A SUMMER TRAINING PROJECT REPORT

GANGA RENEWABLES

(MARKET RESEARCH ON SOLAR RENEWABLES)

Submitted in partial Fulfilment of requirements for the award of Degree of

BBA

Submitted by:

Harshil Ashra

150901157

Under the Guidance of

Dr. Bhawna Chahar

MANIPAL UNIVERSITY JAIPUR

 DECLARATION

I hereby certify that I have successfully completed my internship with” Ganga

Renewables.” From 1st May, 2017 to 30th June, 2017. This is to certify that this project is an
original piece of research work carried out by me under the guidance and supervision of
Mr Sharad Garg. The work has been submitted in partial fulfillment of the requirement of
BBA to our college.

Name: Harshil Ashra

Date: 30th June 2017
ACKNOWLEDGEMENT

The satiation and euphoria that accompany the successful completion of the project would be incomplete
without the mention of the people who made it possible.

My sincere gratitude to Mr. Sharad Garg for providing me an opportunity to work with GANGA
RENEWABLES .Without his kind gesture, this project would not have been possible.

I would like to take the opportunity to thank and express my deep sense of gratitude to my corporate
mentor SHRADHA JAIN and my faculty mentor Dr.Bhawna Chahar . I am greatly indebted to both of
them for providing their valuable guidance at all stages of the study, their advice, constructive suggestions,
positive and supportive attitude and continuous encouragement, without which it would have not been
possible to complete the project.

I would also like to thank Mr. PRATEEK GARG who inspite of busy schedule has co-operated with me
continuously and indeed, his valuable contribution and guidance have been certainly indispensable for my
project work.

I am thankful to Mr.SHARAD GARG for providing guidance to understand the depository participant part
of the company.

I owe my wholehearted thanks and appreciation to the entire staff of the company for their cooperation and
assistance during the course of my project.

I hope that I can build upon the experience and knowledge that I have gained and make a valuable
contribution towards this industry in coming future.
 TABLE OF CONTENTS

S.NO Topic Page No.

1 SUMMARY 1

2 COMPANY’S BACKGROUND 3
3 OBJECTIVES 5
4 SIGNIFICANCE OF THE STUDY 7
5 REVIEW OF EXISTING LITERATURE 8
6 HISTORICAL GROWTH OF SOLAR MARKET IN 9
INDIA
7 IMPORTANT MARKET DEVELOPMENT 10

8 POTENTIAL ESTABLISHMENT FOR SOLAR 14

MARKET IN INDIA

9 IMPORTANT POLICY COMPARISON 38

10 STATUS OF STATES 39

11 OFF TAKE OPTIONS IN INDIA 40

12 TERMS AND CONDITIONING OF FINANCING 42

13 PROJECT VIABILITY IN INDIA 43

14 FINANCING TRENDS 44
 SUMMARY

The growing energy requirement of our economy, coupled with concerns arising out of conventional
energy resources in context of rising finance and deteriorating ecological conditions have created an
environment conducive of a gradual shift toward healthier options, generally referred to as non-
conventional energy resources. These nonconventional energy resources include small solar pannel, our
country is endowed with a huge capacity encompassing all these sectors.

After persistent efforts, the share of renewable energy which stood at a meagre 2% of installed capacity in
2003 stands at nearly 12% with a total installed capacity of 27,541 MWs as of June 2013.

With an average insolation of 4-7kwh/m2 and 300 sunny days the potential of our country stands at 5000
trillion kilowatt of clean energy, if efficiently harnessed it can easily reduce our energy deficit scenario but
had been long neglected in wake of huge investment needed and lack of supportive policies, finally the
solar power is coming of the age with help of various technological improvement and prevalence of
abetting policies. The solar power stands at 1,690 MWs moving up from a mere 45 MWs just a few years
ago.

In the report I have tried to explore and analyze the solar PV market’s complete value chain. The Indian
solar market has an expected potential 25,000 MWs by 2022, the only existing demand driver until very
recently due to very high cost of solar power was the renewable purchase obligation but recently concluded
allocations and bidding experience predicts that we could achieve grid parity sooner than expected, turning
solar into a more viable option than ever before.

During the past couple of years, India has emerged as an attractive investment destination for solar power
developers. The government has taken several policy and regulatory initiatives including the Jawaharlal
Nehru National Solar Mission, for the large scale deployment of solar energy. As a result of such policy
support and incentives, investors from around the world want to have a share of the pie of the growing
Indian solar energy industry. India stands second in the solar energy attractiveness index after US with a
rating index of 64.

The solar market as of now has two off take route FiT and REC the former being the more attractive of the
two citing the uncertainty of returns in REC mechanism. The report will also touch upon Indian solar
manufacturing capacity which is bound to expand under a rising demand. Besides the grid connected
potential the PV market has huge untapped potential in off grid application where soon it may overtake
diesel power, also it would be providing for rural electrification and street lights.

1
Solar technologies are at a nascent stage in India and there are considerable risks in the execution of
projects. Projects based on crystalline cells and modules are comparatively easier to execute and less risky
as manufacturers generally guarantee the products for more than 20 years. However, newer technologies
like thin-film and concentrated PV, although demonstrating higher efficiency and lower life-cycle cost of
ownership, are yet unproven and therefore considered risky in the Indian context. The returns of a solar
project are highly sensitive to radiation levels. High quality solar radiation data is a pre-requisite for proper
potential assessment and project development. Hence, solar radiation assessment is a very important
activity and typically requires several months for ground measurement of solar radiations. Any error in
solar resource estimation adds an uncertainty to the expected future returns. As of now, on-ground solar
radiation data is sketchy and the simulation models are at a preliminary stage. Evacuation of the electricity
generated from power plants located in isolated areas is a potential challenge. It may require development
of new transmission lines, which are often controversial, both because of their expense and the potential of
damage to property and environment. The risks identified and classified as per their impact, probability and
time horizon indicates the overall nature of the risk on the solar sector as a whole. However, these risks are
an even greater concern at a project specific level, where risk avoidance and mitigation measures tend to be
limited and expensive. It is important to determine which of these risks directly impact project viability,
and to what extent. As can be discerned from the analysis above, certain risks have a direct impact on
interest rates and capital costs, which are among the two most important factors affecting project viability.
This report analyses the extent of impact that these specific risks and their mitigation measures can have on
interest rates.

2
 COMPANY’S BACKGROUND

We are complete solar system integrators, having tie ups with huge globally renowned brands for all solar
solutions.

We install solar systems ranging from 1 KWp TO 2500 KWp.

WHAT BRANDS WE INSTALL?

1) RENEWSYS – Solar Panels (240 Wp – 315 Wp)

2) TRINA - Solar Panels (315 Wp – 320 Wp)

3) REC – Solar Panels (250 Wp – 320 Wp)

4) GROWATT – Solar On-Grid Inverters (1 KW – 40 KW, 550 KW - 2500KW)

5) SUNGROW - Solar On-Grid Inverters (50 KW - 500 KW)

6) LIVINT – Solar Pump Controllers (0.5HP – 30HP)

7) CONSUL NEOWATT - Solar Hybrid Inverters (1 KW – 100 KW)

8) LIVINT - Solar Off -Grid Inverters (1 KVA - 200 KVA)

9) GEESYS – ACDB, DCDB, Array Junction Box, etc.

10) SOLUX - All in one Street Lights (8W - 40 W)

11) PANEL CLAW - Mounting Structures.

12) GANGA FLARE - Solar Water Heaters.

13) REFUSOL - String Inverters.

14) SIECHEM - Single & Multi Core Solar Cables.

Our products are MNRE approved.

Solar Inverter Warranty – 5 Years

Solar Battery Warranty - 5 Years

3
Mounting Structure Warranty – 25 years

Solar Panel Warranty – 25 years performance warranty*

PROPOSAL

Table 1
Activity Quantity Rate Amount

OFF-Grid Solar power plant 5KW Rs.75,000/KW Rs.3,75,000-

/-
a)SPV Modules 5KW

b)PCU-5KVA 1 pcs

c)Batteries 4 pcs

d)Mounting Structure 1 set

e)Associate cabling &accessories 1 set

f) Installation & commission

Total Rs.3,75,000-
/-

Terms & Condition

1. Additional Cost : Freight extra as per actual

2. Payment : 30% Advance along with order

40% on the proof of module delivery

20% on the proof of inverter delivery

Balance 10% against installation-commission of system.

3. Expected Delivery : 2-3 Weeks

4. Taxes/Duties : All taxes and govt. duties will be borne by client

: GST Extra@5%

4
 OBJECTIVES

The goal of this report finds the true opportunity in Indian solar market till 2020. The research is done on
two key demand drivers policy implementation and market drivers. The report analyzed the existing
polices. The financial viability and bankability check is also done. The key aspects included in this report
would include:-

1) Potential in various states - Policy Target, Land Bank, Inclination of Market Players

2) Current status of utilization – Include Hurdles if there is under utilization

3) Policy framework - analysis of prevailing policies and drafts at state and central level – Objective shall
be to arrive at the reasons for state wise momentum

4) Financial model of a solar plant of 5 MW - would include the same for 3-5 different states with a
declared solar policy and establishment of the most suitable option from a investor's prospective

5) Market scenario - analysis of supplier market and EPC contractors – Existing EPC contractors, Market
Share, Margin of EPC contractors

5
6
 SIGNIFICANCE OF THE STUDY

This report gives a comprehensive account of all aspects Indian Solar PV markets the potential, the actual
opportunities and threats to be faced by it. The various off-takes available in the Indian solar market and
manufacturing capacities required. The report act as guide for new developers who wants to enter into the
market.

Overview and installed capacity

Until a few years ago solar power played an almost non-existent role in the energy mix of this country, the
total installed capacity before the announcement of JNNSM was a mere 17.8 MWs which now stands
above 1.69 GWs in just over 3 years backed by a rising RPO and conducive environment created by
JNNSM and various other state level policies.

