TAMIL NADU

SOLAR POLICY
targeted installed capacity

3,000 MW 304 MW 15 MW

of solar power by 2015

solar renewable purchase obligation by 2015

installed capacity of solar power in 2012

The Tamil Nadu Solar Policy

INDIA SOLAR POLICY BRIEF

1,900-2,100 kWh/m2 8.9 m MWh/year (10.5%) 2,247 MW (17.5%) 2-12 hours
power outages per day

solar irradiation per year

A detailed analytical outlook on the opportunities and risks under the Tamil Nadu State Solar Policy

-` 80.9 billion

income of DISCOMs in 2011

© BRIDGE TO INDIA 2012

`

LCOE of diesel power

` 8-20/kWh

LCOE of solar power

` 7/kWh
APPC

` 2.54 ` 7.00 ` 5.50 ` 5.75
70

COMMERCIAL INDUSTRIAL RESIDENTIAL

current electricity prices /kWh
© BRIDGE TO INDIA, 2012 1

consequential. © BRIDGE TO INDIA. BRIDGE TO INDIA shall not be liable for any indirect.bridgetoindia. New Delhi All reports are owned by BRIDGE TO INDIA and are protected by Indian copyright and international copyright/ intellectual property laws under applicable treaties and/or conventions. please contact: only pursuant to the terms and Mr. or adequacy of the content of this product. Ltd. 2012 . Contact BRIDGE TO INDIA N 117.bridgetoindia. whether or not advised of the possibility of such damages or losses and regardless of the theory of liability. expressed or implied. nonrefundable. updated as regulations change. accuracy.bridgetoindia. publication or electronic transmission of this report or the information/forecasts therein without the expressed written permission of BRIDGE TO INDIA.com/ our-reports Follow us on BRIDGE TO INDIA hereby grants the user a personal. No part of this report may be used or reproduced in any manner or in any form or by any means without mentioning its original source.com Read our blog for up-to-date market insights and opinions www.anand@bridgetoindia. All rights reserved November 2012.com/blog Track the Indian solar market with our FREE reports www. incidental. BRIDGE TO INDIA is not herein engaged in rendering professional advice and services to you. non-transferable license to use the report for research purposes For further enquiries. BRIDGE TO INDIA makes no warranties. reproduction.com TO INDIA retains exclusive and sole ownership of each report disseminated This policy brief has been published under this agreement. Panchsheel Park New Delhi 110017 India Visit our website to know more about us www. distribution. The user agrees not to export any report into a country that does not have copyright/intellectual property laws that will protect BRIDGE TO INDIA’s rights therein. or punitive damages or for lost revenues or profits. Mohit Anand conditions of this agreement. as to the ownership. non-exclusive. and will be engage in any unauthorized use. The user cannot on December 7th 2012. BRIDGE mohit.DISCLAIMER © 2012 BRIDGE TO INDIA Energy Pvt.

4.350 MW REC off take .150 MW Policy summary Glossary of terms About the authors 10 12 13 © BRIDGE TO INDIA.000 MW 01 03 03 04 07 3. 6. 7. 2012 .1. Rooftop solar systems .500 MW Distribution companies (DISCOMS) through competitive bidding – 1. 2.1. 5.CONTENTS 1. Overview Utility scale projects .500 MW High Tension (HT) customers through Solar Purchase Obligation .

2012 • • No penalty • • structure to enforce SPOs • Not all SPOs will be bankable PPA signatories PPA bankability • Enforcement of RPOs • Little clarity on (demand for RECs) process as yet FiT auction • •• Technical Medium-term pricing of process RECs (bankability) challenges unpredictable • Overall supply/demand of (power evacuation) RECs in India • Little clarity on process as yet Technical challenges (power evacuation) RISKS .000 MW UTILITY SCALE PROJECTS 1.500 MW RENEWABLE ENERGY CERTIFICATE (REC) PROJECTS 1.TAMIL NADU SOLAR POLICY 3. 2012 © BRIDGE TO INDIA.150 MW ROOFTOP PROJECTS 350 MW SOLAR PURCHASE OBLIGATION (SPO) PROJECTS 500 MW COMPETITIVE BIDDING PROJECTS 1.000 MW PRIVATE ROOFTOP PROJECTS 50 MW GOVERNMENT ROOFTOP PROJECTS 300 MW OFF TAKERS • High Tension • DISCOM (TANGEDCO) consumers (33 kV+) / SPO obligated entities • Open-Access consumers • DISCOM • DISCOMs (TANGEDCO) • RPO obligated entities • SPO obligated entities • DISCOM (TANGEDCO) • SPO of 3%/6% • FiT with state • High returns under the • Frequent power • Project sizes REC mechanism expected at 5-50 • No size restriction of outages projects MW • High cost of • Pro-active and diesel responsive management by state authorities OPPORTUNITY • Net metering • Net metering • Generation • Rising power Based Incentive costs (GBI) available • Rising power costs Source: BRIDGE TO INDIA OUR VIEW MEDIUM TO HIGH likelihood of realisation MEDIUM likelihood of realisation LOW likelihood of realisation HIGH likelihood of realisation HIGH likelihood of realisation © BRIDGE TO INDIA.

