presentation risks opportunities solar

8/12/2019 Presentation Risks Opportunities Solar

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Risks and Opportunities in securing

Financing Phase I and Phase II

National Solar Energy Summit 2012

Solar Thermal Power14thDecember 2012

Presented By:

Saurabh Kamdar,

Associate Director, CRISIL Infrastructure Advisory

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Agenda

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1 Solar PowerOpportunity & Current Adoption Status3

2 Solar Thermal Technologies..16

3 Solar Thermal - Risks and Funding Trends..21


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Solar PowerOpportunity & Current

adoption status

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Solar Power Development Potential

India receives on an average 4-7

kWh/m2 of solar energy daily with an

average of 250-300 sunny days in ayear

Rajasthan and Gujarat receive maximum

radiation in the range of 66.6 KWh per

square meter

Solar power potential for Indiaaccessed to be >100,000 MWeq

However, capacity additions in

Indian solar industry have been

miniscule as compared to the

additions globally

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Solar Power Density in India

Solar Installed Capacity - India Value

Grid connected Solar Power (Cumulative Capacity) 1,035 MW

Additions during last year (FY12) 446 MW

Off-grid Solar PV plants (Cumulative Capacity) 85 MW

Solar Water HeatingCollector Area (Cumulative Capacity) 5.63 Mn Sq. m

Source: MNRE (As at June30, 2012)


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Grid connected Installed Solar capacity

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Source: MNRE (As at October, 2012)


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Indian Power Generation Capacities

(As on 31stMarch 2012)

Presently, of Total Installed Capacity in the country Solar forms 0.45%, and it

forms 3% of the Total Renewable Energy Capacity in the country

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Thermal,131,353,

66%

Hydro,38,990,

20%

Nuclear,4,780,

2%

Renewable,24,915,

12%

Total Installed Capacity (MW)

Wind,17,353,

70%

Small

Hydro,3,396,14%

Solar,905, 3%

Biomass,3,225,13%

Installed RenewablePower Capacity (MW)

Source: MNRE


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Solar capacity additions expected to increase

Source: MNRE

Solar power is expected to be ~11% of capacity additions of renewable

capacity additions in XII Plan period (2012-17)

JNNSM is expected to be a major driver for Solar capacity additions

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3.5

10.2

24.9

55

2002 2007 2012 2017P

Cumulative RenewableCapacity in GW

400

200 200

500550

50 200 200 500 550

2012-13 2013-14 2014-15 2015-16 2016-17

Projected Solar CapacityAdditionsJNNSM (MW)

Solar PV Solar Thermal


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Jawaharlal Nehru National Solar Mission (JNNSM)

JNNSM is one of the major initiatives in promotion of solar energy

technologies, Mission aims to achieve grid tariff parity by 2022

JNNSM (Phase 1) - Capacity allocation between SPV and Solar Thermal was

decided to be 50:50.

Solar PV: Selection of PV projects done in two batches of 150 MW and 350 MW over

two financial years of Phase 1 i.e., 2010-2011 and 2011-2012

Solar Thermal: Given the longer gestation period of Solar Thermal Projects, entire

capacity was selected in Batch 1 (2010-2011)

The various phase wise targets set under the NSM are as follows:

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Application Phase I (2010-13) Phase II (2013-17) Phase III (2017-22)

Utility grid power, including roof top 1,100 MW 4,000-10,000 MW 20,000 MWOff Grid Solar Applications 200MW 1000MW 2000MWSolar Collectors 7 million sqm 15 million sqm 20 million sqm


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Various Sale options for Solar

Developers are preferring the PPA route as of now.

Once the REC markets mature and the regulations are put in place to

enforce RPOs, developments based on RECs will also gain traction.

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Utility

NVVN

Exchange

Solar RadiationElectricity

Generation

IPP/ Grid Sales

& Captive

Sales

Solar

Power

Plant

Sale to Utility Bundled Power

Sale through state tariff policy or REC route

(I) FIT + GBI (PPA) (II) APPC + REC (non-PPA)

Merchant Sale

Market Price + REC


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Solar Thermal Projects under development in JNNSM

(Phase 1)

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Sr.