As foretold the Indian energy sector has grown enormously in the last few year from the humble beginning
of 22 MWs in 2010 it has grown beyond 1.7 GWs the ambitious mission of NSM has started to pay off
with unprecedented support from state wise policies has also helped in the endeavor As envisioned by our
long term energy supply strategy; that solar power should achieve parity with thermal power generation by
2022 but as it is being reported by a report by Deutsche Bank and many other reports released recently that
few states in India have already achieved grid parity namely Kerala, Maharashtra and Delhi.

Table 2: Factor favouring solar energy in India

Factors Favouring Solar Energy in India
Equivalent energy through 5,000 trillion kWh/year
solar radiation
Clear sunny weather 250 to 300 days a year

Annual global radiation 1600 to 2200 kWh/m2

Geographical alignment tropical and subtropical

region
Average solar insolation about 5.5 kWh/m2 per day
incident

7
 REVIEW OF EXISTING LITERATURE

Electricity Act 2003

Section 3. (1) says…..”The Central Government shall, from time to time, prepare the national electricity
policy and tariff policy, in consultation with the State Governments and the Authority for development of
the power system based on optimal utilisation of resources such as coal, natural gas, nuclear substances or
materials, hydro and renewable sources of energy.”
Section 4. Stipulates …..”The Central Government shall, after consultation with the State
Governments, prepare and notify a national policy, permitting stand-alone systems (including those
based on renewable sources of energy and non-conventional sources of energy) for rural areas.”
Under section 6 of the act it is given as “The Appropriate Commission shall, subject to the provisions of
this Act, specify the terms and conditions for the determination of tariff, for the promotion of co-
generation and generation of electricity from renewable sources of energy”
Under section 86 “The State Commission shall promote cogeneration and generation of electricity
from renewable sources of energy by providing suitable measures for connectivity with the grid and
sale of electricity to any person, and also specify, for purchase of electricity from such sources, a
percentage of the total consumption of electricity in the area of a distribution licensee”

National Tariff Policy

National Tariff Policy on Non-conventional sources of energy generation including Co-generation:

1. Pursuant to provisions of section 86 (1) (e) of the Act, the Appropriate Commission shall fix a
minimum percentage for purchase of energy from such sources taking into account availability 15 of such
resources in the region and its impact on retail tariffs. Such percentage for purchase of energy should be
made applicable for the tariffs to be determined by the SERCs latest by April 1, 2006.
It will take some time before non-conventional technologies can compete with conventional sources in
terms of cost of electricity. Therefore, procurement by distribution companies shall be done at preferential
tariffs determined by the Appropriate Commission.
2. Such procurement by Distribution Licensees for future requirements shall be done, as far as possible,
through competitive bidding process under Section 63 of the Act within suppliers offering energy from
same type of non- conventional sources. In the long-term, these technologies would need to compete with
other sources in terms of full costs.
3. The Central Commission should lay down guidelines within three months for pricing non-firm
power, especially from non–conventional sources, to be followed in cases where such procurement is
not through competitive bidding.

8
 HISTORICAL GROWTH OF SOLAR MARKET IN INDIA

The Rural Electrification Program of 2006 was the first step by the Indian Government in recognizing the
importance of solar power. It gave guidelines for the implementation of off-grid solar applications.
However, at this early stage, only a mere 2MW of capacity was installed through this policy. This
primarily included solar lanterns, solar pumps, home lighting systems, street lighting systems and solar
home systems. In 2007, as a next step, India introduced the Semiconductor Policy to encourage the
electronic and IT industries. This included the Silicon and PV manufacturing industry as well. New
manufacturers like Titan Energy Systems, Indo Solar Limited and KSK Surya Photovoltaic Venture
Private Limited took advantage of the Special Incentive Scheme included in this policy and constructed
plants for PV modules. This move helped the manufacturing industry to grow, but a majority of the
production was still being exported. There were no PV projects being developed in India at this stage.
There was also a need for a policy to incorporate solar power onto the grid. The Generation Based
Incentive (GBI) scheme, announced in January 2008 was the first step by the government to promote grid
connected solar power plants. The scheme for the first time defined a feed-in tariff (FIT) for solar power
(a maximum of INR 15 or $0.37per KWh). Since the generation cost of solar power was then still around
INR 18 ($0.45) per KWh, the tariff offered was unviable. Also, under the GBI scheme, a developer could
not install more than 5MW of solar power in India, which limited returns from scale. One of the main
drawbacks of the GBI scheme was that it failed to incorporate the state utilities and the government in the
project development, leaving problems like land acquisitions and grid availability unaddressed. As a
result, despite the GBI scheme, installed capacity in India grew only marginally to 6MW by 2009. In June
2008, the Indian government announced the National Action Plan for Climate Change (NAPCC). A part
of the plan was the National Solar Mission (NSM). It was announced in December 2009 with the aim of
finally initiating the solar industry in India. 21
The NSM guidelines indicated that the government had improved on the shortcomings of the GBI scheme.
It aimed to develop a solar industry, which was commercially driven and based on a strong domestic
industry. The extra cost of generation of solar power was being borne by the federal government under the
GBI scheme. Even before the NSM, Gujarat was the first state to come up with its own solar policy in
January 2009. The Gujarat solar policy initiated a process of the states formulating their own policy
frameworks independent of the federal guidelines. The renewable purchase obligations for state
distribution companies, a demand-driven scheme, further accelerated the formulation of solar policies at
the state level. These policies exist independent of each other as well as the NSM. One of the key novelties
of the Gujarat policy was that it introduced the concept of solar parks. These parks offered a
comprehensive solution to concerns over land acquisition, grid connectivity, and water availability, hence
offering developers a project allocation packaged with the necessary infrastructure. Other states like
Karnataka, Andhra Pradesh and Rajasthan have followed suit in developing solar power development
programs. Rajasthan has implemented land banks as well to make land acquisition easier. As more states
plan to meet their solar power obligations, new policies are expected to be offered, creating as very vibrant
set of markets across the subcontinent.

9
 IMPORTANT MARKET DEVELOPMENT

NSM
Application
Segment Target for phase Target for phase Target for phase
I(2010-2014) II(2013-2017) III(2017-2022)

Utility grade
including 1000-2000MWs 4000-10,000MWs 20,000Mws
roof top

Off grid solar 200MWs 1000MWs 2000MWs

Application
Solar collectors 7 million sq. meters 15 million sq meters 20 million sq. meter
Table-3

Batch I, Phase I
The selection of Solar PV projects of 500 MW capacity was decided to be undertaken in two batches over
two financial years of Phase 1 i.e., 2010-2011 and 2011-2012. The size of PV projects in the first stage in
2010-11 was fixed at 5 MW per project. Under Migration scheme NVVN started the process of short
listing the on-going projects to migrate to the JNNSM. A total of 16 projects of 84 MW capacity were
selected. These project developers signed PPA with NNVN in October, 2010 and reported financial
closure. The last date for commissioning of 54 MW capacity PV projects was by end of October, 2011.
The 30 MW capacity solar thermal projects are to be commissioned by March, 2013.

Later in August 2010, NVVN started the process of selection of new grid solar power projects comprising
of 150 MW of Solar PV and 470 MW of solar thermal capacities. This yielded a tremendous response and
applications were received for over 5,000 MW capacity. The projects were selected based on tariff
discounting. Bidders offered substantial discounts as given below.
Table 4: Bidding results batch i phase i
Solar PV Solar Thermal
CERC Approved tariff for solar CERC Approved tariff for solar
PV Thermal
(Normal
(Normal Depreciation) Depreciation
1791 Paise/ Kwh 1531 Paise / Kwh
Max discount Min. discount Max discount Min. discount
offered Offered offered Offered
(Paise) (Paise) (Paise) (Paise)
696 515 482 307
Final tariff discount for Solar PV Final tariff discount for Solar
(Paise / Thermal (Paise
Kwh) / Kwh)
10
 1095 1276 1049 1224

Total 30 SPV projects were selected after bidding process and subsequently 28 project developers signed
PPAs for 140 MW capacity with NVVN. Similarly seven solar thermal projects were selected after bidding
process and signed PPA with NVVN. Average tariff for selected SPV projects was 1216 Paise/kWh which
was 32% lower than the CERC approved benchmark tariff of 1791 Paise/kWh. For solar thermal projects,
average tariff for selected

Batch II, Phase I

Under Batch II of Phase I, the total aggregate capacity of grid connected Solar Projects was 350 MW for the
deployment of Solar PV Power Projects. NVVN had been designated as the nodal agency for procurement of
solar power and for carrying out the bidding process. On August 24, 2011, NVVN invited Request for Selection
(RfS) from interested developers to develop 350 MW solar PV projects with a capacity in multiple of 5 MW,
Minimum capacity 5 MW & Maximum Capacity 20 MW for each project. Total Capacity for each bidder was
limited to 50 MW. NVVN received 183 bids from project developers indicating discounts offered by each on
CERC approved benchmark tariff of 1539 paisa/kWh. Discount offered by the bidders was in the range of zero
paisa to 790 paisa per unit.

Discount offered in Paisa/Unit

80 400

70 350

60 300

50 250

40 200

30 150

20 100

10 50

0 0
601-700 501-600 401-500 301-400 201-300 101-200 zero

No. of Bids (Primary axis) capacity(MW) (Secondary Axis)

Figure 1: Discount offered in batch I Phase I

Table 5: Bidding results batch i phase i

Solar PV Solar Thermal
CERC Approved tariff for solar PV CERC Approved tariff for solar Thermal
(Normal Depreciation) (Normal Depreciation
1791 Paise/ Kwh 1531 Paise / Kwh
Max discount Min. discount Max discount Min. discount
offered Offered offered Offered

11
 (Paise) (Paise) (Paise) (Paise)
696 515 482 307
Final tariff discount for Solar PV (Paise / Final tariff discount for Solar Thermal (Paise
Kwh) / Kwh)
1095 1276 1049 1224

GUJARAT SOLAR POLICY

The state of Gujarat was the first Indian state to launch its own solar policy in 2009 even before the NSM.
The current policy is operative until 2014 but a new policy is expected before it ends. The initial target was
to achieve an installed capacity of 500 MW. Given the interest from a large number of developers and an
assumption that some projects may not be implemented, the government allocated projects worth 958.5 MW
of PV. Unlike the NSM, Gujarat has not opted for reverse bidding as a means to allocate projects, nor does
the policy have a Domestic Content Requirement (DCR). The tariff was fixed as shown in Table 3. From
Table 1, no project allocations are expected from Gujarat since the state’s RPOs have been fulfilled. Future
project allocations are likely to be through the REC mechanism.