1. the state has a significant energy deficit. The annual peak power deficit is calculated by subtracting the highest availability at any point in time from the highest demand at any point in time during that year. The remaining 500 MW will be driven by private power purchase agreements (PPAs) with power consumers who need to fulfill solar purchase obligations (SPOs). Taking --------------------1 The original policy document envisaged 1.6%) in the financial year 2012-13 with an anticipated peak power deficit of 4. At the same time. Solar power could help reduce the deficit and the use of expensive diesel for back-up gen-sets. Tamil Nadu already has significant experience with the generation and transmission of renewable energy as it has the highest installed capacity for wind power in India (over 40% of total installed capacity. The operative period of the policy is from 2012 to 2015. a total of 6. The generation potential in Tamil Nadu is high. For both. No breakup between photovoltaic (PV) and concentrated solar power (CSP) projects has been given.000 MW from HT consumers and 500 MW from sales through the TANGEDCO.613MW in December 2011)3. net metering is allowed. Of this.150 Private buildings Government buildings RPO obligated entities/third party consumers The total annual electrical energy deficit in the financial year 2011-12 was 8.150 MW of the total target is to be added through Renewable Energy Certificate (REC) projects2. The state’s main industries are textiles and automotive. 2012 . 2012 1 1. annual electrical energy deficit in the financial year 2011-12 was 8. Power generation in Tamil Nadu comes mostly from wind. CEA. making Tamil Nadu the seventh Indian state out of 28 to announce a solar policy. during which it targets to add 3 GW of solar power. The TANGEDCO portion had subsequently been increased to 1. The remaining 1.1. coal and hydro power plants. The policy is targeting 1. 300 MW is expected from the rooftops of government owned buildings. The Tamil Nadu Solar Energy Policy 2012 was announced in October 2012. We are assuming that this will lead to an equivalent reduction of the HT customer share (leaving the overall target intact).7%)4. The peak power deficit during that year stood at 2.4m MWh (29.9m MWh with a peak monthly deficit in March.247 MW or 17. © BRIDGE TO INDIA. A further 350 MW capacity addition is being targeted from rooftop solar installations.5%.000 MW.9m MWh with a peak monthly deficit in March. Of this. TANGEDCO will also sell the procured power to the SPO obligated entities. The total Break-up of policy targets Category Utility Scale Off takers High Tension (HT) consumers [through Solar Purchase Obligation (SPO)] TANGEDCO (DISCOM) (through competitive bidding) Rooftop REC Source: BRIDGE TO INDIA Capacity addition (MW) 5001 © BRIDGE TO INDIA.0001 50 300 1.000 MW will be allocated through competitive bidding for sale to Tamil Nadu Generation and Distribution Company Limited (TANGEDCO). while 50 MW is expected from privately owned or domestic rooftops.500 MW of capacity addition through utility scale installations. 2 To download the policy follow the link given in the Policy Details table at the end of this document 3 Ministry of New and Renewable Energy (MNRE) annual report financial year 2011-2012 4 ‘Load Generation Balance Report 2012-13’. The Central Electricity Authority (CEA) estimates that the annual electrical energy deficit will significantly rise to 27.123 MW (30. OVERVIEW Tamil Nadu already has significant experience with the generation and transmission of renewable energy as it has the highest installed capacity for wind power in India.

