Month: October 2014

Andhra Pradesh has opened the financial bids for allocation of 500 MW solar projects. Developers have quoted a tariff for the first year, which will then increase at 3% every year till the 10th year. The term of the Power Purchase Agreement (PPA) is 25 years. First Solar has quoted the lowest bid at INR 5.25/kWh (levelized at INR 6/kWh) and has shown the way to reach parity with imported coal.

The lowest bid of INR 5.25/kWh (levelized at INR 6/kWh) is also the lowest in India

Over 95% of the projects will be installed in the southern districts of Anantapur, Kurnool and Chittoor

The bid shows solar as almost at par with imported coal

India has seen bids lower than this rate in the National Solar Mission (NSM) batch I phase II and Rajasthan state policy. However NSM offers viability gap funding and Rajasthan provides land and transmission infrastructure. The tariffs seen in Andhra Pradesh are now the lowest without a capital subs

The highest successful bid will likely be at INR 5.99/kWh (USD 0.1/kWh). The cumulative capacity offered by the bidders was 616 MW, 116 MW more than the proposed 500 MW. The levelized tariff for this bid would be INR 6.85/kWh (USD 0.11/kWh). The median winning bid will likely be at INR 5.86/kWh (USD 0.1/kWh), the levelized tariff of that will be 6.7/kWh (USD 0.11/kWh).

The most favored locations were the three southern districts of Anantapur, Kurnool and Chittoor. Over 95% of 500 MW is likely to be located in there. Incidentally a new solar park for an additional 1,000 MW under NSM batch II phase II will also be located in Kurnool district.[1] Additionally, the central government has agreed to provide a grant of INR 5 bn (USD 83 m) for development of solar parks with a total capacity of 2,500 MW.[2]

The developers might be tempted to approach the state government for land in the solar parks. However, under the current terms of bid document, the developers have to commission the project within 12 months from signing the PPA. Since, central government hasn’t declared the timeline for solar park development,  developers may have to acquire land outside solar parks for this bidding.

Most project capacity are of 30 MW or more. BRIDGE TO INDIA estimates that developers will be able to get a turnkey EPC price at ca. INR 57 m/MW[3]. Land prices in Anantapur, Kurnool and Chittoor districts are currently ca. INR 400,000-500,000 per acre (although that might rise now). Adding transmission infrastructure, financial cost during construction and other commissioning costs, the project cost will be ca. INR 65 m/MW (USD 1.08 million/MW). At a debt cost of 11% and a 30:70 debt equity ratio, the median tariff of INR 5.86/kWh (levelized tariff 6.7/kWh) could thereby achieve an equity IRR of over 15%.

The tariff offered by First Solar is only marginally higher than the cost of power from new, imported coal, which is between INR 5-5.5/kWh (0.08-0.09/kWh). However, the escalation in imported coal tariffs is higher than 5%. With further bid results in Telangana (500 MW) and Karnataka (500 MW) expected soon, India could likely see solar tariffs below the tariff of new, imported coal. NSM phase II batch II bids will quite likely see solar undercutting coal.

[1] Refer to our blog, “MNRE releases draft guidelines for 3,000 MW solar under NSM”, http://bit.ly/1yGmPsF

[2] Economic Times article, “Centre to provide Rs 500 crore grant to Andhra Pradesh for solar parks”, http://bit.ly/1DW01YG

[3] The price of INR 57 m/MW has been calculated by considering 1.1 MW DC capacity and 1 MW AC capacity for project size of over 30 MW.

Mudit Jain is a Consultant at BRIDGE TO INDIA

Over the past few weeks, we have been discussing the various positive and ambitious announcements of the new Indian government on the solar sector (refer blog 1, blog 2 and blog 3). Now, the government has started announcing broader coal and power sector reforms in the country. It is clear that power sector is top priority for the new government and that should be highly beneficial for the overall economy.

Pooling of domestic and international coal to arrive at a balanced coal price could lead to an across-the-board increase in power prices by around INR 0.50/kWh

The e-auction process for the cancelled coal blocks, might be the first step towards privatization of coal mining

Given India’s huge power deficit and social-cum-environmental imperatives, increase in coal and thermal power output is unlikely to affect growth prospects for solar power

Let us first look at the proposal for cost pooling of Indian and international coal. Currently, most existing power plants secure their fuel supply from cheaper domestic coal but supply of domestic coal is very limited. Imported coal fired power is around 50% more expensive, affecting investment interest in new thermal power capacity in the country. Pooling of domestic and international coal to arrive at a balanced coal price could lead to an across-the-board increase in power prices by around INR 0.50/kWh (refer). The impact on commercial and industrial customers will likely be disproportionately higher. This, of course is good news for parity-driven solar projects under private PPAs.

