The Honest Truth
Today Over half our energy comes from fossil fuels extracted from deep within the Earth’s crust. Since commercial oil drilling began in the 1850s, more than 135bn tonnes of crude oil has been extracted from the Earth. Every day, human beings consume more than a million terajoules of energy. And this means …roughly equivalent to what we would use if all 7.5 billion people on earth boiled 70 kettles of water an hour around the clock (See figure 1). It illustrates our thirst & hunger for Energy and dependence on it. This also leaves no doubt in our mind that business as usual means this craving to grow, and exponentially as the underdeveloped too climb the prosperity ladder(see Figure2).
Vital to Cope with Energy Demand Sustainably – Need Energy Only if we Exist!
AS THIRST FOR POWER GROWS…Will supply of energy in the future be enough to satisfy the needs of all? What about quality of the energy generated? Will it be environment-friendly? As scientists ponder these and other questions, a hard look at the big challenges facing mankind on the energy front as well as environment front simultaneously has become imperative to ensure man’s very sustainability on planet !! We need Energy only if we continue to be alive and kicking. Therefore ‘Need to Exist’ is a precondition to ‘Energy Need’. Therefore the need to look for means that satisfy both ‘Existence’ & ‘Energy’ in that order!!
The challenge is of supply which is critical with huge ‘Demand spike’ expected in Asia, Latin America and parts of Africa as these are still in developing phase. (see Figure 2 ).
Making Renewable Energy the Answer
The sector is expected to continue growing by 2.6% each year until 2040. Worldwide, solar energy production grew by 50% in 2016 (See Figure3). Sun is an inexhaustible source and the pity is that man is just utilizing 10% of what it is offering. There is a huge ground to cover. Look to the sun and just focus on it and man needs not depend on anything else!
But the Questions that Remain Unsolved are
One challenge is we cannot store electricity in large quantities yet; this limits how much renewable energy can be practically used.
Without energy storage only about 10% of power can come from solar.
Thus, the question is what to do when the sun is shining and the wind is blowing yet electricity demand is low.
Some propose Hydel dams to be a solution. For instance UK has used its excess power to pump water to the top of dams for storage as potential energy. The water with this potential head is released as required to drive turbines. Of’course the pumping costs are to be factored but net gains make the point.
‘Global Warming’ makes ‘Cooling’ needs the Burning Issue
Man needs to take stock of global warming issue because it will strike as a double whammy as while temperatures soar high the energy need will spurt to cool all built environment. Energy consumption on cooling buildings, machines and practically everything will in fact be the burning issue! A few credible markers to ‘bookmark’ are :
– Some scientists said “globally, the greatest challenge for energy is going to be cooling”
– The growth of the middle class in India and China will see a demand for air conditioning
– UN’s Intergovernmental Panel on Climate Change said by 2050, the demand for cooling will outstrip the demand for heating
Therefore, Green house gas emissions (CO2 especially) from fossil fuels as a whole needs containment.
Focus on Solar Keeps CO2 in Check
Global energy related carbon dioxide emissions remained flat for a third straight year in 2016 on the back of increasing dependence on natural gas, renewable power, new nuclear capacity and greater focus on efficiency, the International Energy Agency (IEA) said in its latest report on Friday 17th March 2017 .
Energy-related carbon emission remained flat even as the global economy grew, signalling continued decoupling of emissions and economic activity. On India specific latest data, an IEA spokesperson said individual country-wise data is not yet released.
Though global carbon emission re-mained nearly stagnant in 2015, India’s emission had shown an increase of 5.2% in 2015. However what industry observers say is that the figure could be stagnant or indicate only a tapering growth in 2016 because Indian government has continually taken several measures in the last three years. These they say included, thrust on creating a gas-based economy, ramping up of solar power capacity, replacing all traditional bulbs with LED, deploying technology to improve emission from old power plants and improving fuel and automobile quality.
But the greatest impetus in reducing India’s energy-related carbon footprint that is expected is from the Modi government’s thrust on building solar power projects, which now have aggregate capacity of 10GW. Also, revival of gas-fired power stations last year was a plus.
