The India Solar Handbook

The whos who and whats what

A complete industry overview for solar energy in India

With support from:

BRIDGE TO INDIA, 2011 Illustration by Dwarka Nath Sinha BRIDGE TO INDIA, 2011

SupporTerS
The US$ 14.4 billion Mahindra Group aims to be at the forefront of the solar revolution in India through Mahindra Solar. Powered by proven engineering expertise and leading technology partners, Mahindra Solar is committed to deliver reliable turnkey EPC (Engineering, Procurement and Construction) services and build over 75MW of large grid-connected solar power plants across India. Backed with innovative and costeffective solution for rooftops and captive power plants, we are empowering commercial organizations and telecom towers to reduce their cost through diesel savings. In 2011, we received the highest CRISIL-MNRE rating of SP1A for off-grid solar PV system integration. Tel: +91 22 24 90 14 41, Extn.: 2259 Fax: +91 22 24 96 65 73 email contactus.solar@mahindra.com epc@mahindraepc.com www.mahindraepc.com www.mahindra.com

GIZ is a federal enterprise, which supports the German Government in achieving its objectives in the field of international cooperation for sustainable development. GIZ operates in many fields: economic development and employment promotion; governance and democracy; security, reconstruction, peace building and civil conflict transformation; food security, health and basic education; and environmental protection, resource

conservation and climate change mitigation. We support our partners with management and logistical services, and act as an intermediary, balancing diverse interests in sensitive contexts. Tel: +49 61 96 79-0 Fax: +49 61 96 79-11 15 email info@giz.de www.giz.de

Bosch Solar energy, the Solar Energy division of the Bosch Group, is a leading supplier of photovoltaic solutions. From small-scale systems for single family homes to large turnkey photovoltaic projects, Bosch Solar Energy is a global provider of high-quality solar cells and modules for turning sunlight into electricity. The company also takes on contracts to build entire solar parks which cover everything from the initial planning stages through to the actual construction and the final handover

of the completed turnkey system to the owner. Bosch Solar Energy is also part of Bosch Limited in India, Indias largest auto component manufacturer and also one of the largest IndoGerman companies in India. Tel: +91 80 22 99 23 66 e-mail venugopalan.cm@in.bosch.com www.boschindia.com

BRIDGE TO INDIA, 2011

The India Solar Handbook

The whos who and whats what

A complete industry overview for solar energy in India

BRIDGE TO INDIA, 2011

DISclAIMer

BrIDGe To INDIA

January 2012 Edition

THe INDIA SolAr HANDBook

2011 BrIDGe To INDIA pvt. ltd. All rights reserved December 2011, New Delhi Authors Dr. Tobias Engelmeier Mohit Anand Shishir Basant Shivansh Tyagi Design & layout Dwarka Nath Sinha No part of the India Solar Handbook may be used or reproduced in any manner or in any form or by any means without mentioning its original source. BRIDGE TO INDIA is not herein engaged in rendering professional advice and services to you. BRIDGE TO INDIA makes no warranties, expressed or implied, as to the ownership, accuracy, or adequacy of the content of this product. BRIDGE TO INDIA shall not be liable for any indirect, incidental, consequential, or punitive damages or for lost revenues or profits, whether or not advised of the possibility of such damages or losses and regardless of the theory of liability. For further enquiries, please contact: contact@bridgetoindia.com BRIDGE TO INDIA Pvt. Ltd. S-181, Panchsheel Park New Delhi 110017 India www.bridgetoindia.com Read our blog for up-to-date market insights and opinions www.bridgetoindia.com/blog Follow us on Facebook www.facebook.com/bridgetoindia

BRIDGE TO INDIA, 2011

coNTeNTS

The PV market opportunity in India

International policy comparison Solar irradiation in India Indian solar policies Demand and growth projections The off-grid market opportunity rpos and rec mechanism 01 03 05 10 11 14

The PV manufacturing industry in India

Status Domestic content requirement opportunities for foreign manufacturers pV manufacturing forecast 16 17 17 19

Expert Interviews
Mr. Alan rosling, kiran energy Mr. chandan Guha, Mahindra Solar one Mr. Schneidewind peter, Bosch Solar energy Dr. Tobias engelmeier and Mr. oliver Herzog, Bridge to India 20 23 25 27

Annexure

29

BRIDGE TO INDIA, 2011

THe pV MArkeT opporTuNITy IN INDIA

INTerNATIoNAl polIcy coMpArISoN

In the initial, Feed-in-Tariff (FiT) driven phase of the global PV market, European countries, especially Germany, Spain and Italy, have taken the lead. The concept of compulsory consumption quotas of renewable energy (RPOs) has also first been introduced in Europe. Both market instruments have subsequently been replicated and further developed by other countries across the world. As the solar PV industry enters into its second phase of nearing commercial parity with other energy sources - new markets, with new policy support and high irradiation levels are increasingly coming into focus.

The introduction of highly attractive FiTs and the maturing of the industry have contributed to large-scale capacity additions in these markets. The current economic slowdown in many European countries, especially Spain and Italy, has contributed to a significant reduction of FiTs, making these markets less attractive. Also, with large capacities of solar power already installed, the growth in these markets has been declining for the past few years. As a result, the PV industry is now engaging with new markets that offer opportunities for future growth and give them a more diversified portfolio of market risks.

The current economic slowdown in many European countries, especially Spain and Italy, has contributed to a significant reduction of FiTs, making these markets less attractive.

New Markets
Many new markets like India, Australia or South Africa have the advantage of

Fundamental
Irradiation (kWh/m2/ per day) long Term energy Deficit No No No Yes Yes No No M17($0.425)* ~M12 ($0.30) ~M11 ($0.27) ~M11 ($0.27) M12 ($0.30) M22($0.55) FiT (per kWh)

Driver
rpo capital Subsidy

Mature markets
Germany Italy Spain 2.7 3.3 3.7 5.5 5.2 5.5 3.1 No Yes Yes Yes Yes Yes No Yes Yes Yes Yes Yes Yes Yes

New Markets
India South Africa Australia ontario (canada)

Sources: REN 21 Global Status Report, BRIDGE TO INDIA analysis *For projects less than 10MW

Mature Markets
The PV market in these countries is based on two main drivers: their commitment to reduce their carbon footprint and their desire to reduce the dependency on imported fossil fuel. The average solar irradiation levels tend to be lower in these countries.
01 BRIDGE TO INDIA, 2011

high solar irradiation. Their current installed capacities are still negligible as compared to the mature markets. Growth of solar power in these markets has been initiated by new government initiatives through FiTs and Renewable Purchase Obligations (RPOs).

India, with liberalized policies for the power sector, a high potential for solar power and a variety of central and state-level incentive systems, presents a particularly good opportunity for the solar industry.

South Africa has high solar resources, which are yet to be harnessed and very high FiTs. Currently, PV applications in the country are limited to off-grid solutions. The government plans to add 300MW per year starting from year 2012. However, the country has only one state-run distribution utility that can purchase solar power under the FiT scheme.

mounted solar PV projects is around M24 ($0.42) per kWh, which is highest in the world. The market potential for large solar PV projects without the support of government is low. There are doubts about the long term strategy of the government.