The government has also announced that it would soon start e-auction process for the cancelled coal blocks. This might be the first step towards a privatization of coal mining. In addition, the government is working on improving infrastructure required to remove transportation bottlenecks between mines and power plants. These are both very significant and far reaching measures. While the impact may not be felt in the short term, it will make coal more easily available in the mid-to-long term. India has the fourth largest coal reserves globally. Most experts feel that these measures will boost power output and bring stability to power costs which have been increasing at double digit rates over the past few years.

The proposed measures would help bring much needed transparency and predictability to the Indian power market. BRIDGE TO INDIA believes that this will lead to higher economic growth, more spending power and even greater demand for power. Given India’s huge power deficit and social-cum-environmental imperatives, increase in coal and thermal power output is unlikely to affect growth prospects for solar power. India needs more power – both thermal and renewable and the new government is rightly pressing on all fronts.

Madhya Pradesh has emerged as the preferred state for new solar investments, overtaking earlier favorites Gujarat and Rajasthan. With close to 322 MW[1] of solar capacity installed, MP is now ranked third after Gujarat and Rajasthan in cumulative terms. Interestingly, about 96% of this was added only in the last two years (2013 and 2014), the highest among all states. Key drivers for this growth are:

 The transmission and losses charges in Madhya Pradesh (about INR 0.62 / USD 0.01), are lower than in most other states

The state government is offering land at almost free of cost to solar power developers and has introduced a “right to use” concept for government land to reduce the time and cost of land allotment

To avoid delays, the state government has also simplified the process of clearances, approvals and inspections for setting up solar plants

 Other reasons, which are conducive to solar sector growth in MP are: the rise in power demand and the supply gap with a high peak energy deficit of (8-10%)[2], good sites and irraditaion (5.5-5.8 kWh/m2). A digital land database for several thousand hectares, accessible to developers, makes site identification easy. Bureaucratic processes were streamlined.

Source: Bridge To India analysis

[1] Bridge to India Project Database

[2] Source: Central Electricity Authority

The state aims to take the total installed capacity to 2,654 MW by 2017. A number of large solar projects are currently planned in Madhya Pradesh. These include one “ultra mega solar power plant” (UMSPP) of 750 MW to be set up by NTPC in the district of Rewa. About one-third of JNNSM-II projects have been allotted to developers wanting to construct in MP. Recently, the Minister of Power, Shri Piyush Goyal, said that if the state government provides land, Coal India Limited, too, would set up a 1,500 MW solar plant in MP.

Another indicator of the attractiveness of MP to solar developers is that when, recently, Tata Power Delhi Distribution Pvt Ltd invited proposals for 750 MW of solar plants under the “open access” system, most bidders chose Madhya Pradesh as a location for their plant. Azure Power, which opted for Rajasthan and submitted three bids with two plants of 40 MW each and another of 20 MW, was rejected, mainly because of the high transmission and losses charges in Rajasthan, which makes the landed cost of solar power from Rajasthan higher than from Madhya Pradesh (despite a slightly higher irradiation).

 Jyoti Gulia is Senior Manager, Market Intelligence at BRIDGE TO INDIA

Statements by Mr. Upendra Tripathy, Secretary, Ministry of New and Renewable Energy (MNRE), suggest that the government is thinking about a “Renewable Energy Act 2015” to create a comprehensive framework for investment in the sector (refer). Such an act would be a part of the build-up towards the Renewable Energy Global Investors Meet and Expo (RE-INVEST) hosted by the MNRE in February 2015 in Delhi (refer). Preparations for RE-INVEST have already begun. Road shows in London and Hyderabad have informed the investors about the sector and the event; the next roadshow is planned for Singapore on the 27th of October’14. A “Renewable Energy Act 2015” could focus on reducing the risks and transaction costs in the Indian renewables market, creating a framework that makes India an attractive option for professional and for global investors.

