapur 1777
Punjab Moga 1774
Andaman Nicobar Andaman 1762
Bihar Munger 1750
Uttarakhand Haridwar 1746
Delhi New Delhi 1735
Himachal Mandi 1707
Mizoram Aizwal 1707
Chandigarh Chandigarh 1699
Jammu Kashmir Baramulla 1695
Manipur Palel 1678
Tripura Agartala 1662
Assam Tangla 1557
Meghalaya Shillong 1543
Nagaland Mokokchung 1526
Arunachal Dambuk 1295
Sikkim Sikkim 1260


2.2 LAND AVAILABILITY
Rajasthan has been leading state in JNNSM phase 1 as it has a waste land area of more
than 25% of the total land. The four states of Gujarat, Madhya Pradesh, Rajasthan & Andhra
Pradesh have wastelands in the range of 10 15% . These four states are also amongst the high
power consuming states

Note : Irradiation data in India is not accurate
7

Table 3 : State-wise Distribution of Wastelands
SI. No. STATE NAME TOTAL
WL
TGA % to TGA
1 Andhra Pradesh 38788.22 275068 14.10
2 Gujarat 21350.38 196024 10.89
3 Madhya Pradesh 40042.95 308252 12.99
4 Maharashtra 38262.81 307690 12.44
5 Punjab 1019.50 50362 2.02
6 Rajasthan 93689.47 342239 27.38


Figure 3 : India - State-wise Wastelands Distribution


Source : Wastelands Atlas of India
8

Table 4 : Solar Potential in India
Solar Potential in India
Total land Area 3,287,263
No. of sunny days 300
Unit potential from 1 sq mt 4 kwh/day
Conversion efficiency (%) 15%
1 sq km (mn units per year) 120
0.5% of the land area (sq km) 16,438
Potential units (bn units) 1,972

The Potential is based on two assumptions. Assumption 1 : Unit potential for 1 sq. m
area is 4 kwh/day and taking solar cell efficiency conversion 15%. Assumption 2: Assuming that
0.5% of the lands area is brought under the solar net over 1900 billion units of electricity can be
generated.
2.3 COMPARISON OF TARGET STATES BY EASE OF LAND
ACQUISITION
A solar plant of scale greater than 10 MW requires a land of around 50 acres (5 acres/
MW). In India the land ownership in rural areas is distributed and hence convincing all the
owners/ farmers can be a tough task. For large scale serious developers, it is important to develop
land banks well in advance. The four main factors to be considered are quality of land surface,
grid availability, availability of water and right of way.5

9

Table 5 : Performance of States on parameters vital for Solar Plant Installation


Gujarat and Madhya Pradesh lead in terms of ease of land acquisition, ease of
Governmental clearances and local support ( i.e. in all the three parameters important for setting
up a solar power plant).
2.4 INDIAS ENERGY MIX
India primarily depends on fossil fuels to meet its energy needs and with increased
volatility in prices in fuel market, India must focus on RE sources to maintain our energy
security . India has an installed power capacity of almost 225 GW of which only 12.7% (over 28
GW) is based on renewable energy sources . Among renewable energy sources, nearly 68% of
the capacity is contributed by wind power alone and Solar Photovoltaic Plants account for 0.78%
of the total installed capacity (As of 31.07.2013).
Andhra
Pradesh
Gujarat

Madhya
Pradesh
Maharashtra Punjab* Rajasthan
Radiation data (kWh/m
2
/ Year)
5.67 5.7 5.23 5.41 5.21 5.52
Land prices (lakhs/acre)
4 to 6 6 to 8 5 to 6 8 to 10

3.5 to 5.5
Ease of land acquisition
3 1 1 2 2 2
Ease of Governmental clearances
2 1 1 2 3 2
Local Support
2 1 1 2 3 2
1: Effective and streamlined process 2: Moderate with some problem areas 3: Difficult to execute
*data not available/ private sources
10

Figure 4 : India's Energy Mix (As of 31.07.2013)


2.5 LITERATURE REVIEW
2.5.1 REGULATORY FRAMEWORK ENABLING GROWTH OF SOLAR
SECTOR

Electricity Act 2003
(e) promote co-generation and generation of electricity from renewable sources of energy by
providing suitable measures for connectivity with the grid and sale of electricity to any person,
and also specify, for purchase of electricity from such sources, a percentage of the total
consumption of electricity in the area of a distribution license;
NAPCC 2008
3% RPO by 2022
Tariff Policy 2006: Amendment in January 2011
6.4 Non-conventional and renewable sources of energy generation including cogeneration:
58.60%
9.01%
0.50% 2.10%
17.54%
9%
2%
0.56%
1.03%
0.04%
0.78%
12.71%
Coal Gas Diesel
Nuclear Hydro Wind
Small Hydro Power Biomass Bagasse Cogeneration
Waste to Energy SPV
Source : MNRE Website
11

(1) Pursuant to provisions of section 86(l)(e) of the Act, the Appropriate Commission shall fix a
minimum percentage of the total consumption of electricity in the area of a distribution licensee
for purchase of energy from such sources, taking into account availability of such resources in
the region and its impact on retail tariffs. Such percentage for purchase of energy should be made
applicable for the tariffs to be determined by the SERCs latest by April I, 2006.
(i) Within the percentage so made applicable, to start with, the SERCs shall also reserve a
minimum percentage for purchase of solar energy from the date of notification in the Official
Gazette which will go up to 0.25% by the end of 2012- 2013 and further up to 3% by 2022.
Jawaharlal Nehru National Solar Mission 2010
20 GW of solar power by 2022
Phase I : 1000 MW
Phase II : 9000 MW
Phase III: 10000 MW
CERC: REC Mechanism 2010
Solar Specific RECs
Renewable Regulatory Fund
Fund created for spreading the costs due to disparity in scheduled generation and actual
generation of Solar and Wind power
2.6 PV V/S CSP : INDIAN SCENARIO
Indian Solar market is relatively a new market and inclined towards PV. PV is a much
simpler technology having a less gestation period. Other features are ease of installations and
ease of O & M.
2.6.1 KEY ISSUES IN CSP
Requirement of high DNI
12

Scarcity of water at high DNI areas
Long gestation period
Projects only viable for higher capacities as compared to PV plants
Table 6 : PV VS CSP (COMPARATIVE ANALYSIS)
PV CSP
Technology
Uses the light of the sun to
generate electricity
Focuses the heat of the sun to generate
heat and uses liquids to transfer heat to
turbines to generate electricity
Commissioning
period
Plant can be commissioned with 3-
6 months
Plant commissioning anywhere from 6-
36 months
Types
PV, TF Fresnel, Parabolic Trough, Sterling,
Tower
Storage
Indirect Grid, Battery Banks Direct Molten Salt, Oil, Steam
Application
Small to large scale Grid,
Rooftops, Residential, Off-grid,
Small installations
Hybrids, Large Scale Grid, Industrial
Processes, Cooking, CHP
Advantages
Easy to deploy, short installation
time, low skill requirements, easily
maintainable, Lower costs, Minute
installations, Ubiquitous and long
life
Efficiency higher than PV, Improve
efficiencies of existing systems
Disadvantages
Low efficiencies, Expensive direct
storage, Unviable for residential
power
Significant water requirement for cooling
and cleaning, Needs vast tracts of
contiguous land, High DNI requirement,
Specialized skills, High raw material
usage, Lengthy Installations for large
scale projects
13


Total PV capacity : 1,815 MW
Total CSP capacity : 55.5 MW
Average project size in India : 6.9 MW
2.7 CURRENT STATUS OF PROJECTS
India has touched the mark of 1800 MW Solar installed capacity as of 31.07.2013 with
most capacity addition after the introduction of JNNSM.
Figure 5 : YOY INCREASE IN SOLAR INSTALLED CAPACITY (MW)

2.11 2.12 2.12
10.28
35.15
941.24
1800.1
0
200
400
600
800
1000
1200
1400
1600
1800
2000
2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13
Source : MNRE Website
14