India, with liberalized policies for the power sector, a high potential for solar power and a variety of central and Australia has some of the highest state-level incentive systems, presents average solar irradiation levels in a particularly good opportunity for the world and has a competitive, the solar industry. The market is open electricity market. The remote supported by FiTs to provide an initial locations in Australia, which offer the thrust. Further, by introducing the best solar resource, however, often Renewable Energy Certificate (REC) lack grid and road infrastructure. mechanism and Renewable Purchase Also, Australia, like South Africa, Obligations (RPOs), the government has significant, domestic fossil fuel has tried to create an independent market for solar power in India. resources available. Reverse-bidding auctions in some programs have significantly reduced ontario (Canada) is a fast emerging the FiTs, reducing the profitability of solar market with an expected installed solar PV capacity of 2,800MW projects. In the long-term, however, by 2015. The capacity addition is mainly solar power is considered to be a key strategic choice for this energydriven by the FiT policy. The FiT policy strapped, large and high growth was introduced in 2009 but is only economy. applicable for projects smaller than 10MW. The tariff offered for ground

Mature markets New markets

BRIDGE TO INDIA, 2011

02

SolAr IrrADIATIoN IN INDIA

03

BRIDGE TO INDIA, 2011

 BRIDGE TO INDIA, 2011

04

INDIAN SolAr polIcIeS

National Solar Mission
Since its launch in 2009, the National Solar Mission (NSM) has been the keydriver of the growth of the Indian solar industry. It targets installations of 20 GW of grid-connected and 2GW of offgrid solar power by 2022 (both PV and CSP). In the first of its three phases, from 2010 to 2013, the government incentivizes the construction of 1,000MW of grid-connected power plants, encouraging the more developed PV technology as well as CSP equally with 500MW each1.

For the first batch of projects under the NSM offered in autumn 2010, as many as 333 project developers had put forward bids worth 1,815MW for 150MW of PV projects. Given this unexpected oversubscription, the government decided to award contracts based on a competitive reverse bidding process. Developers that offered the highest discount on the initial tariff of M17.91/kWh ($0.45 per kWh) were awarded the projects. As a result, tariffs fell by around 30% to an average of M12 per kWh ($0.32 per kWh). The NSM has also introduced the concept of bundling, where the

THe INDIA SolAr coMpASS

BRIDGE TO INDIAs expertise lies in combining keen market insight with in-depth and precise knowledge of the industry and policy framework in India. We publish this knowledge through our quarterly India Solar Compass. The India Solar Compass is an essential tool for all companies and investors engaging with the Indian solar market. Subscribers include some of the leading international solar companies, such as Bosch, IBC Solar, Gehrlicher Solar and Belectric. In addition to the India Solar Compass, BRIDGE TO INDIA has authored or co-authored a number of reports on the Indian energy, renewable energy and solar markets, most recently the report: India Solar Market: Strategy, Players and Opportunities with GTM Research (November 2011). content I. Indias Solar Market Overview and Latest Market Developments Status of the States Focus on Resale of PPAs in Gujarat Industry Developments Challenges and Outlook II. Indepth expert Interview III. key Question Answered What is the captive commercial diesel off-set opportunity in India? To purchase our reports or subscribe to the India Solar Compass, please visit the Reports section on www.bridgetoindia.com or send an email to mohit.anand@bridgetoindia.com

Bundling of solar power

* Approximate - actual tariff could vary from project to project

Each federal power generator such as NTPC has to sell 90% of power generated to state distribution companies (DISCOMS) as enforced by the government. The other 10% is termed as un-allocated and this power can be sold by NTPC through NVVN in the open market.

Currently NTPC has 4,000MW of unallocated power, which can be bundled with solar power from projects. However, NSMs target of 4,000MW of solar power by 2017, will need 16,000MW of unallocated thermal power.

--------------------1 - MNRE National Solar Mission, Guidelines for New Grid Connected Solar Power Projects, July 2010
05 BRIDGE TO INDIA, 2011

government (through the state-owned power trading company NVVN) is to buy the expensive solar power from developers and then bundle it with unallocated cheap thermal power from the federally-owned power generator NTPC before selling it off at an average cost of around M4 per kWh ($0.10 per kWh) to the state utilities. In order to reduce the payment default risks inherent in the power purchase agreements (PPAs) with the financially weak State Electricity Boards (SEBs), the federal government later approved a Payment Security Scheme worth M4.86 billion ($122m) for projects under Phase 1 of the NSM. The scheme is implemented by the Ministry of New and Renewable Energy (MNRE), which will allocate the funds to the NVVN through a Solar Payment Security Account (SPSA).

banks (large areas of land acquired and consolidated by the government for the use of developers), thereby pushing developers to purchase private land, which is usually a tedious process taking anything between eight to twelve months. A new solar park at Charanka is meant to solve many infrastructure-related problems. So far, however, there have been some issues with land allocation and the provision of evacuation infrastructure by the Gujarat Energy Transmission Corporation Limited (GETCO). While such issues will not necessarily derail the solar park, they will create further delays for developers who are already facing challenges in meeting their deadlines. The state is also planning to allocate another 1,000MW worth of projects in the beginning of 2012 with the new tariff control period.

Gujarat Solar policy

The state of Gujarat was the first Indian state to launch its own solar policy in 2009. The current policy is operative until 2014. The initial target was to achieve an installed capacity of 500MW. Given the interest from a large number of developers and a likelihood that a significant number of the initial projects will not materialize, the government allocated projects worth 935MW. The Gujarat Solar Policy is the only policy, which has awarded projects with a fixed FiT, on a first-comefirst-serve basis. This has resulted in the allocation of a number of projects to in-experienced or unknown developers. Land acquisition has proved to be a challenge for projects in Gujarat. There are a limited number of land-

rajasthan Solar policy

The Rajasthan Solar Policy, launched in July 2011, has a long-term target of 12GW of installed solar power in the state by 2022. In the first phase, PV projects worth 300MW will be awarded through a competitive bidding process. The bidding is expected to take place by end 2011. Projects are then to be installed by 2013. The Rajasthan Solar Policy has incorporated some lessons from forerunners like the NSM and the Gujarat Solar Policy. It does not have the 5MW limit on individual projects which made the NSM less attractive to large players but, unlike the Gujarat policy, it has placed fixed limits of 61MW (accumulated capacity under different scheme of projects) on overall capacity allocation to encourage the development of a competitive developer landscape. The policy also
For first 12 years M15 per kWh For next 13 years M5 per kWh

Gujarat Tariffs
For projects commissioned before 28th January 2011 For projects commissioned post 28th January 2011
BRIDGE TO INDIA, 2011

levelized tariff M13.30 per kWh

M10.81 per kWh

M12.04 per kWh

M6.84 per kWh

06

addresses the concerns of developers with regard to the allocation of land and water, availability of a transmission network and the localized supply chain. In October 2011, the state government announced a tax exemption of 4% on entry of 43 capital goods like solar PV modules, batteries, inverters and other goods used in solar power plants.