 To keep pace with the ambitious NSM, it’s about time for a comprehensive new arrangement that gives clarity on grid rules to consumers, investors, utilities and grid operators

The MNRE has in the past stated that reducing the cost of capital for renewables would be one of its key tasks

BRIDGE TO INDIA assumes that, Renewable Energy Act 2015 – if really in the works – is still in the conceptualization phase

 Currently, all generation, transmission and distribution of renewable electricity falls under the broad ambit of Electricity Act 2003. The Electricity Act has been drafted with centralised non-intermittent power in mind. Since 2003, the global and Indian electricity landscape has changed fundamentally. Wind and solar power have risen from the fringes to the mainstream. Since the government has very ambitious plans for their future growth, there is a dire need for a comprehensive new arrangement that gives clarity on grid rules to consumers, investors, utilities and grid operators.

 For example, if a company wants to sell power to a customer by setting up a rooftop solar project at the customer’s premise (this model is fairly common in the US), it is often unclear, whether the locally consumed power should be subject to charges, such as wheeling charges, losses and interconnection charges (perhaps not), or electricity duty and cross subsidy surcharges (a political call). Or should there be – as long as the generator/consumer remains grid-connected – a grid maintenance or stability charge, or even a bonus if distributed generation can help stabilize the grid?

 Renewable energy plants are typically more capital intensive than fossil fuel plants and the cost of finance is a key determinant of the levelized cost of energy. The MNRE has in the past stated that it regards reducing the cost of capital for renewables as one of its key tasks. In this endeavor, the government is currently negotiating a soft loan for a billion euros from KfW (a German government-owned development bank) exclusively for the rooftop solar market. The World Bank has already committed to long term funding for very large scale solar projects through the Solar Energy Corporation of India (SECI). Some of these interests could also be guarded through a new legislation.

 We contacted the MNRE and the Ministry of Power on the specifics of this plan, but could not get any confirmation, clarification or details. We assume that a Renewable Energy Act 2015 – if really in the works – is still in the conceptualisation phase. We hope that the government would seek broad inputs from stakeholders in the process.

India’s new government is revamping the National Solar Mission (NSM). The planned allocation of 1,500 MW under batch II of phase II has been cancelled. Instead, the Ministry of New and Renewable Energy (MNRE) has now issued draft guidelines for a more ambitious 3,000 MW for tranche-I. The guidelines clarify the allotment for part-I of this tranche, for 1,000 MW, located at a solar park in Kurnool district in Andhra Pradesh. We expect the allocation process will begin in December (“December tranche”). The guideline document for this can be accessed here.

Out of 1,000 MW, 250 MW is reserved for domestic content requirement (DCR)

The individual project size is set as 50 MW; a company can apply for a maximum of five projects

The objective is to make life as easy as possible for developers. However, the draft guidelines leave crucial questions unanswered

The solar park for the “December tranche” of 1,000 MW will be developed by a joint venture (JV) of public senctor companies (SECI, NEDCAP and APGENCO). The power will be purchased by NTPC Vidyut Vyapar Nigam (NVVN). Out of 1,000 MW, 250 MW has been reserved for projects under DCR.

The selection process for the “December tranche” will be based on reverse tariff bidding. The capacity of all projects will be 50 MW. A single group company (including all subsidiaries, promoters and affiliates) can have a maximum of five projects (250 MW) – three in ‘open’ category and two in ‘DCR’ category. Unlike, previous allocations under NSM, the “December tranche” will not distinguish between developers claiming accelerated depreciation (AD) and developers not claiming AD. While the AD mechanism brings down the cost of power, it puts renewable IPPs (without a different. taxable business to leverage AD) at a disadvantage. (If the AD route is to be followed in future, it would be a good idea to delink the AD from the asset owning company and make it a tradable good to make solar more inclusive).

To fast track the installation phase, the government wants to help project developers by taking up the cumbersome process of land acquisition and provision of transmission infrastructure. The JV developing the solar park is responsible for developing and maintaining the local infrastructure. The state transmission utility will provide the power evacuation (transmission) infrastructure. Developers will only have to enter into an “implementation support agreement” with the JV company.

 While the document demarcates some responsibilities, it still leaves room for confusion. For example, the guideline specifies that, “while it will be the endeavor of the State Agencies /Central Agencies to facilitate support in their respective area of working [read: providing land and transmission infrastructure], but nevertheless, the developer shall be overall responsible to complete all the activities related to Project Development at its own risk and cost”. This is confusing and self-contradictory. In the past, we have seen that for solar parks in Gujarat and Rajasthan, developers have had to face delays due to a delayed delivery of evacuation infrastructure and allotment of lands. Such a clause increases the contingency risks of developers and exposes them to activities out of the project’s scope that they have not accounted while bidding. It would be much better, if the allocation process would begin only after all the developmental work is completed and the evacuation infrastructure has been created at the solar park. Alternatively, the guidelines must delink the risks of land and transmission infrastructure availability from the developers.

