6/27/2011

AsiaCleanEnergyForum2011 ADB,Manila

AnoopSingh Dept.ofIndustrialandManagementEngg., IndianInstituteofTechnologyKanpur Kanpur 208016(India) Email:anoops@iitk.ac.in

BusinessModelforFeedintariffs
O&M Equity

RE Projects Debt

EPC

CDM Feed-in-tariff Regulatory uncertainty due to revision of tariffs Uncertainty In the carbon market

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BusinessModelforRECs
APPC O&M Equity

RE Projects Debt

EPC

CDM REC Registry REC Market Based Pricing with Floor Price Support Uncertainty In the carbon market

BusinessModelofREC&Energy EfficiencyCertificates
Energy Service p y (ESCO) ) Company ( Project Owner EE Benefit Funding EE Project Revenue BEE Ecerts Registry CDM

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FinancialViabilityandBankabilityof Renewable/CleanEnergyProjects
NetCashFlows=P1*Q1+P2*Q2 C1 C2 C3. Where,P PriceofOutputs;Q QuantityofOutput C1,C2. C1 C2 CostComponents

APPC + PREC_min - Feed-in-tariff, projects should be viable and financeable.

RiskProfileforRECs
Natural Resource RE Project Electricity

RECs

Other Inputs

CERs

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RiskProfileforEcerts
Energy Input EE Project Ecerts

CERs

Other Inputs

Product Output

FinancingRenewableEnergy Projects
GenerallyLowTechnologyRisk y gy Highbutdecliningcosts RenewableSupportObligation/VoluntaryGreenMarkets Publicsupportthroughsubsidies,fiscalincentivesand lucrativepriceofelectricity(Feedintariff ) RevenuesfromCleanDevelopmentMechanism NewsupportschemeslikeRenewableEnergyCertificates RegulatoryandPolicyStability RecourseandNonrecourseFinancing Weatherrisk,predictableintheshortrun.

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FinancingCleanEnergyProjects
LowTechnologyRisk ModeratetoHighcosts RoleofEnergyServiceCompanies l f Publicsupportthroughsubsidies,fiscalincentivesand lucrativepriceofelectricity(Feedintariff ) RevenuesfromCleanDevelopmentMechanism NewsupportschemeslikeEnergySavingCertificates ( / ) (Whitecertificates/Ecerts) RegulatoryandPolicyStability RecourseandNonrecourseFinancing OutputRisk(productioncut) Lowenergypricerisk(lowprobability) ChallengeofMonitoring(leakagepotential)

SourcesofRiskinFinancingREC Projects
ChangeinAPPC,priceatwhichelectricityissoldto g ,p y localdistributionutility.Predictableinshortto mediumterm. PriceaswellasQuantityofRECsaleissubjectto marketrisk.
AbsenceofpenaltyforRPOnoncompliancemakesREC demanduncertain. RECsarecappedbyfloorprice(seemshigherintheIndian context)

PoorliquidityintheRECsmarket RegulatoryRisk

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SimranWind RECCaseStudy
Simran WindProjectPrivateLimited,a100%owned subsidiaryofTechnoElectric&EngineeringCompany b idi f h l i i i C Limited. WindCapacityExpansionfrom50.4MWto126.9MWin Muthianpatti,Amdhapuram andRastainTamilNadu. USD15million IFCscorporateequityfinancing uptoUSD$40millionIFCALoan(12yeartenorwith3 yeargraceperiod). IFCPost2012CarbonFacilityproposestoforwardpurchase upto1.75millionCertifiedEmissionReductions(CERs)to begeneratedthrough2020 atapredeterminedpercentage oftheCERspotpriceatthetimeofdelivery,subjecttoa floorandacap.

Conclusions
Marketsarenotapanaceainitself.MarketDesignand RegulatoryandPolicyEnvironmentsignificant influenceriskprofileandriskperception. MediumlongtermRegulatorycertaintycanimprove appetiteofdomesticlenders. EnergyEfficiencyCertificateshavegreaterriskand challengethanREC.