8 degree celsius • Expected plant output: 1. the average of various cities in Tamil Nadu. The strongest part of the policy so far is the SPO. Most 2011 and mid 2012 with grid-connected doubts come around the proposed power plants being built mostly in targets for REC-based projects. CERC 6 ‘Solar irradiance data in Tamil Nadu’.560 MWh/ year/MW • Capacity Utilization Factor (CUF) for a year: 17. However.The Tamil Nadu Solar Policy attempts to shift part of the financial burden from the DISCOMs to large power consumers. the policy has attracted great initial enthusiasm from a number of new entrants: project developers from south India as well as large power consumers (obligated entities).67 kWh/m2/day6 • Average ambient temperature: 28. which nudges industrial and commercial customers that are already plagued by high and rising power costs and low supply security towards adopting solar power quickly. waiting for the second phase of the NSM and new state policies such as the Tamil Nadu Solar Policy to be announced. long term Feed-in-Tariffs (FiT). The The timing of the policy is good: The most interesting aspect of the policy is first wave of installations under the the net metering for 350 MW of roofNational Solar Mission (NSM) Phase I top projects as it has the potential to and the Gujarat Solar Policy has crestructurally change the solar market ated a spurt of growth from almost in Tamil Nadu and India as a whole nothing to 1. in India’s north-west. the market has been very slow. based on 2011 data from the Central Electricity Regulatory Commission (CERC)5. the states of Gujarat and Rajasthan --------------------5 ‘Performance of solar power plants in India’. TEDA © BRIDGE TO INDIA.81% The Tamil Nadu distribution company (DISCOM) is a high loss making entity that can currently hardly afford to purchase expensive solar power over a long period of time through.36-5. the policy is still a work-in-progress and a number of essential aspects such as implementation of SPOs and other aspects or a payment security theme that ensure a realization of the targets are under discussion or need to be tackled. for instance.000 MW between early (if implemented successfully). we arrive at the following data points: • Average irradiation: 5. The policy reflects this concern to some extent by shifting part of the financial burden from the DISCOMs to large power consumers. Since then. So far. 2012 2 .

More clarity is needed on the subject. Tamil Nadu is preempting that buying solar power instead of conventional power will be a viable option for HT consumers by 2015 and is not making any long-term financial commitments. Also.07)/kWh and ` 9. accelerated depreciation (AD) benefits will apply. all colleges and residential schools and all buildings with a built up space of 20. as it would have done under a FiT scheme such as that of phase one of the NSM. Tamil Nadu has introduced a new SPO mechanism. UTILITY SCALE PROJECTS – HT CUSTOMERS 1. The market tariff for solar power in India has already fallen to ` 79(€ 0. 11 BTI estimate based on the falling CAPEX for a solar plant © BRIDGE TO INDIA.15)/kWh for the obligated entities (who comprise of primarily commercial and industrial tariff customers). GBI.500 MW (THROUGH SOLAR PURCHASE OBLIGATION) 500 MW Solar projects set up under the SPO mechanism will not receive financial assistance from the government in the form of FiT. or capital subsidies. registered factories7. we believe that due to a recent fall in polysilicon prices and the continuing oversupply in the market is its feasible now. This implies that the power tariff paid in the state. purchase power from a solar plant. places of worship. Generation Based Incentives (GBI). certain power consumers have to purchase a set quota of solar power.000 square meters or above. Tamil Nadu is preempting that buying solar power instead of conventional power will be a viable option for HT consumers by 2015 and is not making any long-term financial commitments. However. government hospitals. tea estates.48. power could be generated at ` 4.11)10/kWh . CERC estimates the current cost per kWh is at INR 7. who receive power from the grid at a constantly maintained high voltage level. The obligated entities to which the SPO applies are different from those specified by the national Renewable Purchase Obligation (RPO).2. Thus. as we expect. VGF or capital subsidies. the cost of solar power falls by a further 40% till 201511. transmitted though high tension lines. railway traction. lift irrigation8 cooperative societies. While the tariff was ambitious then. of more than 11kV.5 (€ 0. Under this. government educational institutions.06)/kWh. These include special economic zones (SEZs).2 (€ 0. telecom towers. this can have a significant upside to such projects. consumers paying commercial electricity tariffs. textile factories. To fulfill their SPOs. cinemas and theaters. SPO obligated entities include HT consumers. there is a possibility that these projects will be allowed to get RECs as SPO requirements are supposedly not conflicting with the RPO mechanism. If allowed.5 (€ 0. This provides an oppor- --------------------7 Factories registered under the Factories Act (1984) 8 Lift irrigation is a method by which water for irrigation is lifted with the help of pumps or other such means which use electricity 9 Conversion rate used in this document is 1 €=65 ` 10 ` 7/kWh was the lowest winning tariff bid for a solar project during allocations by the state of Odisha for 25 MW to Alex Green Power in February 2012. will reach parity with solar tariffs by 2015. 2012 3 . Viability Gap Funding (VGF). The opportunity The Tamil Nadu government has estimated that through the implementation of the SPO mechanism 500 MW of solar power will be installed for direct use of or third party sale to SPO obligated entities. industries guaranteed with 24/7 power supply. The solar projects set up under the SPO mechanism will not receive financial assistance from the government in the form of FiTs. IT parks. If. purchase RECs on any of the national power exchanges or purchase power from TANGEDCO at the prevalent solar tariff. which is approximately the same as the tariff paid by commercial consumers in the state. which is between ` 4. obligated entities can produce their own solar power. The SPO has been fixed at 3% till December 31st 2013 and 6% from January 1st 2014 onwards.