In 2016, global emissions from the energy sector stood at 32.1 gigatonnes (GT), the same as the previous two years, while the global economy grew 3.1%, according to IEA estimates.
Here and Now!
This is a narrative to bring to the reader the Solar- situation that is ‘Here & Now’ and the path it will tread ‘from here and from now’ will be based on steps the Influencers (Government, Global trends, Stakeholders including each consumer type at large) make the Indian Market to take.
Solar market in the Americas also continued to grow with the USA, Canada and Chile leading the pace but Europe, which had previously led the way for the solar industry globally, has seen growth stall in recent times because of the pull back of the FiTs.
India has been a pioneer in allocating utility scale solar projects through competitive tender process. In contrast to most other large solar markets around the world (China, US, Germany, Japan), which have been allocating projects on a preferential basis by offering attractive feed-in-tariffs (FITs), India started using the auction route for project allocations back in 2010.
At the outset to put India in the right perspective in respect of its relative good standing it is necessary for me to say that,
– In 2016, about 65 GW of solar capacity is expected to be added globally. Asian countries including China, Japan and India are expected to be in the top five countries.
– China is expected to continue leading the global PV market while USA is set to overtake Japan as the second largest solar market, exceeding the much-anticipated 10-GW mark.
– India is at the fourth position leaving behind the major European solar markets (UK, Germany and France) with expected new capacity addition of 5.6 GW in 2016. Its pacing to third with ongoing steps.
There is much to celebrate for the dev-elopments in the renewable energy sector in India in 2016 which saw the renewable energy capacity commissioned being higher than thermal capacity addition for the first time. And Solar power expectedly dominated the Indian renewable energy space in 2016 – the highest ever annual solar capacity was added (4GW). The icing in the cake was recording of unprecedented low tariffs, and commissioning the world’s largest solar PV power plant with a capacity to produce 648 MW in Kamuthi, Tamil Nadu.
Tendering its Way Ahead
The pace of solar tenders picked up sharply after the announcement of 100 GW solar capacity addition target for 2022. From July 2015 to December 2016, India allocated 15.9 GW of solar projects.
It has been observed that bidding in the sector has been responsive and in fact fairly aggressive too. In terms of Bidding Risk pricing, particularly for capital cost, offtake and transmission risks, appears inadequate.
The huge plus for the sector has been its being extremely lucky with rapid falls in solar module prices significantly easing financial and execution challenges. However on the minus side the capital raising continues to be difficult for many small- and medium-sized developers. This is more than evident from substantial gap between tendered and installed capacities. If it’s tenders for growth the effectiveness index no doubt will be based on tariffs and right cost bids. Then it would depend on the due diligence that the parties to contract exercise that would deliver right results. Also these will determine the ‘Shift’ to ‘Solar from Thermal’ as examined herein later.
Key project variables affecting tariffs
A Bridge to India report identified the following variables and performed sensitivity analysis to show that tariffs can vary by as much as 20-25% or even more depending on tender structure, timing and specifications. See Table 1.
Finding Right Place Under the Sun
Renewable energy, especially solar power, is slowly finding its space under the sun. This is happening especially when India’s thermal power generation plants are working at sub-optimal capacity, and this low performance is not due to inadequate coal supply. In fact India Ratings and Research(INDRA) says in a recent report that electricity demand has not kept pace with capacity addition in coal-based power generation in the past five years. The report adds ‘growth in power demand has also moderated to five percent, from earlier projections of 8-9 percent, leaving upcoming power projects in the dark’.
On the other hand, the renewable sector’s total contribution to energy generation in India has risen from 4.59 percent to 5.7 percent, year-on-year over the past eight months, says India Ratings. And the Solar power space has seen majority capacity addition growing by a whopping 155 percent to an installed capacity of 2.1 gigawatt (GW).
Investment Shift from Thermal to Solar
IND-RA has pointed out that India’s power demand will eventually go up once production activity picks up, while also arguing that future capacity addition may not be coal-based. The feasibility dynamics tilted in favour of Solar over Thermal due better financial viability of solar power projects, which brings us to the REWA Solar Park as a successful template.
