Sector Report: Solar Power

Sector Report - Solar Energy 1

CLEAN ENERGY
As a part of its Paris Agreement commitments, the Government of India has set an ambitious
target of achieving 175 GW of renewable energy capacity by 2022. With this the market
players in India now have enough incentive to move to clean sources of energy. India
supports around 17 % of the world’s population but its energy and electricity consumption is
only around 5% of the world’s consumption. Its per capita consumption of energy and
electricity is less than one-third of the world average. In order to sustain a growth rate of
over eight per cent through the next two decades, India would need to grow its primary
energy supply by three to four times and electricity supply by at least five to seven times of
its current consumption. The country might need to import over 90 per cent of its
requirement of oil and over 45 per cent of its requirement of coal. Energy shortages are
currently at an average of 8.7 per cent with peak deficit at nine per cent. Fossil fuels though
cost effective and efficient, pollute the environment, and contribute to the greenhouse effect
and global warming. For instance, mining of coal results in the destruction of wide areas of
forest land and is environmentally hazardous. Coal also produces Sulphur dioxide which
creates acid rain. All fossil fuels have a finite life – the deposits that exist cannot be
replenished easily once these are used.(1)
Renewable Energy (RE) is environment friendly and can provide energy security and offers
distributed solutions. It is derived from natural processes that are replenished constantly
such as sunlight, wind, rain, tides, waves, and geothermal heat. RE has the potential to
address the growing concern over indiscriminate use of fossil fuels and its impact on climate
change. RE technologies are ideally suited to distributed applications and they have
substantial potential to provide a reliable and secure energy supply as an alternative to grid
extension or as a supplement to grid-provided power. The challenge is to make the Cleantech
including RE technologies convenient, efficient, safe and affordable.
The following diagram shows what all Cleantech consists of:

Source: Cleantech – Global trends and Indian scenario by EY & FICCI

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PREAMBLE
This report will concentrate on the Solar Sector. With about 300 clear and sunny days in a
year, the calculated solar energy incidence on India's land area is about 5,000 trillion kilowatt
hours (kWh) per year (or 5 EWh/yr). The solar energy available in a single year exceeds the
possible energy output of all of the fossil fuel energy reserves in India. The daily average solar-
power plant generation capacity in India is 0.20 kWh per m2 of used land area, equivalent to
1,400-1,800 peak (rated) capacity operating hours in a year with available, commercially-
proven technology.(2)

Therefore, there is huge potential for solar energy in India. To harness this potential India has
also conceived the idea of International Solar alliance which aims to focus on solar power
utilization and reduce the cost of finance and the cost of technology for the solar sector. Solar
Sector in India consists of 4 segments: Policy based Utilities, Open Access Solar, Rooftops &
Off-grid solar.

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RENEWABLE ENERGY
Installed REC Capacity (GW)
114 117 India accounts for approx. 4% of total global
102 electricity generation and contributes 4.43% to
86 the global renewable generation capacity.
77 Installed renewable capacity has increased at a
70
CAGR of 13% over FY14-18. India added a
record 11.8 GW of renewable capacity in 2017-
18. As of June 2018, the total renewable
capacity in the country was 117 GW, which is
33.7% of the total installed capacity of 346 GW.
Installed wind capacity as of June 2018 stood at
FY14 FY15 FY16 FY17 FY18 Q1 34 GW and solar capacity at 24.5 GW.
FY19
SOLAR POWER
Segmental Share
Due to favourable location in the solar belt,
[VALUE] India is one of best recipients of solar energy.
Growth in solar power installed capacity is
forecasted to reach 100 GW by 2022 from
its current levels of 24.5 GW. Under the
Total installed
Union Budget 2018-19, zero import duty on
capacity of components used in making solar panel was
24,454 MW announced to give a boost to domestic solar
panel manufacturers. Utility scale solar
3% projects contribute to 74% of the total
10% 13%
installed capacity. Solar Sector in India
received investments of over US$10 billion
in CY2017.
Utility Solar Open Access Solar
Rooftop Solar Off-grid Solar

OPEN ACCESS SOLAR Open Access enables consumers with more

Capacity Addition, MW than 1 MW of connected load to buy power
1,900 from the open market. The concept allows
the consumers to choose from a number of
competitive power companies rather than
from the local utility monopoly. Open access
allows consumers meet their Renewable
Purchase obligations (RPO) as well. A
600
500 variation of the open access model is the
400 380
300 captive model, wherein the consumer takes
ownership of an off-site power generation
asset. As of FY18, 20% of open access
FY14 FY15 FY16 FY17 FY18 FY19* capacity is under the captive model.

