BTI report

ESTIMATING COST OF CAPITAL FOR INDIAN SOLAR PROJECTS  | APRIL 2018

This report examines different methodologies and related issues for estimating risk-adjusted cost of capital for solar projects in India.

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A solar power plant rarely produces nameplate capacity power as solar modules operate at their maximum efficiency only during limited peak hours. It has therefore become routine industry practice to over-size DC module capacity, a concept commonly known as DC overloading. It allows solar plants to increase generation during non-peak hours and optimizes overall performance. In 2017, 45% of the projects installed in India used DC overloading of over 20%.

However, DC overloading may create a situation where peak-hour generation crosses capacity constraints of the inverter forcing it to ‘clip off’ extra generation. Optimal DC overloading requires balancing the trade-off between clipping losses during peak hours and extra generation during off-peak hours through the year. This trade-off is complicated by the fact that solar modules degrade over time causing reduction in clipping losses in later years.

Figure: Benefits and losses of higher DC overloading

 

 

 

 

 

 

 

 

 

 

Increasing DC capacity reduces effective cost of transmission lines, AC side equipment and soft costs. Choosing optimal DC:AC ratio depends on multiple parameters:

  1. Irradiation: Higher irradiation results in higher clipping losses and hence, lower DC overloading is suggested for such projects.
  2. Site temperature: High site temperatures adversely affect power output from the modules. Most utility scale project sites in India have high temperatures (over 40 deg C) during peak-hours, resulting in underperformance of the system and lower clipping losses. Hence, higher overloading may be desirable for such sites.
  3. Land availability: Increasing DC overloading requires more land. Land availability constraints, in solar parks or other projects, may dictate the amount of overloading.

New project tenders in India in recent years have not prescribed any cap on DC overloading. The trend to use higher DC overloading has increased in India. A few projects have even used overloading of over 50%.

Figure: DC overloading in India in 2017

 

 

 

 

 

 

 

 

 

Source: BRIDGE TO INDIA research

For more details of Indian inverter market and various design and operation issues related to inverters, download our report, Inverter Design and Selection.

FULL STORY

SECI conducted another e-auction for 2,000 MW of wind power projects on 6 April 2018. Winning bids were INR 2.51 – 2.52/kWh, just marginally higher than the tariffs discovered in the previous 2,000 MW SECI auction (2.44 – 2.45) held in February 2018. Winning bidders include an even spread of international and Indian names. International winners include Continuum (250 MW), Sprng (300 MW), BLP (285 MW) and Engie (200 MW). Indian winners include Inox (100 MW), Adani (300 MW), Mytrah (300 MW) and ReNew (265 MW).

These projects will be connected to national grid. SECI will sign 25-year PPAs with developers and back to back Power Sale Agreements (PSAs) with DISCOMs across non-windy states. The project commissioning timeline is 18 months from the date of signing PPA.

So far, 6,000 MW of wind capacity has been auctioned by SECI alone in the past one year. All these projects will have Inter-State Transmission System (ISTS) connectivity. NTPC has also issued a similar 2,000 MW tender, for which bid submission is expected by 25 April 2018.

With 7,500 MW of wind capacity tendered (by SECI, Tamil Nadu, Gujarat and Maharashtra) and 4,000 MW capacity tenders in pipeline, wind sector is expected to pick up pace in 2018 and 2019. MNRE has planned to auction a further 20 GW of wind projects by March 2020. Wind tariffs have gradually settled down around INR 2.50/kWh (40-60% lower than state feed-in tariffs) and are expected to remain stable in the upcoming auctions.

FULL STORY

About two weeks ago, the Central Electricity Authority (CEA), a statutory agency constituted under the Ministry of Power, released final National Electricity Plan for the five-year period beginning April 2017. The Plan is an important document – it should provide a roadmap for power sector development and serve as a planning guide for all government agencies. Unfortunately, unrealistic assumptions about power demand growth and RE capacity addition as well as some fundamental exclusions render the exercise futile in our opinion.

Last week, MNRE issued a clarification to its guidelines for competitive bidding of solar PV projects. The clarification allows inclusion of changes in duties and other cesses in Change in Law provisions in power purchase agreements. It effectively means that risk of any new duties or changes in duties including safeguard and/or anti-dumping duties arising after the “last date of bid submission” would be borne by the power purchasers ie DISCOMs.

  • The protection offered to developers is highly welcome even if it poses some operational challenges and doesn’t eliminate the risk entirely;
  • It paves way for the tender pipeline, stuck for many months, to start moving forward;
  • The status of projects auctioned without any explicit protection remains unclear;

Gujarat conducted e-auction for a 500 MW utility scale PV solar tender last week. Capacity has been won by four developers at tariffs between INR 2.98 – 3.06/ kWh – Kalthia Engineering (50 MW, INR 2.98), Gujarat State Electricity Corporation (GSEC) (150 MW, INR 3.00), Acme (100 MW, INR 3.06) and Azure (200 MW, INR 3.06). Losing bidders include Hero, Adani, Shapoorji Pallonji, Mahindra, Mytrah and Fortum.

  • Tariffs have gone up by 22% in 3 months because of the threat of safeguard duty;
  • Ministry of Power statement that developers would be expected to bear duties only as applicable on the date of auctions is being disregarded by them;
  • We expect little progress on over 11,700 MW of tenders stuck in pipeline until there is clarity on duty decision;

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