No.Project Name Promoter Location

Capacity

(MW)Technology

Tariff

(Rs./KWh)

1 Rajasthan Sun TechniqueEnergy Private Limited

Reliance Power Jaisalmer,Rajasthan

100 Compact LinearFresnel Reactor

11.97

2Diwakar Solar Projects

Private LimitedLanco Infratech

Jaisalmer,

Rajasthan100 Parabolic Trough 10.49

3KVK Energy Ventures

Private LimitedKVK

Jaisalmer,


4 MEIL Green Power LtdMegha

Engineering &

Infrastructure

Anantapur,

Andhra Pradesh50 Parabolic Trough 11.31

5Aurum Renewable Energy

Private LimitedAurum

Mitrala,

Porbandar,

Gujarat

20Compact Linear

Fresnel Reactor12.19

6 Corporate Ispat Alloys AbhijeetPokaran,


7Godavari Green Energy

Limited

Godawari Power

and Ispat Limited

Jaisalmer,


7 projects for 470 MW selected in December, 2010. Average Tariff Rs. 11.48 per

unit (25% reduction on CERC Tariff)


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Other Solar Thermal Projects under development

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Sr.

No.Project Name Developer Location

Capacity

(MW)Technology

1 Rajasthan Solar One Entegra Rajasthan 10 Parabolic Trough

2 Bap Solar Power Plant Dalmia Cements Rajasthan 10Parabolic Dish

Sterling

3 NTPC Pilot Project NTPC Rajasthan 15 Parabolic Trough

4 Andhra Pradesh Project Sunborne Energy Andhra Pradesh 50 Parabolic Trough

5 Cargo Solar Power GujaratCargo Power &

InfrastructureKutch, Gujarat 25

Parabolic Trough with

Thermal Storage


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Gujarat has been front runner in Solar Power Adoption

First state to launch an independent solar policy in 2009 (operative till 2014)

PPAs of 969 MW signed. The projects allocated through the MOU route with pre-

qualification criteria

Projects of 690 MW commissioned till 30th June, 2012.

High investor confidence being showcased as

More than 1000MW of projects have pre-registered for future allocations

Applications worth 1715 MW received for allocation of 150MW

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Tariffs PV project

(Rs. /kWh)

Thermal projects

(Rs. /kWh)

Projects commissioned before

31.12.10

15 (for first 12 years) 10 (for first 12 years)

5 (from 13thto 25thyear) 3 (from 13thto 25thyear)

Projects commissioned after

31.12.14

12 (for first 12 years) 9 (for first 12 years)

3 (from 13thto 25thyear) 3 (from 13thto 25thyear)


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Other states have also framed their Solar Policies

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Particulars Karnataka Rajasthan Madhya Pradesh Tamil Nadu

Policy instrumentKarnataka Solar Policy,

2011-16

Rajasthan Solar Energy

policy, 2011-2017MP Solar Energy Policy

TN Solar Energy Policy

2012

Target Capacity

200 MW - DISCOMS

upto 2015-16 (40 MW

p.a.)

50 MWSolar

Thermal

100 MW - REC

mechanism

50 MW SPV; 50 MW

ST - DISCOMS

Phase I (upto 2013) -

200MW

Phase II (2013 - 17) -

400MW

200 MW SPV

announced

3000 MW by 2015,

including rooftop

1500 MW utility scale

by 2015

Capacity Cap

SPV : Min 3 MW, Max

10 MW

ST : Min 5 MW

SPV : Min 5 MW, Max

10 MW

ST : Min 5 MW, Max -

50 MW

SPV : Min 5 MW NA

Sale of Energy under

state policy

Reverse bidding

Ceiling tariff :