1 of the NSM the state has already attracted around 60% of the bids for projects and is likely to attract more developers under its state policy.

karnataka Solar policy

Karnataka announced its solar policy in July 2011 and targets 350MW of projects by 2016. The state has already called for bids for 80MW worth of projects. The last date to submit the bid was November 24th, 2011. The selected projects will be announced by The policy promotes domestic manufacturing by providing incentives the end of 2011. The size of individual projects is limited to 3MW to 10MW. for developers with manufacturing facilities in Rajasthan. Of the 300MW of It allows plants to feed power into the low voltage, 11KV distribution grid. PV projects available under its policy, With these measures, Karnataka 200MW are reserved for allotment is looking to attract investors that to developers planning to build are interested in developing smaller manufacturing facilities in Rajasthan. These projects are required to use the plants for a more decentralized energy supply. The policy has no domestic modules manufactured in-house. content requirement. Due to its high irradiation levels and availability of space, Rajasthan will likely become the hub of solar power generation in India. Under Batch I of Phase I of the NSM, out of 145MW of solar PV projects selected, 70% are in Rajasthan. Under Batch 2 of Phase
policy Target project allotment method Reverse competitive bidding FiT

In October 2011, MNRE refused to give subsidies to 129MW of projects allotted by the Karnataka government, which led to the cancellation of these projects.

project Sizes

Domestic content guideline Yes. Exception: Thin film modules No

expected installed capacity by 2013** 480MW

NSM

500MW by 2013

Average FiT for first batch: M12 ($0.3) per kWh

Batch 1: 5MW Batch 2: 20MW Min 5MW; Max no cap

Gujarat

500MW by 2014

Fixed FiT on M15 first come ($0.375) basis per kWh for first 12 year and M5 ($0.125) per kWh for the next 13 years Reverse competitive bidding Biddings yet to take place

700MW*

rajasthan

300MW by 2013

Min: 1MW Max: 50MW

No. Exception: 200MW projects for module manufacturers No

250MW

karnataka

126MW by 2013

Reverse competitive bidding

Biddings yet to be take place

Min: 3MW Max: 10MW

100MW

*Projects awarded are more than the targets of policy **BRIDGE TO INDIA market projections For procedures and timelines of project allotment, criteria and development, refer to AnnexureI
07 BRIDGE TO INDIA, 2011

STATuS oF THe STATeS

STATe
GuJArAT

SolAr polIcy STATuS

State Solar Policy under execution Phase 1: Deadline Dec. 2010 Phase 2: Deadline Dec. 2011 Phase 3: To be announced by end of 2011 State Solar Policy announced in April 2011 Base FiTs announced. Bidding expected by end of 2011 (250MW to be allotted) NSM State Policy

FINANcIAl cloSure/ ppAs SIGNeD coNSTrucTIoN

0MW 933.5MW 0MW 400MW

pV proJecTS
coMMISSIoNeD
40MW

Top perForMer

rAJASTHAN

NSM RPSSGP GBI Direct RPO

171MW 12MW 5MW 100MW 5MW 6MW

170MW 12MW 40MW 5MW

1MW 5MW

kArNATAkA

State Solar Policy announced in July 2011 NSM Bids totake place by end of 2011 (80MW to GBI be allotted) Deadline for RfS: October 2011 Broad Renewable Energy Policy, No policy NSM RPSSGP specific to solar energy Direct RPO

6MW

MAHArASHTrA

16MW 1MW 153MW

12MW 150MW

4MW 1MW 3MW

TAMIl NADu

State solar policy likely to be released soon

NSM RPSSGP GBI NSM RPSSGP GBI NSM RPSSGP RPSSGP Direct RPO NSM RPSSGP Direct RPO NSM RPSSGP Direct RPO RPSSGP

5MW 7MW 5MW 65MW 10.5MW 2MW 5MW 8MW 7.8MW 5MW 5MW 4MW 5MW 7MW 8.5MW 6MW 5MW

5MW 5MW

2MW 5MW

poTeNTIAl rISerS

ANDHrA prADeSH

Draft solar policy expected by end of 2011

65MW 8.5MW

2MW 2MW

orISSA

Draft solar policy expected by end of 2011

5MW 5MW 5.8MW 5MW 5MW 4MW 5MW 5MW 8.5MW 6MW 5MW

3MW 2MW 0MW

HAryANA

Broad renewable energy policy, No policy specific to solar energy No state solar policy

uTTAr prADeSH

puNJAB

No state solar policy

2MW

uTTArAkHAND

Existing broad renewable energy policy

WeST BeNGAl cHHATTISGArH

No state solar policy No state solar policy No state solar policy Only central policy No state solar policy (Rooftop projects initiated by MANIREDA)

GBI RPSSGP RPSSGP RPSSGP Direct RPO

7MW 4MW 14MW 1MW 1.5MW

5MW 4MW 14MW 1MW 1.5MW

2MW

SloW MoVerS

JHArkHAND puDucHerry MANIpur

BRIDGE TO INDIA, 2011

08

pV proJecTS
STATe
DelHI

SolAr polIcy STATuS

No solar policy yet, notified their RPO requirments. Solar rooftop policy expected. Draft solar policy (Not formalized) Projects to be developed under NSM offgrid and RPSSGP Existing broad renewable energy policy Draft solar policy (Not formalized) Draft solar policy (Not formalized) Direct RPO

ppAs SIGNeD
2MW

FINANcIAl cloSure/ coMMIScoNSTrucTIoN SIoNeD

2MW

JAMMu AND kASHMIr

No development so far

kerAlA TrIpurA MIZorAM

No development so far No development so far No development so far

ASSAM

No state solar policy

No development so far No development so far No development so far

HIMAcHAl prADeSH No state solar policy AruNAcHAl prADeSH No state solar policy

NoN MoVerS

NAGAlAND MeGHAlAyA SIkkIM GoA uNIoN TerrITorIeS

No state solar policy No state solar policy No state solar policy No state solar policy Only central renewable energy policy Total

No development so far No development so far No development so far No development so far No development so far 1,575.3MW 957.3MW* 82MW

Direct rpo: Projects initiated to fulfill RPO obligations (project specific FiTs negotiated between utility & developers) NSM: First batch of projects allotted under phase-1 of the NSM (includes migration projects) rpSSGp: Rooftop & Small Solar Power Generation Program under NSM GBI: Projects under MNRE GBI scheme * We do not expect that all projects that have attained financial closure will be constructed and commissioned.

09

BRIDGE TO INDIA, 2011

DeMAND GroWTH AND proJecTIoNS

projected Market Growth of Solar pV in India

Given Indias high irradiation levels, solar power will soon become a feasible choice for captive generation in the future.

capacity addition is currently driven almost exclusively by government subsidies The installed capacity for gridconnected solar power under the various policies by the end of 2011 will be close to 250MW up from a mere 22MW at the beginning of the year (all PV). The growth has been driven by the launch of the NSM and Gujarat Solar Policy and the preferential FiTs they offer. Currently, growth is centering on grid-connected plants. This trend is expected to continue over the next three years because of a lack of incentives outside the policies and because solar power is not yet commercially viable on a large scale. Growth of captive solar power

installations will be dependent on the solar REC market in the short term. Grid parity is expected by 2018 The capital cost for solar power has come down by about 16% to 20% in the last two years. It is expected to continue the downward trend for the next three years as the manufacturing scale increases and the technology matures. At the same time, the cost for fossil fuels such as coal is expected to increase and subsidies in the power sector in India are expected to fall, thus driving up grid power prices. Given Indias high irradiation levels, solar power will soon become a feasible choice for captive generation in the future.

BRIDGE TO INDIA, 2011

10

STrATeGIc coNSulTING
BRIDGE TO INDIA provides strategic consulting services to Indian and international companies and investors interested in the Indian solar market. With its extensive industry network, market insights and project knowledge on demand growth and projections, BRIDGE TO INDIA is able to provide customized solutionsto generate tangible success for its clients. Our work encompasses the following areas: Market entry advisory Competitive analysis Business model development Partnerships M&A advisory For more information, visit the Strategic Consulting section on www.bridgetoindia.com or contact tobias.engelmeier@ bridgetoindia.com

Grid parity in India

industrial users, powering telecom towers and rural electrification through small solar applications; solar home systems or mini-grids. The realizable market potential and the The major market segments in the technical and financial entry barriers Indian solar off-grid market are captive indicate their level of attractiveness power plants for commercial and and business opportunities.

