Category: Market Outlook

Last week, the Andhra Pradesh government announced that it will buy power from rooftop PV systems installed on residential and commercial buildings in the state at a fixed tariff of INR 3.5/kWh (refer).

Capital subsidies of 30% is offered by the MNRE and 20% is offered by the Andhra Pradesh state government

Both residential and commercial consumers will require further subsidies for solar to be financially viable

Providing reliable information on rooftop potential and easily accessible, low-cost financing as well as waiving state level taxes for solar PV systems are steps that can be taken by the government to increase viability

The state expects the consumers to take advantage of the 30% capital subsidy offered by the MNRE for rooftop projects (currently on hold, but expected to be available again by early July 2013 for 200 MW of projects annually across the country under Phase 2 of the National Solar Mission). An additional capital subsidy of 20% will also be offered by the state.

Based on an analysis of Delhi’s rooftop potential (refer), accounting for obstructions and shadowing on the roofs, we estimate that typical residential buildings usually have solar suitable rooftop space of at least 40-300 sq. meters, accommodating at least 5 kW of PV. The LCOE of a 5 kW PV system for residential consumers with a cumulative 50% subsidy (MNRE + State) is approx. INR 6/kWh (depending on on-site irradiation). Residential consumers need an additional INR 2.5/kWh from the government for solar to be financially viable for them.

Commercial consumers typically have solar suitable space of 2,400 sq. meters and more, accommodating upwards of 200 kW of PV. The LCOE of a 200 kW PV system with the 50% subsidy is approx. INR 4/kWh. Despite the significantly lower LCOE owing to larger system sizes, commercial consumers need an additional INR 0.5/kWh for solar to be viable.

It is important to note that the solar LCOE is unviable even though we have considered a system cost of INR 120,000 per kW which is lower than the Andhra Pradesh government’s benchmark of INR 160,000-180,000 per kW.

The Andhra Pradesh government’s goal of using rooftop solar power to bridge its power deficit could be a non-starter if the government does not meet the basic viability criteria for the consumers. The Gandhinagar Rooftop Program, offering a feed-in-tariff of INR 11.21/kWh to Azure Power and INR 11.78/kWh to Avantha Solar, is set to complete 1.3 MW of installations (refer) and should be taken as a benchmark. Rooftop solar for end-consumers faces additional challenges of a lack of reliable information on rooftop potential and easily accessible, low-cost financing which also need to be addressed by the government. The government could also consider waiving state level taxes for solar PV systems to improve viability.

This post is an excerpt from this week’s INDIA SOLAR WEEKLY MARKET UPDATE. Sign up to our mailing list to receive these updates every week.

You can view our archive of INDIA SOLAR WEEKLY MARKET UPDATES here.

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The Indian electricity system is in dire need of ‘fixing’ – or, perhaps, of fundamental, paradigmatic reconfiguration? But how can complex systems be changed? This blog piece is based on a very interesting conversation with my friend and a systems aficionado, Anna da Costa, her blog piece and reading suggestion.

In changing systems, too much time is spent on ‘fixing’ and too little on re-imagining

In electricity, India should embrace distributed models rather than the traditional, centralized one of large power plants and transmission grids

This would make the electricity system less political, less corrupt, greener and allow the local population to become value creators in addition to consumers

Did you ever get stuck in a traffic jam in an Indian city and look at the tight mosaic of cars, buses, motorbikes, cycles, pedestrians filling every inch of space, optimistically trying to head into entirely different directions, horns blowing? Add monsoon floods to take it up a notch. And did your eyes then, perhaps, wander to a nearby half-rotten concrete mast, cuddled in a wild knot of power lines? Did that make you think about the fuse in your house that was gone again?

What could this be, you might wonder? An extraterrestrial form of swarm intelligence? A mysterious super-organism? Or just a hopeless mess that will never change? Being German, I might have a genetically limited bandwidth for dealing with exasperatingly uncategorizable complexity. I just yearn to know: are things getting better or are they getting worse? Unable to give an answer, my mind usually wanders off, with a lingering sense of frustration.

But for a systems theorist, this is where the real thinking (perhaps even fun) begins. India must be the ultimate challenge for this rare breed of researchers. Donella H. Meadows in her 1999 article ‘Leverage Points: Places to Intervene in a System’ (refer) argues that we have an intuition where the key leverage points to change a system (a society, an economy, a city, an infrastructure, whatever) might be. We might be already thinking about them. But, we usually want to push them in the wrong direction. Systems are often just too complex for us to understand. Also, we focus 99% of our efforts on fixes within the system, which is not nearly as powerful as changing the system and its purpose itself. Anna da Costa has provided a very useful clustering of Donella’s leverage points (refer), classifying them and adding a layer of human capacity.

Let us take a specific system. At BRIDGE TO INDIA, we work in the power sector in India. This is a notoriously dysfunctional system: there is not enough power, it is not delivered well, the costs are rising, the utilities are in perpetual financial survival mode and hundreds of millions of people do not get power at all. The most powerful points to change a system, according to Donella Meadows, are not the nuts and bolts of the system (“constants, parameters, numbers such as subsidies, taxes, standards”). The best way to change a system is the “power to transcend paradigms”.

The discussion in the Indian ‘electricity system’ is indeed hovering mostly on the level of ‘constants, parameters and numbers’, focusing on transmission and distribution losses (far too high), coal availability (difficult), power prices (too low for the utility, rising too fast for the consumer and voter). From there, it moves up the ladder to matters of investment risks and returns (risks have been considered too high, reducing the level of investment), then to public vs. private players (who better supplies sufficient, reliable power at acceptable tariffs?), to governance of the power market (avoiding massive grid failure, financing repairs and improvements) and then perhaps to the political system of federalism itself (who is actually in charge?). Yet, the system has not been made to work. It just limps along. It changes a little, but usually not enough.

The discussions is limited by the paradigms that fossil fuels are indispensable, that electricity comes from large plants and is transmitted through a grid, that more electricity means more growth and more development, and that electricity is a product that is produced by some and sold to others. This is the way industrialized countries have thought about electricity since the days of Tesla and Edison: In an era of cheap fossil fuels, no climate concerns, and a state-run infrastructure economy. This led to the growth of large power plants and a grid that has become more and more integrated until it covered the entire region, state and increasingly integrates countries, even continents.

Utilities and the companies servicing them became ever larger. They have invested heavily into a specific approach to providing energy: costly and risky exploration of fossil fuels, investment into complex technology such as nuclear power, building of vast infrastructure such as pipelines or transmission grids. In such a system, whenever a decision is made, it has an impact for decades and is very difficult to reverse. In the process companies, regulators and politicians, have become heavily ‘path dependent’: mentally and structurally averse to change. External shocks such as the oil price rise in the 1970′s or the climate debate in the 1990′s are outliers to be made to fit into the system in a procrustean manner.

Thomas Kuhn, a philosopher of science, tried to understand how scientific systems have changed. In his view, they do not follow a process of continuous evolution or progress. Rather, the old system is hollowed out by new ideas until it collapses. There is always a dominant world view (e.g. the earth is the center of the universe) and scientists try to fit all observations into it. Some observations will, however, not really fit (e.g. the observed path of objects in space), causing an irritation. They are at first ignored by the mainstream, but the irritations are bound to become more, because the system is flawed (the earth is not the center of the universe). At some point, they become so powerful that the old orthodoxy is overthrown in favor of a new one (the sun is the center of the universe). And so on.

We are living in an old energy system. We know it is flawed and it is dawning upon us that it might be broken beyond repair. It fails us on at least two accounts: it does not bring enough energy to vast groups of poor people and it does not keep carbon emissions below acceptable limits. In India, the energy system is not only structurally flawed, but also badly executed.

This is an opportunity. Because India is not yet as heavily invested into a centralised electricity system (as, for example, China has become over the last twenty years) the ‘path dependency’ and the sunk costs are less. Ironically, the practical failures of those who should take care of power supply and are thinking along the old model – the large industrial houses, the utilities and the political and regulatory decision-makers – make room for new types of actors, entrepreneurs (‘green’, ‘social’ or ‘just normal’), cooperatives, and individuals working out solutions for themselves. Much like in mobile telephony, where Africa and South Asia have a higher mobile internet penetration than Europe because for many that is the only way to get into the internet, in power, too we will see more and more distributed solutions.

To return do Donella Meadows: what can we do to fix India’s electricity system? We need to think about the provisioning of power differently. In a country like India – dynamic, anarchic, vast – centralised actors might not be able to provide the solution. They might be were IBM was in the 1980′s: on the wrong side of change. The solution might be elsewhere, in decentral solutions – the power station in every home, based on renewables (especially solar), storage, diesel, perhaps in some places gas, driven by local entrepreneurs building up new micro – and meso-grids, perhaps even ‘smart’ grids, connecting a number of generator and consumers. The best the government can do to facilitate this is to allow this market to flourish through easy access to distribution licenses, through realistic power pricing, perhaps through tax incentives. India should become the global leader in this new, powerful, distributed, matrix system of power supply. There are some technical challenges – but they can be solved. Research and finance should look in this direction. Entirely new business models will emerge. Power will be cleaner, and less stifled by the politics of infrastructure. Local jobs and local wealth will be created. It could become a mysterious super-organism. A functioning one.

Since I have referred to many other people’s thoughts in this blog post, let me make one last reference. In the ‘Art of War’, Sun Szu writes that “victorious warriors win first and then go to war, whereas defeated warriors first go to war and then seek to win.” Having to fight a war is already and admission of strategy failure. India should forget about the wars it fights over fixing the current electricity system and instead embrace a winning strategy.

Tobias likes to write about solar business models, solar and energy policy and wider issues of sustainability, development and growth.