with a levelized cost of energy (LCOE) between ` 8 (€ 0. Further information will likely be provided in the Request for Selection (RfS) at a later point. the enforcement of the mechanism by the state has to DISCOMS (THROUGH COMPETITIVE BIDDING) – 1. there are risks related to charges (transmission charges. P.14)/kWh14. Diesel is already more expensive than solar power. For plants that are located off site and supply solar power through the grid. For example. The policy document as it stands today does not outline a penalty structure. The realized capacity addition would increase significantly. the policy just specifies that wheeling charges will be as normal and tax concessions as per the state’s industrial policy. at a preferIn order to ensure that the SPO tarential FiT. As of now. For this the state has to levy penalties. who default on their SPOs. they will often choose to buy power from private power producers by signing a PPA with them. space or technical knowledge to set up large solar power plants themselves. agency will be directly allocating 1. wheeling losses.000 MW --------------------12 ‘Outrage in Chennai over frequent outages’. Obligated entities can either have solar plants set up on site (under a captive model) or off site (under an open access model). be stringent. in a state with an energy deficit of 18%15 in its monthly energy requirement.11)/ kWh to ` 9 (€ 0. In order to ensure the SPO target is fully realized. are typically larger single off-takers and might have space locally available to build solar power plants. Thus. the enforcement of the mechanism by the state has to be stringent. get is fully realized. Project developers could supply power to one customer or to many. wheeling charges. TANGEDCO. transmission losses.12)/kWh and ` 20 (€ 0. crosssubsidy charges) and related to the stability of the grid as such. which are higher than the prevalent REC prices for entities. buying solar power already makes financial The Tamil Nadu Electricity Developsense for some commercial and indusment Authority (TEDA) as the nodal trial consumers. Another factor making solar a viable option for the obligated entities is the frequent power outages and high diesel prices for diesel-based gen-sets in the state.000 MW by 2015. while having a lower power tariff. Outlook We believe that under the current policy structure around half of the 500 MW of SPO installations will be constructed. 2012 4 .31)/kWh13 while solar has an LCOE of ` 7 (€ 0. and will often choose to buy power from private power producers. The solar power produced The risk from these projects will be sold to the state DISCOM. Therefore. Industrial consumers. such as Chennai12. Tamil Nadu has been facing frequent bouts of load shedding which stretch up to 10 hours in the suburbs and over 2 hours in the cities. if the state imposes a strict penalty on the defaulters. many commercial consumers will not be equipped with the infrastructure. We reach this figure after discounting for those obligated entities (48%)16 whose current power tariff has not yet reached parity with solar tariffs and who will default on fulfilling their SPO as long as there is no credible penalization.Many commercial consumers will not have the infrastructure. tunity for project developers to enter into private PPAs for the sale of solar power to those obligated entities that do not regard solar power as part of their core business or that do not have the financial liquidity to set up a solar power plant to fulfill their SPO. The Hindu 13 BRIDGE TO INDIA analysis 14 BRIDGE TO INDIA analysis 15 NLDC monthly report September 2012 16 A study on power scenario in Tamil Nadu. space or technical knowledge to set up large solar power plants themselves and on site. Jayabalan © BRIDGE TO INDIA.