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 ROOFTOP SOLAR
Capacity Addition, MW 1,450
Industrial Residential
1,100 544 1,088 404 503
Commercial Public Sector
680

400
631 1,907
200
100
OPEX CAPEX
FY14 FY15 FY16 FY17 FY18 FY19*
Rooftop solar additions of 7-8 GW is expected over FY19-23. The rooftop segment has failed to
gain significant traction with an estimated installed capacity of 1.5 GW in FY18 as opposed to
MNRE target of ~ 5 GW for FY18. The overall target for rooftop is set as 40 GW by FY22. The
commercial and industrial consumer segment has seen the most activity with rooftop
developers targeting large C&I customers due to high industrial/ commercial DISCOM tariffs. Of
the total tenders announced in FY17-18 for 527 MW capacity, 56% were under CAPEX and 44%
under the OPEX model.

UTILITY SOLAR
Capacity Addition, MW 7,400 NTPC offtake SECI offtake Public Sector
State Govt. Others
5,000
3.3 3.4
4,000
3,000 Total
Installed 3.0
Capacity of
600 900 21.3 GW 1.2
10.2
FY14 FY15 FY16 FY17 FY18 FY19*
Around 60% of the total National Solar Mission target of 100 GW by 2022 is allocated to utility
scale solar projects. A utility-scale facility generates solar power and feeds it into the grid,
supplying the power to a utility. A utility is an electric company (often a public utility) that
engages in electricity generation and distribution in a regulated market. Virtually every utility-
scale solar facility has a Power Purchase Agreement (PPA) with a utility, guaranteeing a market
for its energy for a fixed term. Solar capacity addition in FY18 was higher than that of all other
energy sources, non-renewable included. In comparison, coal and wind added only 4.6 GW and
1.7 GW respectively. Capacity addition is expected to slow down in FY19 due to low tender
activity in FY17.

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 MAJOR TRENDS IN UTILITY SOLAR

1. Slowdown in tendering as well as bid response affected the commissioning schedule for
FY’19.
2. Significant allocations and tendering over FY19 YTD is expected to lead to significant
capacity additions over FY20 and FY21.
3. FY22 may see rapid expansion in capacity additions due to terminal year of the target.
4. The sharp fall in tariffs over 2016-17 and 2017-18 (to INR 2.44 per kWh) was a result of
sharp fall in module prices, falling interest rates/ low cost funds availability, rising debt tenor
and scaling benefits.

MAJOR TRENDS IN ROOFTOP SOLAR

Rooftop Solar EPC Price Index (INR/w) Share of OPEX model to total capacity
80 50%
70
60 40%
50 30%
40
30 20%
20
10%
10
0 0%

FY13 FY14 FY15 FY16 FY17 FY18 FY13 FY14 FY15 FY16 FY17 FY18

1. The Rooftop Solar EPC prices fell at 18% CAGR between FY13-17. Prices increased marginally
in FY18 due to increase in module costs but are expected to fall again going forward.
2. OPEX capacity addition grew by 164% in FY2017-18 to 44% of the total installed rooftop
capacity.
3. In the CAPEX model, the customer pays for the installation cost while in the OPEX model,
the customer enters into an agreement with the 3 rd party to consume all the power.
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PORTER’S FIVE FORCES

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 PLAYER PROFILES (in RoofTop Solar)

CleanMax Solar ZunRoof

Profile Profile

Incorporated 2011 Incorporated 2016

Revenue FY17- INR 300 Cr Revenue FY18 – INR 40 Cr

FY18 – INR 1,200 Cr
Installed Capacity 1.5 MW,
Installed Capacity 100 MW,
20,000+ clients
60+ clients
Operating Model CAPEX
Operating Model Predominantly OPEX

Date Investor Funding Date Investor Funding

July 17 IFC USD 15 mn Jun 18 I-cube-N USD 240k

Nov 17 Warburg Pincus USD 100 mn

Bigger players like Tata Power, Adani Power, Welspun Energy etc. are into larger utility scale
power plants.

COMPETITIVE OPERATING MODELS BY LEADING PLAYERS

Build-Own-Operate-
Transfer 1.CAPEX-free model, consumer invests 0% on asset
(BOOT) 2.Operation & Maintenance ensured by player
3.The customer enters into PPA with the player

• Player installs the plant, consumer takes ownership

My Solar Plant Model • Operation & Maintenance ensured by player
• Client pays for the EPC cost

• Player supplies solar power from remote farms

Solar Farm • 0% upfront investment for the consumer
(Open Access) • The electricity is wheeled to the customer via grid

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INVESTMENTS
New Investments in Cleantech, USD Bn
13.7 100 percent FDI is allowed under automatic
route for power generation and distribution.
11.0 While the non-conventional energy sector has
9.9 received a total FDI inflow of USD 6.4 billion
8.1 8.5
between FY01-18, investments in clean energy
6.8 was USD 11 billion in 2017. Clean energy sector
witnessed 28 deals in 2017, contributing to
27% of the total USD 4.4 billion M&A deals. In
June 2018, Japan’s SoftBank Group had
decided to invest USD 60 – 100 billion in solar
power generation in India. Softbank and Indian
FY12 FY13 FY14 FY15 FY16 FY17 government are expected to reach a formal
agreement shortly.