The Ministry of New and Renewable Energy (MNRE) has decided to defer the penalties that are to be levied on delayed solar thermal (CSP) projects. 470 MW were allocated under phase one of the National Solar Mission (NSM) in December 2010 and were to be commissioned in May 2013. However, none of the projects are expected to meet this deadline.

No project is expected to reach completion before at least June 2013

Many common and genuine reasons caused the delays, the most important of which was incorrect solar resource assessments

A shift in the short-term CSP strategy can be considered towards its hybridization with other technologies. CSP should also be promoted to provide process heat solutions to factories with high energy and heat demand

A 50 MW project being set up by Godawari Power is the closest to completion and might be fully commissioned by June 2013 (refer). The next project to be commissioned is by Reliance (100 MW), which is delayed by at least six months. The MNRE has suggested that the commissioning deadlines for these projects could be extended by another 10 months.

Some of the common reasons cited by project developers for not meeting the deadline are: a delay in laying of a water pipeline by the Rajasthan government, delays in procurement of heat transfer fluid (HTF) and other components for the plant and delays in achieving financial closure. However, according to industry sources, the main, unstated cause of delay is the incorrect solar resource assessment for the projects. The actual direct normal irradiation (DNI) at most locations in Rajasthan is significantly lower than what was assumed at the time of planning. This realization led many developers to contemplate the relocation or even cancellation of projects. This is not news. In the October 2012 INDIA SOLAR COMPASS, BRIDGE TO INDIA had already mentioned that all projects are behind schedule (refer).

Under phase two of the NSM, it is expected that a capacity of 1,080 MW is to be allocated for CSP projects in 2014. The allocation process for these projects will draw from the learning of the 470 MW projects. However, the complexity of setting up CSP plants has been systematically underestimated so far (refer to this blog entry for a detailed analysis). It is unlikely that these issues will be resolved and lessons learnt by 2014, especially considering that the previous projects would have just come up (if at all).

It might not be the time to write off CSP just yet. CSP power plants retain a key benefit over PV in that they can produce better quality (more stable, predictable) power. This is crucial for a country with a fragile power grid infrastructure such as India.

India should probably consider a shift in its short-term CSP strategy towards hybridization of CSP with other technologies such as conventional thermal and biomass. In addition, CSP should also be promoted to provide process heat solutions to factories reeling under power shortages and rising power prices across the country. This would be relevant especially for industries with high energy and heat demand such as pulp and paper, steel, cement, or textiles. At this stage, more working examples of how CSP can reduce energy costs and improve energy security need to be provided.

This post is an excerpt from this week’s INDIA SOLAR WEEKLY MARKET UPDATE. Sign up to our mailing list to receive these updates every week.

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Solar capacity addition in India has so far been centered on large, grid connected, ground-mounted PV plants. The lack of space for such power plants in a highly urbanized and congested city like Delhi is a challenge for solar energy. But, this is true only if solar deployment is restricted to large, ground mounted power plants. The potential to install rooftop solar PV in a city like Delhi can be tremendous.

Delhi’s total land area is 1,483 square kilometers

700 square kilometers of Delhi’s total area is built-up, which could theoretically give a potential of 58 GW of rooftop solar

Not every inch of Delhi’s rooftop space is viable for solar, scaling down the potential drastically, but none the less being worth a couple of gigawatts

The potential fundamentally depends on the rooftop space available in Delhi for the use of PV systems. The numbers are staggering! According to the Census 2011, Delhi’s total land area is 1,483 square kilometers. If such an area were unused and exclusively available for solar installations, it could support 123 GW of installed capacity which, at peak power production, would be more than 20 times Delhi’s current annual peak power demand of 5.6 GW and more than half of India’s installed capacity of 215 GW. According to the Delhi Master Plan 2021, 50% or 700 square kilometers of Delhi’s total area is built-up. If the rooftops on this entire built-up area could support solar PV installations, Delhi could theoretically have a potential of 58 GW!

While this number is enormous and very tempting for us solar aficionados, it would not be accurate. Not every inch of Delhi’s rooftop space is viable for solar. Taking in to consideration the structural strength of building, obstructions like water tanks, shafts and other utility space, the shadows of such obstructions, and incomes of the property owners, the viable space for solar gets drastically scaled down. This none the less gives a potential of at least a couple of gigawatts or more of solar. With gigawatt scale potential, Delhi can definitely become a solar city!

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The Solar Energy Corporation of India (SECI) has announced the second round of biddings for the implementation of large scale, grid connected rooftop PV systems ranging from 100 kWp to 500 kWp for a total allocation of 11.1 MW.

A developer can apply for multiple projects for a minimum allocation of 250kWp and a maximum of 2 MWp

No Feed-in-Tariff is being offered. Instead, the bidder will quote a cost in INR/Wp terms based on which SECI will provide a capital subsidy of 30%

Sale of power and the negotiation of the tariff is the developer’s responsibility

The projects will be spread across the cities of Bhubaneswar/Cuttack (1 MW) in Odisha, Gurgaon (1.5 MW) in Haryana, Hyderabad (2 MW) in Andhra Pradesh, Jaipur (3.1 MW) in Rajasthan, Noida/Greater Noida (1.5 MW) in Uttar Pradesh and Raipur/Naya Raipur (2 MW) in Chhattisgarh. A developer can apply for multiple projects for a minimum allocation of 250kWp and a maximum of 2 MWp. The SECI has released the Request for Selection (RfS) document on 1st May 2013 India (refer). The pre-bid meeting is scheduled to be held on May 8th 2013 in Delhi and the last date for the submission of bids is May 30th 2013.

The rooftop PV allocations are different from most policy-based allocations so far in that there is no Feed-in-Tariff (FiT) being offered. Instead, SECI will provide a capital subsidy of 30%. This is similar to the off-grid capital subsidy scheme of the Ministry of New and Renewable Energy (MNRE). Under this mechanism, the scope of work for the bidder includes the identification and leasing of the buildings suitable for the rooftop plants. The bidders also need to obtain No Objection Certificates (NOC) from the relevant distribution company (DISCOM) for connecting the projects to the grid. In addition, bidders are responsible for the complete design, engineering, manufacturing, supply, storage, civil work, erection, testing and commissioning of the grid connected rooftop solar PV project, including operation and maintenance (O&M) for a period of two years after commissioning of the plant.

Under the new mechanism, the bidder quotes a consolidated cost in INR/Wp terms for providing a turnkey solution. Based on this bid price, SECI will provide a capital subsidy of 30%. However, the disbursement of the subsidy is linked to the performance of the plants: 20% will be disbursed at the time of commissioning after the project can prove a performance ratio of a minimum of 75%. A further 5% will be disbursed at the end of the first year, and another 5% at the end of the second year of generation of the plant, if the project can prove a minimum Capacity Utilization Factor (CUF) of 15% for the two years.

The sale of power and the negotiation of the tariff is the developer’s responsibility (refer to the clarifications provided by the SECI in the first phase of biddings). The generated power is expected to be consumed by the rooftop owner first, after which any excess power can be exported to grid.

The new allocation process improves on the existing process for disbursing the MNRE subsidy as (a) it is competitive, which means that the cost to the government exchequer will be minimized; and (b) the disbursement of the subsidy is tied to the performance of the plant, which will ensure that the subsidy is released only to well executed projects. If SECI can allocate such subsidy-based projects on a monthly basis and not limit the allocations to some particular cities, the process can become an effective and transparent replacement of the existing MNRE capital subsidy.

This post is an excerpt from this week’s INDIA SOLAR WEEKLY MARKET UPDATE. Sign up to our mailing list to receive these updates every week.

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The south Indian state of Andhra Pradesh had carried out a bidding process for an allocation of 1,000 MW earlier this year. The state followed a L1 (lowest bid) process, where developers were required to meet the lowest tariff being offered by any other developer for a given sub-station.

The policy’s bidding process accounted for different project sizes, land costs and irradiation levels and was considered to be a progressive variation of the L1 process

In a sudden change of process, after the bidding process was complete, the state announced that it could only offer a tariff of INR 6.49/kWh

This policy instability and sudden change in process is expected to severely impact the outlook on new capacity addition as well as the investor confidence in the state

This process was different from the L1 process followed in Rajasthan and Tamil Nadu, where the developers were required to meet the lowest bid (L1) across the state. This key differentiating factor allowed to account for different project sizes, land costs and irradiation levels and was considered to be a progressive variation of the L1 process.

Based on this, 330 companies participated in the bidding process and the planned investments to be made were to the tune of INR 70 billion for a 1,000 MW capacity. In the April 2013 edition of the India Solar Compass , BRIDGE TO INDIA had predicted that a capacity of 550 MW would come up by the end of the first quarter of 2014. However, in a sudden change of process, after the bidding process was complete, the state last week announced that it could only offer a tariff of INR 6.49/kWh. The state’s cabinet sub-committee on power fixed this benchmark price at its meeting on 23rd April 2013 (refer).

This policy instability and sudden change in process is expected to severely impact the outlook on new capacity addition as well as impact the investor confidence in the state. Using the L1 process, Rajasthan, for example, has been able to allocate only 75 MW of the planned 100 MW capacity. Tamil Nadu, after revising the offered tariff up from L1 of INR 5.97/kWh to an ‘acceptable tariff’ of INR 6.48/kWh with an escalation of 5% per annum for the first 10 years (refer to the April 2013 edition of the India Solar Compass), has been able to allocate only a little over 200 MW of the planned 1,000 MW.

In Andhra Pradesh, the average bid had come out to a little over INR 8.7/kWh and only 13 bids out of the 330 bids are below INR 7/kWh and at several locations, the L1 is as high as INR 8.89/kWh. In such a situation, it is unlikely that many developers will agree to the proposed tariff. Currently, only the bids submitted by SunBorne and Essel Mining are close to the offered benchmark price.

