bridge to india_india solar handbook june 2013

8/12/2019 BRIDGE to INDIA_India Solar Handbook June 2013

1/43 BRIDGE TO INDIA, 2013 1

The IndiaSolar

HandbookJune 2013 edition

A complete industry overview

for solar energy in India


2/43


3/43 BRIDGE TO INDIA, 2013

BRIDGE TO INDIA

THE INDIA SOLARHANDBOOKJune 2013 edition

2012 BRIDGE TO INDIA Energy Pvt.

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June 2013, New Delhi

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Authors

Dr. Tobias F. Engelmeier

Mohit Anand

Jasmeet Khurana

Tanya Loond

Prateek Goel

Cover Illustration

Dwarka Nath Sinha

Design & Layout

Ragini Ahluwalia

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Is India the right market for solar? 01High solar irradiation in India 01

One of the fastest growing solar markets globally 04

What is the expected demand? 11

Overview of the market segments 13Feed in Tariff (FiT) 13

RPO (REC) 13

RPO (SP) 13

RPO (thermal captive) 13

Commercial captive 13

Telecom towers 13

Diesel captive and diesel backup 14

What currently drives solar in India? 15Policy based demand 15

Parity Based Demand 26

Project trends 29

Financing trends 30

What is the future of the Indian solar market? 33

Glossary 34

CONTENTS



IS INDIA THERIGHT MARKET

FOR SOLAR?High solar irradiation in India



Over 1.7 GW of installed PV capacity

B

RIDGETOINDIA,2

013

Source:BRIDGETO

INDIA



Status of projects

Until 2012, the main drivers forcapacity addition in India had been

the Gujarat Solar Policy and phaseone of the National Solar Mission

(NSM). Projects under these twopolicies still account for over 70% of

Indias installed capacity as of May2013. Capacity additions grew at animpressive pace in the first half of 2012

but had more or less stalled in thelatter half. During the first half of 2013,

we have seen the capacity additionspick up. The new capacity addition

is largely backed by the projectsunder batch two of phase one of the

NSM, a single large 125 MW projectin Maharashtra and over 70 MW of

projects under the Renewable EnergyCertificate (REC) mechanism. The total

installed capacity in India as on May2013 stands at 1.7 GW.

In the second half of 2012 and in thefirst quarter of 2013 several states

came out with their solar policies andallocation processes. This includes

new policies in states such as Kerala,Uttar Pradesh, Andhra Pradesh

and Tamil Nadu and new allocationprocesses in Rajasthan and Karnataka.

The allocation process for the NSM hasalso begun with the release of the draft

Request for Selection (RfS) document.The key change in the NSM allocation

process is the introduction of ViabilityGap Funding (VGF)1, and limiting of the

domestic content requirement (DCR) tojust 300 MW out of the 750 MW planned

allocation capacity.

Other than the NSM and state

policies that typically allocate utilityscale projects, several states came

out with solar specific policies andallocations. Kerala has announced a

policy for 10,000 rooftop installationsof 1kW each. The suppliers for this

policy have already been empaneled.Gujarat announced a 25 MW rooftop

policy, under which projects havebeen allocated in five cities. Phase

two of the NSM (2013-2017) also

targets a deployment of 1,000 MW ofrooftop solar PV projects. The newly

incorporated Solar Energy Corporationof India (SECI), that will be responsible

for the implementation of phase two

of the NSM, has already carried outrooftop allocations for 5.5 MW andannounced an additional allocation of

11.1 MW since the beginning of 2013.These projects are to be installed

across nine cities in India.

Another major market developing in

India is the parity based market. Thismarket is largely driven by the fact

that solar is approaching parity with

the commercial tariff being paid byconsumers in Delhi, Maharasthra and

Kerala2. It is expected that more than45% of the Indian states will achieve

commercial parity by 2016. Some initialprojects have already come up for

direct sale of power to commercial andindustrial consumers. Such projects

depend on additional viability enablerssuch as the REC mechanism, tax

benefits and the subsidy mechanism.Going forward, these projects are

expected to be almost completelydriven by parity.

One of the fastestgrowing solarmarkets globally

The markets that led the solar

revolution in the world are nowapproaching maturity. These markets

are now cutting incentives andfocusing on parity driven demand.