The more comprehensive power purchase agreements for the 750 MW power projects at Rewa Solar Park, Madhya Pradesh makes it easier for power producers to get financial aid at competitive rates. The lower tariffs for power too are not seen as risk in giving out financial aid. In fact as per IND-RA lower rates are incentive for purchasers to pay the due. The question is how low can lenders consider it to be risk free. The threshold will definitely come up !
India Ratings Report concludes “…a lot of investor interest has shifted towards solar and other forms of renewable energy. Thus, coal-based power plants may not be a preferred investment in the future”.
Policy, Projections, Stakeholders, Investments and Project Landscape
The Indian solar market is witnessing key policy changes being introduced. There is burgeoning investment interest both from Indian and international developers in the sector. The current frantic activity is a giant step considering just capacity addition of approximately 1 GW per annum for three straight years until 2014. Delivery will be key to sustained rush!
As earlier mentioned about fierce tariff war the same continues unabatedly. The severe competition on tariff front has seen them dropping phenomenally to M4.34-5.00/ unit ($0.07-0.08) levels. However now many developers have feeling the pinch struggling to raise capital as banks seem reluctant to lend to projects at such tariffs. This could see progress in 2017 and 2018 to ebb a bit and not be as fast as expected. In contrast to Ministry of New and Renewable Energy (MNRE) target of 12 GW of utility scale solar projects for FY 2016-17, ‘Bridge to India’ estimates peg actual capacity addition to be only about 5-6 GW in FY 2016-17.
Moreover its report points out a possible growth trajectory for the sector over the 3-5 year horizon mentioning that Central government had taken early lead through
– National Thermal Power Corporation (NTPC) and
– Solar Energy Corporation of India (SECI)
by releasing project tenders of more than 9 GW as of April, 2016 itself.
India has multiple types of utility scale solar projects with several off takers and processes(See Figure5a. & b). India installed 6.6 GW of Utility Scale Solar as of March31,2016 (See Figure 6)
The southern states have also shown huge interest in solar power to overcome their growing power deficit. But with power demand showing slow growth and grid stability issues growing more important over time particularly in areas of high renewable penetration, a slowdown in the sector after 2017 and 2018 is expected.
On the policy front, the Solar Parks Policy and UDAY scheme have been hailed largely as a successes. In Solar Parks, MNRE had approved 33 Solar Parks in 21 States with 19.9 GW capacity (Figure 7 Solar Parks Plan). These have been enhanced to 50 in 2017 (see later in story).
Going forward, ensuring grid robustness and investment/lending appetite at aggressive tariff levels will be the two main challenges. Policy interventions to address these challenges together with demand growth measures will be key to sustainable growth of the sector.
One major disappointment continues to be the rooftop solar market where the 40 GW target for 2022 seems like a very remote prospect. This market needs more focused policy support to ensure effective net-metering implementation and attraction of financial investors.
Overall, the growth prospects for the India solar market are very bright providing an immense opportunity for investors, developers and equipment suppliers. However the market will remain very price sensitive and with its share of challenges.
Project Development Landscape & Projections 2020 – Utility
Indian Solar Market has seen project size with International Utilities &IPPs with strong balance sheets emerging within just last year. (See Figures 8a, 8b).
Market projections – Utility till 2020 are shown at Figures 9a with 9b illustrating ca-pacity split between states, MNS and others.
Rooftop Solar – Installed Capacity & Projections
Economic fundamentals for adoption of rooftop solar in India are improving rapidly. In 2016, the market expected addition was a capacity similar to the entire capacity added in India till date. The market is expected to grow at compounded annual growth rate of 58% per annum.
(See Figure 10 & 11).
India Doubles its Solar Power Capacity Target to 40 GW by 2020
The Union Cabinet Committee of Economic Affairs (CCEA) of India has approved the doubling of the solar power capacity target by 2020 from 20 GW to 40 GW. This increase has been approved in the new budget as well.