Many project developers and even supplier’s had invested in the state based on the earlier proposed process. While project developers had invested in the development process, many suppliers have been looking to set up local presence to cater to the sales and service requirements arising out of the opportunity. The change in process is expected to have a negative impact on such investments. Based on the new announcements, BRIDGE TO INDIA has revised its new capacity installation outlook for Andhra Pradesh from 550MW to under 200 MW for the next four quarters.

This post is an excerpt from this week’s INDIA SOLAR WEEKLY MARKET UPDATE. Sign up to our mailing list to receive these updates every week.

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Rooftop PV could reduce the capital’s power costs and improve its supply security. These are benefits typically associated with solar. However, the real benefit might lie in reducing Delhi’s chronically high levels of smog. We are only just beginning to understand the economic (let alone social and political) cost of excessive pollution. A look at China helps.

Smog in Delhi has reached extremely hazardous levels

Beijing has comparable problems with smog and is paying a huge economic prize

Policy interventions have worked for Delhi before – solar could be the next step

Delhi’s smog has become a winter scourge. According to an estimate, the deaths of over 10,000 a year are attributable to the bad air quality. Levels of P10, a measure of particulate matter, has in the winter months reached 749 – more than seven times the safe limit. P2.5 has reached 489 or more than eight times the safe limits. Some causes are found within the city (rapidly increasing car traffic, burning of wood, diesel back-up gen sets, coal fired power plants), some are outside of the city (burning off of agricultural residues, industrial air pollution). Meteorological factors play a role too.

The only city that might consistently be scoring worse on the smog index than Delhi is the Chinese capital of Beijing. According to the World Bank (refer), environmental pollution costs China as much as 5.8% of GDP. The costs of air pollution alone are estimated at around 3.8%. They include: healthcare costs, damages to materials, car accidents and flight cancellations. As a result, China plans to invest over USD 500bn into environmental protection until 2015. Experts believe that this is still insufficient: as much as 4% of GDP or more than USD 300bn would be required each year. This is just the economic cost of pollution.

In addition, there is the issue of quality of life. As Delhi will continue to grow and its citizen become wealthier, they will demand better air quality. This will become a political issue. China shows the way. According to a Gallup survey of December 2012, 57% of Chinese already agree that environmental protection should be given priority even at the expense of economic growth. In India, the number is at 45% (refer).

10 years ago, Delhi managed to significantly reduce pollution levels through strong new policy measures, enforcing structural changes and the adoption of cleaner technologies. Today, it could do so through e.g. reducing diesel subsidies, providing more public transportation, moving brick-kilns away from the city, or paving all roads to reduce the dust levels.

Solar could also play a significant role in the transition to a more environmentally sustainable, economically efficient and politically acceptable path to urbanization. Making the use of rooftop PV mandatory for certain building owners or power consumers would reduce the pollution from generator sets as well as from coal-fired power plants. There would be less smog. Today this sounds like a choice. Soon it might become a non-negotiable political demand and economic necessity.

The power tariffs in Delhi for commercial customers are at 8.3 INR/kWh – a price that can already be matched by solar PV (100 kW) installations if storage is not included. PV would be a complementary power source. Storage could become viable, if a 20% increase in tariffs (demanded by utilities), the cost of power stored in inverters (20-50% higher due to inverter inefficiencies) or diesel back-up costs (anywhere between 12-20 INR /kWh) are considered. Residential consumers, currently paying only INR 6/kWh might also turn to solar soon. The government can accelerate a transition to solar in Delhi by providing subsidies, by allowing for regulatory improvements such as net-metering or buy granting tax advantages (e.g. on VAT). Any additional cost for solar power to the government and to the public should be more than outweighed by the environmental cost of not reducing smog levels in Delhi.

BRIDGE TO INDIA and Greenpeace are currently exploring the case for solar rooftop PV in Delhi and will be publishing a joint report soon.

Tobias likes to write about solar business models, solar and energy policy and wider issues of sustainability, development and growth.

What are your thoughts? Leave a comment below.

The south Indian state of Kerala has published a draft solar policy (refer). This makes it the ninth Indian state to release a solar specific policy document.

The Kerala solar policy has set a target of 500 MW by 2017 and 1,500 MW by 2030

Unlike the NSM, the state will incentivise distributed solar through Feed in Tariffs

Like Tamil Nadu, Kerala has also tried to pass on the financial burden of RPOs from the state-owned DISCOM to large power consumers. This may be the only viable option for implementing the RPO mechanism

Under the draft policy, Kerala has set itself a target of an installed capacity of 500 MW by 2017 and 1,500 MW by 2030. Earlier, the state had already initiated a 10,000 rooftop solar power programme (refer).

Until now, all state and central solar policies have emphasised utility scale projects. Kerala’s policy is unique in its focus on distributed power generation. Unlike the off-grid capital subsidy scheme under the National Solar Mission (NSM), the state will incentivise distributed solar through Feed in Tariffs (FiTs). Net-metering and a focus on protocols to improve the quality of the grid (especially community grids that would be integrated with the state’s “no load-shedding”-campaign) will help the implementation. This policy is a further step in a significant development in India towards the implementation of net-metering and community grids to unlock the immense distributed generation potential of India. See also the net-metering initiative under the Tamil Nadu policy (refer).

Like Tamil Nadu, Kerala has also tried to pass on the financial burden of Renewable Purchase Obligations (RPOs) from the state-owned distribution company (DISCOM) to large power consumers. Solar Procurement Obligations (SPOs) will be mandated for commercial consumers with a connected load of more than 20 kVA and industrial consumers with more than 50 kVA on the low tension (LT) transmission network (up to 415 V). Also, SPOs will be applicable to all consumers connected to the high tension (HT) transmission network (up to 11 kV) and Extra High Tension (EHT) transmission network (up to 66 kV). All HT and EHT consumers have to procure 3% of their power from solar until March 2014 and 6% from April 2014 onwards. In future, the SPO requirement will also be applicable for high consuming domestic consumers, i.e., consumers with more than 500 kWh per month. Open access, wheeling and transmission & distribution charges for captive consumers have been waived off in the state. An exemption on electricity duty and conditional banking of power has also been provided.

Given the poor financial health of most state DISCOMs, passing on RPO requirements as SPOs directly to consumers seems to be the most viable option for implementing the RPO mechanism and encouraging solar without burdening public funds. In India, roughly 70% of all RPOs have to be met by Discoms that are in bad financial health. If more states implement such an SPO mechanism, it can revitalise the Renewable Energy Certificate (REC) market that is currently written off by many stakeholders due the lack of RPO implementation.

Jasmeet Khurana works on project performance benchmarking, success factors for module sales, financing and bankability of projects in India.

This post is an excerpt from this week’s INDIA SOLAR WEEKLY MARKET UPDATE. Sign up to our mailing list to receive these updates every week.

You can view our archive of INDIA SOLAR WEEKLY MARKET UPDATES here.

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The finance minister of India will be presenting the union budget in front of the parliament on 28th February 2013. The budget is will highlight the public fund allocations for the next financial year (April 2013-March 2014). Multiple commerce and industry associations have provided suggestions to boost the solar sector in India.

FICCI has released suggestions for methods to reduce the high interest rates in India in the next budget

Expensive access to debt puts Indian manufacturers and developers at a disadvantage as compared to their international peers, with the domestic rate of interest as much as 10% higher

FICCI has also proposed further measures to make solar power more competitive, meant to be in addition to existing direct subsidies. However, given the fiscal deficit in India, these measures could replace the direct subsidies

In a pre-budget memorandum, the Federation of Indian Chambers of Commerce and Industry (FICCI), has submitted suggestions (refer) for reducing the high interest rates in India by i) creating a low cost fund for financing solar projects; ii) providing an interest subsidy through the National Clean Energy Fund (NCEF); iii) creating a hedging mechanism for external commercial borrowing (ECB) and iv) creating a separate lending category for renewable energy projects to avoid these being crowded put by conventional power projects.

Expensive access to debt has indeed put Indian project developers and manufacturers at a disadvantage as against their international peers and has hampered the growth of the industry (refer to BRIDGE TO INDIA’s upcoming report on ‘Bankability and Debt Financing of Solar Projects in India’, to be released on 1st March 2013). The domestic rate of interest is as much as 10% higher than in established solar markets.

In addition to financing, the following steps have been proposed by FICCI to make solar power more competitive: i) extend the cutoff date for accelerated depreciation from the end of each fiscal year (March) until 2017 (the end of the next Five Year Plan); ii) exemption from payment of Minimum Alternate Tax (MAT, 19.2% of EBITDA, payable, if now income tax is paid) under section 115JB of the income tax act in addition to the exemption from the income tax (32-33% for 10 years); iii) availability of 80% accelerated depreciation in the first year to manufacturing companies and 100% accelerated depreciation benefit for companies installing large MW scale projects; iv) exemption from all indirect taxes, including CST, VAT and service tax, on equipment used solar plants and v) provision of personal income tax incentives for individuals who are buying solar PV or thermal systems for domestic use (comparable to US tax credits).

These measure are proposed in addition to existing direct subsides (such as FiTs, viability gap funding or capital subsidies). Given the fiscal deficit facing India, however, it is much more realistic that such measures could actually replace the direct subsidies. We already see that the release of some funds to the Ministry of New and Renewable Energy (MNRE) has either been delayed or cancelled (refer). This has caused a significant delay in allocations under phase two of the NSM, which was originally supposed to being in January 2013 but has now been postponed to June 2013. Also, there is uncertainty over the availability of funds for the 30% capital subsidies for solar projects below 100kW in the next financial year.