Table 7 : Total Installed Capacity (Solar Power As of 31.07.2013)
Sr. No. States Installed Capacity (MW)
1 Andhra Pradesh 43.15
2 Arunachal Pradesh 0.025
3 Chhattisgarh 4
4 Delhi 2.525
5 Goa & UT 1.685
6 Gujarat 852.09
7 Haryana 7.8
8 Jharkhand 30
9 Karnataka 14
10 Kerala 0.025
11 Madhya Pradesh 11.75
12 Maharashtra 184.5
13 Odisha 13
14 Punjab 9.325
15 Rajasthan 584.75
16 Tamil Nadu 17.055
17 Uttarakhand 10.05
18 Uttar Pradesh 12.375
19 West Bengal 2
Total 1800.105


Source : MNRE Website and Bridge to India Solar Compass Reports
15

CHAPTER-3
SOLAR POLICIES ANALYSIS
3.1 NATIONAL SOLAR MISSION JNNSM
National Solar Mission is a part of NAPCC policy and a main instrument of federal
Government to promote solar energy in India. Has a target 20 GW grid connected and 2 GW off
grid by 2022. JNNSM policy mechanism was created to provide the supply side driver for
RPOs. It is a federal scheme with payment security mechanism to infuse confidence in the
investors. The overall target is based on total installed capacity under JNNSM, state policies and
open market. JNNSM is a key driver of down ward trend of solar price in India through
competitive bidding. DCR is applicable only for NSM.
Table 8 : JNNSM Overall Targets (GW)
Targets (Overall)
Connectivity Phase I Phase II Phase III
Grid 1.1GW by 2013 Initially 3 GW by 2017
Currently 9GW by 2017
20 GW by 2022
(Cumulative)
Off - Grid 0.2 GW by 2013 1 GW by 2017 2GW

Table 9 : JNNSM Achievements (Phase I)
Achievement (Phase I)
Phase I - Batch I Phase I Batch II
Allotted Installed Allotted Installed (Till may13)
140MW 130MW 340MW 300MW
16


3.2 NATIONAL SOLAR MISSION JNNSM (PHASE I, BATCH I)
JNNSM (Phase I, Batch I) was launched in FY 2011. Projects were awarded by reverse
bidding mechanism, where developers provided discount on CERC benchmark tariff. Other key
features were payment security mechanism to secure payment in case of default by discom and
project size limited to 5MW which is unattractive for bigger players, domestic content
requirement of crystalline modules and tough time lines to adhere with 12 months to commission
from the date of signing of PPA.
Figure 6 : JNNSM (Phase I, Batch I) Projects Status

3.2.1 ASSUMPTIONS
Capacity 5 MW
Capex Rs. 125 million
CUF 19 %
Tariff 25 years
Debt : Equity 70 : 30
Repayment 12 years
150
1765
140 130
0
500
1000
1500
2000
Bids invited Bids received Projects alloted Projects completed
M
W

17

Interest 14 %
O&M Rs. 1.1 million
3.2.2 LESSONS LEARNT
Difficulties in financial closure to new player with the timelines and due to high rate of
interest
The lower project size of 5MW with limitation of only one application per Company
including its Parent, Affiliate or Ultimate Parent-or any Group Company
Reduction in tariff is possible if capacity to be allotted is high.
Availability of unallocated power for bundling
3.3 NATIONAL SOLAR MISSION JNNSM (PHASE I, BATCH II)
Launched in FY 2012, in JNNSM (Phase I, Batch II), the Project maximum capacity was
increased to 50 MW with max. 3 projects at different locations by one developer, subject to a
maximum of 100 MWDCR extended to solar cells (only for crystalline). The PPA structure is
same as batch I. The Time given for financial closure is within 180 days from the date of
signing Power Purchase Agreement. The Tariff quoted by Solar Direct is INR 7.49, first sub
8 tariff in India which initiated tariff war in India.
Figure 7 : JNNSM (Phase I, Batch II) Projects Status

350
1915
340
300
0
500
1000
1500
2000
2500
Bids invited Bids received Projects alloted Projects completed
M
W

18

Table 10 : Tariff Discovered (Jnnsm Phase I,Batch II)
Tariff Discovered
Minimum Maximum Wt. Avg.
Tariff Discount Tariff Discount Tariff
7.49 7.82 9.44 5.87 8.77
CERC Benchmark Tariff is 15.31
3.3.1 ASSUMPTIONS
Capacity 12.5 MW (average)
Capex Rs. 92.5 million
CUF 19 %
Tariff 25 years
Debt : Equity 70 : 30
Repayment 12 years
Interest 13.5 %
O&M Rs. 1.1 million
IRR projections not including AD benefits

19

3.3.2 LESSONS LEARNT
As tariff is same irrespective of the location, most of the projects are concentrated in
Rajasthan
Availability of unallocated power again a problem
A total of 340 MW projects are being developed in batch 2
Of which 300 MW have been commissioned.

3.4 RAJASTHAN SOLAR POLICY
Launched in FY 201, Rajasthan Solar Policy has a target of 10000-12000 MW by FY
2022 as the state aims to achieve grid parity by 2018. The policy got delayed as initially
government floated the RfP for 200MW which was later suspended. . RRECL the nodal
agency acts as the PPA signing authority for a period of 25 years. There is a requirement of first
registering the project with RRECL, with 20 lakh per MW as fees. RRECL followed L1 bidding
process for the allocation of projects i.e. developers were asked to match the lowest bid. Out of
100 MW target, only 75 MW matched the bids. The weak financial condition of the state
Discoms is a cause of concern for the developers. 50 MW RfP for 1 MW solar rooftop project is
currently open.
Figure 8 : Rajasthan Solar Policy (Projects Status)

100
185
75
0
50
100
150
200
Target Allocations Bids Received Alloted
M
W

20


Table 11 : Rajasthan Solar Policy (Tariff Discovered)
Tariff Discovered
Minimum Maximum Wt. Avg.
Tariff Discount Tariff Discount Tariff
6.45 1.97 8.1 0.32 7.13
RERC Benchmark Tariff is 8.42

3.4.1 KEY FACTS
Net worth criteria Rs. 3 Crore/MW
Bank guarantee Rs. 20 lakh/MW
Earnest money deposit of Rs. 5 lakh/MW
The minimum and maximum sizes of PV Projects are 5 MW and 10 MW
Creation of Rajasthan Renewable Energy Infrastructure Development Fund (RREIDF)
for Transmission network
For solar PV and CSP projects, if the power plant lies within 15km of the nearest
substation, the cost will be borne by the DISCOM and for any length above 15km, the
cost will be borne by the developer.
Solar based generation shall not be covered under scheduling procedure for Intra-state
Availability Based Tariff (ABT)
Allotment of government land @ 10% of market rate
21

3.5 GUJARAT SOLAR POLICY
On of the first states of India to have Solar Policy, before NSM was launched in FY
2009, applicable up to FY 2014.Envisages productive use of wastelands and introduced the
concept of Solar Parks (Charanka Solar park , current installed Capacity 214 MW). The Projects
are allotted at a fixed two part tariff which is front loaded on first come basis. The policy targets
only 500MW by 2014 whereas 852.5 MW of solar projects have already been installed. No
new allocation is expected in near future due to already achieved RPO targets and Gujarat being
a energy surplus state. Implementation of RRF can attract new projects for sale of solar power to
other states.
Figure 9 : Gujarat (Solar RPO Target)

Figure 10 : Gujarat (Projects Status)

0.5 %
1 %
1.5 %
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
2011-12 2012-13 213-14
872.5
852.5
840
845
850
855
860
865
870
875
Projects alloted Projects commissioned as on 31st July '13
M
W

22

Table 12 : Gujarat (Feed in Tariff)

3.5.1 KEY FACTS

PPA with state distribution utilities.
Waiver from paying Electricity Duty and Exemption from demand cut to the extent of
50% of installed capacity.
The policy also defines projects under sale through open access out side the sate and
project for direct sale to obligated entities in the state.
No Cross subsidy surcharges applicable for Open Access obtained for third party sale
within the state.
Feed in Tariff for Photovoltaic (PV) plants
Commissioned in period
29
th
Jan 10 to 28
th