This enhanced target capacity would ensure the construction of at least 50 new solar parks in the country with a capacity of 500 MW each. The park developers will receive financial support from the central government which plans to spend for this purpose around US$1.207bn in 2019-2020. The implementing agency is the SECI (Solar Energy Corporation of India).
This figure has doubled since the 2014 plan which forecasted an aggregated ca-pacity of 20 GW. The Indian Ministry of New and Renewable Energy (MNRE) is currently implementing this scheme and as of today, 34 solar parks with an aggregated capacity of 20 GW have been approved or are presently under development.
2016 Was Great, Best is Awaited!
2016 was a great year for the Indian solar industry but the best is yet to come. Taking a holistic look at the Indian solar sector means to analyse key trends, challenges and outlook. Key highlights include record project volumes both for capacity addition and issue of new tenders, impro-ving power distribution company (DISCOM) financial position as a result of UDAY scheme, steep fall in equipment prices, improving M&A activity and India’s ratification of climate accord adding credibility to the country’s ambitious 100 GW target for 2022.
Most key indicators grew 2-3x over previous year. The total solar capacity of 4.9 GW (estimated) got added, which is an increase of 101% over 2015 and crossed the 10 GW cumulative installed capacity mark. New tenders were floated for 9 GW of grid connected solar projects including 900 MW for rooftop solar systems.
As solar tariffs fell below INR 5 (USD 0.07)/ kWh, solar power gained parity with other sources of greenfield power. The falling cost helped to boost solar demand from the DISCOMs despite total power demand staying relatively weak throughout the year. Both Solar Energy Corporation of India (SECI) and National Thermal Power Corporation (NTPC) are to allocate substantial new capacity in 2017 attracting even more competitive tariff bids. An INR 4 tariff level will be seen to be breached in 2017.
Indian project developers asserted themselves strongly in 2016 winning over 90% of tendered capacity. All of the top 10 developers by pipeline capacity are now ‘home-grown’ IPPs and corporates. Successful sale of solar assets of Welspun (to Tata Power), SunEdison (Greenko), Punj Lloyd (IDFC Alternatives) among others and international IPO by Azure has helped instil confidence in the sector’s growth prospects. Falling module prices proved to be a gift to aggressive bidders. Reduced Chinese demand in the second half of 2016 resulted in prices tumbling by 20% during the year.
India’s rooftop solar segment also crossed the symbolic 1 GW mark in September 2016, growing by 135% over 2015. Attractive capital subsidies and substantial demand from public sector are expected to continue ensuring good demand boost to the rooftop segment over the next few years.
The strides made however dampened owing to growth of delayed power purchase payments by many DISCOMs and curtailment risk. These two risks badly affected wind power sector during 2016 but Solar sector has so far been lucky to escape this perhaps because of smaller capacity (9 GW vs 28 GW of wind power capacity). These risks pose significant challenges to the sector despite strong government support and UDAY scheme.
The global supply glut in modules consolidated the hold of Chinese suppliers in the Indian market as over 80% of all modules installed in India in 2016 came from China. The World Trade Organization (WTO) declared India’s policy for domestic content requirement illegal and the proposed policy to support local manufacturing has been getting delayed. ‘Make in India’ plans announced by various Indian and international suppliers have landed in limbo.
Expectation in 2017 is of a total new capacity addition of over 9 GW (up 90% over 2016) and up to 8 GW of new utility scale capacity allocation by NTPC, SECI and states including Madhya Pradesh, Maharashtra and Tamil Nadu. As other international markets including China, Japan and Europe slow down, India will remain one of the fastest growing markets around the world. The new domestic manufacturing policy continues to be worrisome.
And in 2017 – India’s Solar Growth to be 90%
Looking at 2017, in the pipeline is around 14 GW of utility scale projects, out of which 7.7 GW is expected to be commissioned in the year (growth of around 90% over 2016). Combined with 1.1 GW of expected rooftop solar capacity, India should add a total of 8.8 GW in 2017, ranking it amongst the top three global markets after China and the USA. On the policy front, impact of central government policies related to manufacturing, power distribution (UDAY) and implementation of GST is awaited keenly.