The exemption of MAT alone would reduce the cost of solar for a 1 MW plant by around INR 1/kWh to ca. INR 7/kWh. The effects of VAT, CST and service tax could add another INR 0.5/kWh. Personal income tax incentives for the <100kW category would also be significant. This can make solar power extremely competitive with grid supplied power and can perhaps even free the market from the need for capital subsidies. Overall, we think that FICCI’s suggestions are good. However, it is unlikely that the government will approve all of them. In BRIDGE TO INDIA’s upcoming INDIA SOLAR COMPASS April 2013 edition, we will analyse in detail, if solar power is already competitive without government support.

Jasmeet Khurana works on project performance benchmarking, success factors for module sales, financing and bankability of projects in India.

This post is an excerpt from this week’s INDIA SOLAR WEEKLY MARKET UPDATE. Sign up to our mailing list to receive these updates every week.

You can view our archive of INDIA SOLAR WEEKLY MARKET UPDATES here.

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Globally, most experts have predicted that module prices will continue to fall in the first half of 2013 as a significant overcapacity still exists. Prices from the last two months, however, suggest a contrary trend: a firming up of prices. On the global front, a price index (PV-Insights) has posted marginal week on week increase in upstream raw material costs for over one month now. This has been confirmed to BRIDGE TO INDIA in the Indian market by leading EPC companies and project developers. We believe that this is a good development at this point in time.

Prices in India had been up to 14% lower than the average global prices

Developers in India have in the past bid for tariffs based on a discount factor for expected cost reductions

The stabilisation in solar PV prices will lead consumers to stop waiting and start buying

India needs a stable and predictable pricing regime so that an ecosystem is built that allows businesses to succeed and innovate

In 2012, based on the available market information, BRIDGE TO INDIA had suggested that many deal prices in India had been up to 14% lower than the average global prices. According to BRIDGE TO INDIA’s conversations with global module suppliers, including Chinese suppliers, Indian developers often expect unrealistic prices and some suppliers feel that they can no longer continue to service the market. Due to this, some suppliers have scaled down their plans for sales to the market.

Under a competitive process, developers in India have been in the habit of bidding for tariffs based on a discount factor for falling cost of solar modules, i.e., developers anticipate a price reduction between the bidding date and the procurement date and then bid based on this anticipated price reduction. If module prices stabilise or even rise, the market dynamics will fundamentally change. Another key game changer can be the imposition of anti-dumping duties. The cost of modules in India is expected to rise, if anti-dumping duties are enforced (to understand the impact, refer to the key-question section in the January 2013 edition of the INDIA SOLAR COMPASS).

We expect that BOS costs will continue to see some price reduction as volumes and competition increase. This effect might not be significant in MW-scale projects, where margins are already squeezed. The impact will be counteracted by the increasing cost of land. It is estimated that the cost of land for setting up solar projects in Rajasthan has gone up by almost 300% (from INR 100,000/acre to INR 400,000/acre).

The price reduction that has taken so far will begin to seep into the kW-scale market, where we expect system price costs to come down significantly. This segment will get a further push as the maximum size of MNRE subsidy-based projects has been increased from 100 kW to 500 kW under phase two of the NSM, boosting demand from industrial and commercial consumers. We expect that the budget for subsidies for a financial year, which has been fixed at a cumulative upper limit of 100 MW, will be exhausted before the end of the year and projects planned thereafter will not get subsidy sanctions.

An overall cost stabilization for large kW and MW scale projects at around USD 0.65/Wp (exclusive of taxes), will push some serious stakeholders that have been sitting on the fence to stop waiting and start investing. Developers, investors, manufacturers and power consumers will be able to plan their investments based on fundamentals and move away from the earlier guess work of falling costs.

At this point in time, India needs a stable and predictable pricing regime so that an ecosystem is built that allows businesses to succeed and innovate. In the long run, gradual cost reductions backed by technology and process improvements should continue to make solar increasingly more competitive.

Jasmeet Khurana works on project performance benchmarking, success factors for module sales, financing and bankability of projects in India.

What are your thoughts? Leave a comment below.

The US on Wednesday filed a complaint with the World Trade Organization (WTO) over the Domestic Content Requirement (DCR) under India’s National Solar Mission (NSM), which it said discriminates against foreign solar products, including the ones made in the US (refer).

Phase one of the NSM included a DCR on Crystalline Silicon (c-Si) cells,  however phase two of the NSM is expected to expand the restrictions to include thin-film modules as well

US companies supplying thin-film modules to the Indian market risk a significant drop in sales in the event of such restrictions

India and the US have 60 days of consultations to resolve the issue and beyond that the US can ask the WTO to hear the matter. India’s DCR may be done away with if module manufacturers are unable to put up a strong defense

In order to promote domestic manufacturing of solar cells and modules, India has been

mandating procurement of c-Si cells and modules from within the country for projects under

the NSM.

Until now, there had been no such restriction on the import and use of thin-film modules. The US, which exports primarily thin film modules, has been the main beneficiary of India’s DCR. Chinese companies offering c-Si modules have suffered and Indian manufacturers have not been able to take advantage of it. First Solar, a US company and the world’s leading manufacturer of thin-film (CdTe) modules, is the most successful supplier in India with a market share of over 20%. Lately, the company has sold around 130 MW out of 340 MW for projects under batch two of phase one of the NSM.

However, phase two of the NSM is expected to expand the DCR restrictions to include thin-film modules as well. This would risk a significant drop in global sales for First Solar, which in 2011 has supplied 8% of its modules to the Indian market.

India has always justified the DCR by arguing that since it is financially incentivizing the use of solar power through subsidies and feed-in-tariffs (FiTs), it has the right to impose conditions. Also, it is the stated goal of the Indian government to create a domestic solar manufacturing industry. However, cases challenging local content rules have received a boost since the WTO ruled against Canada’s domestic requirements for a green energy plan in Ontario province.

As per the WTO process, India can file a response within 10 days of receiving the WTO notice. The government has asked for a consultation meeting with both Indian manufacturers as well as developers on 15th February 2013 to discuss and review India’s stand on the restrictions. According to a statement by Farooq Abdullah, Minister for New and Renewable Energy (MNRE), the onus to put up a strong defense lies with the module manufacturers and if they are unable to do that, India’s domestic requirements may be done away with (refer). India and the US have 60 days of consultations to resolve the issue and beyond that the US can ask the WTO to hear the matter.

Also, India is currently investigating allegations of dumping against US companies (along with suppliers from China, Malaysia and Taiwan). Efforts from these suppliers with regards to submitting data and presenting their case to the Directorate General of Anti-Dumping Allied Duties (DGAD) under India’s Ministry of Commerce are already under way. According to BRIDGE TO INDIA, import restrictions will lead to increases of module prices and hence the cost of power to the Indian taxpayer and power consumer without really benefiting Indian manufacturers in the long term (refer to the January 2013 edition of the India Solar Compass to read the analysis).

Jasmeet Khurana works on project performance benchmarking, success factors for module sales, financing and bankability of projects in India.

This post is an excerpt from this week’s INDIA SOLAR WEEKLY MARKET UPDATE . Sign up to our mailing list to receive these updates every week.

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The financial bids for the allocation of 100 MW of solar PV projects in Rajasthan were opened on February 11th 2013. A total of 25 bids worth over 200 MW have been received.

The lowest valid solar bid in India of INR 6.45/kWh was submitted in Rajasthan. This tariff only makes financial sense if the developer makes full use of accelerated depreciation benefits

The Rajasthan solar policy does not consider separate tariffs for projects that avail accelerated depreciation and projects that do not

Only the developers backed by Indian companies and with prior businesses in India will stand to avail accelerated depreciation benefits, and are at a clear advantage

Developers could bid for either a 5MW project or a 10MW project. The lowest bid has been submitted at INR 6.45/kWh by Essel Mining and Industries Ltd. This is currently the lowest valid solar bid in India. It has no escalation. (The INR 5.97/kWh bid for a 10 MW project in Tamil Nadu by Mohan Breweries has now been offered a tariff of INR 6.48/kWh with an escalation of 5% per annum for the first 10 years. Effectively providing a tariff of over INR 7/kWh in levelized terms).

According to the project allocation process under the Rajasthan policy, in order to obtain a project, other developers will now be asked to meet this lowest tariff (referred to as L1). Assuming that the current capital cost of setting up a project is at least INR 70m, this tariff could only make financial sense if the developer is making full use of accelerated depreciation benefits. Unlike the National Solar Mission (NSM) and the Gujarat solar policy, the request for proposal (RfP) document for the bidding process in Rajasthan does not consider separate tariffs for projects that avail accelerated depreciation and the projects that do not. For the Rajasthan bids, project development companies that are not backed by an Indian corporate (e.g. Azure Power) as well as international project development companies that do not have prior businesses in India (e.g. SolaireDirect) face a disadvantage in competing for the allocations as they would not be able to avail the accelerated depreciation benefit.

For the Rajasthan bidding process, companies that are backed by Indian businesses with multiple interests such as Essel Mining, Emami Cement, OCL Indian and Jindal Power will stand to benefit as they will be able to make use of such accelerated depreciation benefits. Apart from that, these companies will also be able to avail recourse-based debt finance for the projects. Non-recourse financing in Rajasthan will be extremely difficult given the poor long term payment security for the PPA signing entity, Rajasthan Renewable Energy Corporation Limited.

Jasmeet Khurana works on project performance benchmarking, success factors for module sales, financing and bankability of projects in India.

This post is an excerpt from this week’s INDIA SOLAR WEEKLY MARKET UPDATE . Sign up to our mailing list to receive these updates every week.

