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5.0 Introduction
Solar Power has been hugely emphasized during the past 2-3 years in India and a large number of
players have joined the league of solar power generation during this tenure. Reducing cost of solar
panels, increased efficiency and government support have been the key drivers of the existing rally
in the sector. Jawaharlal Nehru National Solar Mission which lays down a target of adding 22000
MW of solar power by 2022 has helped the developers in overcoming some of the constraints such
as risks pertaining to power off take and financing constraints.
In this section it has been tried to find out the opportunity for Reliance Infrastructure to enter into
the Solar PV generation sector
Thus the section is aimed at finding out the best state for Reliance Infra to enter into the sector and
also suggesting best methodology to be followed to enter into the sector.
Solar photovoltaic (PV) capacity was added in more than 100 countries during 2010, ensuring that
PV remained the world’s fastest growing power-generation technology. An estimated 17 GW of
PV capacity was added worldwide in 2010 (compared with just under 7.3 GW in 2009), bringing
the global total to about 40 GW – more than seven times the capacity in operation five years earlier.
Total existing capacity of all PV grew 72% relative to 2009, with the average annual growth rate
over the 2005 to 2010 period exceeding 49% (for grid-connected only, corresponding growth rates
were 81% and 60%). For the first time since 2005, thin film’s share of the market declined, from
17% in 2009 to 13% in 2010, although sales continued to increase. The PV market was driven by
falling costs (see Industry section), new applications, strong investor interest, and continued strong
policy support, but also by accelerated tariff digressions in some countries. The EU dominated the
global PV market, accounting for 80% of the world total with about 13.2 GW newly installed –
enough to meet the electricity consumption of some 10 million European households. For the first
time ever, Europe added more PV than wind capacity during 2010, led by Germany and Italy.
Germany added more PV (7.4 GW) in 2010 than the entire world did the previous year, ending
2010 with 17.3 GW of existing capacity. During the first quarter of 2011, Germany generated 2.75
TWh of electricity with PV, an increase of 87% over the same period in 2010. Italy added an
estimated 2.3 GW of new PV capacity to the grid by the end of the year, bringing the official total
to nearly 3.5 GW. Actual installations may have been higher, however; by the beginning of June
2011, total capacity officially connected under the nation’s feed-in tariff (FIT) totaled 5.8 GW,
some of which may have been installed in 2010. In the Czech Republic, the combination of high
FIT rates and the reduction in PV equipment costs led to a second strong year (1.5 GW), lifting
the country from virtually zero capacity in 2008 to nearly 2 GW of existing capacity by the end of
2010. Other major European installers in 2010 included France (adding 0.7 GW), which more than
tripled its additions relative to 2009, followed by Belgium (0.4 GW) and Greece (almost 0.2 GW),
which more than quadrupled its 2009 additions. Spain saw a second consecutive year with
installations well below the 2008 peak as a result of a cap on ground-mounted systems and
uncertainties associated with the new regulatory framework; less than 0.4 GW were added in 2010,
bringing total PV capacity to 3.8 GW. Beyond Europe, the largest PV markets were Japan (nearly
1 GW), the United States (0.9 GW), and China (0.6 GW). The Japanese and U.S. PV markets
almost doubled relative to 2009, with Japan’s total existing capacity reaching 3.6 GW and the
United States passing the 2.5 GW mark. More than one-fourth of capacity added in the United
States was in utility-scale projects, and electric utilities are becoming a key driver of future growth
in the country. At least 5.4 GW of additional U.S. capacity was under contract by year-end.
California still leads the nation with 30% of the market (down from 80% in 2004/05). South
Korea’s market (0.1 GW) declined for the second year in a row, but Australia’s market (0.3 GW)
grew fourfold relative to 2009. The trend toward utility-scale PV plants continued, with the number
of such systems exceeding 5,000 in 2010, up from just over 3,200 in 2009. These facilities totaled
some 9.7 GW of capacity by the end of 2010, an increase of more than 3 GW during the year, and
accounted for almost 25% of total global PV capacity. The EU continued to lead with 84% of the
global total by year’s end, with Germany alone accounting for about one-third of global additions.