KARNATAKA SOLAR POLICY

Karnataka announced its solar policy in July 2011. 80 MW was auctioned through a reverse bidding process
held in November 2011 out of which 70 MW was allocated to PV. These projectsare expected to be
commissioned by the end of 2013. The lowest bid received was at ` 7.94 (€0.12)/ kWh while the highest
winning bid received was at ` 8.50 (€0.13)/kWh.
Karnataka has abolished all wheeling and transmission charges in order to promote investment in solar
energy. The solar policy does not mandate a DCR. The policy aims to add another 120 MW over the next
five years.

RAJASTHAN SOLAR POLICY

The Rajasthan solar policy was expected to be announced in early 2012. Due to delays, the Request for
Proposal (RfP) of the policy was announced only in November 2012. The policy expects an allocation of 150
MW (100 MW of utility-scale projects and 50 MW of rooftop projects). The policy aims at achieving an
additional 200MW of capacity addition until 2017.

MADHYA PRADESH SOLAR POLICY

The Madhya Pradesh solar policy was approved by the state cabinet in July 2012. It is expected that the state
will allocate 800MW of solar power under the policy. The projects will be divided into four solar parks of
200MW each. However the policy document does notoffer any clarity on the total targeted capacity addition,
the time frame for the execution of the policy, eligible entities and the method of allocating projects or the
incentives under the policy. As the policy does not clarify the allocations, Table 1 assumes that one solar park
of capacity 200MW will be available each year between the period 2013 to 2016.

ANDHRA PRADESH SOLAR POLICY

The Andhra Pradesh Solar Policy abstract was announced on September 26th 2012. It is the first solar

12
policy to be based entirely on the REC mechanism. The policy waives wheeling and transmission charges.
The policy also includes exemption from Cross Subsidy Surcharges (CSS) and Electricity Duty, and a
refund on Value Added Taxes (VAT) on all components of the plant and on stamp duty and registration
charges on the purchase of land. These concessions are against the Central Electricity Regulatory
Commission (CERC) ruling, which states that REC based projects cannot avail any other benefits.
Clarification is awaited from the Andhra Pradesh government on this matter. A more detailed policy
announcement is expected by early 2013.

TAMIL NADU SOLAR POLICY

The Tamil Nadu solar policy was announced in October 2012 and aims to achieve 3 GW by 2015. The table
below lists the allocation of the policy by segments.
The policy is the first policy to include net-metering, which will allow rooftop connection at the LT
distribution network. The Tamil Nadu policy lays a strong emphasis on the fulfillment of Solar Purchase
Obligations (SPOs). SPOs are mandated on the following entities: Special Economic Zones (SEZs), IT
parks, industrial consumersguaranteed with 24/7 power supply, colleges, telecom towers, residential
schools and all buildings with a built up area of more than 20,000 square meters. For the REC projects,
there are no concessions unlike the Andhra Pradesh solar policy. The guidelines are expected to be in line
with the national policy on RECs.There is no Domestic Content Requirement (DCR) under this state
policy. For a detailed analysis on the Tamil Nadu state policy please download our free INDIA SOLAR
POLICY BRIEF on the Tamil Nadu Solar Policy.

13
 POTENTIAL ESTABLISHMENT FOR SOLAR MARKET IN INDIA

Table 6: established potential of solar market in india

State Policy Land Financial Notes
target availability exemptions
and
incentives.
Rajasthan Nearly Solar park Govt. land to Three different
10,000 mw planned in 4 be made channel
by 2022 districts each available on underway total
of 1000mw concessional to nearly
each rate 10% of 700MW by
dlc 2017 no cap on
Energy used addition for
by self sale through
exempted REC mech
from
electricity
duty
Also there are
various
exemptions
on taxes as
high as 70%
in some cases
Karnataka 200 mw by No land Incentive of Each year only
2014 allocation upto 12Rs per 40 MW is
specifically KWh for allowed
for the solar PV and
purpose but 10Rs per
land set aside KWh for
for renewable solar thermal
development
in all major
districts

14
Madhya 1102 MW Land Exemption
Pradesh envisaged by allocation from
end of 2017 already made electricity
for solar park duty and
in 5 districts CESS for 10
with capacity year also 4%
of 200 MW grant for
each wheeling
charges
Equipment
free from
VAT
Tamil Nadu 3000 MW by Atleast a park 100% SPO (solar
year 2015 0f 50MW exemption purchase
capacity in 24 from various obligation) of
districts duties for 5 6% from march
Various other years 2014 which
sizes of solar will make it
park defined necessary for
the state to
have around
1000 MW of
installed
capacity
Gujrat 3000MW by Power PPAs for
2014 purchase upto nearly 972
15Rs/KWh MWs already
signed
Haryana Lacking a Exemption
clear cut from electricity
target duty and
(targeted 500 various land
MWs of RE conversion
by 2012 but charges also
only 160 various other
MWs benefits
achived till
jan 2013)

15
Punjab 500 MWs by In case of Exemption Policy in draft
2020 land from octroi state
availability Captive
land may be generation
leased out for exempt from
38years on electricity
notional lease duty, 100%
of 1 sqmt exemption
/annum from payment
of stamp duty
also
Uttar 500 MWs by Land yet to No special
Pradesh 2017 be identified privileges as
such.
Privileges
under the sate
industrial
policy 2012
Bihar Lacks a clear No special O
cut target but privileges
a tender for other than
100 MWs of ease in land
solar power allotment
was floated
with last date
for
submitting
bids being 1st
july
Kerela 500 MWs by Policy in draft
2017 and state
1500 by Also there is
2030 going to be a
obligation on
everyone
including
domestic
consumer

16
Maharashtra Not defined Not allocated None None

Orissa 14000 as per Not defined Buying

state looking for power at
regulatory proposals incentivized
body rates
Jharkhand 500MWs by Exemption of SPO is 4%
2017 50%
1000MWs by electricity
2022 duty and cess
for 10 years
to all plants
also 50 %
exemption to
captive plants
for 5 years
4% grant on
wheeling
charges
Equipment
exempted
from VAT
Chhattisgarh 500 to 1000 Exemption
MWs by from
2017 electricity
duty and
relief in vat
and other
associated
West Bengal 2000 MWs Comprehensive
by 2020 policy yet to be
declared

17
 Himachal 10 MWs by
Pradesh 2017

J&k 4000 MWs Land bank Exemptions A high SPO is

by 2017 are being in line with likely to be
identified pioneering declared soon
states
North Yet to define
eastern comprehensive
states RE policies

In this part of my report I have emphasized on the policy driven potential of the various state as show
above in the table and elaborated further below.

18
Rajasthan

Highest annual global radiation is received in Rajasthan (Solar insolation ranging between 6-6.4 Kwh/m2/day in
about half of Rajasthan). Large areas of land are barren and sparsely populated, making these areas suitable as
locations for large central power stations based on solar energy. Rajasthan received the second largest amount of
solar radiation in the world as per DOE.

Rajasthan is situated in the north-western part of India. The north-west part of the country is best suited for solar
energy based projects because the location receives maximum amount of solar radiation annually in the country.

Solar Irradiation in Rajasthan:

Highest annual global radiation is received in Rajasthan (Solar insolation ranging between 6-6.4
Kwh/m2/day in about half of Rajasthan). Large areas of land are barren and sparsely populated, making
these areas suitable as locations for large central power stations based on solar energy. Rajasthan received
the second largest amount of solar radiation in the world as per DOE.

Rajasthan is situated in the north-western part of India. The north-west part of the country is best suited for
solar energy based projects because the location receives maximum amount of solar radiation annually in
the country.

Table 7: Month wise solar insolation in rajasthan (Kwh/m2/day))

City Jan Feb Mar Apr May Jun July Aug Sep Oct Nov Dec Avg
Ajmer 3.9 4.58 5.42 6.08 6.64 6.43 5.3 5.04 5.1 4.76 4.04 3.64 5.08
Alwar 3.75 4.5 5.32 5.82 6.26 6.06 4.99 4.66 4.93 4.59 3.92 3.47 4.86
Bali 4.13 4.89 5.59 5.99 5.79 4.49 4.09 3.9 3.88 4.32 4.21 4.02 4.61
Bharatpur 3.67 4.6 5.43 5.9 6.23 5.95 4.95 4.54 4.76 4.62 3.93 3.46 4.84
Bhilwara 4.1 4.89 5.62 6.06 6.36 6.08 4.87 4.53 5.11 4.9 4.2 3.83 5.05
Bikaner 3.51 4.11 4.9 5.85 6.52 6.44 5.77 5.36 4.95 4.38 3.66 3.19 4.89
Jaipur 3.9 4.67 5.4 5.99 6.35 6.21 5.08 4.68 5.05 4.75 4.04 3.66 4.98
Jodhpur 3.84 4.54 5.48 6.27 6.79 6.6 5.57 5.27 5.23 4.64 3.96 3.52 5.14
Kota 4.01 4.87 5.55 6.11 6.31 6.01 4.83 4.36 5.12 4.92 4.19 3.81 5.01
Pali 4.03 4.75 5.55 6.18 6.65 6.38 5.22 4.89 5.18 4.79 4.18 3.7 5.13

Solar irradiation measured in kwh/m2/day onto a horizontal surface

Rajasthan solar policy came into operation with effect from 19.04.11 and will remain in force until
superseded or modified by another policy.