Mr. The project is to be commissioned 360 days after of the publication of the tender. Signing of the PPA is expected 120 days after the publication of the tender. • The tariff will be determined by a slightly convoluted reverse bidding process. driven by the Gujarat Solar Policy and the NSM there has been a marked lull in the market since the middle of 2012.09) /kWh. The timeline for project developers starts with the issuing of the tender and not with the signing of the PPA (as in previous policies in India). © BRIDGE TO INDIA. Madhya Pradesh. declared that “everybody will get a piece of the cake”. please refer to the recent TEDA document 18 ‘Piece of cake for everyone: TANGEDCO chief’. as per its financial model. K Gnanadesikan.800) per MW for taking part in the bidding process and a security deposit of ` 3. • The tariff will be determined by a Mr.8% to be approximately ` 6. There will be a 5% annual escalation of the tariff for 10 years. Andhra Pradesh and Chhattisgarh) have so far not made any specifications. since when there have been no PV project allocations in India. a financial or price bid.000) per MW once the PPA is signed. The other currently available policies (Karnataka. K Gnanadesikan.000) per MW. Chairman of TANGEDCO. expects the tariff at an internal rate of return (IRR) of 12. Even for 2013 and beyond. As of now. 2012 5 . It now owes approximately ` 35 billion (€ 538m) to 400 members of the Indian Wind Turbine Manufacturing Association (IWTMA)19. As per TANGEDCO. suggesting that there will be a large number of project developers rather than a few large ones. declared that “everybody will get a piece of the cake”18.000 (€ 10. there will be a 5% annual escalation of the tariff for 10 years. at the TEDA meeting. The Hindu Business Line 19 ‘Up in the air’. Business World 20 Ibid. Of this. in which all bidders will be asked to match the lowest bid. the first is a techno-commercial bid with the commercial terms and conditions and the financial statements of the bidder and the second. BRIDGE TO INDIA. are the only states with current project announcements that have announced that they would be paying a FiT to projects. • reverse bidding process called the open tender-two part system in which all bidders have to submit two separate bids in two separate sealed envelopes. The delay in payments can primarily be attributed to the fact that it has the second highest loss making state utility in --------------------17 For a full list of the evacuation capacity of districts. Tamil Nadu – and more recently still Rajasthan.The opportunity Following the spurt of growth in the Indian solar industry.2 (€ 0.000. Project development investments specified so far. are: an earnest money deposit of ` 700. The risk The state utility has a record of delaying its payments to wind project developers in the state since July 2011. Also. but single project sizes will likely not exceed 50 MW.000 (€ 46. Chairman of TANGEDCO. A consultation meeting was held by the TEDA in Chennai on November 23rd 2012 to discuss the details of this policy. This is due to the evacuation constraints of the grid17. so far only projects amounting to 750 MW from phase two batch one of the NSM (to be announced shortly) and 40 MW from the Karnataka Solar Policy are expected. The last date for submission of the bid is January 4th 2013 at 14:00 hours. • Minimum capacity is 1 MW – there is no limit on the maximum capacity. These are the main points: • Bidders need to show a “net worth” (roughly equivalent to the balance sheet) of ` 10m (€ 150. The tender was published on December 5th 2012 by the TANGEDCO. • The validity of the PPA will be 20 years • Project developers need to have their land tied-up before they take part in the bidding.

and the per-district limitations on project sizes. Thus. payment uncertainties remain.9 billion (€ 1. revolving letter of credit.36 and 5. An additional risk inherent in the policy as it currently stands is the bidding process. there is no direct connection between the FiT and the solar tariff paid by the obligated entity.67 kWh/m2/day across the state’s districts). project developers might find it difficult to obtain financing for their projects in the state. this could cover the costs of a solar FiT that TANGEDCO pays to project developers selling power to it directly. The per-district limitations on project sizes will make it difficult for bidders to estimate what could be a winning bid and how the state would handle over-subscription. will make it difficult for bidders to estimate what could be a winning bid and how the state would handle over-subscription. The extra solar tariff income would be absorbed by the overall financials of TANGEDCO. At the moment. Due to TANGEDCO’s poor financial condition and past record for delayed payments.7 billion) by March 2012 (estimated)20. By this. There is currently no provision for a payment security scheme except for a Letter of Credit (LoC) to cover the payment of tariffs to the 1000 MW of solar projects that is to be allocated through bidding. © BRIDGE TO INDIA. revolving letter of credit. BRIDGE TO INDIA can help developers to participate in the process by providing them with key planning related insights that will help them to get an allocation. the only guarantee of payment is a standard one year. K Gnanadesikan of TANGEDCO said that “you can tell your bankers that there is absolutely no problem in getting the payment”. So far. In theory. develop own solar projects or buy RECs. We expect that there will be significantly more discussion and detailing of the process. in case of default. Any credible payment guarantee scheme or a direct link between the solar tariff paid by an obligated entity and the solar power producer would significantly strengthen this project option. the strength of its PPA is being questioned by investors and banks. only a small amount of projects will be realized. Thus. 2012 6 . TANGEDCO would receive a high (“solar”) tariff from those obligated SPO entities that decide to act upon their SPO but do not buy solar power under direct PPAs with project developers. we can offer our project development services for a professional and timely execution of plants. where it would make little difference. In countering critical questions from prospective bidders at the TEDA consultation meeting of November 23rd 2012. Also. however. which has gone up to ` 500 billion (€ 7. Mr.25 billion) in 2011. Some project developers might choose to build plants (probably initially financed purely on equity) under a PPA and. This provision. see the REC mechanism as a fallback option. They would be betting on a strengthening of either the TANGEDCO PPA or the REC mechanism in the future to allow them to refinance the project after commissioning. which wind park operators also hold but do not redeem in order not to jeopardize their longer term payments. which wind park operators also hold but do not redeem in order not to jeopardize their longer term payments. However.The only guarantee of payment is a standard one year. Outlook We estimate that under current conditions. all bidders will be asked to match the lowest bid (although irradiation varies between 5. the country with a net internal loss of ` 80.