 Overall, the draft guidelines highlight the government’s new, more ambitious target of 15,000 MW under batch II of phase II in three tranches:

        i.            Tranche-I (including the 1,000 MW “December tranche”): 3,000 MW through bundling mechanism, with 1,500 MW of unallocated coal power from 2014-17

      ii.            Tranche-II: 5,000 MW possibly via an interest rate subsidy from 2015-18

    iii.            Tranche-III: 7,000 MW possibly via solar parks (land and transmission infrastructure) from 2016-19

 Figure 1: Target capacity under batch II phase II of NSM

Previously, the central government aimed at 3.6 GW by 2017. This new target is significantly higher than the previous target of the NSM and is in line with the aim of making India a 5-6 GW solar market per year.

Mudit Jain is a Consultant at BRIDGE TO INDIA

The Renewable Energy Certificate (REC) mechanism was introduced three years ago as a market tool to support the policy of Renewable Purchase Obligation (RPO). However, since then, the mechanism has attracted little interest from investors. Projects that counted on REC income have made losses as there were not enough takers for RECs. The Central Electricity Regulatory Commission (CERC) has now proposed a revision for the mechanism. Will the changes finally revive the dysfunctional solar REC market?

So far the REC market has failed to deliver because of non-implementation of the RPO mechanism and a high minimum price of RECs (set by CERC)

Despite CERC’s step towards reducing the price per REC, the market not fly unless RPOs are enforced

The long term demand for RECs looks bleak considering that parity is fast approaching

There have been two primary reasons why the REC market failed to deliver: non-implementation of the RPO mechanism and a high minimum price of RECs (set by CERC). So far, one REC (representing 1 MWh of solar power) could not be sold for less than INR 9,300 (USD 97). However, given the drastic fall in the cost of solar, it quickly became cheaper to buy solar power than to buy RECs (see graphic). Since June 2013, the ratio of buy bids to sell bids has fallen continuously and unsold RECs have accumulated. At the end of September 2014, over 377,000 RECs, equivalent to 80% of all issued RECs, remained unsold.

In the draft proposal (refer), the CERC now wants to slash the minimum (and maximum) price to INR 3,500 (and INR 5,800) per REC. Projects commissioned before 1st April 2014, shall be eligible for a vintage multiplier. Considering that the average pool purchase cost (APPC) is around INR 3.3/kWh (USD 0.5/kWh), this revision will bring the effective revenue solar power (APPC plus REC) to at least INR 6.8/kWh, which is at par with the tariffs offered under various policies. This revision has raised hopes for a revival of the dysfunctional REC market.

While it is a step in the right direction, we believe that the market will not fly as long as RPOs (the demand side) are not enforced. Though most states have solar RPOs, few are taking any steps to actively enforce them. In order to enforce RPOs effectively, states have to accept a stringent penalty structure for non-comliance. The penalty, moreover, has to be higher than the traded price of solar RECs.

In addition, there are other aspects of the market that do not make sense. Firstly, why should the price be controlled at all? Basic economics tells us that we can only control either price or quantity – but not both. If the goal is achieving RPOs, then RECs should be traded at any price that the buyer and seller might agree to.

Also, there is no reason why RECs should not be sold bilaterally but have to go through exchanges. Additionally, most states prefer buying solar power to buying just a certificate that cannot be used. This restricts the market to those states that cannot build or purchase own plants, which are typically states where the distribution companies are financially weak. Enforcing RPOs on them is going to be tough. A further concern is that the current RPO targets are roughly in tune with the old NSM goal of achieving 20 GW of solar across the country by 2020. Now the government wants to push for 100 GW or more (see our previous blogs). Will the RPO targets be amended accordingly?

The larger question hovering over RECs, is the long-term visibility of demand. As the cost of solar falls and the cost of energy rises, solar will soon be built across India without incentives or obligations, simply on the merits of a competitive generation cost. This will happen in various market segments throughout the next 5 years. Under conditions of parity, when solar installations will likely fast exceed RPO targets, who will buy RECs? What investor (and bank) will take such a bet? Overall, BRIDGE TO INDIA maintains that the REC market remains fundamentally flawed. A more promising way of looking at incentivising demand for solar power may be to look at a “value of solar” calculation. We will write a post on it shortly.