On the Negative side, there has been some concern about weak power demand growth in India and growing incidence of grid curtailment and what it means for growth of solar power. Demonetization may also impact power demand negatively.
However on the positive side,
– Continuing fall in module prices combined with downward trend in domestic interest rates should be providing strong enough ongoing demand thrust to the market. Solar tariffs are expected to plummet below the critical INR 4.00 (USD 0.06)/ kWh mark making solar power the cheapest new source of power.
– At the same time, improving financial health of power distribution companies due to UDAY implementation will also help in sustaining renewable ener-gy demand in particular. A sustainable demand of 6-8 GW for utility scale solar in the coming years is forecast.
– As the Indian market ramps up, it will become a key pillar for demand growth when demand in other leading countries including China, Japan and even possibly the USA is expected to slow down.
– Leading international equipment suppliers have started paying more attention to Indian market and are developing specific pricing and product strategies for India.
– Weak power demand growth and grid curtailment incidence notwithstanding, solar power outlook in India remains strong
Will this improving domestic demand lead to large-scale investments in greenfield manufacturing capacity? Notwithstanding government’s intent for domestic manufacturing (‘Make in India’), the competitive dynamics are not conducive.
The Goods and Services Tax (GST) implementation during 2017 means marginal cost increases but could create uncertainty for developers and contractors. Anyways expectation is, any adverse impact go to the distribution companies.
Rooftop solar will continue its spectacular growth trajectory in 2017 with a 1.1 GW of rooftop solar capacity expected to be added up 75% from 2016. This is ba-sed also on available capital subsidies and substantial demand from public sector.
Overall, 2017 will be a bumper year for the solar power sector in India. Total installed capacity is expected to reach 18 GW by the end of the year.
The SECI Booster Shot!
A master development in 2017 for renewable IPPs has been SECI being inclu-ded as a beneficiary in a tripartite agreement between the Government of India, state governments and the Reserve Bank of India (RBI). This tripartite agreement serves as a payment security mechanism for central government undertakings whereby, in the event of a payment default by any state government undertakings in-cluding DISCOMs, they can withhold funds from the centre’s financial assistance to the states.
Real Time Facts to Know
At this juncture, it would be useful to see a few landmark cases to understand some pertinent aspects of this sector:
1. A template for future Rewa Project
2. Perils to Avoid Case Jharkhand
3. Delhi offers power plant @Smartphone cost (Commoner’s ‘Own Rooftop Power’)
1. A template for future Rewa Project
The Rewa project shows the way forward for future of power sector. The 750 MW Rewa solar project has seen tariffs fall to a record low of ` 2.97/ kWh. Levellized tariff works out to ` 3.29/ kWh, 24% below the previous low of ` 4.34 seen in an NTPC tender in January 2016. Acme Solar, Mahindra Renewables and Solenergi Power won 250 MW each. Mainly this fall is due to lower equipment cost with Solar module prices, constituting about 60% of capital costs, have fallen by 26% in 2016.
The Rewa auction makes solar PV the lowest cost power source in India. New coal-fired thermal power today costs about Rs 5/kWh. Gas power is not viable in India due to high cost (over Rs 6/ kWh) and short supply of feedstock. For wind power, even after auctions, tariffs are closer to
` 4/ kWh. Solar technology is in early evolution stage and advancements & growth in industry volumes will drive solar power cheaper. The target is solar power costing ` 2/ kWh by 2020. On top of that, cost of inte-grated solar-storage systems with 100% power back up is expected to fall below the critical threshold of ` 5/kWh by 2020.
TERI in its bold report, Transitions in Indian Electricity Sector, records for India to exercise option of stop adding new thermal power capacity from now itself (read 2017). As on date it considers India to have surplus power supply in the country and therefore stresses the need to plan to add no more thermal capacity for future (which have gestation period of 4-5 years). Instead the need is to have holistic approach in addressing pressing requirements of the energy sector which includes following steps :
– Finding ways of solving the inter-mittency problem of solar power. Storage technology solutions need to be evolved rapidly. Indian government should devote resources too in this crucial segment by favourable policies and investments in R&D, design, manufacturing and operations.