This is significant. plant. (This mechanism is also often called “gross” metering). However. we do not arrive at a positive return.50 (€ 0.03)/kWh for the first two years from the date of installation (independent of the year of installation). 50 MW serves as both a targeted capacity addition from domestic rooftops and also as a cap for the GBI for this category. ROOFTOP SOLAR SYSTEMS350 MW Tamil Nadu is the pioneer in allowing net metering in India on a MW scale. In specific. This space is ideal for project developers to build rooftop systems by signing a PPA with the government. as the rooftop space available in these buildings is often large and the policy implementation will likely be stringent. this new tail-end generation might even have a (mild) stabilizing effect on the distribution grid. In order to encourage installations in the rooftop space the policy allows net metering at 240V. if handled well and if spread evenly throughout the grid.3. might even have a (mild) stabilizing effect on the distribution grid. as calculated by the meter. Net metering. The owner of the rooftop system ultimately pays for the “net” difference of the power consumed. The risk This is the first attempt at large scale net metering in India and hence a pioneering effort. A residential customer with around 25 m2 of rooftop space could set up a 2 kW --------------------21 Ashwin Gambhir. November 2012 © BRIDGE TO INDIA. TANGEDCO might find it difficult to monitor the erratic supply of solar power from multiple rooftops while simultaneously maintaining the stability of the local grid. See the recently published report by Prayas on “Solar Rooftop PV in India” for more details21. For net metering to function efficiently. The GBI starts off with ` 2 (€ 0. as the state is the pioneer in allowing net metering in India on a MW scale.700). the project IRR would be at only around 5%. The Tamil Nadu policy is targeting a capacity addition of 300 MW from rooftops of government owned buildings and 50 MW from rooftops of privately owned buildings.000 (€ 4. There are always certain risks associated with being a first mover.02)/kWh for the next two years and ` 0. two meters are set up along with a rooftop solar system: one which calculates the units of conventional power that is consumed by the owner of the rooftop system and another which calculates the amount of solar power the rooftop solar system feeds back into the grid. the local grid has to be responsive and stable. 2012 7 .01)/kWh for the last two years. There might be a specific tender coming out for government rooftops (as has been the case in Gujarat). which is already facing difficulty in handling the supply from various wind farms. which is not the case everywhere in the state. Shantanu Dixit. Vijaypal Singh (Prayas): “Solar Rooftop PV in India”. Assuming that all power would be fed into the grid. This would cost approximately ` 300. However. that power tariffs escalate by 5% per annum (as they have done on average for the last years). In addition to allowing net metering the private rooftops with solar systems installed before March 31st 2014 are also eligible to receive a GBI. 415V and 11KV. The opportunity The highest tariff of residential customers in Tamil Nadu is currently ` 5. including the solar meter. and assuming that such a system would be fully funded by equity. Vishal Toro. Under the mechanism.75/kWh (above 500 kWh/month). For a 100 KW system (with 70% debt finance at 12% interest). if handled well and spread evenly throughout the grid. Installations on government owned buildings can also use net metering but are not eligible for a GBI. ` 1 (€ 0.

solar will increasingly start to replace diesel back-up power generation. On the market side. The size of the batch is also good to allow TANGEDCO to experiment and gain experience with net metering. solar will increasingly start to replace diesel back-up power generation (even without storage). suffering from a significant budget deficit itself. this would add a significant incentive to the installation of these rooftop systems. If net metering works. the 50 MW of private rooftops will also be built by “solar enthusiasts”. The central government. Given the size of TANGEDCO’s deficit. has set aside funds to bail out DISCOMS only under the condition that they take the politically unpopular step of increasing power prices. In addition. the main driver for this will be the rising cost of power – Given the off-take security that net metering provides. we see this as a potential game changer in the Indian solar market and believe that the capacity additions in Tamil Nadu can significantly exceed the current target. this could lead to a significant rise in tariffs in Tamil Nadu. sales mechanism) to small generators. We believe that despite the currently low IRR.Outlook We believe that the 350 MW will be constructed in Tamil Nadu. The government can directly control the construction of 300 MW on public buildings. 2012 8 . © BRIDGE TO INDIA. given the off-take security that net metering provides. If the REC mechanism works and if it is adapted to become more suitable (registration costs and processes. both of grid power as well as back-up (diesel) power.