MAJOR FDI INVESTMENTS IN RENEWABLE ENERGY SECTOR

Foreign Collaborator Country Indian Company Equity Flow
(USD mn)

Asian Development Bank Philippines Renew Power Ventures 44.69

AIRRO Singapore Singapore Diligent Power 41.07

ORIX Corporation Japan Laalpur Wind Energy 37.75

ENEL Green Power

Netherlands BLP Energy 32.61
Development

DEG, Germany Germany Welspun Renewables Energy 32.50

ENERK International
Seychelles RKM Powergen 32.50
Holdings

OSTRO Renewal Power Mauritius Ostro Energy 32.21

AREVA Solar U.S.A AREVA Solar India 31.53

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GOVERNMENT INITIATIVES & POLICY SUPPORT

Foreign 100 per cent FDI allowed in the power sector

Direct under automatic route has boosted FDI inflows
Investment in this sector

VGF means a grant to support infrastructure

Viability Gap projects that are economically justified but fall
Funding short of financial viability

Renewable Purchase Obligations (RPO) that

require DISCOMs and large industries to source
RPOs a fixed % of their power requirements from
renewables. Each state has set its own RPO
requirement, which varies from 2-14 %

Solar power generation is exempted from

Tax income tax for 10 years, interstate transmission
Incentives charges, GST limited to 5%., 80% accelerated
depreciation,30% subsidy in project costs

No The Ministry of Environment, Forest and

Climate Change, Government of India has
Environment
clarified that solar PV power, solar thermal
Clearance projects, and solar parks will not require the
requirement environment clearance certificate

GOI aims to set up 25 Solar Parks and Ultra

Mega Solar Power Projects targeting 20,000
Solar Parks MW of solar power installed capacity by 2019-
20

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OPPORTUNITIES (1/2)
Renewable potential & installed capacity, Huge Untapped Potential
GW (Mar’18) ➢ India is estimated to have renewable
energy potential of 900GW from
commercially exploitable sources viz.
Solar energy- 750 GW, Wind power1 -
102 GW, Bio-energy – 25 GW and Small
Hydro – 20 GW.
➢ As of March 2018, the installed power
capacity of renewable energy sources
(other than hydro) in the country is
69.02 GW. Out of the total installed
capacity, 34.05 GW is contributed by
wind power, 21.65 GW by solar energy,
8.84 GW by bio-power and 4.49 GW by
small hydro power.
➢ Recognizing this potential, a target of
175 GW of renewable energy capacity
by 2022 has been fixed.
➢ In India, there is an estimated potential
of about 8000MV of tidal energy.

Installed Capacity as of March 2018

Potential
Rising Power Demand
Peak Power Demand India, GW ➢ India’s power demand has been rising
at a fast pace. It is estimated that India
will require an additional power supply
capacity of 450 GW by 2034.
➢ The peak power demand of the country
was reached 164.07 GW in 2017-18. It
is estimated that this demand will rise
to 295 GW by 2021-22 and 690 GW by
2035-36.
➢ Also, India has an electricity-GDP
elasticity ratio of 0.8. A seven per cent
growth in energy supply will be
required if India is to grow at eight per
cent. This shows that electricity will
continue to remain a key input in
India’s GDP growth.

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OPPORTUNITIES (2/2)
RES as % of total installed capacity %

Towards Renewable Sources

➢ It has been estimated that
renewables will comprise 49%
of India’s Power Generation
capacity by 2040.

➢ Over the last few years there

has been an increase in
percentage contribution of
renewable energy to total
installed capacity. In 2013-14
the contribution was 12.92
per cent which has increased
to 20.06 per cent by March
2018.

➢ India aims to achieve a total of 175 GW of installed renewable energy capacity by

2022. It is estimated that India will become the third largest solar market in 2017
while India already has the fourth largest wind power installed capacity
globally.

➢ Replacing coal plants with renewable sources is expected to save India Rs

54,000 crore (US$ 8.4 billion) annually due to reduced power costs.

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References
1. Report of the Comptroller and Auditor General of India on Renewable Energy Sector in
India, Report No. 34 of 2015
2. Asif, M.; Munawwar, S. (2005). "Sustainable production of solar electricity with
particular reference to the Indian economy“
3. New and Renewable Energy Sector achievements report, DIPP, January 18, 2017
4. India Solar Report 2018, Bridge to India.
5. Renewable Energy Report 2018, IBEF
6. Solar Energy, Sector Report 2018, CRISIL Research
7. CleanMax Enviro Energy Solutions Pvt. Ltd. Website
8. ZunRoof Tech Pvt. Ltd. Website
9. Crunchbase database
10. Cover Picture-https://www.revisionenergy.com/solar-power-for-your-home/community-solar-farms/

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