The objective of this policy is to establish Rajasthan as a national leader in solar energy. It targets a minimum of
550MW of grid connected solar power in Phase 1 (up to 2013)12. Projects will be awarded through a process of
competitive bidding. PV projects will be worth 300MW, out of which 100MW are reserved for project developers

19
and 200MW for panel manufacturers. The minimum and maximum sizes for PV projects are 5MW and
10MW.Module manufacturers that set up their manufacturing in Rajasthan can bid for either 10MW or 20MW
worth of PV projects based on their manufacturing capacity. A further 50MW will be allocated for rooftop PV
(1MW each) and other small solar power plants. The DISCOMS in Rajasthan will provide PPAs for the projects.
In addition, projects worth 100MW (50MW PV and 50MW CSP) are targeted for bundled solar power. In such
projects, the developer can sell conventional power and solar power in a ratio of 4:1 at the weighted average tariff
to the distribution utilities in Rajasthan. Varied project sizes will attract small as well as large developers looking
to invest in projects of different scale.

The Rajasthan Renewable Energy Corporation Limited (RRECL), the nodal agency responsible for implementing
the state‟s solar policy, has published the revised draft for the Request for Selection (RfS) document for 250MW
worth of projects in July 2011. The revised draft incorporates some crucial suggestions from industry players and
will most likely be released as the official document to be used by developers looking to submit their bids for
projects under the Rajasthan solar policy. The RRECL has also published the draft for the Power Purchase
Agreements (PPA) for these projects.

Developers will be required to offer discounts on these in order to win the bid. Bids are open to both Indian as
well as international companies. Out of the 250MW being auctioned, a single parent company can bid for 61MW
worth of projects - one rooftop project of 1MW, up to 10MW worth of PV and 50MW of CSP projects. Unlike
the National Solar Mission, there is no domestic content requirement in the Rajasthan solar policy. The developer
can choose any established and operational technology from India or abroad. The draft also gives clear
parameters for setting up evacuation infrastructure from the plant to the nearest substation. This has been an issue
between the distribution utility and developers in other solar policies. For solar PV and CSP projects, if the power
plant lies within 15km of the nearest substation, the cost will be borne by the distribution company (DISCOM).
For any length above 15km, the cost will be borne by the developer. For rooftop projects, the cost will be borne
by the DISCOM but the developer will need to takepermission from the DISCOM before finalizing the location
of the project.

Objectives to be achieved in a phased manner by creating the policy framework for promoting use
of solar energy in various applications and move towards achieving following objectives:

1. Developing a global hub of solar power of 10000-12000 MW capacity in next 10-12 years to meet energy
requirements of Rajasthan and India.
2. Contributing to long term energy security of Rajasthan as well as ecological security by reduction in
carbon emissions
3. Providing a long term sustainable solution for meeting energy needs and considerably reducing
dependence on depleting fossil fuel resources like coal, oil and gas.
4. Productive use of abundant wastelands, thereby utilizing the non-industrialized desert area for creation
of an industrial hub
5. Creating favorable conditions to solar manufacturing capabilities by providing fiscal incentives.
6. Generating large direct and indirect employment opportunities in solar and allied industries like glass, metals,
heavy industrial equipments etc.
7. Creation of skilled and semi-skilled man power resources through promotion of technical and other related
training facilities.
8. Creating an R&D hub for deployment of various combinations of solar power technologies and solar based
hybrid co-generation technologies which will focus on improving efficiency in existing applications,
reducing cost of balance of system.
9. To achieve the grid parity in next 7-8 years, the State will encourage the Solar Power
Developers to establish manufacturing plant of their technology in Rajasthan.

20
10. Establishment of an industrial set-up involving both domestic and foreign manpower participation
which will promote Rajasthan as a global tourist destination.
11. Create a solar centre of excellence which would work towards applied research and
commercialization of nascent technologies to accelerate the march to grid parity.

Incentives

1. Exemption from Electricity Duty: - Consumption of electricity generated by Eligible Power Producers for its
captive use or for sale to a nominated third party will be exempted from Electricity Duty @ 50% for a period
of 7 years from COD
2. Grant of incentives available to industries: - Generation of electricity from Non-conventional Energy
Sources shall be treated as eligible industry under the schemes administered by Industries Department and
incentives available to industrial units under such schemes shall also be available to the Power Producers.
3. Single Window Clearance: A State Level Empowered Committee consisting of following will provide
single window clearance on proposals received for developing the power plants based on Non-
Conventional Energy Sources.

4. The Government land required for power projects based on non-conventional sources of energy shall be
allotted to Power Producer at concessional rates viz, 10% of DLC rates Rajasthan is likely to emerge as the
power house of the country with the possibilities of setting up installed capacity exceeding 100,000 MW.

21
Karnataka

Karnataka, with its growing interest in the green energy space, is targeting installation of 350 MW solar
projects by 2016, under the Karnataka Solar Policy. As part of this, KREDL has recently floated tenders for
setting up a 80 MW solar projects. A few months from now, the State is expected to start allocation of 400-
MW grid-connected solar power generation projects. For this, the government will allot 40MW worth of
projects every year till 2016, a fact that provides much needed certainty on the allotment timelines to the
developers. The split of projects between PV and CSP technologies will be defined at a later stage. About
50MW of the total 350MW will be allotted to utilities for development, based on a bundling mechanism with an
equivalent capacity of thermal power. In these cases, the utility mixes thermal power sourced from outside
Karnataka with solar power that it generates within the state. The bundling of solar power from within the state
with conventional power bought from outside is significant. Through this mechanism the state will obtain
thermal power in addition to its allocation from the federal generating utilities like the National Thermal Power
Corporation (NTPC) or from an independent power producer located outside the state. Karnataka is a power
deficit state and will be able to supplement its thermal power supply through this mechanism. These projects are
reserved for the state and federally owned utilities, as it is easier for them to enter into PPAs for thermal power.
The National Thermal Power Corporation (NTPC), a public sector undertaking and India‟s largest power
generation utility will be a key player to develop these 50MW. It has aggressive expansion plans for renewable
energy and a large capacity to bundle this solar power with its own thermal power.

The sizes of projects at the moment are only defined for the 200MW worth of projects that will sell electricity
to the DISCOMS. PV projects can have a capacity of 3MW to 10MW, while for CSP the minimum is 5MW
with no cap on the maximum. Though the state has now come up with its own policy, it will continue to
support programs like the NSM. It has set a combined target of 126MW of solar power to be developed by
2013-14 through the NSM and its own solar policy.

The policy also lays out plans for building solar power capacity for captive users. There is no cap on
the capacity installed by captive users. Further, the policy promotes projects for the sale of solar power
directly to third party players through open access. This will help users fulfill their RPOs and will
bring more investment into the state‟s solar market. The policy allows developers to inject power at
11kV and above, while under the NSM the requirement is 33kV and above. Developing 11kV
substations at power plants is cheaper than a 33kV substation which requires high-cost components.
This will help bring down project costs for the developers.

Mr Prasanna Kumar also said that KREDL would also put up projects for 200 MW under the
REC scheme as a ‘continuous process'. He told ‘Business Line' that a few companies had already
applied for projects under this and allotments would be made very soon.

Few months from now, Bangalore will see several of the city's lakes dotted with royal blue solar panels
floating the surface, replacing plastic covers and garbage amidst sheets of algae.

22
 Figure 2

Karnataka receives global solar radiation in the range of 5.1-6.4 kWh/sq.m during summer,
3.5-5.3 kWh/sq.m during monsoon, and 3.8-5.9 Kwh/Sq.m during winter. Coastal parts of

City Jan Feb Mar Apr May Jun July Aug Sep Oct Nov Dec Avg.

Belgaum 5.32 5.99 6.46 6.5 6.03 3.85 3.35 3.65 4.6 4.82 5.08 4.96 5.05

Bellary 5.21 5.88 6.34 6.29 6.1 4.95 4.37 4.43 4.92 4.86 4.89 4.87 5.26

Bengaluru 5.31 6.07 6.53 6.43 6 4.92 4.45 4.53 4.89 4.57 4.49 4.72 5.24

Bidar 5.11 5.91 6.39 6.44 6.29 4.88 4.25 4.16 4.6 4.92 4.96 4.81 5.23

Bijapur 5.23 5.86 6.38 6.37 6.26 4.98 4.49 4.44 4.88 4.93 4.98 4.84 5.30

Gulbarga 5.14 5.82 6.28 6.3 6.3 5.13 4.51 4.39 4.85 5.03 4.98 4.81 5.30

Mangalore 5.65 6.33 6.81 6.84 5.85 4.37 4.25 4.87 5.44 5.19 5.21 5.44 5.52 -

Mysore 5.39 5.89 6.31 6.01 5.54 4.15 3.8 4.01 4.82 4.71 4.77 4.95 5.03

Raichur 5.14 5.88 6.33 6.4 6.09 5.04 4.28 4.34 4.71 4.81 4.87 4.78 5.22

Shimoga 5.38 6 6.38 6.21 5.58 3.62 3.26 3.53 4.58 4.66 4.94 5.11 4.94

Tumkur 5.31 6.07 6.53 6.43 6 4.92 4.45 4.53 4.89 4.57 4.49 4.72 5.24
Table 8 Solar irradiation measured in kwh/m2/day onto a horizontal surface karnataka

23
Karnataka with the higher global solar radiation are ideally suited for harvesting solar energy.

Solar irradiation measured in kwh/m2/day onto a horizontal surface:

Under Karnataka Renewable Energy Policy, Karnataka will have a target for achieving 126MW of
solar power up to 2013-2014. The policy came in to effect from 1.06.2011 and shall remain in
force up to 31.3.2016 or until any changes are made by the state government or by the KERC
(Karnataka Electricity regulatory commission) whichever is earlier.