You can view our archive of INDIA SOLAR WEEKLY MARKET UPDATES here.

Tamil Nadu today opened the financial bids received for allocations under its state policy. The state had received a subdued response with bids totaling 499MW for a tender of 1,000MW (refer to our earlier blog post to read more). Initial reports suggest that financial bids have been opened for 493MW and the lowest bid has touched INR 5.97/kWh (for a 10MW project by Mohan Breweries).

The lowest bid has touched INR 5.97/kWh, the average bid is just over INR 8/kWh

The options for determination and negotiation of tariffs are still open.

Large parts of the state are reeling under severe power cuts and solar is the only source of power that can help the state meet its peak power needs in a short duration of time.

Tamil Nadu has thus seen the lowest tariffs in the country, primarily owing to the provision for a 5% annual escalation for 10 years in tariff. However, the average bid was just over INR 8 kWh and some prominent bidders such as Welspun (INR 8.56/kWh) and Lanco (INR 8.2/kWh) were significantly higher than the current norm in the country (around INR 7-7.5 kW/h).

BRIDGE TO INDIA had earlier estimated that the lowest tariff in Tamil Nadu could touch INR 6.2/kWh (refer). This tariff was based on very aggressive assumptions with an expected IRR of 12%. While some industry experts communicated to us that this estimate was unrealistically low, we were surprised to see that the lowest tariff is even lower than that. A more realistic tariff with a 5% escalation for the first 10 years that should be acceptable to developers, the state and the lenders is likely to be around INR 6.8/kWh.

The state had planned for a mechanism under which it would ask all bidders to meet the lowest bid (L1). However, due to the subdued interest and complications involved in negotiating such a price with the developers, first signs are emerging that the Tamil Nadu Power Generation and Distribution Corporation Ltd. (TANGEDCO) is willing to consider other options such as taking a median tariff for all projects. The options for determination and negotiation of tariffs are still open.

However, even if the final tariffs are acceptable to developers, we expected ongoing challenges. The revolving line of credit that promises to be a guarantee of payment to developers is unlikely to help them in raising non-recourse debt. One clause in the agreement implies that the government will have the right to make amendments in the policy and guidelines of the agreement from time to time. Such a clause places the developer in a position that is not protected from policy or governance changes. Another clause states that the Power Purchase Agreement is subject to approval from the Tamil Nadu Electricity Regulatory Commission. The time required to obtain such approval from the TNERC is not known and may create delays.

BRIDGE TO INDIA believes that if the PPA does not get TNERC’s approval in time, developers will face difficulties in achieving financial closure. This will further strain the already stringent eight-month commissioning deadline.

The state must, however, be commended on taking an initiative to promote solar power in spite of its financial problems. Large parts of the state are reeling under severe power cuts and solar is the only source of power that can help the state meet its peak power needs in a short duration of time. If Tamil Nadu is able to take all steps necessary to help the allocated capacity of 493MW to come up, it will still be a more than respectable target achievement.

Read our Tamil Nadu Solar Policy Brief for more.

Jasmeet Khurana works on project performance benchmarking, success factors for module sales, financing and bankability of projects in India.

What are your thoughts? Leave a comment below.

The Ministry of New and Renewable Energy (MNRE) has today announced draft guidelines (refer) for setting up of 750 MW solar PV capacity under Phase 2, Batch 1 of the National Solar Mission (NSM).

Viability Gap Funding will be provided with an upper limit of 30% of the project cost for a maximum capacity of 100 MW
The VGF amount will be handed over in three installments, and the SECI can claim assets equal to the VGF amount if the plant remains inactive or if any assets are sold
A mechanism is needed to ensure that there is a match between states willing to buy power at the pre-determined prices and developers’ preference of location for the projects

As per BRIDGE TO INDIA’s predictions in the October 2012 edition of the India Solar Compass (refer), the allocations are based on Viability Gap Funding and the maximum capacity that a developer can bid for has been increased to 100 MW.
The allocation process, signing of Power Purchase Agreements (PPAs) and handing out of VGF will all be handled by the Solar Energy Corporation of India (SECI). According to the draft, a fixed tariff INR 5.45/kWh will be awarded to projects not availing accelerated depreciation and a fixed tariff of INR 4.95/kWh will be awarded to projects availing accelerated depreciation. Over and above this, VGF will be provided with an upper limit of 30% of the project cost or INR 25m/MW. The exact quantum of VGF will be determined by a reverse bidding mechanism.
A key concern with regards to the implementation of the VGF is its impact on the long term performance of projects and the scope for developers to execute low quality projects for short term gains. The MNRE has provided some safeguards to prevent this. As per the draft guidelines, it has been decided that a hand-out of the VGF amount will take place in three installments. The first installment of 25% will be handed out after the delivery of at least 50% of the equipment, another 50% will be handed out on successful commissioning of the project and the remaining 25% will be handed out after one year of successful commissioning. The draft also says that if the plant fails to generate any power continuously for one year during the course of the PPA period or the project is dismantled or its assets sold, SECI will have the right to claim assets equal to the value of VGF granted. However, no real safeguards have been provided to ensure the quality of production. In the current scenario, the developers’ will lend greater focus on reducing the CAPEX against focusing on optimizing plant performance. For example, a developer could buy the cheapest equipment and reduce the plant CAPEX to INR 60m/MW with an equity investment of 18m/MW. On this, the developer could avail tax benefits based on accelerated depreciation, up to INR 15.8m/MW, and, as an example, is able to avail INR 20m/MW as VGF. In such a scenario, the developer would have received back almost 60% of the project investment and almost 200% of the equity investment within one year. This will leave very little incentive for the developer to stay invested in a project with a PPA of just INR 4.95/kWh. This not only has the potential to derail the policy motives but will also put the lenders in doubt about the developer’s intentions.
Another key concern is the location of projects. Currently, the draft guideline states that as and when the Request for Selection (RfS) is submitted by the project developer, the SECI will simultaneously issue “Expression of Interest” to states willing to procure the power. No clarity has yet been provided on which states will be willing to buy solar power at the given prices. There could be a scenario in which all the developers opt to set up projects in Rajasthan but Rajasthan is unwilling to buy this power. For such a situation, there is no clarity on how the SECI will ensure the off-take of the power to states across the country that might be willing to buy the power. There is a need for a mechanism to ensure that there is a match between states willing to buy power at the pre-determined prices and developers’ preference of location for the projects. As the NSM provides the cheapest option for state power distribution companies to meet their Renewable Purchase Obligations (RPOs), most states that are currently not meeting their RPO requirements should be willing to buy this power. We can expect demand for solar power from the NSM to move out of Rajasthan this time as the state is already meeting its RPO requirement. However, given a free reign (as is currently the case), developers would prefer to set-up projects in Rajasthan due its excellent irradiation and large availability of land.
BRIDGE TO INDIA will follow up with the concerned officials and industry leaders to get their thoughts on the issues and also look at possible solutions to these issues. Follow BRIDGE TO INDIA’s blog to keep track of our analysis and opinion on the new phase of the NSM.
This post is an excerpt from this week’s INDIA SOLAR WEEKLY MARKET UPDATE. Sign up to our mailing list to receive these updates every week.
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What are your thoughts? Leave a comment below.

Jasmeet Khurana , Market Intelligence Consultant at BRIDGE TO INDIA, works on project performance benchmarking, success factors for module sales, financing and bankability of projects in India.

Curbing the fiscal deficit has become a key priority in India. Therefore, the government has set itself a deficit target of 5.3 percent of gross domestic product for the fiscal year ending on 31st March 2013. India had already exhausted 80.4% of the target between April and November and as per the current spending trajectory, India will fail to meet that target by around 20% or INR 2.06 trillion. One of the key measures now being taken to achieve the target is the reduction of subsidies. This has positive and negative implications for the Indian solar market and accelerates the overall transition from a subsidised to a commercially viable market.

Phase two of the NSM will get delayed due to unavailability of funds to cover the cost of subsidising solar energy under Viability Gap Funding

The subsidy cut for bulk consumers of diesel improves the business case for distributed solar power generation in India

Non-fiscal policy actions such as enforcement of the RPO/REC mechanism, clarity on regulations regarding grid interaction and implementation of net-metering can help tap the potential of solar power

Project allocations under phase two of the National Solar Mission (NSM) delayed

The ministry of finance has delayed the release of payments to the National Clean Energy Fund (NCEF) (refer). The NCEF is supposed to cover the cost of the subsidising solar under the Viability Gap Funding (VGF) mechanism of the NSM. The idea that the NCEF provides significant upfront capital to be infused into the Solar Energy Corporation of India (SECI) to carry out the part upfront funding for the new projects (refer to the October 2012 edition of the India Solar Compass to understand VGF). As the funds are not yet available, phase two allocations under the NSM are getting delayed. The allocations were supposed to be completed by March 2013. How long the allocation process will be delayed is unclear. Many investors and developers have already been planning their projects and have incurred costs for typical pre-development work such as land and off-taker identification. Also, module and other component suppliers have planned for sales to NSM projects in the next financial year. Some of them have invested into contract manufacturing and growing their teams. A delay of more than two months (which might still be avoided) would have a negative impact on the confidence of market participants.

Better business case for distributed solar

In another measure taken by the oil ministry to scale back the fiscal deficit, diesel subsidies have been cut for bulk consumers of diesel (refer). Due to their high consumption, these consumers buy diesel directly from oil companies and not from retail outlets. Many of these consumers use diesel for captive production of power. Such consumers include large malls, hospitals, office buildings, hotels, airports, etc. The new price for such consumers has been increased by INR 10/liter, equivalent to almost 20%. Many of these consumers may now resort to buying diesel from the pumps, where the prices are still subsidised, despite the fact that buying diesel over a certain amount from retail outlets is not permitted. For most customers, however, the measure is expected to have a significant impact on their energy costs. Solar power is already financially attractive for consumers with high tariffs and/or high back-up or captive diesel consumption. With an increase in diesel costs, especially in areas where power supply is irregular, solar power will now become even more competitive, improving the business case for distributed solar power generation in India.