Jan 12
29th Jan '12 to 31st
Mar '13
1 Apr '13 to 31st
Mar '14
1 Apr to 31st
Mar '15
With Accelerated Depreciation (AD) Rs/Kwh
For first 12 years 15 9.98 9.13 8.35
For subsequent 13 years 5 7 7 7
Levelized tariff for 25 years 12.54 9.28 8.63 8.03
Without Accelerated Depreciation (AD) Rs/Kwh
For first 12 years - 11.25 10.3 9.42
For subsequent 13 years - 7.5 7.5 7.5
Levelized tariff for 25 years - 10.37 9.64 8.97
23

Developer to furnish a BG @Rs 50Lakhs/MW at the time of PPA signing , to be refunded
if the developer commissions the project in time as per PPA.
Sharing of Clean development mechanism (CDM) benefit in ratio of 50:50 between Solar
developer and state distribution utility with whom PPA is signed.
Solar based generation shall not be covered under scheduling procedure for Intra-state
Availability Based Tariff (ABT).
Minimum Financial Criteria:
Net worth criteria of INR 2,00,00,000/ MW of the capacity
Annual turnover of INR 4,80,00,000/ MW of the capacity
Internal resource generated of INR 1,20,00,000/ MW of the capacity

3.6 ANDHRA PRADESH SOLAR POLICY
Andhra Pradesh Solar Policy was launched in FY 2012, applicable up to FY 2017. The
Policy has a target of 1000 MW. Bids of 1000 MW were invited and a total bids of 1712 MW
were received. Average tariff discovered in bidding was Rs. 8.707 per unit with average project
size of around 10 MW. Subsequently all bidders were asked to match the fixed price of INR
6.49/unit, which was only accepted for 418 MW. Initially only 53 MW unconditionally agreed,
while other have conditions such as change in location, size etc. The viability of projects at this
tariff is highly dependent on CAPEX and long term performance of plants. The arbitrary and
post bidding changes in tariff identification will hurt investor confidence permanently. Strong
balance sheet of the state distribution utility is a positive factor.
24

Figure 11 : Andhra Pradesh (Projects Status)


Table 13 : Andhra Pradesh (Tariff Discovered)
Tariff Discovered
Minimum Maximum Wt. Avg.
Tariff Tariff Tariff
6.49 15.99 8.707
Tariff of Rs. 6.49 decided after bidding (L1)

3.6.1 KEY FACTS
PPA with state distribution utilities for a period of 20 years.
Incentives for a period of seven years from the date of implementation.
No wheeling and transmission charges for sale of power within the state.
1000
1712
418
0
200
400
600
800
1000
1200
1400
1600
1800
Capacity announced Bids received Bidds accepted as on 31st
July '13
M
W

25

No Cross subsidy surcharges applicable for Open Access obtained for third
party sale within the state.
Waiver from paying Electricity Duty for captive consumption and third party sale
within the state.
Refund of VAT (paid in AP) for all the goods used for Solar developers.
Refund of Stamp duty and Registration charges paid for land purchase.
Banking of 100% of energy permitted for one year. The settlement of banking to be done
on monthly basis.
The policy promotes solar plants for captive use or sale of power to third party.
The evacuation line shall be laid by the APTRANSCO or distribution utility at the cost
of the project developer.
3.7 SOLAR POWER IN MAHARASHTRA
Maharashtra has no state solar policy. Maharashtra Govt. cleared the proposal of
Mahagenco to set up 150 MW solar energy project in Dhule district in May, 2011 to fulfill their
RPO requirements. Out of 150 MW, 100 MW of power to be produced through crystalline
technology and 50 MW through thin film technology. MahaGenco commissioned 125 MW out
of the 150 MW in June, 2013. This is the single largest solar PV plant in India. Maharashtra has
an installed solar capacity of 184.5 MW as of July, 2013. Similarly Reliance has developed a 40
MW project in Gujarat to sell power to Distribution company of Reliance in Mumbai to fulfill
their specific SPO. Tata Power is also developing a 28 MW project in Maharashtra for their own
Discom. The Mahagenco 150 MW project is funded by the State Govt. and KFW, a German
financial institution.
MERC has fixed the rate of solar energy at Rs. 17.91 per MW, but for this project, the
rate would be Rs. 12 per MW. Out of 125 MW, 75 MW has been commissioned by Lanco and
Juwi and 50 MW by Megha Engg & Aries Ingeneria Sistemas
26

Figure 12 : Maharashtra (Solar RPO Target)

3.7.1 KEY FACTS
The Mahagenco 150 MW project is funded by the State Govt. and KFW, a German
financial institution
MERC has fixed the rate of solar energy at Rs. 17.91 per MW, but for this project, the
rate would be Rs. 12 per MW
Out of 125 MW, 75 MW has been commissioned by Lanco and Juwi and 50 MW by
Megha Engg & Aries Ingeneria Sistemas
75 MW produced by crystalline modules and 50 MW from thin film
Maharashtra is further planning development of 500 MW solar power projects at various
locations in Maharashtra
174.5 MW of total installed capacity
3.8 PUNJAB SOLAR POLICY
Set a target of 1 GW of new solar capacity by 2022 in its New and Renewable Sources
of Energy Policy 2012 with a target of 1000 MW by the year 2017 Solar RPO Target of 3%
(2500 MW) by 2020. Punjab is the first state to allow the use of agricultural land for setting up
projects. 50 MW is to be allotted for companies with no experience in setting up solar projects.
The minimum capacity of the project shall be 1 MW and the maximum capacity shall be 4 MW.
The net worth criterion is 2 Crore/MW. 250 MW is to be allotted for experienced companies.
0.25 0.25 0.25
0.5 0.5 0.5
0
0.1
0.2
0.3
0.4
0.5
0.6
%

t
a
r
g
e
t

27

The minimum capacity of the project shall be 5 MW and the maximum capacity shall be 30 MW.
The net worth criterion is 1 Crore/MW. RfP for 300 MW grid connected Solar power was
launched in March 2013. Selection process was through competitive bidding. The benchmark
tariffs for the bidding process were the CERC tariff for SPV plants. 8.75 for companies not
availing accelerated depreciation and 7.87 for companies availing accelerated depreciation.
Projects under this category were underbidded.
Figure 13 : Punjab (Projects Status)

Figure 14 : Punjab (Tariff Discovered)
Tariff Discovered (Rs./KWh)

Minimum Maximum Wt. Avg.
Category- I
( 1 to 4 MW)
7.20 8.71 8.27
Category- I
( 5 to 30 MW)
7.67 8.74 8.34
300
270
251
220
230
240
250
260
270
280
290
300
310
Target Allocations Bids Received Projects Allocated
M
W

The projects have to be
commissioned within 13 months
28

3.8.1 KEY FACTS
PPA with PSPCL for a period of 25 years
Punjab Energy Development Agency (PEDA) is the nodal agency
Project developers are given various incentives such as exemption from
100% electricity duty
Value Added Tax (VAT) on equipment
Entry tax for equipment supplies
Payment of fee and stamp duty for registration/lease deed charges for the projects
land requirement
Change of land use (CLU) charges, External Development charges (EDC)
NOC from pollution control board
Domestic content requirement
The developers have to submit bank guarantee worth Rs. 40 Lakhs
Higher tariffs than other states due to high cost of land and lower irradiation
Developers face a fine of 30% of this guarantee in case the project is delayed upto one
month and full guarantee will be encashed for delay upto 2 month
The RfP allows a period of six months for achieving a financial closure and 13 months
for commissioning from the date of signing of PPA
3.9 MADHYA PRADESH SOLAR POLICY
Launched in FY 2012. Target under the policy will follow the states declared RPO. MP
has declared a solar RPO of 1% by 2016. In order to fulfill its RPO; installation of 360MW is
required. Before the policy the government invited bids for 200 MW. It received bids for 430
MW. But only125MW was allocated; Welspun (105 MW), Alpha Infra (20 MW) while 100
29