THe oFFGrID MArkeT opporTuNITy

off-Grid pV-Market: potential and Market entry Barriers

11

BRIDGE TO INDIA, 2011

electricity cost
Depending on the design of the PV system, a unit of power from an offgrid solar system currently costs about M11-12 ($0.28-0.30) per kWh (without storage). This is higher than the cost of grid electricity (M4-5 or $0.10-$0.13 per kWh) but competitive to electricity from diesel gen-sets (M10-15 or $0.25$0.38 per kWh). Currently diesel costs around M45 ($1) per liter. Therefore, in areas where grid power is erratic and diesel power is used extensively, solar power already has a strong business case.

captive power plants

Solar captive power plants are already a viable option for many locations to complement diesel or grid power. Amongst the advantages for off-grid solar systems vis--vis grid connected plants is the fact that it is mostly a business-to-business transaction, leaving aside governmental processes. On the other side, there is a risk that PPAs with private customers are less bankable. According to the Electricity Rules, 2005, at least 26% of the plant has to be owned by its user and at least 51% of the annually

comparison of cost per power unit [INr/kWh]**

BRIDGE TO INDIA, 2011

12

BrIDGe To INDIA project Development

BRIDGE TO INDIA supports international investors and Indian companies in their project development process. This includes project scouting, technical and commercial due diligence, energy concepts for captive projects, and site development including permits. BRIDGE TO INDIA is also developing commercially attractive captive PV projects. For more information, visit the Project Development section on www.bridgetoindia.com or contact oliver.herzog@bridgetoindia.com

produced electricity must be captive consumption. Market participants estimate the payback period of solar captive power plants to be two to seven years, depending on diesel prices, location and system design. The main challenge is to find a financially viable business model with a long-term strategy for scalability. There are two main approaches to this: an EPC or an ESCO model.

The payback period for PV systems as power supply for telecom towers is currently two to four years and it is expected to reach one year by 2014 (see Figure 3)2. The lesser the availability of grid-power and the more remote the location, the better is the case for autonomous PV systems. Further, increasing diesel prices and decreasing diesel subsidies will support this trend.

epc Model

eSco Model

Power plant is owned by the customer Power plant is owned by the customer after the contract expires at no extra cost apart from maintenance Most plants are sold through this model EPC company finds funding through equity with banks who can provide high upfront costs Customer operates the power plant after commissioning Customer takes on the responsibility of maintaining the power plant Solar as a service - more suitable for achieving economies of scale Design, construction, financing, operation and maintenance is done by the Energy Service Company (ESCO) Customer only pays for the energy consumed by signing a contract with the ESCO for 7-14 years ESCO takes the risk of running the power plant for the customer for the contract period

payback of solar power systems for telecom towers

--------------------2 - BRIDGE TO INDIA expert interviews and analysis

13 BRIDGE TO INDIA, 2011

reNeWABle purcHASe oBlIGATIoNS (rpos) AND THe rec MecHANISM

In order to further encourage power generation from renewable sources, the federal government, through the Central Electricity Regulatory Commission (CERC), has introduced RPOs for both renewable power in general and solar power in particular. Solar RPOs are the minimum amount of solar energy that obligated entities -

distribution licensees, open access and captive consumers (1MW and above) - have to have as a percentage of their total available electricity. Currently, these are set at around 0.25% of the total consumption of state utilities and vary across states. A distribution utility, which distributes one million kWh of electricity in a year, is obligated to obtain 2,500kWh of these from solar energy. It can meet this obligation by purchasing the required quantity of solar power directly from producers. Alternatively, it can buy solar RECs to fulfill its RPOs.

rec Framework: eligibility

BRIDGE TO INDIA, 2011

14

rec Mechanism
RECs can be generated by any developer who sells solar power to the public grid at the Average Pooled Purchase Cost (APPC) of the relevant distribution utility or sells solar power to third-party consumers at a mutually decided price. RECs are not applicable for projects in which power is sold to the grid at a preferential tariff. Further, power producers that have begun to sell power at a preferential FiT are not allowed to later switch to the REC mechanism.

The REC market will grow once the solar market strengthens in India and when longerterm price signals are available.

2012. As a result, developers who build their case on RECs face problems in raising debt because they are unable to project their returns accurately for the loan repayment period. Also, there are still too few solar projects in India to generate enough volume for a well functioning market.

The REC market will grow once the solar market strengthens in India and when longer-term price signals are available. The market is also looking to the government for making changes in the REC policy. Currently the RPOs which create the primary market The REC market is yet to pick up in for the RECs have to be fulfilled on India. The main challenge it faces, is a yearly basis. As a result, obligated the lack of a long-term predictability of entities go to the market to purchase REC pricing. The current REC floor and RECs only at the end of a financial year. forbearance prices are only applicable This creates a spike in the cash flows through 2012, and CERC issued an of projects rather than continuous cash order to lower the REC price after flows throughout the year.

recs can boost returns significantly

15

BRIDGE TO INDIA, 2011

THe pV MANuFAcTurING INDuSTry IN INDIA

The Indian manufacturing industry currently has module production capacities of about 1,300MW, more than 90% of which is for crystalline silicon modules.

In order to remain globally competitive in an increasingly tough market, Indian The Indian manufacturing industry manufacturers will need to improve currently has an overall production their offering by reducing their cost capacity of about 1,300MW for modules positions (through increasing scale and and 700MW for cells. These capacities integrating along the value chain) and far exceed PV installations in India generating innovation. Currently, most and will do so for some years, even module manufacturers in India are considering the annual growth rates. still dependent on foreign suppliers The Indian PV industry has grown for ingots, wafers and cells. Maharishi based on exports to international solar Solar is currently the only Indian markets and continues to depend company with manufacturing facilities on the European countries for more for ingots and wafers; it has a total than 80% of its revenues. More than capacity of 15MW. 70% of cells and 80% of modules3 manufactured in India are still exported.

STATuS

cell manufacturers in India(MW)

Module manufacturers in India(MW)

--------------------3 - Based on industry interviews and company reports

BRIDGE TO INDIA, 2011 16

Indian Solar pV Supply chain

DoMeSTIc coNTeNT opporTuNITIeS GuIDelINeS For ForeIGN For the first batch of projects in the MoDule SupplIerS
NSM, crystalline modules being used must be manufactured in India. The second batch of projects under the NSM due to be allotted by the end of 2011 are not allowed to install modules with imported cells. Use of thin film technology is still exempted from domestic content guidelines. Going by the current supply contracts, India will import more than 1GW of modules until the end of 2012. More than 60% of these will be for thin film modules, all from foreign manufacturers.

About 80% of currently installed capacity use thin-film modules.

The installed capacity in India stands at 90MW4.New projects worth more The state policies of Gujarat, Rajasthan than 200MW are expected to be and Karnataka do not have a domestic commissioned by the end of 2011. Most content requirement. Other states of these are expected to be thin film such as Tamil Nadu, Orissa and Andhra installations. Of the currently installed Pradesh are also expected to not capacity of 90MW, 77MW use thin film mandate domestic content in projects. modules. Of the 71MW PV capacity installed in the last one year, 61MW have been thin film installations.