--------------------22 Please refer to our report BRIDGE TO INDIA. The REC mechanism has so far experienced only limited success in the Indian market. If RPOs were to be stringently enforced.150 MW of solar through REC projects. exemption on wheeling and transmisIf RPOs were to be enforced stringently sion charges or tax rebates.300 (€ 143)/REC. feeding power into the grid.4. lack of price visibility for RECs beyond 2017. primarily because of the difficulty in obtaining financing for projects. ects is the same as the opportunities 22 then REC projects would become more in the country as a whole . only 18 MW of REC projects have been registered nationally with the National Load Dispatch Center (NLDC) or the State Load Dispatch Centers (SLDC). the project owner will receiving at least the floor price of ` 9. However. but not all RPOs will be met through the purchase projects will be met. the solar power plant owners enter into a PPA with either a DISCOM at average pooled purchase cost (APPC) or a private consumer at a mutually greed tariff and additionally generate RECs to be traded on either the Indian Energy Exchange (IEX) or the Power Exchange of India Ltd. Under this route. (PXIL).150 MW The state does not offer any additional benefits for REC projects in the form of land acquisition benefits. The state does not offer any additional benefits for REC projects in the policy is still being discussed and might undergo a change. Also. including in Tamil Nadu. Outlook The risks involved with the REC mechanism in the state are the same as the risks involved in the mechanism all over the country. most states do not have a penalty structure in place for non-compliance of RPO. as per an official at TEDA. The policy aims to add 1. provision of ects (by comparison: the state’s own a fallback revenue option). The low number of REC projects can be attributed to the This policy brief has been published on December 7th 2012. Considering the current conditions of the REC mechanism in India. Thus. The risk So far.150 MW for REC projdevelopers (such as e. The risks involved with the REC mechanism in the state are the same as the risks involved in the mechanism all over the country. the and the CERC were to stabilize REC opportunity in the state for REC projprices over a longer period of time. INDIA SOLAR DECISION BRIEF: The REC mechanism. exemption on wheeling and transmission charges or tax rebates. the REC target of of RECs). and will be updated as regulations change. the form of land acquisition benefits. This makes it difficult for project developers to raise debt from banks and other financial institutions for REC projects.304 MW. unless The Tamil Nadu Solar Policy sets a there are additional benefits for project high target of 1. encouraging more active trading of RECs on the exchanges and more REC projects. REC OFF TAKE 1.g. the demand for RECs would increase. attractive to pursue in the whole of India. The opportunity The REC mechanism allows a project developer to have a dual income stream: the income from the sale of power produced and the income from selling REC certificates (1 REC = 1 MWh). we do not total RPO and SPO requirements by expect that the state’s target for REC 2015 amount to 1. 2012 9 . Sept 2012 for more information © BRIDGE TO INDIA. Such projects could be of any size but would typically be of 10 MW or above. Until 2017.

in/pdf/tamilnadu_solar_energy_policy_2012.pdf http://www.000 Total 1. Chairman & Managing Director. College Road.000 MW 2013 750 100 150 1. 5th Floor. Tamil Nadu Energy Development Agency. E. IAS. Chennai 600 006. 2012 10 Contact Thiru Sudeep Jain.Sampath Maaligai.pdf http://www.500 350 1.POLICY SUMMARY Period of operation Target Allocation Timeline Utility Scale (MW) Rooftop (MW) Renewable Energy Certificate (REC) (MW) Total (MW) 2012-2015 3.in/pdf/pdf3.in Source: BRIDGE TO INDIA © BRIDGE TO INDIA.teda.in/pdf/pdf1.pdf © BRIDGE TO INDIA.in http://www.V.teda.gov.50 (€ 0. November 23rd 2012 Evacuation capacity per district Irradiation data per district http://www.150 3. 2012 .03)/unit Till the 4th year Till the 6th year ` 1 (€ 0.01)/unit Single window clearance Domestic Content Requirement PV/CSP break up Exemption on wheeling/open access/ transmission charges Electricity duty Net metering Commissioning period Banking of power CDM benefits Nodal agency State DISCOM Links Tamil Nadu Energy Development Agency (TEDA) None None given None Up to 100% exemption for 5 years Allowed For (voltage) Size Not specified Eligible to apply 240 V <15 kWp 415 V 10 kWp to <100 kWp 11 kV > 100 kWp 360 days from the date of release of the tender TEDA TANGEDCO Tamil Nadu Solar Energy Policy .tangedco.teda.teda.tidco.pdf http://www.com/images/industrialpolicy_e_2007.in/pdf/pdf2.pdf http://www. 044-28222973 | cmd@teda.02)/unit ` 0. Tax and duty rebates as per the state’s Industrial Policy 2007 Till the 2nd year ` 2 (€ 0.000 2015 200 125 675 1.teda.000 2014 550 125 325 1.K.in/ www.2012 Tamil Nadu Industrial Policy 2007 TEDA TANGEDCO Minutes of the TEDA meeting.000 Off takers Tamil Nadu Generation and Distribution Company Limited (TANGEDCO) Obligated entities under the Renewable Purchase obligation (RPO) Obligated entities under the Solar Purchase obligation (SPO) Open Access (OA) consumers Obligated entity High Transmission (HT) consumers as defined by the Solar Purchase Obligation (SPO) 3% till December 31st 2013 6% from January 1st 2014 Financial incentives Feed-in-tariff (FiT) for projects allocated through competitive bidding Generation Based Incentive (GBI) for rooftop installations for domestic consumers installed before March 31st 2014 from the date of installation For SPO obligated entities No financial incentives.