SPV : INR 14.50 / kWhST : INR 11.35 / kWh

Reverse bidding

Ceiling Tariff :SPV : INR 10.12 / kWh

Reverse bidding


Reverse bidding



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Way ForwardJNNSM Phase 2

3000 MW capacity to be supported by the Government of India

Bundling with thermal power to the extent the latter is available

Generation Based Incentive

Use of viability gap funding mechanism

Additional 6000 MW is envisaged through Solar RPO requirement

Requirement of solar power capacity by 2017 is estimated to be about 10000 MW

1000 MW off grid solar applications by 2017

15 million square meters solar thermal collector area by 2017

Solar Capacity required to meet Solar RPOs (MW)

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2011-12 2012-13 2013-14 2014-15 2015-16 2016-17

1465 3018 4659 6387 8204 10109


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Solar RPO requirements are expected to provide fillip to

the sector

Solar RPO obligations of these states are higher than installed capacity in

India at present.

Enforcement of RPO obligations will lead to increased demand for solar

power in coming years.

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State RPO Target Target in MW

Gujarat 1.00% 451

Haryana 0.75% 366

Madhya Pradesh 0.60% 166

Rajasthan 0.50% 152

Karnataka 0.25% 87Maharashtra 0.25% 182

Tamil Nadu 0.25% 45

Punjab 0.07% 6

Total 1,455

Solar RPO Targets in selected states (2012-13)


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Solar Thermal Technologies

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Technology for Solar power plants

Solar power generation technologies

can be broadly classified into two

broad categories: Solar Thermal: Thermal power plants

produce electricity by converting the solar

radiation into high temperature heat using

mirrors and reflectors. This energy is used

to heat a working fluid and produce steam.

Steam is then used to rotate a turbine or

power an engine to drive a generator and

produce electricity

Solar Photovoltaic(PV): Photovoltaic

converters are semiconductor devices that

convert part of the incident solar radiation

directly into electrical energy

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Solar Power GenerationTechnologies

Solar Thermal PowerPlants

Parabolic Trough

Solar Tower

Parabolic Dishes Compact Linear Fresnel

Reflectors

Photovoltaic technologies

Wafer-based crystalline-silicon

Thin Films


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Solar Thermal Technologies

Also referred to as CSP (concentrating solar power) technologies for power

generation

Technology Options include

Parabolic Troughs

Compact Linear Fresnel Reflector systems

Central Receivers or Power towers

Paraboloid dish systems

Thermal storage and hybridization with conventional sources are the

biggest strength

Lot of scope for indigenization, local manufacturing and employment

generation

Of the 470 MW of CSP capacity being developed under JNNSM Phase 1

350 MW is using Parabolic Troughs and 120 MW is using Compact Linear Fresnel

Reflector

Inline with global trends as 88% of worlds CSP is being operated using Parabolic

Troughs

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Solar Thermal Technology Options (1/2)

Parabolic Trough

Parabolic troughs focus the sun onto a linear

receiver tubes placed in the trough focal line Gives temperatures up to 400 deg C.

Hot liquid is passed through a series of heat

exchangers to generate steam, and to drive a

turbine

Globally most widely adopted technology

Compact Linear Fresnel Reflector

Similar to parabolic trough however the

parabolic trough sliced into individually tracking

strips of mirrors & installed near ground

Receiver is stationary and does not move with

mirrors as in trough systems thus providing

additional design flexibility

Has advantage of lower production costs and

requires least amount of land per MW capacity

among all solar technologies

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Solar Thermal Technology Options (2/2)

Central Receivers or Power towers

Uses field of mirrors called heliostats that

individually track sun on two axes and redirectsunlight to receiver at the top of a tower

Sunlight is concentrated 6001,000 times, and

achieves working fluid temperatures of 500

800C

Paraboloid dish systems

These systems use series of mirrors arranged

in concave plate to focus light onto a point

Usually a Stirling external combustion engine is

placed at the focal point for collecting heat to

drive pistons by continually expanding andcondensing hydrogen gas

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Solar Thermal -

Risks and Funding Trends

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Solar Thermal ProjectsRisks and Challenges (1/3)

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Some Phase 1 projects encountered imprecise irradiancedata from satellite