– Also needed are policy, regulatory and technology related interventions to facilitate energy transformation more flexible generation capacity, time of day power pricing to adapt consumer behavior, better forecasting technologies, huge investments in smart grids and transmission systems as well as a redesigned regulatory framework.
– Since current market trends show that most of the future investment in re-newable power and allied storage and grid systems will come from the private sector, it would be imperative to have financially strong DISCOMs with technical and financial capability to strengthen the last mile distribution infrastructure. Strenuous implementation of the UDAY reform package for DISCOMs is very critical.
– Fortunately thus far, the financial re-structuring part of the package has gone off relatively smoothly but the more challenging aspects of operational restructuring, tariff reform and cutting T&D losses still lie ahead.
The renewable energy age is here to stay and rule, as it is the powerful game changer in Energy space. It forms the sub stratum that can transform economy, environment and uplift of lives.
2. Perils of State Government Tenders- Case Jharkhand
Unless the states manage tenders prudently and bidders use discretion the perils of huge failures and losses cannot be avoided bringing distress in an otherwise prospective sector. This is a case in point.
It was in the second half of 2015, Jharkhand Renewable Energy Department (JREDA) had announced India’s then largest tender for allocation of 1,200 MW of ground mounted, grid connected solar projects.
Why was the state out to procure 1,200 MW of solar capacity?
The tender size was so large as to meet over 90% of the state’s peak power consumption and over 20% of its overall power requirement. Despite this and the state being power surplus, the tender was subscribed by over two times.
But then obviously staring at disaster, as expected, ever since Jharkhand Bijli Vitran Nigam Limited, the state power distribution company (DISCOM) has been dragging its feet. and has not signed a single PPA so far, ten months after opening the bids. It therefore is to dawn on all to exercise prudence before tendering and bidding. We know:
– As tariffs have fallen across India, Jharkhand may now renegotiate tariffs and sign much less than the planned 1,200 MW capacity;
– Implementation and enforcement of renewable policies has been uneven across states;
– Better state level planning is required to provide visibility to investors, build necessary transmission infrastructure for seamless integration in the grid and smoothen solar procurement costs for DISCOMs;
As the state continues to delay signing PPAs, solar tariffs have fallen substantially across India. This makes it increasingly unlikely that Jharkhand DISCOM will sign PPAs at bid tariffs of between ` 5.08 – 7.95 (US¢ 7.7 – 11.7)/ kWh. It is expected that renegotiating tariffs and signing less than the planned 1,200 MW capacity will be the case. There have been multiple such precedents in other states including Andhra Pradesh, Madhya Pradesh and Haryana.
Another somewhat similar case could be about the ambitious quantum of solar capacity being developed in many southern states. Karnataka and Andhra Pradesh both need to add around 5 GW by 2022, but the two states have already built total installed plus pipeline capacity of 5 GW and 4.1 GW respectively. This rapid ramp up of solar capacity can increase the risk of grid failures and curtailment that may critically hamper sustained growth of renewable power in the country.
The Government of India has prescribed yearly capacity addition targets for states in line with their respective Renewable Purchase Obligation (RPO) requirements. But actual implementation across states has been uneven and haphazard. As always holistic integral app-roach alone can assure sustained delivery.
3. Delhi offers power plant @Smartphone cost
True! Commoner’s ‘Own Rooftop Power’ is on offer per Delhi Solar Policy.
With the Prices of Rooftop Solar Panels dropping by 50p.c, Delhi Solar Policy has some offerings for residents. Rooftop Solar panels producing a kilowatt of power are now coming within the reach of ordinary citizens. Such a project will cost around Rs 60,000, even less if the central government’s 30% subsidy is factored in. In fact, generating the energy to run two fans and two lights could come at the price of a high-end smartphone. One can in-crease appliances like AC, Fridge etc by increasing the panel KW and pay more based on one’s affordability.