Modules installed in India: crystalline Vs Thin Film

--------------------4 - as on November 22nd, 2011

17 BRIDGE TO INDIA, 2011

crystalline silicon module suppliers to India (MW)

Thin-film module suppliers to India (MW)

BRIDGE TO INDIA, 2011

18

cuSToMIZeD reporTS
BRIDGE TO INDIA provides in depth market knowledge to clients through customized reports to cover the Indian energy markets. Past, publicly available reports include, among others, an analysis of the Indian energy market for the German Environment Ministry, support for REN21s Global Renewables Status Report, an analysis of the Indian Renewable Energy Market with NREL, GIZ and IRADe, a report on the Indian project development processes for DENA and a report on the Indian solar market with Greentech Media.

The PV manufacturing industry in India has grown six-fold from under 200MW in 2007 to a 1,300MW in 2011. In the next few years, the growth in module production will be replicated upstream as well. For the first time, Indian manufacturing industry could be seeing significant production capacities for wafers and ingots as well. Complete integrated module manufacturing facilities of capacities as large as 600MW are currently being built by large Indian business conglomerates such as Lanco Solar and Birla Surya. Various smaller and new business entities such as Alfa Solar, JBM Group, Chemtrols Solar, Vorks Energy and Sonali Energies as new entrants in the PV industry are also planning to build new facilities for production of modules. Besides, existing manufacturers like Tata BP, EMMVEE, Moser Baer and XL Energy

pV MANuFAcTurING ForecAST

are investing to expand their existing production capacities. These plans will add to the module and cell production capacities in India by more than 1GW in the next five years. Over the next five years, production capacities for ingots and wafers are expected to increase from a mere 28TPA5 to more than 1,000TPA. A healthy domestic supply chain will bring down the cost of raw material for module production in India. As a result, the domestic ingot and wafer productions will be directly reciprocated into new domestic module manufacturing capacities. New module production capacities worth 2GW or more could be realized from 2015 to 2020. There is no domestic industry for manufacturing equipments in India. It is imperative, therefore, that the Indian PV manufacturing industry will be a significant market opportunity in the world for the suppliers of PV manufacturing equipments and the turnkey solution providers for them.

In the next three years, Indias PV manufacturing industry for the first time will see a significant production capacity for ingots and wafers.

pV Manufacturing Forecast -India

--------------------5 - TPA: Tonnes per annum

19 BRIDGE TO INDIA, 2011

experT INTerVIeWS
Founder, Kiran Energy

Mr. Alan rosling

Mr. Alan rosling is Chairman of Kiran Energy Solar Power Pvt Ltd, a company he co-founded in Bombay in 2010 together with Ardeshir Contractor. Kiran Energy closed its Series A funding round with a consortium of three private equity investors and is now developing solar power projects in India, typically in joint venture with leading corporates. Kiran signed its first joint venture with Mahindra & Mahindra in September 2010 and has signed two Power Purchase Agreements to date, a 20MW project in Gujarat and a 5MW National Solar Mission project. Alan created his own advisory business, Griffin Growth Partners Ltd, in 2009 to assist clients develop and implement successful strategies in India, and to work with Asian multinationals as they globalise. Prior to this, he served as an Executive Director of Tata Sons Limited responsible for Tata Groups drive to internationalise. Alan has also served as a special advisor to the British Prime Minister, Rt. Hon. John Major MP, and a member of the Policy Unit at No. 10 Downing Street.

support is required to encourage the market to invest, innovate and scale up. The National Solar Mission was a fine policy process and produced a clear roadmap towards an ambitious goal, 20GW of solar in a decade. Its policy prescriptions were well conceived and innovative (reverse bidding, bundling). The first round of bidding was carefully implemented and managed. The second round has shown the government willing to listen and evolve policy. It has also been very welcome that there has been an alternative policy process taking a different approach in Gujarat. The level of immediate ambition has indeed been higher in Gujarat with 960MW of PPAs signed in the first year. The Government has been very supportive over the practical issues of project development, with the Gujarat Solar Park a particularly important initiative. Perhaps most importantly, the regulators have developed an umbrella mechanism around RPOs that in the long run is likely to drive the shape of the solar market. So overall we see 2011, the first year of solar in India on any serious scale, as a great success which much that entirely outweighs the difficulties or non-implementation of any individual projects. India offers lots of different subsidy schemes for PV such as the NSM, state policies and RPO. How do you assess the attractiveness of those schemes from a project development and investment perspective? You should view the various policy initiatives at state and centre as complementary aspects of an overarching ambition to see solar develop into a major industry in India. The Government has set a target of 20GW in a decade. The regulators have evolved RPOs as the critical market driver. The NSM and Gujarat and other state policies are mechanisms within the RPO framework.
20

Perhaps most importantly, the regulators have developed an umbrella mechanism around RPOs that in the long run is likely to drive the shape of the solar market.

Many projects under the NSM are yet to begin construction and many PPAs under the Gujarat Solar Policy have been cancelled? How do you rate the success of both solar policies? We see the development of solar policy in India as a great illustration of how Government can and should work with the market to shape a strategic objective of national importance. The country needs power for development, but increasingly concerns over energy security, balance of payments, climate impacts and affordability will drive India towards an increasing share of renewable in the power mix. Solar has huge potential in India given our insolation and land availability. However for the next few years solar will remain a more expensive source of power until innovation and scale drive costs downwards to parity with conventional sources. So policy
BRIDGE TO INDIA, 2011

We also believe in partnering with technology providers and EPC providers (we have a strong relationship with L&T).

To an important degree multiple objectives in a policy will confuse and hold back the delivery of the policy.

Does the NSM offer optimum support to this improving and how can the industry project developers? In what other forms address this challenge? do you think the developers could be This year the banking community supported? was getting comfortable with the solar industry and its risks, including No developer will ever be entirely questions around technology and satisfied with any policy structure as there will be trade-offs and rub points. the PPAs. Well conceived projects with strong EPC arrangements have Overall, the NSM has been very well secured financial closure. I would conceived and implemented. Our expect the banking process to get criticisms of the first round was over easier over time, though we need to the restriction to one 5MW project continue to innovate project financing and the local content requirement for to bring cost of capital, which is too crystalline. MNRE has listened to our high in India, down towards world feedback and in the second round has levels. adjusted size restrictions upwards, which is very welcome. Our key ask There have been discussions on making of the Government is to have a clear renewable energy a priority sector for roadmap to scaling the industry with regular opportunities to bid for and win lending as a solution to bankability as a world scale plants. Only in this way will challenge. What is your opinion on this? the industry develop and costs We see solar as a strategic industry come down. for India where the country should have a comparative advantage. As such Project development is the business priority sector status can only assist, with most risk exposure. What were especially regarding cost of funds. your reasons/ inspiration behind founding Kiran Energy as a project How do you assess the influence developer? of increasing domestic content requirements on the engagement of Ardeshir and I founded Kiran because foreign manufacturing companies in the we believe that solar will have an Indian solar market? Will other states important future in India as the follow the NSM in this regard? technology develops and costs come down. This is one facet of the NSM policy where we have a continued Kiran Energy has raised PE from reservation. Of course we all wish three PE investors who jointly hold a to see the development of local major stake in the company. The other 5MW plant is being developed in a joint manufacturing including Indian module and cell companies with their own IP venture with Mahindra. What is Kiran and world scale quality manufacturing. Energys long term strategy as India has proved to be a great place for a project developer? engineering intensive manufacturing, given our skills and cost base. And the We aim to be a leading pure play local market for solar will be among solar developer focused on India. We the largest in the world. However, believe in partnering to achieve this we see the policy objective of cost ambition and our JV with Mahindra is reduction and convergence with grid a critical illustration of our approach, parity as the overarching goal of the and together we will grow Mahindra Government. To an important degree Solar One. We also believe in multiple objectives in a policy will partnering with technology providers confuse and hold back the delivery of and EPC providers (we have a strong the policy. Cost reduction will come relationship with L&T). from innovation (largely in Silicon Valley for now) and scale (China for Bankability has been a challenge for solar projects in India. How do you see
BRIDGE TO INDIA, 2011

21

the conceivable future) so cutting the Indian market off from these developments appears counterproductive. As implemented, this protectionism has so far merely distorted the market in favor of Thin Film. What can foreign investors and EPC companies contribute to solar energy development in India? An enormous amount. India should welcome all industry players. According to our assessment, project IRRs are not offering high profit margins at present. Why do an

increasing number of foreign investors look into such investments despite this fact and how successful have foreign investors been in India so far? What kind of returns are they looking for? Electricity supply will remain a regulated industry with utility returns. Foreign players are looking to India for growth within sound regulation. How do you assess the role of PV in Indias future energy strategy? Increasingly important.