Last week, the Delhi Electricity Regulator Commission (DERC) released the guidelines for implementation of solar energy systems on rooftops in the city. The document details the procedure for application, registration and connectivity. These guidelines bring clarity to the nitty-gritties of installing solar on rooftops and greatly simplifies the approach for people looking to go solar. The key takeaways:

The registration process has been divided into 3 tiers: feasibility analysis, registration and connection agreement

The rooftop solar plant must get connected to the grid within one year of registration

If more power is fed into the grid than taken out, the distribution company will, at the end of the year, reimburse the system owner at the Average Power Purchase Cost (APPC) for that year (currently around INR 4.75-5/unit)

Source: zenautomation.in

The local transformer capacity allotted for renewable energy systems will be at least 20 % of the rated capacity of the transformer. In case the capacity of the renewable energy system exceeds the sanctioned load in the premises, rooftop owners will have to enhance their sanctioned load by paying “Service Line cum Development (SLD) charges”. The owner will be exempted from paying the corresponding fixed charges for load enhancement.

The procedure has been divided into three steps:

1. Feasibility analysis

The consumer will have to submit an application to the distribution company along with an application fee of INR 500 for feasibility analysis. Applications will be put on a priority list and served on a first-come, first served basis. The distribution company will then complete the feasibility analysis within 30 days of receipt of the application.

Upon completion of feasibility analysis, the distribution company will decide whether it is feasible to provide connection for the applied capacity, reduced capacity or it is unfeasible.

In case the feasibility analysis suggests reduced capacity or unfeasibility, the rooftop owners have three options:

Accept the reduced capacity and move ahead with registration

Seek refund of application fee within 7 days of receipt of feasibility report

To stay in the priority list for 180 days and seek a re-consideration of the application

2. Registration

Within 30 days of receipt of feasibility report, the consumer is required to fill in the registration form and submit it along with requisite documents and the registration charges listed below.

Sl. No.Capacity (kW)Charges (INR)11 to ≤ 101,0002> 10 to ≤ 503,0003> 50 to ≤ 1006,0004> 100 to ≤ 3009,0005> 300 to ≤ 50012,0006> 50015,000

 If the registration is found deficient or not in order, the consumer will be given two chances to rectify these after which application for registration may be rejected.

3. Connection agreement

Within 30 days from the date of registration, connection agreement will be executed between the consumer and the distribution company. The rooftop solar plant must get connected to the grid within one year of registration, failing which the registration may be cancelled and the freed capacity will be used for allotment to other applicants.

Non time of day consumers (residential and commercial/industrial consumers with a load less than 5 kW) will get their exported units of energy adjusted against their electricity consumption in the monthly bills. In case the export of energy from the solar plant exceeds the consumption from the grid, excess energy credits will be carried forward in the subsequent billing cycle.

For time of day consumers (commercial and industrial consumers with a load above 5 kW), the exported energy will be compensated with electricity consumption in similar time blocks in the billing cycle. In case of surplus export of energy, the surplus generation will be accounted as if it occurred during the off-peak time block.

Any remaining net energy credits remaining at the end of the year will be paid for the distribution company at Average Power Purchase Cost (APPC) of the company for that year (currently around INR 4.75-5/unit). In case of revision of APPC by DERC in the true up order of relevant year, the differential amount will be credited/debited to the account of the consumer.

 Shikhin Mehrotra is a Research Analyst – Consulting at BRIDGE TO INDIA

There are currently nine states (Gujarat, Andhra Pradesh, Uttarakhand, Tamil Nadu, West Bengal, Karnataka, Kerala, Delhi and Punjab) that have announced net-metering policies in India. These policies are aimed at encouraging the adoption of distributed solar PV generation in the country. A careful examination of the policies, indicate that the technical pre-requisites of the solar system components in each of these policies vary significantly and are in some case, not aligned to the central guidelines on distributed generation tabulated by the Central Electricity Authority (CEA). Should there be uniformity in distributed regulations?

Most states in India that have announced net-metering policies have not adhered to the CEA regulations of distributed solar generation. These discrepancies can hinder the overall solar market in India.

There is a large variation is metering regulations. Andhra Pradesh for instance has very stringent metering requirements that can push meter costs to well over 15% of overall systems costs.

Grid penetration limits are yet another important requirement that is completely missing from the CEA as well as many other states (ex: Uttarakhand, Andhra Pradesh, etc.). Among the states that have announced limits (Example: Delhi), they need to be reviewed and perhaps upgraded to allow for greater deployment of solar

 A recently concluded collaborative research project between BRIDGE TO INDIA, the National Center for Photovoltaic Research and Education (NCPRE) based in I.I.T. Bombay, Prayas Energy Group and the University of California, Berkeley suggests that uniformity in regulations can go a long way in boosting the distributed solar market in India. Download the report here.