Our approach to project development is to make projects ‘profitable’ and ‘bankable’. Source: BRIDGE TO INDIA © BRIDGE TO INDIA. 2012 11 . Akhilesh Magal Head of Project Development akhilesh.magal@bridgetoindia. please contact: Mr. Our unique combination of adapting an international quality and localknowledge makes us the right partners for executing your solar projects in Tamil Nadu.com +91 813 033 0011 + 91 (11) 46 08 15 79 © BRIDGE TO INDIA.HOW BRIDGE TO INDIA CAN SUPPORT YOU BRIDGE TO INDIA provides services along the project development value chain. 2012 IDENTIFICATION Site identification & assessment Techno-commercial feasibility studies Detailed Project Report (DPR) preparation DEVELOPMENT CONSTRUCTION & OPERATION Project registration Bid strategy preparation Land securitization Power Purchase Agreement (PPA) facilitation Management of permits and approvals Renewable Energy Certificates (REC) consulting Technology evaluation & selection EPC tendering and selection Project structuring and documentation Site supervision Quality management Stakeholder management Cost controlling and reporting If you would like to discuss our project development services.

Accelerated Depreciation CEA .Letter of Credit NSM .Tamil Nadu Generation and Distribution Company Limited TEDA .Renewable Purchase Obligation OA .Generation Based Incentive HT . REC .Indian Wind Turbine Manufacturing Association LCOE .High Tension IEX .Viability Gap Funding © BRIDGE TO INDIA.Central Electricity Regulatory Commission CSP .Jawaharlal Nehru National Solar Mission NLDC .Renewable Energy Certificate RfS .State Load Dispatch Center SPO .Average Pooled Purchase Cost AD . ANNEXURE GLOSSARY OF TERMS APPC .Request for Selection RPO .Open Access SEZ .Distribution Company FiT .Photovoltaic PXIL .Special Economic Zone SLDC .Levelized Cost of Energy LoC .Capacity Utilization Factor DISCOM .Tamil Nadu Energy Development Authority VGF .Power Purchase Agreement PV .Indian Energy Exchange IWTMA .5.National Load Dispatch Center PPA . 2012 12 .Power Exchange of India Ltd.Central Electricty Authority CERC .Feed In Tariff GBI .Concentrated Solar Power CUF .Solar Purchase Obligation TANGEDCO .

ABOUT THE AUTHORS As part of Market Intelligence at BRIDGE TO INDIA. Over the past years. projects. long term growth. Germany.engelmeier@bridgetoindia. political and economic trends is crucial for business success in India. He is deeply concerned with the energy use of India’s rapidly growing economy and believes in finding business-driven and Indiaspecific business models to cope with this. we are certain that a deep understanding of the underlying social. Prior to setting up BRIDGE TO INDIA. Engelmeier Managing Director tobias. Ltd. Her prior work experience is as a risk and financial analyst at Goldman Sachs Pvt. we provide our clients with the most comprehensive. market demand projections Tobias founded BRIDGE TO INDIA in 2008. We seek to understand the larger dynamics of the Indian market. Ratnottama analyzes the fast developing policy and regulatory framework for solar power in India. Further. financing and manufacturing.com Expertise: Business model development. market regulations. first mover strategies. She also looks at how the market grows and expands into new segments. experiences and skill sets from diverse academic backgrounds to provide clients the best analysis in the industry. Tobias F. 2012 13 . India where her areas of study included macro and developmental economics within the Indian economy. His PhD is in political science from the South Asia Institute in Heidelberg. We are knowledge driven. analytical and up-to-date research and analyses on the Indian market compiled through the joint expertise of our team of experts. Ratnottama Sengupta Consultant ratnottama. he has worked for five years in the energy sector for a leading strategy consultancy and written a book on Indian political culture. © BRIDGE TO INDIA. we offer our clients a range of business intelligence solutions that enable them to take strategic decisions that directly impact their success.com Expertise: Policies. Our team combines various expertise. Through our offering of various products. She holds a masters degree in Economics from Bangalore. Dr.sengupta@bridgetoindia. Tobias has advised many investors and businesses on the Indian energy market. especially in our core fields: renewable energy policies. stakeholder management Ms.

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

Master your semester with Scribd & The New York Times

Special offer for students: Only $4.99/month.

Master your semester with Scribd & The New York Times

Cancel anytime.