It is the emerging markets such asIndia, China and Middle Eastern and

North African (MENA) countries thatare expected to see high growth and

present expansion opportunities tosuppliers in the market. Finally, newer

solar markets such as Chile and SouthAfrica have also recently announced

aggressive targets that will provide

new opportunities for global players.

----------------------1 Read the October 2012 edition of the India Solar Compass to read BRIDGE TO INDIAs analysis onthe subject

2Read an analysis of the parity based markets in India in the April 2013 edition of the India SolarCompass

The total installedcapacity in India as onMay 2013 stands at 1.7

GW.

It is expected that morethan 45% of the Indian

states will achievecommercial parity by

2016.
http://bridgetoindia.com/our-reports/india-solar-compasshttp://bridgetoindia.com/our-reports/india-solar-compasshttp://bridgetoindia.com/our-reports/india-solar-compasshttp://bridgetoindia.com/our-reports/india-solar-compasshttp://bridgetoindia.com/our-reports/india-solar-compasshttp://bridgetoindia.com/our-reports/india-solar-compasshttp://bridgetoindia.com/our-reports/india-solar-compasshttp://bridgetoindia.com/our-reports/india-solar-compasshttp://bridgetoindia.com/our-reports/india-solar-compasshttp://bridgetoindia.com/our-reports/india-solar-compass



Stable markets

The United States of America (US)

The US had an installed capacity of

7,221 MW until the end of 20123. Themarket has primarily been driven by

utility scale projects where eight outof the ten large-scale solar projects

under construction were completedin the year 2012. The US solar market

was propelled by state-wise solardevelopments with over 11 states

installing over 50MW each in 2012.There is no national level obligation

to produce solar. However, over 30states in the country have Renewable

Purchase Standards. Each state offersdifferent solar incentives and energy

off-take mechanisms.

Through 2013, there has been a surge

in the third-party ownership modelin the residential sector. Over 50% of

all new residential installations wereinstalled through this model, with

Arizona topping with 90%. This trend islikely to continue.

Germany

Germany had an installed capacity of32,411 MW until the end of 2012, which

is the highest in the world4.With thisinstalled capacity, solar PV fulfilled

around 4.7% of the countrys electricity

needs. The German market has beendriven by generous national level Feed-

in-Tariff (FiT) offered over the years.However, the FiT has been reduced by

the government since January 2012 tomaintain a steady growth of 2.5 GW to

3.5 GW of installations per year. TheFiTs as of May 2013 range between `

6.5 to `9.75 ( 0.10 to 0.15/$ 0.13to $ 0.19)/kWh. Solar projects for

commercial buildings are one of themain drivers of the German solar

market and account for around 50%of the cumulative installed solar PV

capacity as of 2012. Going ahead, themarket is expected to a see growth

in storage with the launch of the newsubsidy program that subsidizes PV

systems with battery storage by 30%.

Spain

Spain had an installed capacity of 5,100

MW by the end of 20125. It witnesseda boom in 2008 that was followed by a

bust due to the economic slow-downand the burden of the generous FiTs.

Spain retracted the support for solarby way of FiTs in 2012 which curtailed

the demand for solar in the country.Early this year, retroactive cut back

of FiTs and 7% electricity tax charged

on all electricity producers (includingrenewables) has created an unreliableclimate for investment in the country.

USA

EGYPT CHINA

Stable markets

JAPAN

Rising markets

Nascent markets

BRIDGE TO INDIA, 2013Source: BRIDGE TO INDIA

----------------------3IEA; PVPS report - A Snapshot of Global PV 1992-20124Ibid.5Ibid.

Over 50% of allnew residential

installations in the USwere installed through

this model.

CHILE

SOUTH

AFRICA

THAILAND

MOROCCO

SAUDIARABIA



Italy

Italy had 16,250 MW of solar, the

second highest capacity of solarinstalled until the end of 20126.

Financial support through FiTs is

expected to be phased out in 2013.However, schemes like scambio sulposto (similar to net metering) and tax

rebates are expected to keep up themomentum in the market for a steady

growth. Italy is one of the few marketsthat will witness an early transition to

post-FiT phase.

Australia

Australia had an installed capacity

of 2,400 MW by the end of 2012.

Residential consumers have largelydriven the Australian market.State level FiTs provide financial

support to consumers however thevolatility of such state policies has

affected investor confidence. With PVpenetration reaching as high as 90% in

some areas of the country saturationlevels will be reached among the

residential consumers. This mayrestrict growth in this market; however,

it will encourage installers to focus oncommercial consumers and segmentsof the residential market such as

rented spaces and apartments.