Non-fiscal policy actions related to enforcement of the RPO/REC mechanism, clarity on regulations regarding grid interaction and implementation of net-metering can help tap the potential of solar power that is already available in the country because of financial feasibility of such projects. These actions can help ease the financial burden on the government and still keep the capacity addition targets on track.

This post is an excerpt from this week’s INDIA SOLAR WEEKLY MARKET UPDATE . Sign up to our mailing list to receive these updates every week.

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Jasmeet Khurana, Market Intelligence Consultant at BRIDGE TO INDIA, works on project performance benchmarking, success factors for module sales, financing and bankability of projects in India.

Solar in India will, in the medium term, benefit mostly from the ongoing liberalisation and privatisation of the electricity market. In that respect, the state government of Bihar has just announced the process for the privatisation of power distribution in four towns (refer).

Delhi and Mumbai were among the first cities to have privatized power distribution in the country

In 2011-12, transmission and distribution (T&D) losses in the state stood at 39.2%

 In India, privatization of power distribution is usually associated with enhanced customer satisfaction levels due to improved service quality

According to the officials, the primary reason for this move is to minimize the heavy distribution and commercial losses being incurred by the existing state operated distribution companies. In 2011-12, transmission and distribution (T&D) losses in the state stood at 39.2% – an extremely high number and considerably above the already high country average (upwards of 20%). In India, privatization of power distribution is usually associated with enhanced customer satisfaction levels due to improved service quality. Most customers are willing to pay a higher price for power if the supply is more reliable as compared to subsidized but erratic power supply.

It is also hoped that the ongoing privatisation of power infrastructure will further new infrastructure initiatives relevant to the spread of solar power: grid stability, net-metering and smarter grids. The transition can, however, have an adverse impact on some existing power purchase agreements (PPAs). PPAs for sale of solar power within states are usually signed with local distribution companies. Although, there is no available precedent with regards to solar PPAs, it is possible that privatisation of a distribution company may result in renegotiation of a signed long-term PPA.

Delhi and Mumbai were among the first cities to have privatized power distribution in the country. Thereafter, multiple cities across Madhya Pradesh, Odisha and Gujarat have either privatized power distribution or are planning for it. Given that most Indian state level distribution companies are in financial distress, it is possible that power distribution in many Indian cities will be privatized moving forward.

This post is an excerpt from this week’s INDIA SOLAR WEEKLY MARKET UPDATE. Sign up to our mailing list to receive these updates every week.

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Mr. Akhilesh Magal heads the Project Development team as Senior Consultant at BRIDGE TO INDIA.

In an earlier blog post, my colleague Tobias Engelmeier suggested that the Indian market is for players with long-term strategic interests in solar (read his blog here). While this is true, the market will also see what we call ‘Cowboys’ (players with no strategic interest in solar) who will utilize three levers to drive the market in the initial stages.

Accelerated Depreciation benefit for solar projects

Locking-in on land prices and reaping benefits after 20-25 years

Recognizing that the price of metals will rise multi-fold in the coming years in order to cash-in on the scrap value of the solar power plant.

There are many ‘Cowboys’ or players with no strategic interest in the Indian solar industry. They are attracted by the general buoyancy but also by specific business opportunities. These players have little or no knowledge of solar in India, but want to jump onto the solar bandwagon. The overwhelming interest in the Indian solar market serves to raise awareness in the market, but can be detrimental to the industry in the long run, if they result in poorly planned and poorly constructed projects. For example: A 5 MW project in Uttar Pradesh is operating at a Capacity Utilization Factor (CUF) of 14% compared to some other plants in Rajasthan that are operating at a CUF of 23%. The prime reason to establish the plant in Uttar Pradesh was the pre-availability of land. Cowboys who want to capture the market could potentially outbid other developers without considering the full project cost implications. Already, some market participants are worrying that the current prices of solar energy in India are not commercially viable.

So what makes the Cowboys ride?

– Accelerated Depreciation: Most Cowboys are cash rich real estate developers, SME industrialists, film stars or land bank owners who are looking for ways to reduce their tax burden. Solar provides a great opportunity to do so. The wind sector in India experienced a similar trend in the initial phases. Film stars, politicians and any cash-rich companies cashed in on the accelerated depreciation benefit. We are seeing a similar trend for solar in India. Most of these projects are in the red due to lack of technical know-how.

– Locking-in on Land – Land prices in India are skyrocketing. This is also true for land for solar power projects. For instance, land was available in remote districts of Rajasthan for INR 20,000 per acre before the announcement of the National Solar Mission (NSM) Phase 1. Just after two years, the same land prices have reached INR 500,000 per acre – a rise of nearly 2,400%! Land owners are beginning to recognize the value for their land and demanding much more. The cowboys want to cash-in on this and lock in the land for 20-25 years. The returns from the sale of land would be many times higher than the returns from the solar project. This also means that the quality of the solar plant takes a back-seat.

– Scrap value of power plant – Cowboys also recognize that the prices of copper, steel and other materials that go into building the solar plant will rise multifold with increasing demand for these materials in India. The scrap value can be as high as 15% of total CAPEX.

These ‘outliers’ are making the Cowboys ride – for now. Unless the cowboys make the transition to becoming serious long-term players, they are likely to jeopardize their projects.

Related post: The call of sirens: Is India really a good solar market?

Download our latest INDIA SOLAR DECISION BRIEF, ‘The Project Development Handbook’, for a free overview of the processes, timelines, costs, challenges and opportunities in solar project development in India.

BRIDGE TO INDIA provides a precise, analytical and in-depth update on the Indian solar market every quarter as a part of its INDIA SOLAR COMPASS. This is an excerpt from the January 2013 edition of the INDIA SOLAR COMPASS.

The previous quarter (October to December 2012) has seen a flurry of new solar policy announcements, which seem to have awoken a lulled market.

With the new announcements (totaling 11.3 GW of PV by 2013), government sponsored PV in India appears to be set for maturity.

Up to 5.3 GW of the announced capacity relies on the Renewable Purchase Obligation (RPO) targets set by states.

An investigation for anti-dumping duties against manufacturers from China, the US, Taiwan and Malaysia has been launched in the last quarter. Conclusive evidence can result in the imposition of duties up to 20%.

The states of Tamil Nadu, Andhra Pradesh and Chhattisgarh have announced policies targeting a cumulative 5 GW of solar photovoltaic (PV) installations over the coming years. In addition, the National Solar Mission (NSM) has proposed a target of 6.3 GW of PV installations as part of its phase two draft guidelines until 2017. The announcements totaling 11.3 GW of PV by 2017 mark a significant departure from the state of the market in 2011 and the first three quarters of 2012. There was a slump in project opportunities in the Indian market after close to 1.1 GW had been allocated before December 2010.

With the new announcements, government sponsored PV in India appears to be set for maturity. This is crucial for component suppliers and Engineering, Procurement and Construction (EPC) players looking for new project opportunities, especially in the face of a significant fall in demand in Europe. It is also important for a large pool of project developers and investors who have built their capacities in the early stages of the market and are now ready to expand their portfolios towards achieving scale.

The market needs to be approached with measured optimism. Up to 5.3 GW of the announced capacity relies on the Renewable Purchase Obligation (RPO) targets set by states. Further, the policies of Chhattisgarh and Tamil Nadu specifically target the Renewable Energy Certificate (REC) mechanism as an off-take. With no clear RPO enforcement mechanisms at the state level yet and challenges with the bankability of REC projects, there is a significant question mark on how much of the planned capacity addition will actually translate into projects. Further, Feed-in-Tariff (FiT) based projects under the Tamil Nadu and Rajasthan solar policies are expected to rely on the respective state distribution utilities for the off-take. The utilities of both these states are mired with large financial losses that will challenge the bankability of their Power Purchase Agreements (PPA). In addition, up to 1.5 GW worth of projects under the NSM may be offered Viability Gap Funding (VGF) under which they will have to find alternatives to the payment security backed PPA that was offered by the NTPC Vidyut Vyapar Nigam (NVVN) in the first phase. Such projects too might face bankability issues in the absence of a secured PPA.

Another key development in the last quarter has been the launch of an investigation into the alleged dumping of cells and modules into India by manufacturers from China, the US, Taiwan and Malaysia. If conclusive evidence of dumping is found in the next six months, it could result in the imposition of anti-dumping duties of up to 20% on imports from the countries under investigation.

Manufacturers from the countries under investigation have supplied up to 70% of the modules used in the Indian market so far. If imposed, anti-dumping duties are bound to decrease their competitiveness vis-à-vis manufacturers from India and those from countries outside the scope of the investigation. Project developers will face higher system costs as they will no longer be able to import cheaper modules from abroad. This in turn will dent their ability to offer solar energy at prices that can compete with commercial and industrial prices of electricity across some states in India.

While anti-dumping duties are largely perceived as a necessity for the survival of Indian manufacturing, their benefit will be limited to a handful of Indian cell manufacturers. A majority of Indian module manufacturers rely on imported cells. They will face an increase in the prices of their modules as they will have to bear the import duty on cells. Anti-dumping duties are likely to create a distorted market where certain Indian players will enjoy exceptional advantages. Indian cell manufacturers justify this as a move needed to correct the alleged advantage that international manufacturers have enjoyed in India so far. However, BRIDGE TO INDIA’s opinion is that some international manufacturers have been able to sell at prices lower than their Indian competitors because of their scale and technology advantages under conditions of global over-supply. Anti-dumping duties will restrict Indian projects from capitalizing on cheaper international imports while doing little to improve the fundamental competitiveness of Indian manufacturers.