 In addition, the aim of this research project was to understand if the Indian grid is prepared for the impending distributed energy boom. If yes, then what are the ‘safe’ levels of PV that might be injected on to the grid without any major changes in the grid. If no, then what are the specific grid upgrades that might be required. The study also looked at safety procedures in installing and operating these distributed solar systems. The study also examined the current regulations on distributed generation stipulated by the Central Electricity Authority (CEA) and compared them with international standards.

 There are three main differences between various state solar policies.

Metering requirements. The CEA has already announced metering requirements for solar PV generation under the regulations titled, ‘Installation and Operation of Meters, 2006’. However not all states adhere to these regulations. Take Andhra Pradesh for example. The state mandates a meter class accuracy of 0.2. The cost of such a meter ranges between INR 25,000 to 35,000. For a consumer who wants to set up a 2kW system battery-less system that costs approximately INR 250,000, the meter would add another 10-15% to the overall costs. This can serve as a discouragement to consumers.

Maximum PV penetration levels. This is one of the most important pre-requisites to any distributed solar policy. Not many utilities currently understand the effect of having several generating sources at the tail-end of the grid. Yet, many states such as Andhra Pradesh and Uttarakhand do not specify any limits. Although the policy might have targets that would serve as limits to the overall program, limits on the distribution transformer are absent. There are two recommendations from the report A) The CEA come out with a maximum penetration regulation and B) Utilities adopt a “learn-as-you-go” approach to approve connections at every distribution transformer.

Electrical parameters. There are several critical electrical parameters such as voltage range, frequency range, flicker and harmonics that need to be observed in order to ensure that the grid integration of the solar PV system ensues smoothly. However, our research concludes, that many states completely missed outlining these critical parameters. Nor, have many states referred to CEAs flagship regulation (download here).

 The effect of non-uniformity can serve to slow down the growth of the distributed (often rooftop) solar PV market in India. Manufacturers of meters for instance, have to cater to different regulations in different states. This can quickly escalate costs and remove any cost reductions that might have resulted in efficiencies of scale. System integrators also would have their task cut out. Most integrators (or EPC) are national players. Their training costs would quickly escalate thanks to the diverse regulations. In short, having uniform regulations helps the entire solar PV market, from regulators to consumers.

 Akhilesh Magal is a Consultant at BRIDGE TO INDIA

Solar energy in India has a great, intuitive appeal: everyone knows that there is a lack of power and sees the sun shine almost every day. In fact, the more the sun shines, the more people consume or yearn for electricity to provide relief. However, when it comes to the “how?”, there is a vast lack of knowledge and understanding. The more people in India can learn about how solar works, the faster the solar transformation will be. A great, but so far underutilized, medium to explain this is film. This is exactly the opportunity that the filmmakers Valli and Martand Bindana are now addressing with India’s first pan optic film on solar (see details here). We, the solar savvy community of India, have every reason to support this project.

 It will take users on a journey through India’s energy landscape and show how distributed solar can empower people

The film seeks to spread awareness on the true potential of solar to transform the country

It is narrated by famous actor Naseeruddin Shah

To make this movie a reality, the producers need support from the solar community (see details here)

The project is very ambitious. Valli says the film called Surya Ganga is about the “epic conflict between India’s land, energy, water and people”. It addresses the issue of India’s vast, rapidly growing energy needs and how the search for satisfying them (or the failure to do so) impacts lives in both rural and urban India. Solar power can be a game changer for the better in this great struggle.

 Surya Ganga is fiscally sponsored by the prestigious San Francisco Film Society, which gives it a non-profit status. Largely self-funded till now, the filmmakers have now launched a “crowd-funding” campaign to complete the film. “We put in our money when we began and we would have finished the film if it hadn’t expanded in scope as much as it did. Now, since the film covers the entire energy landscape, the shoot is planned over the length and breadth of the country pushing our budget way beyond our means.” says Valli. They hope to raise enough to tide them over the next 10 months of production and post production. Naseeruddin Shah, the legendary actor known not to mince words, says “this is an important film and should be made”. He features in the film as well.