It is proposed to install 200MW upto 2015-16 (in addition to the allotment under JNNSM), for the
purpose of procurement by the Electricity Supply Companies. The annual capacity approved will
be 40MW per year. The minimum capacity of single solar power generating unit shall be 5MW
each and maximum unit shall be 10MW both in respect of solar PV and solar thermal.

Mode of approval of projects will be decided by a committee. Captive power plants and those
put up for sale of power to third party do not form part of the target of 200MW envisaged in the
policy. In such cases the wheeling charges have to be paid at the rates determined by the
KERC.

Under the Renewable Energy Certificate mechanism, the solar energy generators can sell the
electricity to the ESCOMS at the pooled cost of power purchase, as determined by the KERC and
sell the renewable energy certificate to other obligated entities. Under this scheme, a capacity of
100MW can be installed in the state.

The state reserves the right to directly allot any project to the central or Karnataka state owned
undertaking for setting up solar projects in the state, for providing solar power bundled with
thermal power from outside the state at the rates to be determined by the government subject to
the approval of KERC. A maximum of 50MW solar power will be approved under this clause.

If a project is approved under clause-3, the developer has to sign a PPA with ESCOM. The quantum of
power that is to be procured by ESCOMS from solar resources will be 0.25% of the total consumption.
In case of short fall in the procurement of solar energy by ESCOMS, it can be made good by purchase
of solar specific renewable energy certificates.

The solar power generator has to share CDM benefits with the ESCOM with whom PPA is signed, in
the manner prescribed by the KERC. KREDL will be the nodal agency for facilitating and
implementing this policy. Metering and evacuations shall be in compliance with the CEA Regulations
2006 as applicable from time to time and in compliance with the norms fixed by KERC/CERC from
time to time.

The state will continue to implement JNNSM and all other schemes of the MNRE.

Incentives for RE projects in Karnataka

1. The various concession and incentives allowed by MNRE/GOI regarding DSI/DPR, GBI etc will
24
 ipso-facto continue to be passed on by the State Government to the project developer through
KREDL.
2. RE power procurement by distribution companies will be at tariffs as determined by the KERC.
3. Government of Karnataka vide GO No EN 216 NCE 2006 dated 2.3.2007 accorded approval
for the upper limit of the share of renewable energy in the total quantum of energy purchased
by each ESCOMs enhanced to 20 %.
4. KERC in its notification No S/03/1 dated 23rd January 2008 issued amendment to KERC (power
procurement from renewable energy sources by distribution licensee) Regulations 2004 fixing the
minimum renewable energy to be procured by each distribution licensee between 7 to 10%.
5. Sale of electricity: On the electricity generated by the RE projects, the developers will be
encouraged to sell power to the state grid on priority. Such purchases may be in whole or part as per
the rules and regulations of KERC subject to the provisions of the Electricity Act 2003.
6. Wheeling and Banking of electricity: With Wheeling and Banking arrangements for RE projects,
necessary co-operation and facilitation will be provided for executing Power purchase agreement
(PPA) and evacuation clearance as per the Govt./KERC norms.
7. In case of Renewable Energy projects, if Government land (belonging to urban local
bodies/panchayat) is available, the required land for setting up RE projects will be provided on lease
basis as per rules and regulations of the Government, for a period of 30 years, subject to further
renewal as determined by the Government.

25
Madhya Pradesh
Solar irradiation in Madhya Pradesh:

Figure 3:solar insolation in Madhya pradesh

Madhya Pradesh is endowed with high solar radiation with around 300 days of clear sun. Madhya
Pradesh offers good sites having potential of more than 5.5 to 5.8kWh/sq m for installation of solar
based power projects.

Solar irradiation data of cities in Madhya Pradesh monthwise:

City Jan Feb Mar Apr May Jun July Aug Sep Oct Nov Dec Avg
Bhopa
l 4.36 5.21 6 6.46 6.49 5.43 4.09 3.62 4.7 5.1 4.6 4.08 5.01
Burha
n 4.6 5.4 6.18 6.54 6.64 5.36 4.22 3.75 4.64 5.21 4.72 4.32 5.13
pur
Dewas 4.33 5.2 6.02 6.47 6.59 5.61 4.23 3.72 4.77 5.07 4.59 4.06 5.06
Gwali
o 3.76 4.71 5.54 6.01 6.3 5.86 4.76 4.42 4.71 4.73 4.02 3.57 4.87
r
Indore 4.46 5.31 6.13 6.52 6.72 5.51 4.25 3.74 4.65 5.12 4.65 4.2 5.11
Jabalp 4.18 5.18 5.98 6.61 6.56 5.25 4.1 3.55 4.34 5.06 4.62 4.1 4.96
ur
Punasa 4.48 5.34 6.11 6.53 6.63 5.48 4.25 3.71 4.64 5.18 4.67 4.2 5.10
Ratla
m 4.37 5.23 6.04 6.54 6.77 5.7 4.21 3.76 4.74 5.05 4.57 4.08 5.09

Rewa 4.01 4.94 5.82 6.26 6.47 5.36 4.35 3.99 4.29 4.84 4.33 3.86 4.88

Sagar 4.43 5.2 5.95 6.46 6.33 5.3 4.08 3.56 4.46 5.06 4.53 4.13 4.96

26
 Satna 4.02 4.96 5.8 6.37 6.5 5.33 4.33 3.85 4.32 4.96 4.35 3.89 4.89

Ujjain 4.37 5.23 6.04 6.54 6.77 5.7 4.21 3.76 4.74 5.05 4.57 4.08 5.09

Table 9: Solar irradiation measured in kwh/m2/day onto a horizontal surface Madhya Pradesh

In 2010, The Government of Madhya Pradesh has released a draft policy for Solar Energy. The
objective of the draft policy has been set to accelerating the harnessing and development of solar
energy in the state.

The Government of Madhya Pradesh has a target of total capacity of 500MW during the operative
period of the policy. A minimum capacity of a large grid connected Solar Power Project has been
set to 1MW each.

This policy is applicable to all solar power developers and manufacturing units of equipment and
ancillaries related to solar power projects. Nodal Agency is Madhya Pradesh Urja Vikas Nigam
(MPUVN) Ltd.

Only new plant and machinery shall be eligible for installation under this policy. Fossil fuels shall
not be allowed to be used in the grid connected solar thermal project. Hybrid system shall be
allowed as per guidelines of MNRE.

Any enterprise willing to establish solar PV/solar thermal projects in MP shall be eligible for
incentives under this policy. Eligibility for availing benefits under this scheme shall be based on
techno-economic viability and available resources. Captive units will be eligible to get benefits under
this policy as an investor/consumer.

Incentives
1) The solar plants shall be exempted from electricity duty and CESS for 10 year
2) 4% grant for wheeling charges
3) All the Equipment to be utilized shall be kept free from VAT

27
Gujarat

Gujarat has been categorized as the best Solar & Wind power generation destination and 2nd highest
renewable energy generation capacity state. Gujarat has been described as one of the best place which has
very high direct normal irradiance (DNI-5.5 to 6.5) in the country.
Higher the DNI, higher the capacity of solar power generation. According to the geographic distribution
of the estimated potential for renewable energy across States, Gujarat has the highest share of about 14%
(12,948 MW) followed by Gujarat with 13% (11,364 MW).

City Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Total Avg
Rajkot 4.49 5.3 6.1 6.57 6.64 5.77 4.75 4.48 5.13 5.17 4.62 4.18 63.2 5.26
Vadodara 4.53 5.31 6.12 6.59 6.66 5.73 4.48 4.19 4.96 5.21 4.72 4.16 62.66 5.22
Surat 4.5 5.3 6.11 6.43 6.51 5.42 4.4 4.29 5 5.18 4.65 4.13 61.92 5.16
Ahmedabad 4.36 5.08 5.89 6.29 6.56 5.9 4.71 4.39 5.07 5.07 4.52 4.03 61.87 5.15
Bhavnagar 4.5 5.3 6.11 6.43 6.51 5.42 4.4 4.28 5 5.18 4.65 4.13 61.91 5.15
Table 10 Solar irradiation measured in kwh/m2/day onto a horizontal surface Gujarat

Gujarat government introduced solar power policy 2009 to promote green and clean power using solar
energy to promote green and clean power in Gujarat using solar energy. This policy shall remain in
operation upto 31.03.2014. Solar power generators (SPG) installed and commissioned during the
operative period shall become eligible for the incentives declared under this policy, for a period of twenty
five years from the date of commissioning or for the life span of the SPGs, whichever is earlier.

A maximum of 500MW SPG shall be allowed for installation during the operative period of the policy.
The minimum project capacity of a SPG, in case of solar photovoltaic and solar thermal shall be 5MW
each.

Any company or body corporate or association or body of individuals, whether incorporated or not, or
artificial judicial person will be eligible for setting up of SPGs, either for the purpose of captive use and/or
for selling of electricity. The entity desiring to set up solar power project, either for sale of power and/or
for captive use of power within the state, shall submit a proposal, with requisite details, as may be
specified to the nodal agency, for qualifying for setting up of the project.

Fossil fuel shall not be allowed to be used in solar thermal power project

28
Haryana

Haryana has about 320 clear sunny days in a year and the solar insolation level in the state is in the range
of 5.5KWH to 6.5KWH per sq. metre of area.