Download our complete analysis on the previous quarter in the January 2013 edition of the INDIA SOLAR COMPASS, where we answer the key question, ‘What will be the impact of anti-dumping duties in India?’.

Contact us for any further information on the Indian solar market.

Dr. Tobias Engelmeier is Founder and Managing Director at BRIDGE TO INDIA.

No doubt: the Indian solar market has strong fundamentals. Irradiation is very high, power is expensive and in short supply. Solar is getting cheaper. In addition, there are now a host of new policies (NSM phase II, Tamil Nadu, Andhra Pradesh, etc. – please refer to our other blog entries) promising upwards of 4 GW of new solar installations in the coming months. On the other hand, there are only a few players that are really enjoying themselves. Tier 1 Chinese module manufacturers find price pressures too high – as do many EPCs. Project developers still face difficulties in getting their projects financed. The question is: does anyone earn any money? The answer is: no. But those who are ready to try new approaches will do so in future.

Solar in India is a long-term business proposition with moderate returns

‘Quick wins’ are rare

The market has only deceptively low barriers to entry

To tap the great fundamentals, patience and a real business case are needed

On the face of it, solar power in India seems like a no-brainer. And the national and state governments are willing to encourage it in various ways – from providing subsidies to creating demand. Large figures for new allocations are making the rounds. Tamil Nadu alone aims to have 3 GW of installed solar capacity by 2015 and the NSM double that by 2017 (for our assessment of the growth, see the blog’The Indian Solar market – new market, new chances‘). This creates a great attraction from a distance: EPCs and module suppliers in need of new sales opportunities, overseas Indians (often with a finance background) looking for a promising opportunity in India, Indian business houses and land owners with political connections, and many more – they are enthralled by this promise.

However, at a closer look the opportunity is far less straight-forward. In urban slang, the word, I believe, is ‘layogenic’ – or, to go with the 1996 film ‘Clueless’: “A full-on Monet – from far away it’s ok, but from close up it’s a mess”. Once the math is done, solar is a pretty mediocre business proposition. This is, I believe, by-and-large is a success: The Indian government does not overpay for solar power (refer to ‘Rent management in the Indian solar market‘) and allocation processes have so far been transparent and highly competitive (refer to our blog ‘Why the ‘I know the Chief Minister claim’ does not work for solar in India‘). There are also significant risks and uncertainties in the policies, the wider power regulations and infrastructure (including the strength of PPAs with loss-making DISCOMS), the data-basis, and the legal environment that continue to raise concerns about the bankability of solar. Many of the large, 100 MW+ projects being talked about in the market will not come to fruition.

Quick wins are also difficult to realise. Land prices have risen in some areas. Those who sold just the land have profited. However, many of those who wanted to take the process further and have invested into power purchese agreements with a view of selling them on without significant own value addition or constructing a plant with little understanding of the technology have lost money (e.g. their bank guarantees). Even those who knew well what they are doing have made little money. As far as I can see, refinancing of projects post construction has not happened at favorable terms. Selling of completed projects has been difficult, more because of low project IRRs and unmitigated risks than because of legal limitations.

Market entry barriers are only deceptively low. The technology (PV, not CSP) is not difficult to master. Solar projects in other markets (US, Germany) have become household commodities. However, especially in a seemingly simple market, competition is high and making money requires a competitive advantage. That can be found in, for example, a superior ability to raise money at favorable conditions, the provision of real energy solutions to customers, the delivery of quality project development, the mitigatition and hedging of risks, the prediction of pricing developments of the global solar industry, tapping into tax breaks or other policy support, the building of strategically aligned assets and from the point of view of the capital markets.

The hard challenges in the market have been somewhat cushioned by the fact that projects under NSM Phase I and Gujarat have simply ‘lucked-out’, as a large Indian investor recently put it to me. The rapid fall in module prices over the last 18 months has saved project profitability. As per my understanding of the larger industry trends, this cost reduction is not going to be repeated.

If returns are not so exciting, another reason for getting into the market could be strategic. Many participants do not know yet, when or even how they will earn money, but they believe that it makes sense to establish themselves early. However, while there are notable exceptions, many seem to be strategic movers without a strategy and early movers without an early mover advantage.

All this smacks of disappointment. This can be good: The enthusiasm is exaggerated, disappointment separates the wheat from the chaff. And from this more realistic position, the real work to create value starts. It can also be too much. The fledgling industry could get a serious dampener, if too many developers, banks, and module suppliers burn their fingers. It would be difficult to reanimate the industry then. But I don’t believe that will happen. With 1 GW of installed capacity, the market is past this highly vulnerable, nascent stage. Much has already been learned and improved.

This is the good news: The strong fundamentals of the Indian solar market are becoming stronger by the day. Those players who have patience, accept normal financial returns (on the project level, say 15%) and concentrate fully on developing sound power solutions, can look forward to building a busines to cater to a vast, growing market. The single most important factors are: an ongoing, accelerated deregulation of the power industry, which will lead to increasing power costs and a further wave of privatisation of power supply; an underfunded and underperforming grid infrastructure that will make local or regional power solutions more attractive (see our blog: ‘Is the Indian grid ready for expansion to renewable energy?‘); continuously growing power demand across the country with a growing power deficit and falling (in future, less precipitiously falling) solar costs. For more thoughts on this, please have a look at the blog post ‘Making unsubsidized PV work in India‘.

In an upcoming blog post, my colleague Akhilesh Magal will discuss how some project developers are nevertheless looking for ‘quick wins’ rather than sustainable business models.

You can also download our latest INDIA SOLAR DECISION BRIEF, ‘The Project Development Handbook’, for a free overview of the processes, timelines, costs, challenges and opportunities in solar project development in India.

Dr. Tobias Engelmeier is Founder and Managing Director at BRIDGE TO INDIA.

Over the past two years, since we have been working in the Indian solar market, I have had numerous conversations with people who claimed to have access to the Minister of the Ministry of New & Renewable Energy or the Chief Minister of a state and could make “big solar projects work”. I know of none of these conversations that have come to fruition. This is why:

Solar energy, unlike good hydro-power sites or natural resources, is not under the control of anyone, even the Minister

Solar power is sold through long-term Power Purchase Agreements (PPAs) – the time period exceeds those of governments

Barriers to entry in the market are low and PPA allocation processes have so far been quite transparent

Solar does not provide short-term, windfall profits, but pays over a longer period of time if projects are well managed

To develop a solar power project, you need a site. If that site is not someone’s roof-top, it will be someone’s land. Buying land in India is not easy. Especially, if it needs to have certain characteristics. In the case of solar power, these are: suitable terrain and soil for constructing a plant, high irradiation, road access and proximity to a well functioning substation. While this limits the options, so far, there has been no shortage of suitable land. This is not to say that relationships at various levels of the government are not important to understand and expedite various processes, but involving the Chief Minister is usually not necessary. Other than land, there is no resource that could be acquired in a preferential manner. Sunlight is free.

On the PPA side, also, there is little room for receiving Chief Ministerial favors. Solar power is usually sold through long-term PPAs of 20-25 years. Banks have to judge whether to lend money to a project based to a large extent on the strength of the PPA over at least the loan repayment period. That outlasts most governments.

There have been irregularities (a solar scam, even as the Center for Science and Environment claimed) around allocations of projects to Lanco and around plant commissioning dates in Rajasthan. However, public-PPA allocations and all subsequent project development steps have so far worked in a fairly transparent manner. (The partial exception is Gujarat, where the process of allocating FiTs was not clearly defined and open to the public) Given that barriers to entering the market as a project developer are quite low, this has created a healthy competition with significant international participation.

Perhaps the main reason, why solar has not fallen prey to favoritism is that it simply does not pay enough. Solar is a long-term game. It pays those who are professional and patient and can manage risks over a long period of time. The industry is learning that fast. That makes solar power unattractive for those who have short-term profit motivations.

Dr. Tobias Engelmeier is founder and Managing Director at BRIDGE TO INDIA. He consults international companies on developing successful market strategies in India.

The Indian solar market is at an interesting point at the moment: it has come from zero to 1 GW within a period of 1.5 years. Then, it held its breath for half a year. Now it is just about to get going again. Time for a brief look at the status of the market and the main trends driving it. The most important overall trend is that the Indian market has picked-up significantly in the last weeks. New policies have been announced and there is a palpable sense of excitement in the air. We expect the next year to have project allocations in excess of 2 GW.

There has been an introduction of exciting new policies

A shift can be seen from public to private power purchase agreements (PPAs)

The solar renewable purchase obligation (RPO)/renewable energy certificate (REC) market is underperforming

Protectionism is increasing in the Indian solar manufacturing industry

India is a very exciting, progressive policy laboratory: States almost seem to outdo each other. Tamil Nadu has come up with a net-metering provision and solar purchase obligations (SPOs), Andhra Pradesh is looking to match power customers with generators, the National Solar Mission (NSM) will most likely introduce the Viability Gap Funding (VGF). One could complain that it is difficult for an investor to keep track of developments and risks, but that drawback is much smaller than the larger benefit of finding out what works best in India. There is already a keen sharing of best-practices across states and in the future there might be some more convergence. At present this lively, innovative policy space does justice to the complexity of solving the Indian power (not green power) riddle.