Leading to project delays and higher costs because

developers needed to re-design project systems

However reliable DNI data availability is expected in futurewith 51 new stations being set up by C-WET for SolarRadiation Data collection pan India across various states

Limited solar irradiancedata

CSP at early stage of deployment and development in Indiathus carrying higher risk on its applicability and performance

record Lack of trained technicians to build CSP projects: Some

developers have struggled in finding adequately trainedtechnicians with fabrication and welding skills for CSPprojects leading to project delays

Technology Risk &Implementation Record

Escalating prices and limited supplies of heat transfer fluid(HTF) have posed challenges to developers

Several developers have also experienced delays from longlead times for CSP-specific turbines

Supply Chain & Sourcing


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Solar Thermal ProjectsRisks and Challenges (2/3)

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The cost of a parabolic trough CSP plant in India rangesfrom Rs 10.5 crore to Rs 13 crore per MW

Whereas the prices of Solar PV have come down to Rs 10crore per MW

Storage increases the capital cost further but also increaseselectricity generation

Capital Cost Premium

CSP plants require water predominately for cooling and alsofor cleaning similar to thermal plants

Locations suitable for CSP are usually arid regions withshort supply of water

Technology choices to reduce CSPs water demand areavailable, but affect the levelized cost of electricity (up to90% reduction in water consumption possible with 9% rise inelectricity costs)

Water Requirement &Availability

Projects are located in remote areas which are often not well

connected and lacking in adequate infrastructure Under JNNSM the developer is required to put the required

infrastructure (land, water, clearance and evacuation) inplace themselves

Adds to project cost and increases risks of timely completionof projects

Infrastructure Constraints


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Solar Thermal ProjectsLenders Perception & Financing (1/2)

Emerging energy technology Discomfort:

Bankers want to see a CSP project track record in India due to low levels of familiarity

and a discomfort with CSP technology. This can only be resolved when consistentperformance record develops.

Parabolic trough technology deployed in India has been used by more than 80 percent

of international CSP projects with a track record of more than 20 years

Non-recourse project finance:

CSP developers reported securing financing only after parent companies furnishedcorporate guarantees

No CSP plant under the Mission has been financed on a non-recourse basis

Endemic power sector issues affecting CSP investment

Banks approaching power sector lending limits and hence unwilling to increase exposure

to the sector

Poor and worsening financial situation of State Discoms increasing credit risks for

lenders

Even in JNNSM PPAs, the responsibility of payment rests with Discoms (and not NVVN)

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Solar Thermal ProjectsLenders Perception & Financing (2/2)

However, loan syndication broadening lender base for solar projects

When financing CSP projects, banks have typically taken 25 percent of the projects debt

and shared the remaining debt and risk among other participating banks

Leading to involvement of a wide range of banks including Power Finance Corporation,

Bank of Baroda-Dubai, Punjab National Bank, and State Bank of Bikaner and Jaipur

Payment Security Scheme

MNRE introduced an additional payment security scheme for grid connected solar

projects under JNNSM to facilitate financial closure of projects under Phase I

Gross Budgetary Support (GBS) amounting to Rs.486 crore in the event of defaults in

payment by the State Discoms to NVVNL

Introduction of this scheme has mitigated the payment risks perceived by the lenders

considerably

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In Summary.

India has very high solar power potential (>100,000 MWeq) with an average of

250-300 sunny days in a year, which so far has remained largely unutilized

Solar forms only 0.45% of the total Installed Capacity in the country

Of the 1,045 MW of Grid connected solar installed, almost all projects are

using PV technology and are based in Gujarat & Rajasthan

Solar power expected to be ~11% of renewable capacity additions in XII Plan

period with JNNSM expected to be a major driver

470 MW of Solar Thermal Capacities under development in states of

Rajasthan, Gujarat and Andhra Pradesh

Parabolic Trough & Compact Linear Fresnel Reflector technologies being

adopted in India in Phase 1 (JNNSM)

Being new technology, CSP project are subject to various challenges onaccount of performance benchmarks, radiation data reliance, supply chain

issues, infrastructure constrains and Difficulty in Financial Closures

Lenders not open to Non-recourse project finance during Phase 1 due to

unproven track record

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CRIS Credentials

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About CRISIL Infrastructure Advisory*

CRISIL Infrastructure Advisory is

division of CRISIL Risk and

Infrastructure Solutions Limited(CRIS), a wholly owned subsidiary of

CRISIL Ltd.

