THE BRIDGE TO INDIA BLOG
India under Modi’s regime is being deliberated as a preferred destination for solar investments from rest of the world. An upcoming mega exhibition is going to be held in Delhi in February, to facilitate the international investment in India, “RE Invest Summit” (link). Though solar makes sense in India, but the question still remains that when would it be a reality? Besides the policy support, the government should highlight the importance of a self-sustaining market place. BRIDGE TO INDIA believes that the following are the stepping stones to make the shift towards solar feasible in India.
- Cost reduction in solar should be the prime focus & to be supported by accessible information on the industry
- Build strong financing environment backed by robust researches in solar applications and ample entrepreneurship opportunities
- India needs to see more of distributed markets in solar
Weekly Update | India looking at all options for low cost financing of solar projects in the country
The Indian government clearly understands the impact and importance of low cost finance for the solar sector in the country and has taken up efforts to woo international institutional capital to the sector. Latest step in this direction is a Memorandum of Understanding (MoU) between US-EXIM and IREDA for a financing support of up to USD 1 billion (INR 61 billion) for made-in-America renewable energy goods and services (refer). This MoU is expected to be signed next week at the India-U.S. Technology Summit.
- Steps are being taken by the government to enhance access to financing and certification of off-grid technology
- Multi-pronged approach to attract institutional capital to the solar sector is a welcome step
- BRIDGE TO INDIA believes that the government should put additional effort towards ensuring more of private sector participation
Uttarakhand has opened the financial bid for a 30 MW tender which was floated in August’14. Despite the projects lacking scale advantage, Redwood projects has quoted a highly aggressive bid of INR 6.85/kWh for a 1 MW project. This bid is the lowest and is INR 0.71/kWh below the next bid. Overall, the median winning bid is INR 7.75/kWh, which is 12% higher than the median winning bids in Karnataka.
- The median winning bid of INR 7.75/kWh would yield equity IRR of over 14%
- Over 80% of the projects will be located in Haridwar district
- Over 50% of selected projects have a capacity of only 1 MW
Last week, the Ministry of New and Renewable Energy (MNRE) announced revised subsidy benchmarks for various off-grid and decentralized solar applications (refer). The subsidy amounts have been fixed in absolute Rupee terms instead of as percentage of capital cost. BRIDGE TO INDIA welcomes this change as it brings more transparency into the process.
- Revised subsidy benchmarks announced by MNRE, fails to address the critical issue of delay in subsidy disbursement
- BRIDGE TO INDIA agrees that discontinuation of subsidy mechanism might be a better step
- Better incentive mechanisms to ensure quality of installations, which is plant performance linked could be more effective
We believe that India could easily add 100 GW of solar power in the next ten years. Such a capacity addition would likely be divided into different segments: small rooftop (solar bees), large rooftop (solar pigeons), utility scale projects (solar horses) and ultra-mega scale projects (solar elephants). Each segment has implementation challenges. We believe that solar horses would face least hurdles because of the existing execution experience and manageable size. Solar bees will face most hurdles because their implementation at scale requires the development of a new market place. For further details, please refer to our ‘India Solar Decision Brief’ titled “India’s Solar Transformation: Beehives vs Elephants” (online downloadable version available here).
- Solar horses have relatively fewer challenges due to a good track record and existing industry ecosystem
- Solar bees have most challenges; the largest hurdle is financing
- For very large solar plants, grid infrastructure will be the key challenge
Since the 1950’s, the world has witnessed (and recorded) global warming at an unprecedented speed. This radical change in the climatic system has been attributed to massive emissions of CO2 and other greenhouse gases, due to industrialization and related, modern lifestyles. While there have been debates in the past over the reality and validity of global warming, there is now an overwhelming scientific consensus that it happens, that it is man-made and that it affects the climate in potentially very damaging ways. Unless the carbon juggernaut is stopped and rolled back in time, we may soon pass a point of no return. In its fifth report on climate change, the Intergovernmental Panel on Climate Change (IPCC) sets the point of no return at 16 years from now1. One of the solutions is accelerated deployment of renewables. Today, renewable energy already accounts for over 20% of power generation worldwide as of 2013. Renewables are still, however, underutilized.
- The key to avoid a climate disaster is to act quickly and decisively through a global transition in the way we gather, transport and consumer energy
- Global energy needs are increasing and carbon curtailment won’t be possible without providing alternative sources of energy
- Renewables are a technologically and economically mature option
Last week, Karnataka opened financial bids for 500 MW solar PV projects, just a few days after financial bids for another 500 MW solar PV projects were opened in Andhra Pradesh. The bidding process in both the states was based on reverse bidding: on the basis of flat tariff in Karnataka; 3% escalation per year until the 10th year in Andhra Pradesh. The median winning bid in Karnataka is INR 6.94/kWh (USD 0.12/kWh). The levelized (adjusted for escalation) median winning bid in Andhra Pradesh is INR 6.70/kWh (USD 0.11/kWh) (refer).
- The opportunities in both the states are quite comparable
- Both First Solar and Acme who aggressively bid in Andhra Pradesh, did not participate in the Karnataka bids
- Overall solar tariffs in India seem to have stabilized between INR 6/kWh and INR 7/kWh
Andhra Pradesh has opened the financial bids for allocation of 500 MW solar projects. Developers have quoted a tariff for the first year, which will then increase at 3% every year till the 10th year. The term of the Power Purchase Agreement (PPA) is 25 years. First Solar has quoted the lowest bid at INR 5.25/kWh (levelized at INR 6/kWh) and has shown the way to reach parity with imported coal.
- The lowest bid of INR 5.25/kWh (levelized at INR 6/kWh) is also the lowest in India
- Over 95% of the projects will be installed in the southern districts of Anantapur, Kurnool and Chittoor
- The bid shows solar as almost at par with imported coal