Shift from public to private PPAs: The RPO mechanism has started it, but it became clear with the introduction of SPOs in Tamil Nadu. One very good way of encouraging the spread of solar power without burdening stretched public funds is to simply obligate customers who can afford it (industrial and commercial power consumers) to buy it. These customers are often not even too averse to it as they tend to already pay tariffs of INR 5-8/kWh for their grid power and significantly more for diesel power. They need to think of new energy solutions anyway.

RPOs/RECs continue to under perform: This shift to private PPAs will-at present-only work, if obligations are enforced. It is too early to judge the SPO scheme in Tamil Nadu, but the RPO /REC market continues to languish. Trading of solar RECs is slow. Few of the projects that were registered under the REC mechanism were actually completed. There is a sense of frustration with the mechanism in the market.

Project sizes are increasing: When the NSM started, average project sizes for grid-connected power plants were about 5 MW. In batch two, they increased to around 10-20 MW. Now, the project sizes that are discussed in the market often range between 50-100 MW.

Protectionism of manufacturers: In the larger argument between solar project developers and power consumers who want to ensure the lowest cost of solar through unlimited access to international suppliers and Indian cell and module manufacturers who want preferential access to the Indian market to build-up their business, the latter seem to carry the day. The NSM will most likely have a domestic content requirement that might well include thin film as well. Additionally, there is an increasing likelihood of anti dumping duties being levied by mid of next year (please refer to our recent blog post on the topic of anti-dumping duties).

Jasmeet Khurana, Market Intelligence Consultant at BRIDGE TO INDIA, is working on project performance benchmarking, success factors for module sales, financing and bankability of projects in India.

The Indian Solar (PV) Manufacturers’ Association filed a dumping complaint against module imports from China, US, Malaysia and Taiwan in January 2012 with the Directorate General of Anti-Dumping and Allied Duties (DGAD) at the Ministry of Commerce. Indian manufacturers alleged that international photovoltaic module suppliers are selling below cost, or “dumping” in the Indian market. Unlike their counterparts in the U.S. and Europe, Indian manufacturers have not restricted their dumping allegations to just Chinese module suppliers.

The DGAD claims to have found sufficient evidence to order an investigation into the allegations

If conclusive evidence is found, it may recommend an anti-dumping duty which is likely to come into effect only by around August 2013

Even though any anti-dumping duties are likely to spoil an emerging market for international module suppliers, they will have a small window of opportunity right before the implementation of such duties

BRIDGE TO INDIA expects that anti-dumping duties will be enforced selectively on both cells and modules with anti-dumping duties of 20-30%

The DGAD claims to have found sufficient prima facie evidence and is now ready to begin a focused investigation. The ‘period of investigation’ has been determined as between January 1st, 2011 to June 30th, 2012 (18 months).This means that over 600MW of module imports, mostly in Gujarat and batch one of phase one of the National Solar Mission (NSM) will be investigated for the import prices and other terms of sale.

If conclusive evidence is found in the investigation, based on the inputs from the DGAD, the Department of Commerce will then recommend a provisional or a final anti-dumping duty. It is only after this, that the Department of Revenue, under the Ministry of Finance will act upon such a recommendation and impose a duty.

The actual imposition of anti-dumping duties will depend on lengthy and complex proceedings where Indian and international module suppliers will be given due time to put across their respective cases. Based on previous anti-dumping duty investigations in India, it usually takes at least five-six months for any anti-dumping duty to be notified by the Ministry of Commerce and at least another three months for it to be implemented by the Department of Revenue under the Ministry of Finance. Hence, according to BRIDGE TO INDIA, anti-dumping duties are not likely to be implemented before August 2013.

Impact of the timing

Timing of the actual implementation is critical to assess the short-term impact of any such ruling. Projects under batch one of phase two of the NSM are expected to be covered under the Domestic Content Requirement (DCR). As there is a high likelihood of the DCR being extended to thin film modules this time, any anti-dumping duty will not have a significant impact on NSM projects. More clarity on the DCR is likely to be available within a few weeks as the MNRE expects to bring in the draft guidelines for phase two of the NSM (2013-2017).

Assuming that our estimate of the actual implementation date for anti-dumping duties is correct, projects allocated under the Rajasthan Solar Policy can attempt for early delivery and procure lower cost modules. The module delivery for these projects can be managed before August 2013 if the projects are executed on schedule.

Release of the bid document in Tamil Nadu is expected before the end of 2012 and as per the discussions in the consultation meeting on 23rd November 2012, the projects are expected to have a commissioning deadline before the end of 2013. This means that even these project developers can pre-order modules to avoid paying a higher price later.

Given the timing, BRIDGE TO INDIA expects a large number of orders to be placed and delivered just before the anti-dumping duties are implemented. International suppliers will have a small window of opportunity to sell their lower priced modules right before the implementation of such duties.

Likely scenario

BRIDGE TO INDIA does not expect equal anti-dumping duties to be enforced on all the countries and module suppliers under investigation. In fact, it will be difficult for India to enforce anti-dumping duties on module suppliers from the US. Indian manufacturers have petitioned for anti-dumping duties within a wide range of 20-200%. We and even the Indian manufacturers expect that anti-dumping duties of between 20-30% can be enforced selectively on both cells and modules.

Related Posts

Anti dumping duty may be announced soon: Ultimately threatens to negatively impact the industry

Unequal import duties along the value chain are a disadvantage for Indian manufacturers

BRIDGE TO INDIA attended the 6th Renewable Energy India Expo in New Delhi from November 7th-November 9th 2012. While the general air of excitement regarding the Indian solar market was lacking as compared to 2011, there was some cause of excitement for the Indian manufacturing industry. Chinese module companies were astir with the rumor of anti dumping duties being announced in the week starting November 12th 2012. Further, the anti dumping duty became the talk to of the ‘solar’ town when Solar PV TV and PV Magazine in collaboration with BRIDGE TO INDIA, decided to interview some industry members on how they felt, these duties would impact the market.

According to speculation in the industry, anti dumping duties may be anywhere between 20% – 30%

Manufacturers rooting for anti dumping duties, but developers fear rising cost of modules. With rising costs, solar will fight to be competitive in India, says Hareon Solar

BRIDGE TO INDIA feels that ultimately anti-dumping duties will have a negative impact on the market by disallowing Indian manufacturers to be price competitive in the global industry

The interviews were published as part of Solar PV TV’s Weekly News Update. Consultant Jasmeet Khurana was one of the interviewees in the coverage. You can view the video below.

Read more of our views on India’s anti dumping against imported modules here.

Dr. Tobias Engelmeier is founder and Managing Director at BRIDGE TO INDIA. He consults international companies in developing successful market strategies in India.

Last week was a week of conferences and fairs for me – a good opportunity to take stock of what is happening in the Indian solar industry. I attended the Intersolar in Mumbai, where we had our own stall, and the 6th Renewable Energy India Expo in Delhi. Let me share my impressions here. The main takeaways are:

Everyone is looking to sell power under private PPAs

There is less interest in NSM Phase II than in the RPO market

Anti dumping duties were hyped and then did not happen

Quality seems to (slowly) become more valued in a maturing market

The Renewable Energy Expo was around three times larger than Intersolar Mumbai. It had stalls from all renewable energy technologies – although solar dominated. Most Chinese and American solar companies had their stalls there. Europeans and Indians were more present at Intersolar. A few large players, such as Bosch had a booth at both fairs. Overall, it seemed that while there was more action at the Renewable Energy Expo, I had more serious conversations at the Intersolar. These were the themes that came up in my conversations:

Merchant power plants: Many project developers are looking at setting up projects based on private power purchase agreements (PPAs) with industrial or commercial customers. Such plants could be captive, often on rooftops and in the range of 100kW to 2MW or they could be ground mounted and servicing several customers through what is called group captive or Open Access (OA). The latter are typically in the range of 20MW to 100MW. None of these have been built yet, but in the absence of other policy-based project opportunities this is where interest focuses on.

NSM Phase II: There was surprisingly little discussion of the upcoming National Solar Mission (NSM) Phase II. Whenever the discussion turned to the topic, there was a lot of vague second guessing around viability gap funding, the split between PV and CSP. All in all, there was none of the vibrant sense of expectation we saw before the first phase of NSM.

RPO/REC: Both merchant plants and NSM projects are tied to the Renewable Purchase Obligations (RPO) requirements of distribution companies (DISCOMs), captive generators and OA customers. At most of my conversations, there was a sense that the RPO requirements would drive the market through the coming year and there is cautious optimism that RPOs would be enforced even on heavily indebted public sector DISCOMs. The view on Renewable Energy Certificates (REC) is more sombre. They are still seen as a high risk (and high upside) proposition. Many developers are looking for ways to share that risk (and the upside) with power consumers in some way.

Anti dumping duties: These were the “whispers in the corridors”. A Chinese module manufacturer told us that India will impose anti-dumping duties on Chinese modules very soon – it was to be announced this week. As always, at fairs such rumours spread fast and wide. Soon everyone was talking about it. So far, nothing has happened. And, given that there were no announcements on policy hearings yet, we continue to think that duties will not be imposed soon.

Andhra Pradesh and Tamil Nadu solar policies: Most market participants are still mulling over the details, loopholes and implications of these policies. We will come out with Policy Briefs on these policies soon to give our analysis.

Cost/quality: The question was how to ensure that India gets the best solar technology at the most competitive prices? Project developers are becoming more far-sighted and quality conscious. Prices offered are highly competitive. The hitch seems to be with banking institutions: will they finance projects under new (private) PPAs? Will they encourage the spread of new manufacturing technologies that can lower price/increase module efficiency?

Watch a video on our views on the solar trade case in India in collaboration with Solar PV TV and PV Magazine.

Download our latest edition of the INDIA SOLAR HANDBOOK which provides a detailed first look at the Indian solar market.