By year-end, Spain had 32% of total installed utility-scale capacity, followed by Germany (26%),
Italy (16%), the United States (7%), and the Czech Republic (6%). Other countries with utility-
scale facilities by early 2011 included Bulgaria, China, Egypt, India, Israel, Mali, Thailand, and
the United Arab Emirates (Abu Dhabi) – or a total of at least 30 countries. As with wind power,
the trend is toward increasing project size, with nine of the world’s 15 largest PV plants completed
in 2010. At the end of 2010, the world’s largest PV plant in operation was the 0.08 GW Sarnia
facility in Ontario, Canada, which is expected to power 12,800 homes. Interest in concentrating
PV (CPV) is also on the rise, with as much as 0.02 GW connected to the grid worldwide during
2010 and early 2011, including projects or demonstrations in the U.S. state of California and in
several countries, including Australia, Egypt, France, Italy, Jordan, Mexico, Spain, and South
Africa. A number of large U.S. projects were announced in 2010, and power purchase agreements
were signed for 0.3 GW with the utility Southern California Electric. Interest in building-integrated
PV (BIPV) also increased in 2010 and extended beyond the traditional markets of France and
Germany, with the largest BIPV project to-date commissioned in China. The vast majority of
installed PV capacity today is grid-connected, with the off-grid sector accounting for a declining
share with each passing year. Yet there is growing interest in off-grid and mostly small-scale
systems, particularly in developing countries but also in developed countries. In Australia, an
estimated 70% of solar PV is off-grid at remote homes, farms, and other locations, including the
country’s largest PV tracker system, installed in 2010 as part of a hybrid solar/diesel power station
in Western Australia
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Price/ $/Wp
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M A M J
India is endowed with vast solar energy potential. About 5,000 trillion kWh per year energy is
incident over India’s land area with most parts receiving 4-7 kWh per sq. m per day. Hence both
technology routes for conversion of solar radiation into heat and electricity, namely, solar thermal
and solar photovoltaic, can effectively be harnessed providing huge scalability for solar in India.
Solar also provides the ability to generate power on a distributed basis and enables rapid capacity
addition with short lead times. Off-grid decentralized and low-temperature applications will be
advantageous from a rural electrification perspective and meeting other energy needs for power
and heating and cooling in both rural and urban areas. From an energy security perspective, solar
is the most secure of all sources, since it is abundantly available. Theoretically, a small fraction of
the total incident solar energy (if captured effectively) can meet the entire country’s power
requirements. It is also clear that given the large proportion of poor and energy un-served
population in the country, every effort needs to be made to exploit the relatively abundant sources
of energy available to the country. While, today, domestic coal based power generation is the
cheapest electricity source, future scenarios suggest that this could well change.
In the recent past the government has emphasized on the policy backup for solar power projects.
There has been a great interest show by the developers in both solar PV and solar thermal sector.
Reducing prices of solar panels, greater stability and surety of power off take and the resulting
revenue stability, incentive mechanisms designed for promoting generation and other financial and
fiscal benefits are the main reason for the rally in the sector. The installed capacity of solar power
in India has increased rapidly due to the above factors as on 30.04.2012 the installed capacity of
solar power stands to be around 979 MW. Some of the recent power plants commissioned and the
state wise breakup of installed capacity is as follows
DC Peak
Name of Plant Power Notes
(MW)
Charanka Solar Park - Charanka village,
Patan District, Gujarat 214 Commissioned April 2012
Mithapur Solar Power Plant - Mithapur,
Gujarat (Tata Power) 25 Commissioned 25 January 2012
Waa Solar Power Plant - Surendranagar,
Gujarat (Madhav Power) 10 Commissioned December 2011
Dhirubhai Ambani Solar Park 40 Commissioned in April 2012
Bitta Solar Power Plant - Bitta, Kutch
District, Gujarat (Adani Power) 40 Commissioned January 2012
Mahindra & Mahindra Solar Plant,
Jodhpur, Rajastan 5 Completed in January 2012
Rasna Marketing Services LLP,
Ahmedabad, under the Gujarat Solar
Policy Phase II 1 Completed in December 2011
Chesdin Power - Biomass and Solar
Photovoltaic Plants 4.1 Completed December 2011
Citra and Sepset Power Plants - Solar
Photovoltaic Plants 4 Commissioned October 2011
Gandhinagar Solar Plant 1 21-Jan-11
Tata Power - Mulshi, Maharashtra 3 Commissioned April 2011
Azure Power - Sabarkantha, Gujarat Commissioned June 2011, 63 acres, using
(Khadoda village ) 10 36,000 Suntech Power panels.