CRISIL Infrastructure Advisory is

associated with infrastructure

development and investment. We are

present across various infrastructure

sectors.

We are the preferred consultant to

governments and leading

organizations.

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Our Local Presence

Delhi

Ahmedabad

Mumbai

BengaluruChennai

Kolkatta

Hyderabad

Pune


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About CRISIL Infrastructure Advisory

CRISIL Infrastructure Advisory is a professionally managed multi-

disciplinary consultancy firm.

Our offerings span the entire spectrum of activities in infrastructure

development.

30

India

Conventional RenewableTransmission Distribution

Coal Oil & GasMinerals

HealthcareGeneration Fuels

Power Natural Resources

St rate gy | Val uati ons | F inanci al Mar kets | PPP Poli cy | Re gul atory | PPP Proje ct

Deep domain knowledge | Strong analytical skills | Independence of opinion

Companies | Equity Investors | Lenders | Governments | Multilateral Agencies

Urban Development Transport and Logistics

Education

Planning TransportUrban Finance

& Reforms

Water

Supply &

Sanitation

Solid

Waste

Manage

ment

Ports Airports Roads Logistics

A f r i c a | S o u t h - E a s t A s i a | M i d d l e - E a s t


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Key Service Offerings - Power Sector

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Policy Formulation for

Project Structure, PPP,

Fuel Supply/Pricing, Tariff Advise to Regulators for

License, Tariff, and reform

implementation and

planning

Bid Process Management

Project Appraisal

Regulatory and Tariff Filings Power purchase, electrification,

staff, capital investment and

contracts planning

Business Plans & Entry

Strategy

Risks identification,

evaluation & mitigation

plans

Contractual Structuring

Strategic Bid Advisory

Due Diligence & Risk

Analysis

Market assessment &

business intelligence

Project /Portfolio analysis

Valuation


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Select Engagement Spread in Power Sector

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POWER SECTOR ADVISORY

Regulatory and

Policy Advisory

Central and

State Govt. Utilities

Cause 2

Developers Cause 4

Forum of RegulatorsAssessment of tariff (structure,rationalization, and MYT), viability of distribution licensee

Coal India Implementation of NCDP

MNRE Generation based incentive

NVVNPower trading and development of Power

Exchange

DEARisk Management Framework for InfrastructureProjects

NTPC, PGCIL, BHELAppraisal of Capital

investment plans

PFC, REC Policy for Promoter Appraisal of

Private Power Project

Extensive work in Mah, Guj, Chhattisgarh,

Raj, UP, Pun, HP, J&K, TN for Tariff

structuring and Bid Process management

Developers

Tata PowerBid Advisory for Successful award ofMundra UMPP

GMR Market Assessment & Strategy for Power Sale

GVK Escrow abilityStudy for sale of Power

Adhunik Power Finalization of PPA

Indiabulls, Moser Baer, HCC, Essar, Sembcorp

Strategic and Commercial Advisory

Investors

Morgan Stanley, NVP, 3i, Actis, SC TPG

Successful PE Investment in Power Sector

ICICIBank, SCB, BTMU, USEXIMProject and

Sector Assessments

GMR, EMCO, DS ConstructionAcquisition of

majority stake


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CRISIL Risk & Infrastructure Solutions LimitedA Subsidiary of CRISIL Limited, a Standard & Poors Company

www.crisil.com

Mr. Saurabh Kamdar

Associate Director, CRISIL Infrastructure Advisory

Contact Numbers-

Direct: + 91 22 3342 3000 (Board)

Email: [email protected]

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