MW was awarded at pre-determined tariff of Rs. 8.05 per unit to four developers (25 MW
each).Policy to promote setting up of solar technology parks, for solar systems and ancillary
equipment manufacturing and generation units . These parks will be given preference in land
allocation & other facilities.
Figure 15 : Madhya Pradesh (Projects Status)

3.9.1 KEY FACTS
PPA with state distribution utilities for a period of 25 years.
There will be four categories of Solar projects
Competitive bidding process for selling power to MP Discoms
For captive use or sale of power to 3rd party within or outside the state
Under REC mechanism
Under JNNSM
Details for category 2 projects
For project on government land (Minimum capacity 0.025 MW, Maximum
capacity 100 MW)
Project land use permission within 3 months.
200
430
225
0
100
200
300
400
500
Capacity announced Bids received Bidds allocated
M
W

30

Financial closure within 11 months.
Project commissioning within 17 months.
Performance guarantee of Rs. 5 lakh/MW
Wheeling grant of 4% of energy injected.
Electricity duty exemption for 10 years.
Banking of 100% of energy with 2% banking charges
VAT & entry tax exemption for solar equipments purchased.
Net worth criteria Rs. 3 Crore/MW.
Bank guarantee Rs. 5 lakh/MW.
Earnest money deposit of Rs. 20 lakh/MW
The evacuation line shall be laid by the developer.
For government land, maximum land use permission at 3 hectares/ MW.
For private land, exemption of 50% on stamp duty.






31

CHAPTER-4
STAKEHOLDERS ANALYSIS
4.1 KEY DEVELOPERS
Over 1.8 GW of total installed capacity
The developers can be segregated into two categories
Large developers dedicated to large scale solar farms
Small developers single time investors
Around 1450 MW installed under state policies and JNNSM
1452 MW of projects are concentrated in Gujarat and Rajasthan only
Table 14 : Key Developers in India (Solar Power)
Key Developers in India MWs Commissioned Pipeline Key States
Indian Developers
Welspun 70 130 MW Madhya Pradesh
55 MW Rajasthan
100 MW Chhatisgarh
Mahagenco 125 Maharashtra
Azure 57 Rajasthan, Gujarat, Punjab
Kiran Energy 40.6 Rajasthan, Gujarat
Mohan Brewries 100 Tamil Nadu
Malpani Group 51 Rajasthan
32

Adani 40 Gujarat
Reliance 40 Rajasthan


Figure 16 : Developers break up State-wise

47%
33%
10%
2%
2%
1%
5%
Gujarat Rajasthan Maharashtra AP Jharkhand Tamil Nadu Others
33

4.2 EPCs
4.2.1 SOLAR PROJECTS DIFFERENT MODELS EXISTS
The existing business model consists of various stake holders
Utilities
IPPs
EPC contractors
Sub contractors/component suppliers
Figure 17 : Existing EPC Models


EPC with
full scope
Includes PV module
BOS
Generation warranty or
Performance ratio
EPC w/o
modules
Modules/inverters
excluded
Plant performance
guarantee
Generation warranty is
generally not accepted
Sub
contractor
Guarantees only
supplier products and
systems
Inverters, String boxes,
MV/LV switchgears,
transformers and
substation
Ebop as one package
PV OEM
as EPC
Scope starts from land
development upto
power evacuation
Sources the
components from
different players
Source : ABB
34

4.2.2 SOLAR EPC MARKET SPACE
There are several EPC companies in India both from India as well as international market
Mosebaer EPC is the leading Indian EPC company with over 200 MWs of installed
capacity in India alone
Also the company is having presence in other countries as well
L&T EPC is having commissioned projects of 155 MW
All its commissioned projects are in the states of Gujarat and Rajasthan( 1 MW
in UP)
JUWI is an international EPC company with having a successful track record in
international solar market
They have also commissioned 77 MW in India
Sterling & Wilson is another leading Indian EPC
Currently 83.5 MWs of projects have been commissioned
They have employed crystalline technology majorly in MW projects
Waree is also an Indian EPC company having an experience of 5o MW of solar PV
projects
EPC companies are ready to work in various models and arrangements with the developers.
Also it is important to understand that the industry benchmark is followed throughout,
however the companies structure their contracts in such a way that
Limits their scope of work
Additional charges for additional services offered
Sometimes the warranties and performances may get compromised due to the
financial pressure from the developer.
35


Figure 18 : Preferred Technology


In the International solar domain crystalline silicon (c-si) technology is the dominant PV
technology. The Indian market, however , has seen a 65 % share of thin film technology(with the
data available). A significant driver for thin-film technology in India has been the performance
of thin-film technology under Indian climatic conditions. Low-cost EXIM bank financing has
shifted developers towards American technology which is primarily thin-film till now. The cost
advantage of thin films has tilted the Indian market in its favour.
The various EPC Warranty Types are:
Defect warranty
Module capacity warranty
Performance ratio warranty
Structure warranty

Thin Film,
764.17
Crystalline, 419.2
NSM(551 MW) + GUJARAT(627.37)
36

Figure 19 : Preferred Technology (NSM Phase I, Batch I)


Figure 20 : Module/Cells supply break-up



67%
29%
4%
Thin Film Crystalline Both
71%
29%
NSM (551 MW)
Foregin Domestic
37

Figure 21 : Inverter break up in Indian Solar Domain

As of January 2013, central inverters accounted for 95% of the installed capacity in the country.
4.3 BUSINESS MODELS FOR SOLAR PLANTS : FINANCIAL VIABILITY
4.3.1 APPC + REC
4.3.1.1 KEY FACTS
Physical energy sale to local discom at APPC
Redemption of REC at exchange
The APPC is normally rolling and for payment purpose previous year APPC is taken
Every Discom has its own way to calculate APPC
The main viability of project depends on REC revenue
The bankers are not interested in such projects due to high uncertainity of REC revenue
Requires links in Govt. & Discoms to sign PPA
No need to pay open access charges
Less losses as injection is at nearest substation
SMA
Schneider Electric
Ansaldo
Statcon
0 100 200 300 400 500
SMA
Bonfi
glioli
Powe
r One
Schne
ider
Electr
ic
ABB AEG
Ansal
do
RefuS
ol
Sieme
ns
Statco
n
Electr
onica
Sante
rno
Other
s
Sales (MW) 452.26259.5220.41 105 94.8 92.43 55 50 30 25 21.3 33
Inverter Market share : 1439 MW
38











4.3.1.2 Authors Analysis
Least attractive model nowadays in industry
Raising debt funding an issue
As based on REC revenue hence no financial projection can be done post 2017
As injection is at local discom network for localised consumption, grid downtime can be
high
More suitable for states with somewhat higher APPC & high % growth in APPC




Developer
Developer
Discom @ APPC
Low & continuous
Trading of REC at
Exchange
High revenue but non
compliance flow due to
REC trading & RPO
compliance
Green attribute
Physical sale of
electricity

Figure 22 : APPC + REC Business Model
39


4.3.2 PSEUDO CAPTIVE MODEL


The power is sold to the off-taker through a captive route
It is a win-win proposition for both the parties as both can achieve significant profits by
this type of a collaboration

This model is currently being implemented by ReNew Power backed by Goldman Sachs
for two 1 MW projects in Haryana where they have signed a PPA of around Rs. 9.5/unit with
ASAHI India & Coca Cola India.