Moser Baer - Patan, Gujarat (Precious and
Solitaire) 30 Commissioned October 2011
B&G Solar Pvt Ltd - Mayiladuthurai, India's First plant Commissioned under
Tamil Nadu 1 JNNSM scheme 10 June 2011
REHPL - Sadeipali, (Bolangir) Orissa 1 Commissioned July 2011
Tata Power - Patapur, Orissa 1 Commissioned August 2011
Tata Power - Osmanabad, Maharastra 1 Commissioned 1 August 2011
Amruth Solar Power Plant - Kadiri,
Andhra Pradesh 1 Commissioned March 2012
IIT Bombay - Gwal Pahari 3 Commissioned 26 September 2011
Chandraleela Power Energy - Narnaul,
Haryana (EPC by Aryav Green Energy
Solutions Pvt. Ltd.) 0.8 Commissioned 15 January 2012
Green Infra Solar Energy Limited - Rajkot,
Gujarat 10 Commissioned November 2011
TAL Solar Power Plant - Barabanki, UP
(Technical Associates Ltd. 2 Commissioned January 2012
Chhattisgarh 4 0.41
Jharkhand 4 0.41
Karnataka 9 0.92
Maharashtra 20 2.04
Orissa 13 1.33
Punjab 9 0.92
Uttarakhand 5 0.51
If we look at the table of recently commissioned project above it shows that out of the total installed
capacity 407.9 MW has been commissioned in the year 2011 and 2012. This sudden boost up in
the sector can be directly attributed to the implementation of Jawaharlal Nehru National Solar
Mission. This mission being implemented by government of India has addresses some of the basic
problems faced by the solar developers earlier, the main of them being the arrangement of power
off take and convincing the procurer to buy costly power generated from solar. In the next section
this mission has been discussed in detail. The other factor for such enormous growth has been the
global reduction in prices of technologies such as PV cells etc. this has not only helped in reduction
of capital cost of the plant but also reducing the tariff of these projects which has helped the
developers to find out the buyers even outside the arrangement of JNNSM. Further the Tariff
Policy was amended in 2011. This amendment mandated the distribution licensees and other
obliged entities under RPO schemes to procure at least 0.25% of their total power consumption
through solar power projects, this percentage is to be raised gradually to the level of 3% by 2022.
The national action plan on climate change was release by PM of India on 30 th June 2008. This
provides a comprehensive framework on climate change. It relates to sustainable development,
co-benefits to society at large, focus on adaptation, mitigation, and scientific research
Principles of NAPCC
Protecting the poor through an inclusive and sustainable development strategy, sensitive
to climate change
Achieving national growth and poverty alleviation objectives while ensuring ecological
sustainability
Efficient and cost-effective strategies for end-use Demand side management
Extensive and accelerated deployment of appropriate technologies for adaptation and
mitigation
New and innovative market, regulatory, and voluntary mechanisms for sustainable
development
Effective implementation through unique linkages – with civil society, LGUs, and public-
private partnerships.
Under this national action plan 8 missions were envisaged which are as under
National Solar Mission
National Mission for Enhanced Energy Efficiency
National Mission on Sustainable Habitat
National Water Mission
National Mission for Sustaining the Himalayan Ecosystem
National Mission for a Green India
National Mission for Sustainable Agriculture
National Mission on Strategic Knowledge for Climate Change
The Jawaharlal Nehru National Solar Mission (also known as the National Solar Mission) is a
major initiative of the Government of India and State Governments to promote ecologically
sustainable growth while addressing India’s energy security challenges. It will also constitute a
major contribution by India to the global effort to meet the challenges of climate change. Named
for Jawaharlal Nehru, the Mission is one of the several initiatives that are part of National Action
Plan on Climate Change. The program was officially inaugurated by Prime Minister of India,
Manmohan Singh.