An investment of around ` 50,000 on putting up the solar panels would have a payback period of around three years. Till a year ago, generating each kilowatt of solar power cost upward of ` 90,000. “Over the past 6-7 years, the prices of solar modules have fallen 85%,“ said Jasmeet Khurana, associate director (consulting), Bridge to India, a renewable energy specialising consultancy. “This slide, coupled with increasing volumes, has led to the price crash.“
This is the prime reason that has chan-ged the misleading notion that only large commercial projects stood to gain economically and made even small capacity stand alone projects for single residential consumers becoming affordable for common man.
A kilowatt means 1400 units power in a year with installed system have 25 years life. Only shadow free space of 120 square feet is required on the roof. The potential for rooftop solar power in the capital is 2200 MW; Delhi’s peak power demand is around 6,600 MW .
“Tapping solar power has become easier because the Discoms now provide services such as installing net meters and facilitating subsidies.“ Tata Power Delhi Distribution Limited (TPDDL) told T.O.I. TPDDL, catering to north and north-west Delhi, has 150 domestic and commercial consumers aggregating installed projects of 7 MW on their rooftops.
BSES Delhi, the capital’s other discom, has around 300 solar rooftop generators, generating 10 MW. “Consumers have be-gun to see how rooftop solar power generation reduces their electricity bills,“ said an BSES official. “Against around ` 90,000 per kilowatt earlier, SECI now says the average cost in Delhi under a 500MW grid-connected project of a size bigger than 25kWp is just ` 66,000.“
The payback period could be shorter if Delhi government’s generation-based in-centive of ` 2 per unit offered for the first three years is taken into consideration. Commercial establishments, which are not entitled to this incentive, can still cut down by opting for solar power generation.
Power department officials said the completion of vendor empanelment in a few weeks will facilitate consumers taking up rooftop projects (T.O.I 18th March 2016). Pujarini Sen, for Greenpeace India, campaigner said. “India has an ambitious target of 100GW of renewable energy by 2022, and all of us, as citizens, have a role to play in that.“
An Uninspiring Budget?
The Union Budget of India for financial year 2017-18 presented has been one dampening the spirits atleast as far as renewable sector is concerned. Why so ? Because it is one document that is viewed as pointing towards major government policy and reform agenda and in this respect the budget had nothing on offer for the renewable sector.
Key highlights for the sector:
– Provision of INR 7.45 billion (USD 110 million) for promoting electronics manufacturing under Modified Special Incentive Package (MSIP) and Electronic Development Fund (EDF) schemes;
– Reduction of corporate taxes from 30% to 25% for businesses with annual income of less than Rs. 500 million (USD 7.3 million) and extension of MAT credit from 10 years to 15 years;
– Increase in the Ministry of New and Renewable Energy (MNRE) total annual budgeted expenditure by 9%
Additional money granted under MSIP and EDF schemes (15 times the amount provisioned for the current year) to help domestic manufacturers of solar cells and modules is very small. This would cover gross investment of only ` 35 billion (USD 514 million) for the entire electronics sector.
What’s more – Allocation for solar is expected to be relatively inconsequential for the sector.
Corporate tax rates reduction and MAT credit extension to help SMEs is countered by ten-year corporate tax holiday phased out. Net final impact on most IPPs will be marginal.
The minor announcements include
– Reiteration to expand the solar park scheme by another 20,000 MW (capital outlay of approximately INR Rs. 40 billion, USD 588 million),
– Plan to install rooftop solar systems on 7,000 railway stations (expected to be installed under BOOT model ie, no capital support from exchequer) and
– Rationalization of indirect taxes on some components used in solar module manufacturing.
– The worst blow is government’s intent to gradually remove all financial subsidies for renewables as both wind and solar energy have gained generation cost parity.
– Even Generation Based Incentive (GBI) for wind sector will lapse from April 2017.
– Also, accelerated depreciation benefit will be reduced from 80% to 40% from next year.