Rising markets

IndiaIndia had an installed capacity of 1,250

MW by the end of 2012 and the capacitystands at over 1,700 MW as of May

20137. The nation-wide solar policy,National Solar Mission (NSM), targets

to install 22 GW of solar by 2020. Thegrowth in the Indian solar market is

driven by central and state incentivesand individual solar policies rolled out

by states. The power deficient southernstates of the country such as Tamil

Nadu and Kerala are gradually shiftingto solar to find long-term solutions

for their power needs. Until now, theIndian solar market has been primarily

driven by utility scale projects however

the country is paying increasingattention to distributed generation

as well. Moreover, solar is becomingfinancially viable for commercial and

industrial consumers in some states

with rising costs of conventional power.With solar becoming increasinglycompetitive in many parts of the

country, the Indian solar market isgeared for accelerated growth.

China

China had an installed capacity of 7,000MW by the end of 2012.8The Chinese

government announced its ambitiousplan of adding 10 GW in the year 2013

and increased the overall renewabletarget to 50 GW by 2020. With a nation-

wide FiT, subsidies at the provinciallevel and completion of large-scale

pilot projects under the Golden Sunprogram, China is expected to witness

accelerated growth. China is planningto cut subsidies under the Golden Sun

program given the declining costs ofsolar systems. However, the country

plans to shift focus from one-timeupfront subsidies to subsidies provided

over the life of the project in orderto encourage a more sustainable

development of solar.

Japan

Japan had an installed capacity of

7,000 MW by the end of 20129. Itintroduced a nation-wide FiT last year

to accelerate the growth of renewablesin the country, especially at the utility

scale. The FiT has been reduced by

10% from `23.9 to `21.5 ( 0.37 to 0.33/$ 0.47 to $ 0.43) this year toaccommodate the reducing costs of

solar equipment but it still remainsone of the highest tariffs offered inthe world. The Japanese solar market

has been primarily driven by theresidential sector until now. But, with

the introduction of the FiT, utility scaleprojects will witness a surge.

----------------------6IEA; PVPS report - A Snapshot of Global PV 1992-20127BRIDGE TO INDIA market model8IEA; PVPS report - A Snapshot of Global PV 1992-20129Ibid.

Italy is one of thefew markets thatwill witness an early

transition to post-FiTphase.

The power deficientsouthern states of Indiasuch as Tamil Nadu and

Kerala are graduallyshifting to solar to findlong-term solutions for

their power needs.



Middle Eastern and North Africancountries (MENA)

MENA countries receive some of the

highest levels of irradiation in theworld and are hence geared to exploit

the vast untapped potential for solar.Morocco is in the process of building a

total of 2,000 MW of solar at five sitesby 2020 to meet 38% of its electricity

requirements10. The first project,a 160MW solar power plant in the

southern Moroccan town of Ouarzazateis already under construction and is

expected to be completed by 2015.Moroccan Agency For Solar Energy

(MASEN) will be dedicated to overlookthe entire implementation process.

Saudi Arabia, the worlds leadingexporter of oil, has announced

solar targets as a part of its shift torenewables. Saudi Arabia is the largest

consumer of oil among the MENAcountries. With an expected increase

in electricity demand in the comingyears, the country wants to become

energy secure. It has thus launchedan ambitious plan to install 16 GW of

solar PV and 25 GW of CSP by 2032.The country has recently completed

the construction of its first largescale project, a 3.5 MW solar plant in

Riyadh. Egypt plans to meet 20% of itselectricity needs from renewables by

2020 where 8% comes from solar andhydro. Egypt's New and Renewable

Energy Authority (NREA) has a 100 MWsolar thermal plant and two 20 MW

PV plants planned for development,however, political/social disturbancecould delay such projects.

Thailand

Thailand had an installed capacity of360 MW by the end of 2012 including

a 73 MW solar park.11The market inThailand has been driven by adder

premiums (similar to feed-in tariffs)offered at the national level that led to

a surge in utility scale projects. Thecountry aims to install 2,000MW of

solar by 2022 under the AlternativeEnergy Development Plan (AEDP).