Goals
The objective of the National Solar Mission is to establish India as a global leader in solar energy,
by creating the policy conditions for its diffusion across the country as quickly as possible. The
immediate aim of the Mission is to focus on setting up an enabling environment for solar
technology penetration in the country both at a centralized and decentralized level. The first
phase (up to 2013) will focus on capturing of the low hanging options in solar thermal; on
promoting off-grid systems to serve populations without access to commercial energy and
modest capacity addition in grid-based systems. In the second phase, after taking into account
the experience of the initial years, capacity will be aggressively ramped up to create conditions
for up scaled and competitive solar energy penetration in the country. The Mission will adopt a
3-phase approach, spanning the remaining period of the 11th Plan and first year of the 12th Plan
(up to 2012-13) as Phase 1, the remaining 4 years of the 12th Plan (2013–17) as Phase 2 and the
13th Plan (2017–22) as Phase 3. At the end of each plan, and mid-term during the 12th and 13th
Plans, there will be an evaluation of progress, review of capacity and targets for subsequent
phases, based on emerging cost and technology trends, both domestic and global. The aim would
be to protect Government from subsidy exposure in case expected cost reduction does not
materialize or is more rapid than expected. Under this mission NTPC Vidut Vyapar Nigam Ltd has
been nominated as the nodal agency which will facilitate the entire process and also will be a
single point procurer for the power generated from the solar plants selected under this mission.
The selection is based upon the tariff based bidding process. The process is different from the
conventional bidding process as under the solar mission the bids are invited in terms of discount
offered over the normative tariff determined by CERC from time to time. NVVN will purchase the
electricity generated from the selected plants and will sell the same as bundled power with the
conventional power generated by its own plants. The tariff of such bundles power is determined
through set formula given in Power Sale Agreement.
Phase I – Batch 1
Phase I – Batch II
It can be clearly depicted from above tables the kind of boost that solar mission has given to the
solar power sector in India. Within a very short time frame the price of solar power has come
down from around Rs.16/unit as determined by CERC to Rs.8.77/Unit which is average of the bids
of selected projects in Batch II of Phase I. This trajectory is poised to further show a downward
movement with the investors gaining confidence in investing solar projects.
REC Mechanism
REC mechanism or green certificate mechanism is the recently implemented scheme by GOI. This
scheme has been specifically developed to address one of the basic problems which the solar
power was facing. This problem has reference to the possibility of inter-state transactions of
power generated from solar projects. India has a vast potential for solar energy but this potential
is not evenly spread throughout the country. As per revised RPO mechanism the state has to
procure at least 0.25% of their total energy consumption from solar energy which is to be
increased to 3% by 2022. But it is quite possible that some of the state may not have that much
potential of solar power. To address this issue they can procure solar power from other potential
rich state and fulfill their RPO but as per the Open Access regulations any transaction on
interstate transmission network (transmission lines between two states) needs to be scheduled
24 hours ahead. This cannot be possible with solar projects as they are totally dependent on
nature for their source of energy, causing a serious road block in inters state transaction of solar
power. As a result the states which have less potential of solar energy fail to comply with the RPO
while at the same time the states with rich potential witness the development of the solar
projects only up to the fulfillment of RPO targets resulting in underutilization of the available
potential as no utility would be willing to buy costly solar power beyond their RPO targets. To
address this issue and to harness the maximum possible potential of solar potential across India
the Renewable Energy Certificate Mechanism was developed as explained below.
In this mechanism the electricity generated from the renewable energy plants is divided into two
components viz. electricity component and environmental attributes. While the energy
component is to be sold at a rate equal to or less than APPC (Annual Power Purchase Cost) of the
distribution utility buying the power. The environmental attribute of the renewable energy
generation will be converted into a green certificate known as renewable certificate. This
certificate can be traded in the power exchange and can be bought by the obliged entities under
the RPO scheme to fulfill their obligation. Since the certificate can be bought or sold on the
national exchanges they can be bought by the obliged entities across India. This purchase of
certificate will be deemed as purchase of renewable energy and these certificates can be
redeemed for the fulfillment of the RPO. Thus indirectly REC mechanism aims at facilitating the
interstate transaction of electricity generated from renewable energy plants.
Further within the renewable energy projects since solar is the most nascent technology and
there is a lot of scope of improvement the REC’s have been divided into two categories Solar
certificates and Non-Solar certificates. Solar certificates are utilized to fulfillment the Solar RPO
and Non Solar certificates are utilized to fulfill the Non Solar RPO.
Only grid connected projects with approved technologies will be eligible for participating
in the mechanism.