BRIDGE TO INDIA, 2011

22

CEO, Mahindra Solar One

Mr. chandan Guha

Mr. chandan Guha is the Chief Executive Officer of Mahindra Solar One Private Limited and leads the SPV Operations. An electrical engineer by profession, he has spent more than 20 years in the Power Sector , mainly on the Thermal and Automation sides, before moving over to renewable. He was the Director Sales, with GE Energy T&D in his last job. Prior to GE, Chandan had worked with Reliance Energy, Honeywell Automation etc and is a key speaker in most forums of Indian Power Sector. Chandan has vast experience in thermal power plant EPC projects and power plant operations. He worked as vertical market head of a 300 crore company & headed distribution automation in one of Indias largest Utility Distribution Company.

With regards to the domestic content requirement, is there not a conflict between the governments objective of supporting generation as well as increasing domestic manufacturing? A dichotomy need not necessarily be a conflict. In my opinion, the domestic content requirement is a very good initiative by the JNNSM to support the growth of local manufacturing. We need an entire ecosystem of manufacturing and projects in order to meet the solar targets of the country. However, Indian manufacturers at the moment operate on a small scale as compared to larger companies abroad. They continue to look at exports to Europe to sustain their businesses.

Our strategy is to offer de-central power solutions because I think this is where the real growth opportunity is in the long-term.

We expect RPOs to be enforced by the end of this financial year,between January and mid-2012. Accordingly, the REC market should pick up by 2012-13.

On the other hand, there is a great opportunity for large international module manufacturers to set up manufacturing in India. If the What is Mahindra Solar ones strategy government offers the right incentives, with regards to solar energy in India? international manufacturers can take advantage of cheap land and low labor costs in India. In turn, the First, Mahindra Cleantech was Indian industry can benefit from some formed to encourage and implement of the best global technology at the renewable energy projects and clean lowest costs. Large scale domestic technology solutions. As a strategy, manufacturing capacities will reduce we have been carefully watching this cost throughout the value chain. space. Solar has been our first step as it can offer energy security not just Is the solar-REC market viable? Will through utility-scale plants but also Mahindra Solar One be looking to through off-grid solutions. Mahindra develop projects based on the REC Solar One is currently developing mechanism? projects under the JNNSM and the Gujarat Solar Policy. In the long term, We believe the REC market can be a our strategy is to offer de-central power solutions because I think this is key driver of the solar industry in India. where the real growth opportunity is in The solar-REC market is struggling only because the states have not been the long-term. able to enforce penalties on utilities for Is Mahindra Solar One looking to invest not meeting their RPOs. Although the in the PV manufacturing sector in India? RPOs have been notified by individual state electricity regulatory committees, the market will not pick up unless We are a solar power developer and the penalties are enforced. We expect are technology agnostic. We are not RPOs to be enforced by the end of this into manufacturing. Currently the financial year,between January and manufacturing sector has several mid-2012. Accordingly, the REC market large gigawatt-scale manufacturers should pick up by 2012-13. which is good for the industry. India would need similar setup to create a sustainable large manufacturing base. Mahindra Solar One has excellent relations with some banks and our

23

BRIDGE TO INDIA, 2011

perception is that they would finance REC based projects as well. They trust this mechanism and the market to pick up in the future. So, yes, we will be looking to develop such projects once the REC market is active.

The large MW scale power plants will definitely be the first to take-off as already seen this year. We expect a 1GW installed capacity by mid-2012 and about 2.5GW by mid-2013. We have seen the political will to encourage the growth of solar power. And the market How important are off-grid solutions is moving fast: the governments grid for India? When do you think will be the parity target of 2020 might actually be tipping point for this market? achieved by 2016. The inflexion point for the growth of solar power in India Currently, we have three business will be when the cost of solar falls to models in PV technology viz. large MW M8 per kWh. I believe this will create scale solar power plants, smaller offroom for the growth of solar power grid PV plants and building rooftops. outside the government policies and subsidy schemes.

BRIDGE TO INDIA, 2011

24

Mr. Schneidewind peter CSO, Bosch Solar Energy

Mr. Schneidewind peter is a member of the divisional board with responsibility for all sales, marketing and product management at Bosch Solar Energy.

according to the EPIA, their share will double to 80% over the next 20 years. It is also to be noted that so far only nine percent of global photovoltaic capacity has been installed in this sunny area.

This region, which is home to 75% of the worlds population, is currently beset by high electricity prices and also by poor energy supply. Its countries together make up just 40% of worldwide energy demand.

How do you rate the Indian solar market Especially, in light of the recent developments in the Indian in the international context? photovoltaic market, there is a good chance that India will be one of the The photovoltaic market is becoming prominent movers in this direction in ever more dynamic around the world. In 2010 alone, solar power plants with the Asia-Pacific region. a total output of 18GW were installed. Will the future of the solar market That equates to the electricity requirements of 24 million Europeans in India be in the on-grid or off-grid space? or the whole of Sweden, Denmark, Finland, and Norway put together. In We expect that within the next few 2007, the total output of photovoltaic years the dominant market will remain facilities installed that year was only the on-grid market at multi-MW 2.3GW. and utility scale. Due to the fact that photovoltaic is on the verge of being Market development will continue competitive with diesel-generated to speed up in the years to come. electricity there is a good chance The forecast is for a total capacity of that a very interesting and large 32GW to be installed in 2015 alone. volume market may arise within the This would meet the electricity next years due to reducing diesel requirements of almost 44 million consumption through photovoltaic Europeans. power. In addition, rural electrification by means of photovoltaic and other The forecast is similar for the Asiarenewable energy sources may cause Pacific region: From 2GW in 2010, the share of off-grid applications to the capacity of newly-installed solar rise in the Indian photovoltaic market. capacity across the region should rise to almost 13GW by 2015. All around the How quick both of these developments world, the area that is being focused will be will strongly depend on several on is the land that lies between the factors such as the willingness and 35th parallel either side of the equator. trust of investors to finance long-term photovoltaic assets, the reliability of This region, which is known as the photovoltaic systems used for offsunbelt thanks to its high level of grid solutions, the development of incident sunlight, and which also includes the largest part of India is the diesel prices, a sufficient push from governments to help the market grow ideal location for solar installations in the initial phases, and others. New and has the highest opportunities developments and innovations in for growth. energy storage technologies will also help augment the adoption of off-grid According to a study by the European systems, if the resultant solutions are Photovoltaic Industry Association, more economical. EPIA, photovoltaic will become this regions most important source of Do you see thin film or mono crystalline energy between 2020 and 2030. This modules being best suited to India? region, which is home to 75% of the worlds population, is currently There cannot be One Size Fits All. beset by high electricity prices The choice of technology will be and also by poor energy supply. Its application specific. For the time being, countries together make up just 40% we see good perspectives for both of worldwide energy demand. But

25

BRIDGE TO INDIA, 2011

technologies in the Indian photovoltaic market.