 A lot of content and inspiration in the film comes from two books “Solar Trillions” and “Clean Disruption of Energy and Transportation” authored by Stanford Prof, Speaker Tony Seba. Having come in early during the pre-production stage, Tony guided the filmmakers on the world energy scene from a renewable energy standpoint. You can also support Surya Ganga and help make it a reality here.

 Tobias Engelmeier is Founder and Director, BRIDGE TO INDIA

The residential rooftop solar market is still at a nascent stage in India. However, as grid-parity nears and net-metering is offered in more and more states, the segment is poised for fast growth. Residential rooftop installations would be on average small and geographically dispersed. Both are good things. BRIDGE TO INDIA estimates refer that around 325,000 jobs will be created, if India installs 25 GW in ten years. While this target sounds large in today’s context, we believe that it is quite achievable. For details, please refer to our ‘India Solar Decision Brief’ on “India’s Solar Transformation: Beehives vs Elephants” (online downloadable version available here).

A capacity addition of 25 GW in residential solar would create around 325,000 jobs over ten years

Parity and net-metering will be the prime drivers for adoption in residential rooftop systems after 2021

Jobs in manufacturing, business development, supply chain, logistics, installation & commissioning and operation & maintenance are “sticky” whereas jobs in the supply chain, logistics and installation and commissioning are not “sticky”

In our report, we have thought through a scenario, in which India will add 25 GW of residential rooftop capacity (as shown in figure 1). We expect the first set of installations in tier-I cities. The next set of installation will happen in tier-II/III cities in the eight states that already have a net metering policy in place (finalized or draft). [1]Net metering in the remaining states and parity will be the driving force after 2021.

Figure 1: Scenario on capacity addition of residential rooftop systems until 2024 (in GW)

BRIDGE TO INDIA’s analysis suggests that 1 GW of rooftop solar installations in this market segment would create around 40,000 jobs.[2]We assume that the creation of jobs in the supply chain, logistics and installation and commissioning correlate with Y-o-Y growth of installations. Jobs in manufacturing and business development only partially correlate with Y-o-Y growth of installations, i.e. they are more “sticky”. In case of negative growth in new installations, only half of the people will be affected. Jobs related to operations and maintenance are directly proportional to the cumulative solar capacity, as plants will need these services throughout their lifetime. They are the most “sticky”. A capacity addition of 25 GW would result in a cumulative creation of around 325,000 jobs over a priod of ten years.

Figure 2: Expected job creation in installation of residential rooftop systems

[1]States with draft or finalized net-metering policy are Andhra Pradesh, Uttarakhand, Punjab, Kerala, West Bengal, Tamil Nadu, Karnataka and Gujarat.

[2]Refer to our blog, “Small rooftop solar systems can generate 4 times the employment than utility scale projects”, http://bit.ly/1uBfyHS

Mudit Jain is a Consultant at BRIDGE TO INDIA

Several new announcements at the central and state level are creating a lot of excitement in the Indian solar market (read the October 2014 edition of the India Solar Compass). Last week, Rajasthan notified that it is looking to revamp its solar policy to achieve 25 GW of solar capacity in five years (refer). The proposed policy aims to streamline land lease/acquisition and statutory approval process to attract investors.

More public sector companies are being asked to consider investing into solar

Scaling-up effect will help bring down the cost of solar power in India significantly

India has the attention of the local and international investment community

 At the central government level, the Ministry of New and Renewable Energy (MNRE) has persuaded large public sector companies National Thermal Power Corporation (NTPC) and Coal India to invest into GW-scale solar projects. More public sector companies, especially those under the Ministry of Petroleum and Natural Gas, are also asked to consider investing into solar. NTPC is clearly looking at this investment as an expansion of its portfolio as a power producer. But Coal India and other public sector companies are being nudged by the government to use available resources such as land and capital.

 Land for new solar parks (typically, 500 MW to 2,500 MW) has been identified in 11 states under the draft solar parks policy released last month (refer). Andhra Pradesh alone has earmarked a solar park for a 2.5 GW capacity. Under the solar park policy, for the states that come forward for central support on such parks, their distribution companies are obligated to buy 20% of the power from these parks. The remainder may be sold within the state, or to other states through national grid.

 All these are excellent initiatives and if they go through, the scaling-up effect will help bring down the cost of solar power in India significantly. However, attracting interest from investors into the sector has not been India’s biggest challenge. Most bids at the central and state level have been oversubscribed in the past and intense competition has led to some of the lowest tariffs globally. But solar power is still likely to be more expensive compared to conventional power (at least in the initial years) and the distressed distribution companies may be hard pressed to pay for it.