Figure 4:solar irradiation in Harayana

Solar irradiation data of Haryana cities monthwise:

City Jan Feb Mar Apr May Jun July Aug Sep Oct Nov Dec Avg
Faridabad 3.71 4.64 5.73 6.17 6.39 6.04 5.19 4.78 4.99 4.79 4.07 3.45 5.00
Hisar 3.41 4.25 5.28 5.88 6.5 6.34 5.66 5.35 5.02 4.54 3.74 3.2 4.93
Karnal 3.6 4.53 5.73 6.69 7.28 6.68 5.54 4.9 5.17 5.01 4.15 3.48 5.23
Panipat 3.6 4.53 5.73 6.69 7.28 6.68 5.54 4.9 5.17 5.01 4.15 3.48 5.23
Rohtak 3.64 4.48 5.42 5.92 6.42 6.22 5.36 5.02 5 4.65 3.93 3.4 4.96
Yamunanagar 3.58 4.52 5.69 6.77 7.5 6.89 5.62 5.05 5.35 5.36 4.33 3.51 5.35
Sonipat 3.6 4.53 5.73 6.7 7.28 6.68 5.54 4.9 5.17 5.01 4.15 3.47 5.23
Table 11: Solar irradiation measured in kwh/m2/day onto a horizontal surface Haryana

Solar irradiation measured in kwh/m2/day onto a horizontal surface

29
Punjab
Solar irradiation in Punjab:

Punjab receives a solar radiation equivalent to 4-7Kwh/m2. Punjab has more than 330 days in a year
with good insolation levels.

Figure 5: solar irradiation on Punjab

Solar irradiation of Punjab cities monthwise:

City Jan Feb Mar Apr May Jun July Aug Sep Oct Nov Dec Avg
Amritsar 3.25 4.28 5.35 6.39 7.31 7.22 6.11 5.66 5.5 5 3.92 3.19 5.27
Bhatinda 3.43 4.39 5.55 6.46 6.45 6.33 5.92 5.7 5.59 4.88 4.08 3.32 5.18
Chandigarh 3.5 4.58 5.65 6.66 7.39 7.08 5.86 5.43 5.54 5.25 4.22 3.4 5.38
Ganganagar 3.44 4.21 4.97 5.66 6.14 6.25 5.57 5.35 5.04 4.53 3.71 3.16 4.84
Jalandhar 3.3 4.33 5.38 6.6 7.39 7.28 5.99 5.56 5.59 5.23 4.09 3.25 5.33
Ludhiana 3.43 4.39 5.55 6.46 6.45 6.33 5.92 5.7 5.59 4.88 4.08 3.33 5.18
Patiala 3.5 4.58 5.65 6.66 7.39 7.08 5.86 5.43 5.54 5.25 4.21 3.39 5.38
Table 12: Solar irradiation measured in kwh/m2/day onto a horizontal surface Punjab

The State is endowed with vast potential of solar energy estimated at 4-7 KWH / Sq mtr of solar
insolation levels and the Government is keen to tap this resource for strengthening power infrastructure
in the State by setting up Solar energy based power projects.

The govt. has offered the following financial and fiscal incentives for solar power projects:

To promote manufacturing and sale of NRSE devices/ systems, and equipments / machinery
required for NRSE Power Projects, Value Added Tax (VAT) shall be levied
@ 4%.

 Octroi: on energy generation and NRSE devices/ equipment/ machinery for NRSE Power Projects
shall be exempted. 

 Wheeling: The PSEB/LICENSEES will undertake to transmit through its grid the power generated
30
 from NRSE projects setup inside or outside the state and make it available to the producer for captive
use in the same company units located in the state or third party sale within the state at a uniform
wheeling charge of 2% of the energy fed to the grid, irrespective of the distance from the generating
station. 

 Sale of power: Power generation from Solar Energy Projects- Rs. 7.00 per unit (Base Year 2006-
07) with five annual escalations @ 5% upto 2011-2012. 

 Banking: The banking facility for the power generated shall be allowed for a period of one year by
 the PSEB/ Licensees. 
 Exemption from Electricity duty: The Power Generation from NRSE projects shall be exempted
from levy of Electricity Duty. 

31
Uttar Pradesh
Uttar Pradesh receives good amount of sunshine throughout the year.

The annual average solar radiation in Uttar Pradesh is about 4-6 Kwh/m2/day.

Figure 6:solar irradiation in uttar pradesh

Solar irradiation of Uttar Pradesh cities monthwise:

City Jan Feb Mar Apr May Jun July Aug Sep Oct Nov Dec Avg
Agra 3.58 4.65 5.53 5.96 6.33 5.98 4.94 4.51 4.68 4.69 3.91 3.42 4.85
Aligarh 3.58 4.65 5.53 5.95 6.33 5.98 4.94 4.51 4.68 4.69 3.92 3.42 4.85
Allahabad 3.79 4.83 5.93 6.39 6.55 5.68 4.56 4.31 4.48 4.8 4.23 3.6 4.93
Bareilly 3.73 4.85 5.97 6.89 7.39 6.51 5.16 4.65 4.88 5.18 4.3 3.64 5.26
Benares 3.84 4.98 6.02 6.56 6.48 5.85 4.47 4.43 4.36 4.7 4.26 3.72 4.97
Delhi 3.71 4.64 5.73 6.17 6.39 6.04 5.19 4.78 4.99 4.79 4.07 3.45 5.00
Etawah 3.68 4.7 5.66 6.05 6.39 5.85 4.81 4.47 4.54 4.8 4.05 3.55 4.88
Farrukhabad 3.72 4.75 5.71 6.64 6.39 5.98 5.01 4.49 4.78 4.93 4.05 3.5 5.00
Firozabad 3.58 4.65 5.53 5.96 6.33 5.98 4.94 4.51 4.68 4.69 3.91 3.42 4.85
Ghaziabad 3.71 4.64 5.73 6.17 6.39 6.04 5.19 4.78 4.99 4.79 4.07 3.45 5.00
Gorakhpur 3.41 4.25 5.28 5.88 6.5 6.34 5.66 5.35 5.02 4.54 3.74 3.2 4.93
Hapur 3.71 4.64 5.73 6.17 6.39 6.04 5.19 4.78 4.99 4.79 4.07 3.45 5.00
Jhansi 3.95 4.84 5.66 6.19 6.26 5.66 4.52 4.21 4.72 4.85 4.17 3.75 4.90
Kanpur 3.62 4.63 5.68 6.19 6.54 5.88 4.78 4.45 4.45 4.83 4.14 3.52 4.89

32
Lucknow 3.62 4.63 5.68 6.19 6.54 5.88 4.78 4.45 4.45 4.83 4.14 3.52 4.89
Mathura 3.68 4.6 5.43 5.9 6.23 5.95 4.95 4.54 4.76 4.62 3.93 3.47 4.84
Meerut 3.6 4.53 5.73 6.7 7.28 6.68 5.54 4.9 5.17 5.01 4.15 3.47 5.23
Mirzapur 3.78 4.86 6.01 6.44 6.48 5.68 4.53 4.31 4.47 4.69 4.24 3.71 4.93
Moradabad 3.74 4.82 5.9 6.47 6.62 6.12 5.2 4.74 4.94 4.97 4.13 3.49 5.10
Muzaffarnagar 3.6 4.53 5.73 6.69 7.28 6.68 5.54 4.9 5.17 5.01 4.15 3.48 5.23
Saharanpur 3.58 4.52 5.69 6.77 7.5 6.89 5.62 5.05 5.35 5.36 4.33 3.51 5.35
Shahjahanpur 3.73 4.75 5.71 6.64 6.39 5.98 5.01 4.49 4.78 4.93 4.05 3.51 5.00
Table 13 Solar irradiation measured in kwh/m2/day onto a horizontal surface Uttar Pradesh

33
 Bihar

The Bihar government has announced new energy policy to attract capital investments in
producing energy through non-conventional sources.

Bihar Renewable Energy Development Agency (BREDA) Director Manish Kumar said under the
new policy —christened as New Energy Policy 2011—the state government has allowed many
concessions to the investors on this score.

Solar irradiation in Bihar:

Figure 7: solar irradiation in bihar

Solar irradiation data of Bihar cities monthwise:

City Jan Feb Mar Apr May Jun July Aug Sep Oct Nov Dec Avg
Bhagalpur 4.13 5.26 6.2 6.57 6.48 5.36 4.37 4.33 4.06 4.82 4.57 4.07 5.02
Bihar Sharif 4.06 5.21 6.19 6.81 6.87 5.71 4.55 4.54 4.37 4.92 4.57 3.97 5.15
Darbhanga 3.95 5.21 6.32 6.84 7.04 5.85 4.61 4.7 4.45 5.03 4.61 3.93 5.21
Gaya 4.04 5.01 5.69 6.21 6.29 5.19 4.36 4.21 4.2 4.53 4.27 3.87 4.82
Munger 4.08 5.25 6.2 6.71 6.71 5.55 4.47 4.44 4.18 4.86 4.56 3.97 5.08
Muzaffarpur 3.95 5.21 6.32 6.84 7.04 5.85 4.61 4.7 4.45 5.03 4.61 3.93 5.21
Patna 4.06 5.21 6.19 6.81 6.87 5.71 4.55 4.54 4.37 4.92 4.57 3.97 5.15

Table 14:Solar irradiation measured in kwh/m2/day onto a horizontal surface Bihar

34
Kerala
Solar irradiation in Kerala:

Figure 8: solar irradiation in kerala

City Jan Feb Mar Apr May Jun July Aug Sep Oct Nov Dec Avg.
Cochin 5.63 6.18 6.58 6.03 5.39 3.96 4.17 4.64 5.29 4.8 4.87 5.17 5.23
Kollam 5.75 6.39 6.75 6.15 5.47 4.74 4.82 5.18 5.66 5.18 4.89 5.25 5.52
Thrissur 5.63 6.18 6.58 6.03 5.39 3.96 4.17 4.64 5.29 4.8 4.87 5.18 5.23
Thiruvananthapuram 5.75 6.39 6.75 6.15 5.47 4.74 4.82 5.18 5.66 5.18 4.89 5.25 5.52
Table 15: Solar irradiation measured in kwh/m2/day onto a horizontal surface Kerala

The objective of Kerala renewable energy policy is the development, propagation and promotion of
renewable energy sources and provision of single window services for project clearance etc.

As per the mandate given by the MNES, ANERT shall be the state nodal agency for
coordinating all activities relating to renewable energy department.