The certificates can only be issued to renewable energy generators, and can be bought
only by eligible entities.
Redemption of certificate
The price of the certificate will be determined in market from the demand and supply
however the forbearance and floor prices will be determined by CERC from time to time.
To analyze the problems we will have a look at some of the statistics which are as follows:
Till date a capacity of around 486 projects comprising of 2772.94 MW has been registered with
the central agency. This includes all type of renewable energy plants. But if we look at the
technology wise breakup of the above stated figures wind projects wind has the highest capacity
registered under the mechanism with 1426.06 MW ( 353 Projects) and comprises of more than
50% of the total capacity registered. Least capacity has been registered under solar technology
with only 7 projects with 18 MW capacity have been registered.
State wise breakup of the solar capacity registered under REC mechanism is as follows:
This clearly shows that solar developers have till now not shown interest in the REC mechanism.
Out of a total 166434 RECs issued till date only 573 have been issued in the category of solar
certificates. Also all these certificates have been issued only in May 2012 and June 2012. The fact
that needs to be mentioned here is that the CERC tariff order for renewable energy projects for
the period of 2009-14 was notified in Feb 2012. As per this order the normative tariff calculated
for solar pv projects was Rs.10.39/ kwh. Impact of this tariff reduction from Rs.15 to Rs. 10.39
can be easily seen on the REC market.
For the purpose of analysis state wise APPC of FY 2011-12 has collected and calculations of
revenue under two schemes has been compared to study the financial impact on the developers.
This analysis has been carried for both tariffs i.e last control period’s tariff and current tariff.
It can be clearly seen that when the CERC tariff investors were not getting the benefit as in most
of the states the APPC was not enough to surpass the CERC tariff but with the reduction of same
the revenue generated from sale of power under the FIT regime is lower than the REC regime.
Thus with the cost of solar power coming down it can be expected that the developers will show
more interest in REC scheme.
Tax Holiday: - Under section 80 (I) (A) of the Income Tax Act, the central govt. offers a 10
year tax holiday for all infrastructure projects.
Equipment for solar photovoltaic and solar thermal and power generation plant and
machinery enjoy a reduction in customs duty.
Government encourages foreign investors to set up projects on Build, Own and Operate
(BOO) basis
Soft loans are available through IREDA for renewable energy equipment manufacturing
The project can also enjoy various incentives under Semi-conductor Policy 2007, as silicon
used in STP & SPV power plants is a semiconductor.
Generation based incentives (GBI) by MNRE for solar power plant (SPV & STP)
The MNRE has issued two separate GBI schemes (one for STP and other for SPV) exclusively for
promoting solar power generation in the state. The guidelines propose to extend the incentive
to a cumulative capacity of 10 MWp in a state and a total of 50 MWp across the country during
11thfive year plan. The scheme is available to only those solar power project developers who
install and commission their eligible project before 31st December 2009. The essential criterions
to be satisfied by the eligible projects are:-
Grid interactive solar power generation plants with a minimum installed capacity of one
MWp
A project developer can set up a solar power project (SPV or STP) up to a maximum
capacity of 5 MWp in the country.
If a project developer avails the benefit under sec. 32, rule 5 of the Income Tax Act, 1961
(claiming accelerated depreciation), then is not eligible for GBI incentives.
According to the GBI guidelines, all eligible solar power developer needs to furnish specific
information in the prescribed format to the IREDA. A project developer needs to furnish detail
information on technical and performance features, technical specifications, requirement and
availability of land, title of the land, capital cost, estimated life of the SPV/ STP power plant,
quantum of electricity expected to be generated and fed to the grid, proposed sale price of
electricity from PV power plant, duration of power purchase agreement and power purchase
rate(s), arrangements for power evacuation and the time frame for installation / commissioning
of the grid PV power plant etc. The disbursement of incentive will begin only when a minimum
capacity of one MWp is commissioned and sold to the grid. Howsoever, the GBI scheme excludes
the provision of third party sale, banking and wheeling of power while availing it.
Recent Development
A recent scheme has been notified by CERC for facilitation of interstate transaction of electricity
generated from wind and solar energy plants. Under this scheme the aforesaid plants will be
allowed to schedule their next day generation and a deviation of 30% in that schedule will be
allowed without any Unscheduled Interchange Charges