What is a Captive Plant in India
Qualifying Criteria according to Electricity Rules 2005
not less than 26 % the ownership is held by the captive user(s), and
not less than 51 % the aggregate electricity generated in such plant, determined on an
annual basis, is consumed for the captive use.
Interesting model to qualify under captive
The Power consumption criteria can be easily fulfilled as consumer will use almost 100%
of the power.
The 26% stake criteria can be engineered as below, given all other conditions match the
criteria of investor and consumer
40

Figure 23 : Pseudo Captive Business Model

4.3.3 Third Party Sale + REC
4.3.3.1 KEY FACTS
Physical sale of power to private consumers at mutually agreed price
Sale of REC through exchanges
Viability of project depends on PPA with private party
Requires open access clearances
Sale of power outside state is difficult due to high losses and infirm nature of solar
Equity in SPV
99% preferential shares (held by the
investor)
1% common shares
26% held by the
consumer
74% held by the investor
41

Required to pay CSS and other wheeling and transmission charges which add up to the
landing cost of power
Such projects are already going in the wind sector
Emmvee has done an open access project funded by IREDA
4.3.3.2 AUTHORS ANALYSIS
Need extensive search for potential clients
Identification of consumer/Off taker is the key to success, but requires rigours
background study
Due diligence of consumers for financial strength and future of their industry
Open access clearances are not easy to get, as the Distribution companies are never
willing to let go the high paying industrial clients.
Open access might result in additional time consuming processes with added costs.
High returns can be achieved in states like Maharashtra and Andhra Pradesh where tariffs
are on higher side
The Viability of the project depends on cross subsidy surcharge, wheeling and
transmission charges.
The project location should be near to consumer to save transmission and wheeling losses
The load curve of consumer should match solar generation
4.3.4 BIDDING IN STATE POLICIES/ NSM
The biddings are crashing as new or strategic developers bid aggressively.
The PPAs are however one of the most bankable.
Also a lot of capital and time is invested in the bidding process

42

CHAPTER-5
RESULTS
5.1 PSEUDO CAPTIVE MODE : WIN WIN SITUATION FOR ALL

Incentives Hurdles
Highest rate of return
Least number of
government clearances
Minimal losses, as
consumption near to
generation
Optimal use of available
space
Pre-defined exist
policy; with transfer of
asset to developer at the
end of contract
Sharing of REC
between developer and
consumer
No upfront investment
by consumer
Consumer adds value to
its brand by going green
Consumer Identification is crucial
Niche market segment
Strength of PPA & contract
Customer Industry performance and forecast is a big
risk
In case of dispute/ week contract ; change of off-taker
not possible





43



5.2 OPEN ACCESS + REC

Incentives Hurdles
Highest IRR in states where:
Tariff is high
T&D charges and losses
are low
Cross Subsidy
Surcharge is low
Can be a solution for energy deficit
states
High potential and ease of installation
near load centre
Green Corridor and RRF will support
the mechanism further
Improvement in overall structure of
power sector will:
Reduce the losses
further
Reduce the existing
Cross Subsidy
Surcharge
Open Access clearances are a tough
task
NoC from discom; as
due to loss of high
paying consumers their
revenue takes a beating
Grid connectivity is a
cumbersome process
Addition to capital cost
Tough competition from thermal and
wind energy
Inclusion of Open Access charges in
the financial model is difficult as they
change periodically


44

5.3 PROJECTS UNDER SOLAR POLICIES AN OPPORTUNISTIC
MARKET FOR LOCAL DEVELOPERS

Incentives Hurdles
Long term bankable PPAs in
comparison to Open access
projects
Less government clearances are
required
State government provide single
window clearances through nodal
agencies
No need to pay hefty CSS charges
Developer has to bear network
losses only up to the point of
injection
Lucrative investment opportunity
for local cash rich investors to
take benefits like A.D
Less competition than JNNSM
Aggressive and un-realistic
biddings by local developers
leading to crashing of FiT market
Financial strength of local
DisCom is a concern
Fear of change of state policy like
in Andhra Pradesh where
developers are asked to match
the very low L1 bid and like
Gujarat where State DisCom
approached regulatory
commission for lowering of
existing tariffs.
High net worth criteria and pre-
expense of bidding eligibility
Risk of non-selection




Incentives

45

5.4 BUSINESS MODEL WHERE VIABILITY DEPENDS ON REC ARE
NOT BANKABLE APPC + REC

Incentives Hurdles
Ease of getting PPA at APPC cost
No need to take cumbersome open
access clearances
Payment of network charges and
losses only up to the point of
injection
Viability of projects completely
depends on the REC market which
in turn depends on RPO
compliance
Non-compliance of RPO by most
of the obligated entities in absence
of any penalty mechanism
No clear picture of picture
regarding REC pricing post 2017
Banks are pessimistic about
financing such projects



46

CHAPTER-6
CONCLUSIONS



Market Scenario
The market is still nascent with more than 50% of developer belongings t pure investor
category
It will move towards Open Access & Captive based models from FiT based models as
India approach grid parity
Developer should target FiT market in states on opportunistic basis


Highly Recommended
Pseudo Captive model

Third Party Open Access sale with highly bankable PPAs


Viable Options
Projects under state policies through competitive bidding or through direct allocation


Opportunistic
NSM through Viability Gap Funding
APPC + REC


Project
Economics &
Costing
Profitable
Sales Models
Commercially
Viable solar
Project
47

STUDY OF GREEN CORPORATE SOCIAL RESPONSIBILITY (CSR)
SOLUTIONS
CHAPTER-7
7.1 INTRODUCTION TO GREEN CSR
The rapid pace of industrialization has exposed the environment to higher levels of risk.
Pollution, greenhouse gas emissions, global warming and depletion of ground water level are
serious issues which cannot be addressed with the Governments interventions alone. CSR
(Corporate Social Responsibility) is the buzzword and its time for the Corporates to do their bit
for the environment which has been endangered with the industrial activities.
Corporate Social Responsibility is the continuing commitment by business to behave ethically
and contribute to economic development while improving the quality of life of the workforce
and their families as well as of the local community and society at large.
Corporate Social Responsibility is broadly categorised by corporates under nine different
segments as highlighted in Figure 24.
Figure 24 : Segmentation of Corporate Social Responsibility

1. Eradicating Extreme Hunger and Poverty
2. Promotion of Education
3. Promoting Gender Equality and Empowering Women
4. Reducing Child Mortality, Improving Maternal Health
5. Combating Diseases Such as AIDS, Malaria
6. Ensuring Environmental Sustainability
7. Employment Enhancing Vocational Skills
8. Social Business Projects
9. Funds For Socio-economic Development
48

7.1.1 ORGANIZATION SPENDING ON CSR ACTIVITIES
Currently, it is very difficult to find information on CSR activity in India. This problem
partially stems from the fact that a lot of current CSR activity is donationbased rather than
project based, and as such there is only a small amount of information on company websites and
in financial reports. There are very few project impact studies and longterm studies detailing the
kind of positive impact CSR activity has on a given community. An additional problem appears
to be that very few companies are spending anywhere near 2% of their average profit after tax
(PAT).
Figure 25 : Spending on CSR Activities by 100 Profitable Companies in India 2012

Source: Forbes India Survey
According to a Forbes Study, the top 100 most profitable companies (based on net sales
in 2012) are only spending a total of Rs. 1763 crore on CSR activity, whereas 2% of PAT would
be Rs. 5665 crore. This accounts for a difference of Rs. 3902 crore that should have been spent
on CSR in the fiscal year 2012. Important to note is that 47% of companies surveyed either did
not have CSR data or were not profitable. Therefore, the actual funds that should have been spent
on CSR activity could in fact be greater than the stated Rs. 5665 crore.
7.1.2 SEGMENT WISE CSR SPENDING
CSR in India has been slowly developing over the last forty years, but has taken a great
leap forward in the last five, and again has been increased with the mandatory stipulations in the
45%
6%
1%
47%
Companies Spending less
than 2% PAT
Companies Spending more
than 2% PAT
Companies Spending 2%
PAT
Unknown CSR Spending
Among Top 100 Companies in India, 92% of them spend less than
2% of their PAT on CSR
I n 2012 Spending on CSR, I NR 1763
Crore, whereas 2% of PAT, I NR 5655
Crore
49