35
Orissa

The average annual solar radiation in Orissa is between 5 to 6 kW-h/m2/day. Orissa, because of its sub-
tropical geographical location between the latitudes of 17 to 23oN, receives an abundance of solar
radiation throughout the year except for some interruption during the monsoon and winter seasons.

With a total land area of 155,707 square kilometers, Orissa holds a vast potential for harnessing
very large quantities of solar power.

Moreover, large portions of the western part of the state, far away from the coasts, are in rain shadow
areas, which receive solar radiation round the year, virtually, without any interruption.

According to Orissa Renewable Energy Development Agency (OREDA) estimates, the potential of
solar photovoltaic power of Orissa is 14,000 MW.

Figure 9: solar irradiation in orissa

Solar irradiation in Orissa cities monthwise:

City Jan Feb Mar Apr May Jun July Aug Sep Oct Nov Dec Avg
Bhubaneswar 4.5 5.22 5.75 6.23 6.15 4.48 3.86 3.72 4.09 4.53 4.4 4.24 4.76
Brahmapur 4.69 5.38 5.9 6.25 6.12 4.28 3.73 3.6 4.04 4.45 4.41 4.33 4.77
Cuttack 4.5 5.22 5.75 6.22 6.15 4.48 3.86 3.72 4.09 4.53 4.4 4.24 4.76
Table 16: Solar irradiation measured in kwh/m2/day onto a horizontal surface Orissa

36
West Bengal

Howrah is set to do a Rajarhat as solar power will soon light up the town. The funds for the dream
project will be provided by the Union ministry of new and renewable energy (MNRE).

"The central funds will give Howrah a badly needed makeover and make dark lanes a thing of the past. A
16member team has been set up to give direction to the project," said Howrah mayor Mamata Jaiswal.

Rajarhat has already seen the birth of eco-friendly houses and streets lit by solar power. The Rajarhat
New Town project was the first in SAARC countries and streets are lit up by solar lights. Apart from the
mayor and commissioner, the team includes professors from the Bengal Engineering and Science
University (BESU).

According to solar energy guru SP Gon Choudhury, 10% of the required energy would come from the sun.
Gon Choudhury is also the vice-chairman of the project.

Solar irradiation in West Bengal:

On an average West Bengal receives nearly 1600 kWh/m2 of solar radiation per year with 250 average
sunny days.

Solar irradiation data of West Bengal cities monthwise:

City Jan Feb Mar Apr May Jun July Aug Sep Oct Nov Dec Avg
Asansol 4.1 4.97 5.7 6.11 6.09 4.96 4.33 4.13 4.08 4.39 4.26 4 4.76
Baranagar 4.13 4.89 5.59 5.99 5.79 4.49 4.09 3.9 3.88 4.32 4.21 4.02 4.61
Barasat 4.13 4.89 5.59 5.99 5.79 4.49 4.09 3.9 3.88 4.32 4.21 4.02 4.61
Barddhaman 4.1 4.97 5.7 6.11 6.09 4.96 4.33 4.13 4.08 4.39 4.26 4 4.76
Haora 4.13 4.89 5.59 5.99 5.79 4.49 4.09 3.9 3.88 4.32 4.21 4.02 4.61
Kamarhati 4.13 4.89 5.59 5.99 5.79 4.49 4.09 3.9 3.88 4.32 4.21 4.02 4.61
Kulti 4.19 5.01 5.59 6.01 6.11 4.85 4.24 4.05 4.06 4.45 4.21 4 4.73
Naihati 4.13 4.89 5.59 5.99 5.79 4.49 4.09 3.9 3.88 4.32 4.21 4.02 4.61
Nangi 4.13 4.89 5.59 5.99 5.79 4.49 4.09 3.9 3.88 4.32 4.21 4.02 4.61
Panihati 4.13 4.89 5.59 5.99 5.79 4.49 4.09 3.9 3.88 4.32 4.21 4.02 4.61
Siliguri 4.03 4.95 5.82 6.14 5.97 4.95 4.19 4.24 3.96 4.76 4.47 4 4.79
Table 17: Solar irradiation measured in kwh/m2/day onto a horizontal surface west bengal

37
 IMPORTANT POLICY COMPARISON
Policy Gujarat Policy JNNSM Rajasthan Karnataka
framework Policy Policy
FIT PV INR 15 for 12 Median bid Competitive Competitive
years, INR 5 for bidding on bidding on
the next 13 benchmark benchmark
years levelised tariff INR 15.32 tariff INR 14.50
tariff for 25
years INR 13.30
Bank INR 5 Million INR 3 million INR 2 Million INR 2 Million
Guarantee per MW per MW per MW per MW
Time available 45 days from 30 days from 30 days from 30 days from
to sign PPA issue of letter of issue of letter of the issue of the issue of
intent intent letter of intent letter of intent
Time available Fixed by 12 after signing 12 months after 18 months after
for committee in PPA signing PPA for signing the PPA
commissioning consultation project upto 5
with developer MW and 18 for
a larger size
Financial 180 days after 180 days after 180 days after 180 days after
closure signing the PPA signing the signing the PPA signing the PPA
required PPA
Financial Internal Net worth INR Net worth INR Net worth INR
criteria to be resource 30 Million per 30 million per 30 Million per
met generation: INR MW for PV MW MW
12 Million per
MW annual
turnover INR 48
million per MW
Technical No restriction A mandatory No restriction No restriction
criteria to be on use of domestic on foreign use on foreign use
met foreign content and use but specific IEC but specific IEC
Modules of specific IEC standards to be standards to be
standards of met met
modules
Table 18: Comparative analysis of various imp policies

38
 STATUS OF STATES
Top Performers
State Solar Policy status Status of solar in the state
Gujarat Existing solar Policy under Nearly 860 MWs installed
execution till date including the
Charanaka Solar park
Rajasthan Existing solar policy A total of 608.5 Mws
Maharashtra No exclusive policy Total of 34.5MWs
Karnataka Existing Policy under Total of 14 MWs
execution
Tamil Nadu Existing Policy under Total of 17.055MWs
execution
Madhya Pradesh Existing Policy under Total of 11.75MWs
execution
Table 19: Top performing states

Potential Risers
Orissa No Policy Total of 13 MWs
Andhra Pradesh Total of 23.15MWs
Punjab Policy in draft status Total of 9.325MWs
Haryana Lacking Total of 7.8MWs
Uttar Pradesh Existing Policy Total of 12.4MWs
Bihar Existing Policy
Kerala Policy in draft status Total of 0.025 installed
J&K Existing Policy
Jharkhand Existing Policy Total of 16 MWs
Table 20: Potential Riser

Slow movers
Himachal Pradesh Lacking
North eastern states Lacking
West Bengal Lacking Total 2 MWs
Chhattisgarh Lacking
Table 21: Slow moving states

39
 OFF TAKE OPTIONS IN INDIA

The Indian market offers two major off-take options for solar power providers. The first is to sell power
to the grid at preferential feed-in-tariffs (FiTs). The second option is to sell power to the grid at a non-
preferential price and additionally generate Renewable Energy Certificates (REC) for sale. FiTs are a
fixed return mechanism while the RECs depend on market conditions. Apart from these two major off-
takes the captive solar plants development also provides market opportunities mainly to EPC and
EPCM players

Typically, a FiT is the tariff offered to developers, based on the actual cost of generation including a
fixed Return on Equity (ROE) as decided by the State Electricity Boards
(SERCs). The tariffs are calculated by the „frontloaded cost plus‟ method and then levelized for a period
of 20-25 years. The cost plus method determines the price of solar power using direct costs, indirect costs
and fixed costs, related to the production and sale or not. These costs are converted to per unit costs after
which a predetermined percentage of the costs is added to provide defined profit margins. It is
frontloaded because the 10-12 years are the debt repayment period faced by the developers19. The tariff
is then levelized taking a discount factor, which typically is the weighted average cost of capital (WACC.
The average discount rate is between 11% and 13% depending on the WACC.

In India, there are three primary methods of availing a FiT as an off-take. First is through a fixed FiT
under a solar policy in which the federal or state governments provide a FiT for projects and the state
DISCOMS buy the generated power. Gujarat is the only state following this methodology. This method
offers fixed returns to all developers as the ROE is fixed for every project. The profitability of projects
depends on the developers ability to execute the projects within the given time lines, assess and mitigate
project execution risks. There is criticism of the fixed FiT method as the project allocation is completely
at the discretion of the state government and the method does little to increase competition and bring
down the cost of generation.

A second method is through a FiT offered through a competitive bidding process that discounts the
benchmark FiT offered by a policy. After the NSM, states like Rajasthan and Karnataka are following
this method. This gives an equal opportunity for players to participate and project allocations take place
through transparent process. Competitive bidding allows the market to decide the price of solar power.
The drawback of this method is that it can lead to aggressive bidding by developers that are willing to
compromise on economic viability in order to obtain projects to meet their strategic objectives.