 It is still not clear: who will buy this solar power and on what terms? Only 3 GW of capacity is planned for the bundling mechanism (that makes solar power competitive by bundling it with cheaper coal power). The off-take of most other planned solar plants is uncertain. It is important to remember that the Renewable Energy Certificate (REC) mechanism also initially found a lot of takers but, in the absence of an adequately functioning market, has now come to a complete halt.

 India has the attention of the local and international investment community. To sustain this phase of optimism and to ensure that the Indian solar market maintains its upward trajectory, the government needs to quickly address key questions around off take and distribution companies bankability. This requires much closer co-ordination between centre and states.

In January 2014, the Congress led government of Maharashtra (GoM) issued a subsidy of INR 1.60/kWh on industrial electricity tariffs to compensate for a tariff hike approved by the Maharashtra Electricity Regulatory Commission (MERC) (refer here). But as the legislative assembly election in Maharashtra draws closer, the future of this subsidy is doubtful. If the GoM continues this subsidy, it will have to pay close to INR 7 bn (USD 113 bn) every month to be paid to the generation, transmission (MSETCL and MSPGCL; ca. 1bn) and distribution (MSEDCL; ca. 6bn) companies (refer here). In a year this amounts to INR 84 bn (USD 1.4 bn). The subsidy has added significantly to the existing revenue deficit of the state government of INR 54bn (USD 875 bn) for FY 2014-15 (refer here).

The existing subsidy might not last post elections

If the subsidy is withdrawn, margins of all electricity intensive industries will be hurt

An impact of INR 1.60/kWh is expected across all industrial consumers

Generating companies (gencos) like Adani and Indiabulls have been given clearance to hike their power sale PPA’s by INR 0.48 to INR 1.40 per unit on grounds of using imported coal. MSEDCL in turn has not passed on this hike to the consumers nor has it paid the gencos. This resulted in the last week shut down of Adani power plant (Refer here).

Even if the Congress government in Maharashtra wins the upcoming election, it will be extremely difficult to sustain the subsidy. In all likelyhood, the cost of electricity for industrial consumers in Maharashtra will rise by 20%, which might make their production uncompetitive. Most industries are aware of the brewing storm, but choose to ignore it as it has not hurt their books yet. It is high time that they start looking for an alternative to grid power in Maharashtra.

All industrial electricity bills since April 2014 carry a reference to the subsidy. It shows that, sans the subsidy, industrial consumers would end up paying an energy charge of INR 8.60/kWh instead of the current INR 7.01/kWh (see Bill snapshot below).

Industries in Maharashtra have some options to steer away from the grid and tariff uncertainty. But as with all good things, these options come at a cost. One option is to buy power via the open access route from merchant power plants (from e.g. thermal, bio mass, wind and now solar plants).  The second option is to invest into a captive or group captive power plant or buy power from such a plant.  The third option is to buy electricity from the power exchanges.

This mechanism is not yet fully functional in Maharashtra, but will hopefully be so in the near future. Different industries benefit differently by most of these options. To make the right choice, industries need to understand their consumption pattern and link that to the different power sources and purchase options. Other questions include: how much space is available on-site (e.g. on the rooftop)? How long or short term should a power supply deal be? Is enough capital available for investment into own power generation infrastructure and if it is available, is that part of the core business?

At BRIDGE TO INDIA, we have been working with industries in Maharashtra and elsewhere in India to find the best options for a secure and inexpensive power supply. We provide solutions as a consultant and as a power supplier.

Reference links:

MSEDCL Commercial circular on subsidy:http://www.mahadiscom.in/consumer/Comm_Cir_218-2014.pdf

Genco tariff hike: http://timesofindia.indiatimes.com/city/nagpur/Coal-shortage-causes-tariff-hike-again/articleshow/41380606.cms

Subsidy volume for transco’s: http://www.mercindia.org.in/pdf/Order%2058%2042/Final%20Order%2036%20of%202014.pdf

http://www.mahadiscom.in/consumer/Comm_Cir_221_Applicability%20of%20Interim%20Charges,%20GENCO%20Charge%20&%20TRANSCO%20Charge%20to%20be%20levied%20for%2012%20months%20as%20per%20MERC%20Orders.pdf

Maharashtra Budget 2014:http://articles.economictimes.indiatimes.com/2014-02-25/news/47670997_1_revenue-surplus-deficit-budget-plan-size

Ashutosh Singh is a Consultant at BRIDGE TO INDIA