Nascent markets

South Africa

With increasing electricity demandand abundant solar resource, South

Africa is viewed as one of the emergingmarkets in the world. Under the

Renewable Energy IndependentPower Producer Program (REIPP),

South Africa plans to install 1,450MW of solar PV by the end of 2016.

With the second round of projectsobtaining financial closure and the

program gearing up for the third roundof bidding this year, the country has

proven its commitment to renewablesand gained investor confidence. The

solar market in South Africa has thustaken-off with the announcement of

the utility scale projects under theREIPP.

Chile

Chile aims to meet 10% of its

electricity needs from renewables by2024. With plentiful solar resource

and demand for solar from the miningsector, utility scale projects are

expected to drive the Chilean solarmarket. Currently the country has

around 3.5 MW of solar installed andaround 68 MW under construction. A

Chilean mining and steel company,CAP and Sun Edison, are also

planning a 100 MW power plant on theAtacama Desert. The Chilean solar

market, though at a nascent stage, iswitnessing a lot of new activity.

Why India?Among all the prominent solar

markets, India is one of themost attractive markets for the

development of solar. Unlike many ofits counterparts, India is an energy

deficient country, which requires animmediate solution that caters to its

energy needs. The power deficit inIndia continues to increase with every

passing year. India has abundant solar

resource and capacity addition using

----------------------10EPIA; Global Market outlook for Photovoltaics 2013-201711IEA; PVPS report - A Snapshot of Global PV 1992-2012

Saudi Arabia has thuslaunched an ambitiousplan to install 16 GW of

solar PV and 25 GW ofCSP by 2032.

South Africa plans toinstall 1,450 MW of

solar PV by the end of2016.



solar power can be the fastest among

all other alternatives. It providesthe optimum solution to Indias

power problems. The country has anaggressive nation-wide policy in place

and states have been pro-active in

promoting solar by way of separatestate-level policies and incentives.Such strong support from the

government has created confidenceamong banks such that they can offer

financing options for solar power

projects. Moreover, India is also one

of the few markets that are movingaway from a policy driven to a parity

driven scenario. With increasing costsof conventional power, solar is already

viable for certain consumers in many

parts of the country. Hence, with arobust framework of solar policiesand an environment conducive to the

development of solar, the Indian solarmarket provides a huge untapped

potential for solar.

India has an aggressivenation-wide policy in

place and states havebeen pro-active in

promoting solar.



A

verage

solar

resource/

Ir

radiation

Solartarget

Insta

lled

capa

city

(aso

n

Dece

mber

2012

)

FiT/

Otherin-

centives

Tax

incentives

and

subsidies

Qu

ota

ob

ligation

or

green

ce

rtifi-

ca

tes

Netmetering

Marketch

aracteristics

andkeyd

rivers

Futuretrends

Market

potential

projected

for2016

Maturemarkets

U.S.A.

4

.68

DifferentRPSfor

states

7.2G

W

Satelevel

FiT

Yes

Statelevel

RP

Sobli-

ga

tion

Satelevel

Marketla

rgelydriven

byutilityscaleprojects.

Increased

demandfrom

commerc

ialconsumers

alsoadde

dtothe

capacity.

Surgein3rdparty

ownedresidentialroof-

topinstallations

37GW

Germany

2

.9

52GW

by2020

(35%

and80%

of

electricityfrom

renewablesby

2020and2050,

respectively)

32GW

National

levelFiT

Yes

No

No

Marketis

drivenbythe

FiTsCommercialand

residentia

lconsumers

aretheke

ydriversofthe

market.

Withthelaunchof

a30%

subsidyfor

PVwithbatteries,

A

marketforstorage

will

bedeveloped.

52GW

Japan

3

.63

33GW

by2020

source

7GW

National

levelFiT

Yes

No

(re-

placed

by

FiTin

20

12)

No

Marketis

largelydriven

byresidentialconsum-

ers.

NationwideFiT

willencou

ragegreater

demandforutilityscale

projects.

Surgeinutilitysca

le

projectswiththein

tro-

ductionofFiT

18GW

Spain

4

.75

7.2

5GW

by2020

5GW

National

levelFiT

(Sus-

pended)

No

No

No

CutbackofFiT/support

fornewP

Vsystemshas

curtailed

demand

7.8

GW

Italy

3

.81

23GW

by2017

16GW

National

levelFiT

No

No

Yesfor

system

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