India is a pricesensitive market but given our long standing existence in India for 60 years and our engineering competence, we are very well placed to compete in the Indian solar industry.

in India with 10,000 engineers (mainly electrical, electronic and mechanical specialists) supporting all Bosch Given its strong engineering verticals. Bosch Rexroth designs and competency in different sectors, how is manufactures mounting structures Bosch placed to tackle the challenges in suitable for our modules and projects. the Indian solar sector? For our solar projects, both on-grid We are optimistic to contribute to the and off-grid, we bring together the challenges of the Indian photovoltaic experience from Europe and leverage market by optimizing our products local talent. We believe the integrated in light of the Indian requirements approach from manufacturing to within the next years. India is a pricesystem engineering and installation sensitive market but given our long will ensure quality and reliability. standing existence in India for 60 years Our emphasis on quality, throughout and our engineering competence, our organization, ensures that all we are very well placed to compete components are mutually compatible in the Indian solar industry. We have and designed into a professionally experience of installing over 50MW of engineered and integrated power projects in Europe and have a strong system, thus enhancing system network of wholesalers - installers reliability, performance and longevity there. Boschs largest engineering which gives the investor safe and centre outside of Germany is located reliable returns.

BRIDGE TO INDIA, 2011

26

Dr. Tobias engelmeier

Founder, Managing Director, Bridge To India

Dr. Tobias engelmeier was awarded a doctorate in political science from the South Asia Institute of the University of Heidelberg for his thesis on the relationship between identity and strategy in Indian politics. Prior to his doctorate, he worked for a leading strategy management consultancy. During that time, he advised large European utilities on how to engage with the fast-rising market for renewable energies.

What is the significance of solar as a resource for India?

Director, Bridge To India

Mr. oliver Herzog

Dr. engelmeier Solar in India is crucial. It is the only credible long-term power supply strategy that this country can have. Fossil fuels are limited and India has its issues with nuclear energy. So, in order to meet Indias enormous energy demands, India needs solar power. Secondly, solar power can provide India with energy security. Indias solar irradiation levels are high. So, In 2008, he founded BRIDGE TO you already have the fundamental INDIA as a strategic environmental necessity to develop solar power and consulting company, based in New hence, the key driver for the industry. Delhi. Since then, he has provided consultancy services to multinationals Given the infrastructure setup and cost of power generation in India, combined as well as SMEs, to institutions, with the irradiation opportunity, governments and to investors. He has published a number of reports, articles commercial viability can be achieved very soon. as well as two books on the topics of India and energy. Mr. Herzog It is important to note that solar power Mr. oliver Herzog studied Business in India will reach grid parity much Administration with a focus on before the grid is enlarged into rural accounting/controlling and general areas. Therefore, solar will be in a management at the University of Applied Science in Cologne. During his stage to deliver power at a reasonable studies he worked for an international price as an alternative to having a complete functioning grid in India. I consultancy company with a focus believe, in the current energy structure on strategic management and and scenario in India, a strategy for restructuring. solar power is completely lacking. However, as Tobias just mentioned, After his studies, in January 2004, with the conditions available the he joined a leading global renewable energy company, where he worked for process to make solar commercially 7.5 years in different positions. During viable has begun and it will spread to the larger parts of the market from the last two years he headed the operations of the project development here. and financing arm in Singapore and What makes the Indian solar market India. In Singapore he successfully different from the other new as well as set up a trust worth 200m with GE Financial, which invests into renewable existing global markets? energy projects across Asia. In India, Mr. Herzog he successfully set up a project India, at the moment, is not fulfilling pipeline of more than 400MW of PV, wind, small hydro and biogas projects. its own energy requirements. Hence there is a crucial need for every kWh Oliver joined BRIDGE TO INDIA in that can be produced. India needs July 2011 as Director. He is based in to produce affordable power and not Hamburg, Germany. Oliver focuses replace power. However, plans to add on renewable energy and advises capacity in power, as has been seen companies on entering the Indian with coal and nuclear power programs, market and on identifying, screening rarely reach their targets. As compared and developing projects. to other countries that already have running solar energy programs, India
BRIDGE TO INDIA, 2011

27

has amongst the highest levels of irradiation. This reduces the energy cost per kWh. Dr. engelmeier Perhaps the key difference is that, India has, through the auction process, significantly brought down the costs of PV plants. India has increased the competitive pressure in the industry significantly. All players along the value chain have therefore stretched themselves more than ever before. This is extremely significant for the development of solar in India as well as for the world. Reduction of prices in India has been significant in driving global prices. It is very difficult to argue that they should be much higher anywhere in the global market. India, therefore, has been as fundamental in advancing the case for solar power as a business opportunity as China has been for solar as a manufacturing opportunity. India has added an entrepreneurial edge and a competitive pressure to the industry.

future. Currently, there is not enough policy support for off-grid. Dr. engelmeier Yes, reaching grid parity or commercial parity is going to change the market significantly. I believe it will be an inflection point, and will reset the market potential of solar industry in India, given Indias massive energy demand. Innovation in energy storage technologies will bring a second inflexion point which will boost the decentral systems further. What are the challenges for the industry at the moment and what can be done to overcome them? Dr. engelmeier What can the government do to facilitate the growth? One is netmetering for back-up options; the second is to reform electricity prices. Indias electricity prices at present are not reflecting the actual costs of generation. We need to stop subsidizing electricity for the end consumers. This will help us reach grid parity sooner. In such a case, if we produce solar power cheaper than grid power and then net-metering will become an off-grid topic. As PV off-grid will be a cheaper option and if, for whatever reason you produce power and its not off taken, you will always have the option to feed back power into the grid. At the same time, this will also balance the demand and supply. Mr. Herzog I believe stopping subsidies will open the energy market for fair competition. The Indian government must also invest in R & D and for India to become a technology leader and the focus should be on de-central applications, low cost applications, mini-grids, rural applications, and storage. Then, a world class industry can be formed which can be also have a good export strength.

India has increased the competitive pressure in the industry significantly. All players along the value chain have therefore stretched themselves more than ever before.

What is the market potential of the Indian solar industry? How realistic are the growth projections? Mr. Herzog The NSM and various state policies at present have capacity addition plans of more than 20GW until 2022. Commercial parity in India is expected by 2017. This will further boost the solar market and make the case for de-central solar power stronger. Our estimate is that by 2017 itself we will have a total installed capacity of more than 11GW and by 2022 we could be having close to 30GW of installed capacity. In terms of the potential, the overall energy structure under the NSM is focussed on CSP and larger MW scale power plants. However, on-grid power generation will be limited because of the intermittency of solar power generation and limited land space. This, in my view, will build a case to boost off-grid solar power in the

I believe stopping subsidies will open the energy market for a fair competition.