Companies Bill 2011. As of 2010, approximately 49% of India's 500 largest companies are
reporting on CSR.
The majority of this CSR expenditure appears to be donationbased rather than
project based, and unfortunately there is not much information on the amounts being
donated, nor measurable impact of said donations.
Figure 26 : Segment wise CSR Spending by Organizations in 2012

Source: ASSOCHAM
7.1.3 SECTORS CONTRIBUTING IN CSR ACTIVITIES
Based on an ASSOCHAM study, there are clear areas of improvement for corporations to
invest in CSR activities, as currently only half of the top 500 Indian corporations are reporting a
measurable amount of CSR activity. More reporting is clearly necessary if adequate data is to be
collected on the state of CSR activity in India. If corporations can partner with NGOs, there
should be a measurable increase in reporting of CSR activities, as well as data collected
regarding the success of CSR projects.
However, without good reporting standards in place it becomes very difficult to measure both the
scope and the effect of CSR across the country. With partnership between corporations, NGOs
and the government, reporting
standards should increase and become more transparent, and thus will result in greater
sustainability both of projects and of profits.
18.83%
15.65%
12.72%
9.05%
5.16%
37.59%
Community
Welfare
Education Environment Health Care Rural
Development
Others
Most of CSR spending is Donation Based rather than Project Based

50

Figure 27 : Sectors Contributing in CSR Activities in 2012

Source: ASSOCHAM
7.1.4 FOCUSSING ON ENVIRONMENT AND SUSTAINABILITY
Sustainability, climate change, energy and energy efficiency, green consumption and
urban sustainable development are globally recognized challenges for the 21st century. Tackling
these challenges requires a strong commitment from companies and private sectors, governments
and agencies, NGOs.
The managers and professionals of tomorrow will require knowledge to understand the
interconnectedness of economic, environmental and social dimensions, and competencies to
manage and contribute the change towards a more sustainable world. Corporate social
responsibility (CSR) is the way to achieve a greener world. CSR is not a new concept, but over
the past decade its focus has shifted from labour issues and local philanthropy toward
environmental actions.
Numerous factors are driving this trend, including managerial altruism, cost-cutting efficiency
improvements, the emergence of a new generation of green consumers, and savvier business
leaders who take pro-active steps to avert political conflict rather than reacting to public pressure
after the fact. Corporations are becoming more and more aware that they should be more careful
with the footprints we leave behind. Huge corporations such as Wal-Mart are selling organic
13.11%
11.71%
9.65%
8.82%
8.12%
48.59%
FMCG and
Consumer
Durables
Chemicals Software and
ITES
Textiles Construction Other
FMCG, Chemicals & IT Sectors Contribute
35% of the Total Spending on CSR in 2012
51

products because it promotes a healthy lifestyle for its customers and provides a positive image
for the company worldwide.
Figure 28 : Boundaries Defining Green Energy CSR

7.2 GREEN CSR INITIATIVES
7.2.1 RENEWABLE ENERGY INVESTMENTS
7.2.1.1 RENEWABLE ENERGY IN INDIAN ENERGY MIX
At present, India has 27,541.71 MW of installed renewable capacity excluding hydro
power stations. India plans to double its renewable energy capacity to 55,000 MW by 2017 as
part of efforts to increase efficiency of its energy use. The contribution of renewable energy to
the total power generation is estimated to be 4.7%, 5.5% and 6.4% during 2010-11, 2011-12 and
2012-13 respectively. Renewable power generation capacity of 14,657 MW has been added in
the country during the 11th Five Year Plan period.
A potential of over 2, 45,000 MW from various renewable energy sources have been estimated
in the country. So far 28,067 MW renewable power generation capacities have been installed.
To encourage use of renewable energy sources, the Ministry encourages private sector
investment and offers incentives such as Capital Subsidy, Generation Based Incentive, and
Accelerated Depreciation for Renewable Energy Projects.

A company's primary responsibility is to owners,
shareholders etc.
Conceptual
A Company must not confuse its role with others Ideological
A company has limited resources, expertise and reach Practical
What was a boundry a few years ago is now a starting
point
Changing Boundries
52

Figure 29 : All India Generating Capacity (In MW as of 31.07.2013)

Source: Central Electricity Authority
The National Action Plan on Climate Change (NAPCC) has taken into consideration the
renewable energy potential including wind power potential in outlining the approach for the
development of renewable energy in the country. In keeping with the objectives and approach
of NAPCC, the Ministry of New and Renewable Energy has set a target of capacity
addition of 29,800 MW from renewable energy sources during 12th Plan period.
This includes 15,000 MW from wind, 10,000 MW from solar, 2,100 MW from small hydro and
2,700 MW from biomass including waste to energy. A Gross Budgetary Support of Rs. 19,113
crore has been allocated for the renewable energy activities for the 12th Plan period.
Figure 30 : Source wise and YOY Targets set during 12th Plan Period (MW)

Source: Ministry of Power
153188
4780
39623
27542
Thermal Nuclear Hydro Renewable Sources
M
W

Source 2012-
13
2013-
14
2014-
15
2015-
16
2016-
17
Total
Wind Power 2500 2750 3000 3250 3500 15,000
Small Hydro Power 350 400 400 450 500 2,100
Bio-Power (including Waste to
Power)
400 400 520 550 830 2,700
Solar Power 1000 1000 2000 2500 3500 10,000
53

7.2.1.2 AMALGAMATION OF RENEWABLE ENERGY & CSR
Renewable energies, such as wind, solar, and geothermal energies, are no longer
considered to be merely complementary to thermal or nuclear power generation. Rather, they are
widely recognized to have a core role in fulfilling our energy needs. Renewable energies such as
wind, geothermal, and hydraulic power emit very little CO
2
, one of the causes of global
warming. These energies, by definition, cannot be depleted and help prevent the depletion of
finite energy sources. Development and supply of these energies, therefore, is a very rewarding
activity that can greatly contribute to global environmental conservation.
Businesses can make a very positive intervention in the society by adding renewable energy
projects to their Corporate Social Responsibility (CSR) activities, which will help to improve the
socioeconomic conditions of the marginalized. Organizations obligations are now extending
beyond maximizing shareholder value and now also include steps to improve the quality of life
of surrounding community and people. As a part of CSR a business can set up Renewable
Energy Technologies like Solar, Biogas to serve energy needs.
Decentralized electricity generation using renewable and its distribution can become the new
frontiers for CSR activities. Such projects reduce load on the grid, bridge the growing electricity
deficit, provide regular electricity supply and generate local employment. As part of a CSR
initiative in renewable space, organizations can set up renewable energy systems in villages that
will be maintained by villagers who have undergone training.
Installing a mix of solar panels, wind mills and biogas plants can make village energy self-
sufficient or can opt for procuring renewable energy for their self-consumption from Renewable
Energy Certificates of bilateral arrangements with Renewable energy developer. By adding
renewable energy projects to their CSR activities, businesses will make a very positive
intervention that will go a long way in improving the socioeconomic lot of disempowered.
54

Figure 31 : Renewable Energy Initiatives under CSR Activities

7.2.1.3 GRID CONNECTED : RENEWABLE ENERGY IS THE FUTURE
The growing energy needs of the emerging economics, specifically India, risks enhanced
environmental damage from conventional carbon based sources of energy. Renewable Energy
technologies are deployed to curb the growing gap between the demand and supply of power,
which is due to increase in the per capita energy consumption and importantly, the much hyped
climate change concerns. The future of solar photovoltaic development in India seems to be very
bright. Indias solar mission envisages the promotion of solar energy to harness and distribute
environment-friendly power, available with high scalability, for sustainable economic growth by
empowering national energy security.
Accelerated growth is expected in renewable energy sector with favorable conditions in terms of
potential, technical support facilities, policy framework and regulatory environment, robust
manufacturing base and investors confidence in the country.
7.2.1.4 INDIA POWERING AHEAD WITH SOLAR
India is located within the equatorial belt and receives plentiful solar radiation. Most parts
of the country receive 250 to 300 days of bright days in a year. The government and private
sectors are currently busy with the development of a large number of Solar Power Projects in
India. Even though the percentage of power generated through solar energy in India is just a tiny
fraction of its overall power production, it shares the number one spot in solar power generation
capacity along with the United States. One of the major Solar Power Projects in India is an
ambitious project undertaken by the government where it plans to generate 20 GW of power
Green
Energy
CSR
Grid
Connected
Solutions
Off-Grid
Solutions
Renewable
Energy
Certificates
Energy
Effeciency
55

from solar energy by the year 2020. It further plans to increase this production to 200 GW by the
year 2050. This project plans to increase the installed solar power capacity by a gigantic level by
the year 2030 so as to significantly bring down the cost of electricity generation from solar
power, almost at par with the power generated from fossil fuels.
Figure 32 : Planned Installed Capacity from Solar (MW)