A third option is independent projects which are not under any specific solar policylike the 125MW solar
plant being developed by MAHAGENCO, a state utility in Maharashtra. This project is being developed
to fulfill Maharashtra‟s RPO. It will receive a FiT decided by the
Maharashtra Electricity Regulatory Commission. NTPC the central generating utility is developing solar
power plants of 10MW to sell solar power by bundling it with thermal power to state of Orissa. The tariffs
are not decided by any commission and the average per unit cost of bundled solar power is less than FiT.
The difference is compensated by the extra revenue from thermal power component. In future private
generators like Reliance Power and ESSAR power can also develop such independent projects selling
bundled power directly to obligated entity at pseudo FiT.
FiTs offered have been reduced by close to 20% in the last one year due to the aggressive bidding for
projects and the expected fall in capital costs. The expected fall in costs are reflected in the benchmark
tariffs used in the solar policies of Karnataka and Rajasthan that are around Rs. 15 ($0.37) per kWh, 15-

40
20% lower than Rs.17.9120 ($0.44) per kWh under the NSM.This has put a pressure on the viability of
projects as, in many cases, the project costs and risks have been underestimated. This, along with the
payment risks associated with the state utilities has jeopardized the bankability of projects. In the absence
of a FiT, the power producer can sell power to a DISCOM at the Average Pooled Purchase Cost (APPC) or
to third party consumers using the open access mechanism. The APPC is the average cost of the total
power bought from different sources at different rates by the DISCOMS. The APPC tariffs however, are
not as high as the FiTs and are unviable. RECs were introduced to solve this problem. In addition, RECs
also address the challenge of selling solar power across states. Transmitting solar power over a long
distance is challenging due to its un-firm nature and scheduling required in inter-state transmission. A solar
project can generate RECs for sale in the open market to a consumer anywhere in India while receiving the
APPC from the local DISCOM. This also helps some small and medium size states like Himachal Pradesh,
Arunachal Pradesh and Jammu and Kashmir meet their RPOs as they either lack the potential or the ability
to build their own solar plants.
RECs can be generated by any developer who sells solar power to the public grid at the APPC of the
relevant distribution utility. The APPC varies from state to state and was between INR 1.60-2.69($0.04-
0.06) per kWh in 2010-1121.Each MWh worth of electricity sold to the grid at the APPC is eligible to
generate one REC which can be sold in the open market to obligated entities that have a shortfall in their
RPO compliance. Each REC issued is valid for one year from the date of issuing. RECs in turn are worth a
minimum of INR 12,000 ($300) per MWh or INR 12($.30) per kWh22(this is the guaranteed floor
price).RECs could also be generated when a developer 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 which have begun to sell power at a preferential FiT are not
allowed to later switch to the REC mechanism. This includes the NSM projects as well as the FiT based
solar policies of Gujarat, Rajasthan and Karnataka. The developers can sell RECs through the power
exchange market to consumers looking to fulfill their RPOs anywhere in India. The REC market is yet to
pick up in India.
The biggest challenge it faces is the lack of a long term trajectory of REC pricing. The current REC floor
and forbearance price are only applicable up to 2012. The CERC issued a suo-moto order to lower down
the REC price post 2012. Recently, the CERC suggested that if the prices of the RECs are reduced, then
they may introduce a vintage REC mechanism. A vintage REC mechanism is followed in many countries,
in which a higher weightage is given to the RECs generated from power plants which have been installed
earlier. This compensates for the higher capital cost associated with these plants. Another challenge is that
the trading price inside the CERC bandwidth depends on the market conditions creating uncertainty on the
returns. Due to this, developers face problems in raising debt because they are unable to project their
returns accurately for the loan repayment period. The REC market will grow once the solar market
strengthens in India. The market is also looking to the government for making changes in the REC policy.
Currently the RPOs which create the primary market for the RECs have to be fulfilled on a yearly basis. As
a result, obligated entities go to the market to purchase RECs only at the end of a financial year. This
creates a spike in the cash flows of projects rather than continuous cash flows throughout the year. This
problem can be addressed by mandating that the RPOs are fulfilled on a quarterly basis. The Indian solar
market will be dependent on these two off-takes. The FiT will provide the initial boost to the market and
will gradually come down to the actual grid rates. On the other hand, RECs, partially regulated and
partially exposed to the market conditions, will make the Indian solar market self-sustained in the long-
term.

41
 TERMS AND CONDITIONING OF FINANCING
Recently Sunborne succeeds to get 12-year loan for a 15MW plant in Gujarat. The company get loan
from multiple banks including State Bank of Patiala, Canara Bank, EXIM bank of India. Other banks
like Bank of Boarda and State bank of India is lending to projects under Gujarat and NSM. The
developers are looking to get loan from multiple banks as it reduces banks exposure to particular project
failure and they readily lends to the developers.

Banks are also looking to solar sector as an equity financing opportunity. Yes Bank and State Bank of
India are among the few banks which have shown interest in equity financing. Though they have not
made clear that what IRR they are looking for these investments. Financial institutes investments like
IDFC private equity which has investing INR 800mn in Green Infra Ltd are also increasing.

The terms and conditions for both equity and debt financing depend of financial institution decision
regarding risk, creditability of developer and bankability of projects. The interest rates charged by
domestic banks vary from 300-400 basis points above State Bank of
India‟s base rate, which is 10% in August 2011. The period of loan is generally according to the tariff
guidelines which are from 12-13 years with grace period of 9-12 months. The mortgage required by
lender also varies from project to project. Banks generally ask full mortgage of the land, all fixed assets
and hypothecation of moveable. As an equity investors banks and other financial institutes expect IRR
which varies from 15-17% as under competitive bidding higher IRR are not possible. The leveraging
capabilities of the developer plays important role while arranging funds for project development.

As non-Recourse financing is not popular in Indian solar sector yet, project developers are looking for
limited recourse financing to decrease their liability and financers risk. Though no project is able to
achieve it yet, but with good number of projects to be awarded by end 2012, the limited recourse
financing can emerge as new option in Indian solar market.

International Players like Asian development bank and KfW of Germany has shown keen interest in
Indian solar market and has long term portfolio plans. EXIM bank of US and IFC are also investing in
Indian solar market as a strategy move to enter Indian solar market. IFC plans to invest $50mn in India
recently, while EXIM bank of US has long term plan of investing $1 billion in emerging Indian
renewable sector with solar as an important part of portfolio.

42
 PROJECT VIABILITY IN INDIA

Developers have offered aggressive discounts in the competitive bidding of projects under phase 1 of the
NSM. This has given the industry a tariff that is likely to be seen as the benchmark in the industry. The
low tariffs of INR12-12.5 ($0.3)per kWh for PV appear viable under ideal conditions of project
development and plant performance, given project costs of around INR125 million per MW ($ 3.1
million) for thin film and INR130 million per MW ($3.3 million) for polycrystalline. Under actual on-
ground conditions, these tariffs do not provide a commercially attractive return, given the risks involved
(see graph 1). This suggests that many developers are taking a long term, strategic view on entering the
market, than a project based approach focusing on maximizing profit

Table 22

Security of the modules against theft is also a concern in India. Most of the developers
have miscalculated the costs associated with these risks.

Table 23

43
 FINANCING TRENDS
Financing overview
Financing of solar projects in time continues to be a critical challenge for project developers. Banks show
concerns over factors such as: bankability of PPAs, lack of experience in the sector, uncertainty on
implementation of regulatory mechanisms such as RPOs and the REC mechanism and absence of reliable
irradiation and plant performance data among other factors.

For Indian banks, lending to solar projects is part of their overall lending to the power sector. With a limit on
the exposure a bank can have in a particular sector, most Indian banks consider solar projects to be too small
and also risky to even be considered for power sector lending.

Interest rates in India have been at an all-time high. This has a significant downside on the margins for
project developers who are already working with some of the lowest solar FiTs in the world.

These reasons have prompted many project developers to look for cheaper and more reliable sources of
project finance internationally. Developers such as Azure Power, Green Infra, Mahindra Solar and Kiran
Energy among many others have financed their projects using international financing sources in the past.

Overall, with an installed capacity of over 1.7 GW, much more clarity is emerging on the process and structure
of debt financing for solar projects in India. For projects under the batch two of phase one of the NSM, most
project developers were able to achieve financial closure for project capacities as large as 50MW within eight
months. This shows the level of maturity that has developed in the market since batch one of phase one of the
NSM, where many developers had to show an internal financial closure through pure equity funding for project
capacities of 5MW. The improvement can be attributed to the large size of the companies in terms of their
balance sheets and also prior solar project development experience.

Financing options
There are various sources for debt finance available in the Indian solar market. They vary with respect to
speed, cost (interest rate), lending criteria, risk perception and motivation. Finding the right source of debt
financing is one of the key competitive advantages in an increasingly commoditized solar market.

Indian Commercial Banks

The majority of solar projects in India have been financed by Indian commercial banks. Some of the first banks
to finance solar projects in India have been the Bank of Baroda, Axis Bank, ICICI Bank, State Bank of India,
IDBI Bank and Yes Bank. Almost all of the disbursed loans in India so far have been backed by the promoters’
balance sheets.

Non-Banking Finance
Non-bank financial companies (NBFCs) are financial institutions that provide banking services without meeting
the legal definition of a bank, i.e. they do not hold a banking license. Some of the prominent NBFCs that are open
to financing solar projects include: L&T Infrastructure Finance Company (subsidiary
of L&T Financing Holdings), Power Finance Corporation (PFC), Mahindra Finance, IDFC, IL&FS and SBI
Capital Markets.

The procedure, interest rates and expectations with regards to IRR and DSCR for NBFCs is similar to that of
the Indian banks.

44
BFCs can be of the following types:

1. Infrastructure funds: Infrastructure funds are specialized NBFCs focusing on infrastructure

investments. It is useful to categorize them separately as most of them are actively involved with
solar investments in India. Infrastructure Development Finance Company (IDFC) is a key
infrastructure fund that is actively financing projects in India.

2. Dedicated power sector financing: The Power Finance Corporation (PFC) and Rural Electrification
Corporation are the two leading public finance companies dedicated to India's power sector. Both are
financing solar projects in India. PFC is India’s largest state-run lender to electricity utilities.

3. Investment banks: Investment banks typically syndicate debt from multiple sources and make it available
to the borrower under a single contract. Among Indian investment banks, SBI Capital Markets
(SBICAPS) has been a prominent player in financing solar projects. In most instances, foreign banks that
are not comfortable with lending to a developer directly may be open to lending to such Indian investment
banks for a portfolio of similar projects. This debt is then passed on to the developers with a margin and a
hedging charge.

Export credit Agency

An export credit agency (ECA) or investment insurance agency is usually a government-backed institution that
supports exporters of a given country by reducing the cost of risk/ debt associated with cross-border
transactions. The financing can take the form of direct debt support and/ or credit insurance and guarantees. A
primary objective of ECAs is to further the exports (modules, inverters, EPC) from the host country for solar
projects in India.

The US EXIM bank has been the most active ECA in the Indian solar market

45