BRIDGE TO INDIA, 2011

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29

ANNexure

crITerIA For proJecT AlloTMeNT uNDer INDIAN SolAr polIcIeS

Gujarat Audited Internal Resource Generation of min. M12m ($300,000) per MW Audited annual turnover of M48m ($1200,000) per MW during the last 3 business years Equity of min. M30m ($750,000) per MW Equity of min. M20m ($500,000) per MW Non-refundable processing fee of M20,000 ($500) EMD of M1m ($25,500) per MW at the time of proposal submission PBG of M5m (approx. $124,500) at the time of PPA For projects under the RPO-mechanism: Collateral of M500,000 (approx. $11,250) per MW Bank guarantee of M2m (approx. $45,000) per MW For other projects the necessary guarantees are unknown at this stage. However, the requirements are expected to be similar to those under the NSM For projects that do not sell their electricity to the distribution companies of Rajasthan: The RRECL levies additional development fees of M1m ($25,000) per MW Refundable guarantees of M100,000 ($2,500) in favor of the RRECL. Refund upon successful realization of the project No used PV modules allowed PV modules must be certified in accordance with the IEC (International Electro technical Commission) specifications Specific PV modules output guarantees are mandatory For projects in connection with module production capacities exceeding 25 MW, modules must stem from own production PV modules must be certified in accordance with the IEC (International Electro technical Commission) specifications The Bidder must deploy a commercially established technology which has been in use for at least one project in the world. PV modules must be certified in accordance with the IEC (International Electro technical Commission) specifications Non-refundable processing fee of M50,000 (approx. $1125) Non-refundable fee of M10,000 ($250) towards the cost of the RFP Document Bid Bond of M50,000 ($1250) per MW at the time of awarding, depending on the discount offered Audited financial statements of the last two years (unconsolidated statements if project developers stake in a consortium exceeds 26%) rajasthan karnataka Bidding companys net worth required: M30m ($750,000) per MW Details regarding audited reports not released

phase

NSM

Financial criteria

Audited financial statements of the last four years (unconsolidated statements if project developers stake in a consortium exceeds 26%)

Equity of min. M30m ($750,000) per MW

BRIDGE TO INDIA, 2011

Financial preconditions for bidding

Non-refundable processing fee of M100,000 ($2500)

Earnest Money Deposit (EMD) of M2m ($50,000) at the time of participation in the auction

Bid Bond of M50,000 ($1250) per MW at the time of awarding, depending on the discount offered

Performance Bank Guarantee (PBG) of M3m ($75,000) at the time of PPA

Technological criteria

PV crystalline modules used must be manufactured locally.

Thin film modules can be imported

For batch-II, PV cells must also be manufactured locally

PV modules must be certified in accordance with the IEC (International Electro technical Commission) specifications

Specific PV modules output guarantees are mandatory

penalties
PBG due Gujarat policy did not define financial closure deadlines Not implemented Not implemented

Failing ppA

EMD and Bid Bond due

Failing to achieve financial closure -PBG due -Penalty charged for every day of delay First month of delay Second month of delay M60,000 ($1,500) per MW per day 6 to 9 months M375,000 ($9,400) per MW 2-3 months M30,000 ($750) per MW per day 3 to 6 months M250,000 ($6,300) per MW 1-2 month up to 3 months M125,000 ($3,150) per MW Up to 1 month M1m ($25,500) per MW M2m ($50,000)per MW

Loss of project developments rights EMD, Bid Bond and PBG due

For delay in commissioning

of up to 1 month

withholding of 20% of the PBG

of an additional month (total of 2 months)

withholding of further 40% of the PBG

of an additional month (total of 3 months) 9 to 15 months M500,000 ($12,500) per MW After 3 months

withholding of the final 40% of the PBG

M2m ($50,000) per MW

BRIDGE TO INDIA, 2011

M0.1m ($2,550) per MW per day

30

31

proceDurAl oVerVIeW For INDIAN SolAr polIcIeS

Gujarat parties Involved NVVN Project Developer NVVN Project Developer NVVN NVVN, Project Developer N/A NVVN, Project Developer Project Developer in accordance with government body N/A N/A within 120 days of awarding N/A up to 30 months after awarding, depending on project size Project Developer X+360 days within 45 days of license award GUVNL, Project Developer X+180 days RRUVNL, Project developer Project developer not defined PAC, Project Developer N/A N/A N/A LOI+30 days LOI+210 days not defined PAC X+150 days N/A N/A N/A X+135 days RRECL N/A Within 7 days of selection N/A N/A X + 105 days RRECL N/A not defined GERC, Project Developer X + 75 days RRECL,Project Developer N/A KREDL KREDL KREDL KREDL N/A ESCOM, Project Developer Project developer and lending institution District on recommendation of RRECL RRECL, Project Developer Project Developer N/A N/A not defined GERC, Project Developer X + 30 days RRECL,Project Developer N/A X GERC X RRECL X KREDL Project Devloper Deadline parties Involved Deadline parties Involved Deadline parties Involved rajasthan karnataka

NSM

phase

Milestones

Deadline

rfS

Request for Selection

Submission of Proposal

X + 30 days

Reselection

X + 75 days

Selection

Auction Procedure

X + 90 days

Awarding

X + 120 days

loI/license

Letter of Intent (LOI) / License Award

Max: X + 135 days

Individual Project Meeting

N/A

Sourcing

PPA

Max: X + 165 days

BRIDGE TO INDIA, 2011

Financial Closure

Max: X + 345 days N/A

Land Reservation

N/A

Final permit Project Developer in accordance with government body Project Developer

N/A

N/A

N/A

N/A

N/A N/A

N/A Project Devloper

commissioning

Commissioning

Max: X + 530 days

legends

NVVN NTPC Vidyut Vyapar Nigam Ltd.

pAc Political Action Committee

Gerc Gujarat Electricity Regulatory Commission

GuVNl Gujarat Urja Vikas Nigam Ltd.

rrec Rajasthan Renewable Energy Corporation Ltd.

kreDl Karnataka Renewable Energy Development Ltd.

loI Letter of intent

eScoMS Electricity supply companies

INSTAlleD cApAcITy MAp oF INDIA (90MW)*

--------------------* - As on November 22nd 2011

BRIDGE TO INDIA, 2011 32

BRIDGE TO INDIA is a consulting company with an entrepreneurial approach based in New Delhi, Munich and Hamburg. Founded in 2008, the company focuses on renewable energy technologies in the Indian market. BRIDGE TO INDIA offers market intelligence, strategic consulting and project development

services to Indian and international investors, companies and institutions. Through customized solutions for its clients, BRIDGE TO INDIA contributes to a sustainable world by implementing the latest technological and systemic innovations where their impact is the highest.

33

BRIDGE TO INDIA, 2011

eArN AND SAVe THrouGH SolAr

BrIDGe To INDIA offers an exciting business proposition for commercial and industrial electricity consumers and rooftop owners in the field of rooftop solar energy. We offer ELECTRICITY CONSUMERS a reduction in your electricity bills and ROOFTOP OWNERS an additional income from your rooftop all at absolutely Zero INVeSTMeNT. We will invest in a solar PV plant on your rooftop and provide you with competitively priced, secure power from it.

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BRIDGE TO INDIA, 2011

BRIDGE TO INDIA is a consulting company with an entrepreneurial approach based in New Delhi, Munich and Hamburg. Founded in 2008, the company focuses on renewable energy technologies in the Indian market. BRIDGE TO INDIA offers market intelligence, strategic consulting and project development services to Indian and international investors, companies and institutions. Through customized solutions for its clients, BRIDGE TO INDIA contributes to a sustainable world by implementing the latest technological and systemic innovations where their impact is the highest.

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BRIDGE TO INDIA, 2011