7.2.1.5 INDIA RETAINS 5
th
POSITION IN WIND
Historically, wind energy has met and often exceeded the targets set for it under both the
10th Plan (2002-2007) and 11th Plan (2007-2012) periods. During the 10th Plan period the target
set was of 1,500 M W whereas the actual installations were 5,427 MW. Similarly during the 11th
Plan period the revised target was for 9,000 MW and the actual installations were much higher at
10,260 MW.
Despite poor pace of capacity addition in the states like Tamil Nadu, Andhra Pradesh,
Karnataka and Maharashtra , India retained its position in top five world wind energy
markets in 2012
The country has potential to set up about 6, 00,000 MW of wind power. The current installed
capacity is 18,000 MW. In 2011, the country added 2300 MW of wind power capacity. This had
come down to about 1700 MW in 2012 and is likely to be in the same range this year. But next
year it could go up to 3000 MW if promised incentives (INR 8 billion allocated to Ministry of
Non Renewable Energy for the purpose of reintroduction of generation-based incentive for wind
energy projects).
1000
10000
20000
0
5000
10000
15000
20000
25000
2013 2017 2022

M
W

Source : MNRE

56

As per various estimates, the total potential for wind energy is around 46 - 70 GW. MNRE
envisages wind to constitute ~70% of overall renewable capacity translating to 2-3 GW of new
capacity per year till 2020.
7.2.3 OFF-GRID SOLUTIONS
Often remote areas or islands are not connected to the national power grid. They generate
their own power from a diverse range of small local generators using both fossil fuels (diesel,
gas) and locally available renewable energy technologies (solar PV, wind, small hydro, biomass,
etc.) with or without its own storage (batteries) depending on the technologies
7.2.3.1 SOLAR TECHNOLOGIES - ONE OF THE BEST SOLUTIONS TO
LIGHT UP AND ELECTRIFY RURAL INDIA
The rural solar off-grid market has so far been driven mainly by government and NGO
efforts. Though there has been increasing interest from corporates and investors (domestic and
international) in exploring viable business opportunities to serve Indias vast rural, unelectrified
population.
In India, close to 70-75 million households in rural areas (approximately 400m people or 80,000-
90,000 villages) lack access to grid-connected electricity. Electrified households in the rural
areas pay INR 106 a month on an average for electricity. This is less than the INR150 which un-
electrified households spend for light from a kerosene lantern. Assuming such households are able
and willing to pay the same as electrified households, the market potential is in the range of INR 90-95
billion per year.
Around 250,000 grid-connected villages with frequent power outages further increase this
potential. There are three key options for providing rural, off-grid, solar PV-based electricity
solutions: small applications with integrated power generation capacity (e.g. solar lanterns and
solar street lights), solar home systems (SHS) and mini-grids.
Falling prices of photovoltaic cells in the last two years have increased the viability of solar
energy projects. Solar powered cell phone charging stations where the villagers can charge their
cell phones for a certain nominal payment will also help boost the off-grid solar PV market along
with supporting the rural enterprise.
57

Figure 33 : Solar powered cell charging stations

Babulal charges the cell phones of the villagers @ INR 5
7.2.3.2 SOLAR - HYBRID SYSTEMS
With the advent of solar hybrid systems, urban India too is catching up. In these systems,
solar PV modules charge the battery during day time while WEGs charge the battery during
monsoon. Although current installed capacity of these systems is very low, it is expected that
these systems will grow in areas with good wind potential.
7.2.3.3 BIOMASS POTENTIAL
Most of rural India is dependent on biomass for fulfilling its energy needs. However,
burning biomass comes with several hazards to personal health and the environment. Off-grid
renewable energy applications present a viable alternative for mitigating the countrys energy
risk in the face of fuel scarcity. In rural India, energy is mainly required for cooking, lighting and
agricultural activities. Biomass is the main source of energy due to easy availability. Around
87% of the off-grid installed capacity in the country comes from biomass (including Waste to
Energy). Figure 33 depicts the off-grid RE Capacity (MW) as of 31.07.2013: Maximum capacity
is from biomass cogeneration followed by biomass Gasifiers while Solar PV Systems have an
installed capacity only of 97 MW.
58

Figure 34 : Off-Grid RE Capacity (MW)

Source : Ministry of New and Renewable Energy
7.2.4 RENEWABLE ENERGY CERTIFICATES (REC)
7.2.4.1 ABOUT REC
Renewable Energy (RE) sources are not evenly spread across different parts of the
country. On the one hand there are States (like Delhi) where the potential of RE sources is not
that significant. On the other hand there are States (like Rajasthan and Tamil Nadu) where there
is very high potential of RE sources. In such States there are avenues for harnessing the RE
potential. However, the high cost of generation from RE sources discourages the local
distribution licensees from purchasing RE generation beyond the mandated level.
Figure 35 : Concept of Renewable Energy Certificates
Source : MNRE
106
396
153
2
97
0
50
100
150
200
250
300
350
400
450
Waste to Energy Biomass Cogeneration Biomass Gasifiers Aero-Generators/Hybrid
Systems
Solar PV Systems
(>1KW)
M
W

59

It is in this context that the concept of Renewable Energy Certificates (REC) assumes
significance. This concept seeks to address the mismatch between availability of RE sources and
the requirement of the obligated entities to meet their RPO. It is also expected to encourage the
RE capacity addition in the States where there is potential for RE generation as the REC
framework seeks to create a national level market for such generators to recover their
cost. Central Electricity Regulatory Commission (CERC) has notified Regulation on Renewable
Energy Certificate (REC) in fulfillment of its mandate to promote renewable sources of energy
and development of market in electricity. The framework of REC is expected to give push to RE
capacity addition in the country.
Voluntary buyers can purchase RECs from trading platform of Power Exchange of India
Limited or I ndian Energy Exchange, as part of CSR activity or to market their product as
Green Product.
The Department of Public Enterprise (DPE) recently expanded the scope of the Energy
management Program of Public Sector Enterprises (PSEs) by including renewable energy as a
specific activity to be pursued by public enterprises. The Ministry of Heavy Industries and Public
Enterprises has asked all Central Public Sector Enterprises (CPSEs) to set up renewable energy
projects or voluntarily purchase Renewable Energy Certificates (RECs).
7.2.4.2 VOLUNTARY REC MARKET
RECs have been traded in India for 25 months now (since March 2011), and the market
has grown in its value and depth. However, one aspect of the REC market that is common
internationally has largely remained absents the procurement of RECs on a voluntary basis to
meet Corporate Social Responsibility (CSR) / Green Marketing.
The procurement of RECs on a voluntary basis help corporates meet Corporate Social
Responsibility (CSR) or Green Marketing of their product without investing to the renewable
energy power projects any organization can use RECs to offset their carbon footprints created
through the consumption of electrical appliances, as these electricity is generated somewhere in
thermal plants burning coal as a fuel.
60

7.2.4.3 REGISTERED CAPACITY UNDER REC MECHANISM
There is total of 3,615 MW (by 09 June 2013) of renewable energy capacity registered
under REC mechanism.
Figure 36 : Registered Capacity under REC Mechanism (MW)