– No increment funding for investment in transmission schemes or development of smart grid or storage initiatives.
– No skilling or customer education initiatives, which are dire need of the day in the sector
– No big bang materially useful announ-cement in the budget.
Quality Matters – Devil is in the Detail
Growth brings pressure on project developers, contractors and equipment suppliers to down pricing because competitive nature of the market. This price pressure leading to cost cutting is risking poorer design and equipment selection. Enough anecdotal evidence is coming to light of poorly performing projects affecting financial returns for the investors. Eroding investors’ confidence can affect long-term growth.
75% of total project cost is accounted for by Modules and inverters which are of standard cost catered by fixed supplier base. It is the BOS(‘balance of systems’) which play havoc. Items such as cables, connectors, junction boxes, circuit breakers and mounting structures, which together account for about 10% of total project cost which are largely non standard forming a tiny part of total project cost that can cause exponential decrease in project performance.
The DC Cables – Don’t be Penny wise Pound foolish
DC cables are used primarily in solar projects. They are unlike LT and HT cables widely used in the power sector both in conventional and renewable energy power generation projects. Cost cutting by quality compromise in DC cables can cost project dearly (see Case Studies 1 &2).
Focus of Project developers and contractors need to be on minimum levelized cost of power after considering full life-time performance and safety aspects.
Spending billions in attaining 100 GW by 2022 necessitates that new solar ca-pacity and the associated infrastructure (government and private sector) ensure quality to deliver performance in order to reap highest possible returns from these investments.
DC cable quality, optimum sizing de-sign and operational issues play a vital role in ensuring optimal performance. Right choice of optimal material for cable use (copper vs aluminium), identifying a set of technical standards most suited for Indian operating conditions and setting up more technical training and quality testing infrastructure across India are important for healthy bottom lines of balance sheets! Few case studies here give an insight to this vital issue.
DC cables life expectancy is for entire solar project life (25 years). Observation is that projects face operating issues in the early years itself owing to poor cable design and/or use of substandard cables. Bridge to India study has looked at two real life case studies.
Case study 1: A 10 MW solar project in Rajasthan, operating for two years
The generation of this plant was around 15% lower than other solar plants operating in nearby regions. After an extensive review, the project developer replaced 4 sq mm string DC cables with 6 sq mm cables. The 300 sq mm aluminium main DC cables were also replaced by 400 sq mm aluminium cables. Power generation in the plant increased by around 10% after replacement of cables.
Case study 2: 5 MW solar project in Rajasthan, operating for around four years
Main DC cables caught fire after two years of operation. The reason for fire was ascertained to be hot spot creation at one of the bending points. The project developer subsequently replaced all main DC cables resulting in total project downtime of 6 days and extra cost of around M 1 million/MW. Financial loss resulting from plant downtime and replacement cost was estimated to be more than the total DC cable cost incurred during project installation.
The Success Mantra
Globally there are three recognized standards for use of DC cables European (EN), Underwriters Laboratory (UL) of USA and TUV of Germany. The fourth standard, IEC, is currently a work in progress document.
DC cables represent only 2% of overall capital cost of a solar project but suboptimal selection and/or design can lead to much greater opportunity loss over the years through loss of output, higher operating costs and risk of fire accidents etc. There are multiple options available to project developers and contractors for DC cables by way of choices in conductor (copper or aluminium), specifications (different sizes, voltage levels, insulation), standards (EN, UL, TUV) and layout combinations.
Due care needs to be given to cable section, specifications and layout bearing in mind project specific factors including site layout, ambient conditions and other equipment selection.
The author leads our Delhi bureau. An Engineer and qualified ADR professional (NALSAR alumnus), Sadagopan Seshadri has been a senior Contract Management Pro-fessional in large national & Inter-national Companies. His domain experience is in Building Pro-ducts, Cement plants and Mega Power project execution. He has been an expert visiting faculty and univ. examiner for Contract Management at the SSAA, IP University, New Delhi. Being passionate about Environment Energy & Sustainability he has now turned to sustainable development Themes He is vocal with his views on these areas through his writings.
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