Recently, Neo Remark Marketing Services LLP (RE-Mark), Indias first labeling program
which identify product, organizations and events which utilize renewable energy in their
operations. RE-Mark assisted I ndianPowerSector.com in procuring RECs and provided label
making them Indias First Green Website utilizing 35% of Renewable Energy.
7.2.4.4 MARKET SIZING
As per the latest amendments to the Companies Bill by the Union Cabinet, based on
recommendations of the Parliamentary Standing Committee on Finance and inter-ministerial
discussions, CSR has been made obligatory on part of companies. The qualifying criterion that
would make the CSR mandatory is: Companies having a minimum net worth of INR 500 crore
or turnover of INR 1000 crore or a net profit of INR 5 crore during any financial year. Regarding
the amount of expenditure on CSR activities, it has been stipulated that at least 2 percent of the
average net profits of the company during three preceding financial years shall be spent on CSR
2033
683
567
188
Wind Bio-Fuel Cogen Biomass Small Hydro
Source : MNRE
61

every year. Further, the companies have been mandated to formulate a CSR policy and to
disclose the activities undertaken and the related spending.
Model I
With the CSR budget as a driving factor for investment in voluntary renewable energy, average
of last three years profit of companies of top 500 Indian companies have been taken into account
to estimate the market potential. Consequently, average of last three year profits of companies
has been calculated as INR 326637 crore (Economic Times, ET 500 List, 2009, 2010, 2011).
Author believes 80 percent of the demand will come from top 500 companies (having turnover
of greater than 500 crore) and they would act as sustainability leaders and would procure
voluntary renewable energy for branding and to differentiate themselves from competitors. This
would be in line with the voluntary renewable energy market in USA where the Environment
Protection Agency (EPA) of US has a list of Fortune 500 partners, which contains 79 companies
and which contributes to majority of voluntary renewable purchase. (United States Environment
Protection Agency Green Power Partnership, 2012)
Hence, considering 2 percent of the average profit of 500 companies as funding available for
CSR budget, a sum of INR 6532 crore is calculated. Further, owing to limitations of data, it is
assumed that 10 percent of the total CSR fund would be set aside for voluntary renewable energy
purchase, which amounts to 653 crore.
Moreover, as mentioned earlier, 20 percent of voluntary renewable energy purchase would be
through corporates, which are not included in top 500 list, and with same percentage of
allocation of fund for CSR, the total amount that could come is INR 163 crore. Adding both the
sum, a market potential for voluntary REC purchase of INR 816 crore is estimated.
However, it is important to note that since no study has been done for estimating market
potential for voluntary renewable purchase market across the globe and given the fact of
absence of its market in I ndia, due to various reasons like new market of renewable energy
certificates lack of awareness among corporates regarding benefits of voluntary purchase; the
market size arrived in first paragraph is only a preliminary estimate and is prone to errors.

62

Model II
Owing to the fact of a very preliminary estimate of voluntary renewable energy market size, one
another way of estimating the market size is devised through assuming a fixed percentage of a
corporate expense on RE requirement of its total revenue. As per a study by Bloomberg New
Energy Finance and Vestas on Global Corporate Renewable Energy Index (CREX) 2012, using
data from the Bloomberg terminal, it has been calculated that total cost of renewable energy is a
small proportion of the publically listed companies revenue on average i.e. 0.02 percent. Hence
estimating market potential of voluntary renewable purchase through this figure, by assuming it
as a standard and replicable for Indian market, a market size of INR 745 crore is obtained
(excludes 20 percent component). Again utilizing 80:20 principle, an overall market size of
voluntary renewable purchase of INR 931 crore is obtained.

Table 15 : Market Potential Estimation of Unrestricted Voluntary REC Market in India
(INR Crore)
Model 1. Lower Bound Market Size Estimation of Voluntary REC
purchase
Profit After
Tax
(PAT)
Average
PAT
CSR
Budget^
Expenditure
on REC
Purchase by
ET 500^^
Expenditure
by Non ET
500 on REC
purchase^^^^
Market
Size
09 260298 326637 6532 653 163 816
10 308316
2011 411298



63

Model 2. Upper Bound Estimation of Voluntary REC Purchase
Revenues Average
Revenue
Expenditure
on REC
Purchase by
ET 500^^^
Expenditure
by Non ET
500 on REC
Purchase^^^^
Market
Size
2009 3329277 3726556 745 186 931
2010 3531540
2011 4318850

*PAT corresponds to sum of total PAT of top 500 companies as per ET list for a particular year
^ 2% of Average PAT
^^ 10% of CSR Budget
^^^ 0.02% of Average Revenue
^^^^ 20% of Expenditure on REC Purchase by ET 500
#Revenue corresponds to sum of total revenue of top 500 companies as per ET list for a
particular year

7.2.5 ENERGY EFFICIENCY MEASURES
Energy efficiency is a way of managing and restraining the growth in energy
consumption. Energy efficiency offers a powerful and cost-effective tool for achieving a
sustainable energy future.
Improvements in energy efficiency can reduce the need for investment in energy infrastructure,
cut energy bills, improve health, increase competitiveness and improve consumer welfare.
Environmental benefits can also be achieved by the reduction of greenhouse gases emissions and
64

local air pollution. Energy security the uninterrupted availability of energy sources at an
affordable price can also profit from improved energy efficiency by decreasing the reliance on
imported fossil fuels.
Figure 37 : Various Energy Efficiency Measures



Energy Efficiency
Measures
Standards and
Labelling
Programme

Demand Side
Management
Energy
Conservation
Building Code
Bachat Lamp
Yojana
State Energy
Conservation
Fund
Energy
Efficiency in
Small and
Medium
Enterprises
Professional
Certification
School
Education
Programme
Energy
Conservation
Awards
65

Figure 38 : Electrical Energy Savings in Terms of Equivalent Avoided Capacity (MW)

Source: powermin.nic.in
It is estimated that National energy Conservation Award Scheme would help in motivating the
other energy consumers in joining and promotion of a nationwide energy conservation
movement.
1 unit energy saved = 1.5 units energy generated
7.3 WAY FORWARD FOR GREEN ENERGY BASED CSR INITIATIVES
Build awareness among the CEOs and designated CSR Heads regarding best practices for
Greener approach to achieving the proposed CSR target
Such sustainable approach should integrate renewable and energy efficiency based CSR
interventions with other specified sub-sectors for CSR such as Education; Heath; Rural
Enterprise; Employment etc
Bringing together the CSR funds and funds from development partner agencies such as
World Bank; UNDP, UNDIO, ADB, JICA and others to make a substantial pool for
green energy development for the society
Government agencies like MNRE, BEE, EESL, MOCA, CERC, CEA , Renewable
development agencies to provide regulatory framework for green CSR projects to make
them viable technically and commercially
45
100
90
122
103
155
252
245
308
325
359 357
0
50
100
150
200
250
300
350
400
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
M
W


66

Joint effort of renewable energy development companies to provide required services to
build green energy projects
CERC and SERC should allow off-grid small scale renewable projects to be considered
eligible for REC (should include 1 NGO, 1 corporate house under CSR and end users as
stake holders). This will make micro grids more viable and self-sustainable
Promoting the voluntary REC market can provide the following social benefits to India
The renewable sector growth will be fuelled by the demand , which somewhat
slowed down after failure of implementation of RPO
If REC as a market becomes mature, this will provide a new sustainable model to
provide green power to people who need it most. The corporate can install
renewable projects in rural areas or where there is no availability of grid power at
all or only for few hours a day as their CSR. The projects can be made sustainable
by providing cheap power to the consumers and claiming RECs on it.
Projects done under CSR should be exempted from paying all kinds of taxes
(even on REC income). The profits from such projects should in turn be used for
other 9 verticals of CSR.
The REC mechanism already in place with few changes can be a game changer
for both corporates willing to do CSR more effectively and also for the society
Allowing corporates to buy REC directly from Re-Generators, who are supplying
power to rural or under privileged area at a subsidized rate. This will reduce the
burden of government from subsidy and also attract more private investment in
rural and un-electrified areas of country.
CSR as a business strategy




67

BIBLIOGRAPHY


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