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Indian Solar Market Update – Third Quarter
2011
By: Raj
Prabhu, Chief Executive Officer, Mercom Capital Group
The Ministry
of New and Renewable Energy (MNRE) announced in August that 35 of the 37 photovoltaic
(PV) projects amounting to 140MW were able to submit evidence of funding and
all of the seven concentrated solar power (CSP) projects amounting to 470MW
were able to secure funding under Phase 1, Batch 1 of JNNSM. This is a very optimistic sign for the JNNSM
solar program as there were doubts about the ability to secure funding on most of
the projects due to the low bids submitted. What is not clear is if these projects were mostly funded by banks
and financial institutions as project funding or if they were primarily funded
through balance sheet funding. All PV projects in Batch 1 are due to be
commissioned around the second week of January 2012 and Batch 1 CSP projects
are due to be commissioned in May of 2013.
Jump to Phase 1, Batch 2
New guidelines for
Batch 2 of JNNSM were issued by MNRE and the present set of guidelines is
applicable to the Second Batch of the photovoltaic projects to be selected
during 2011-12 for about 350MW. These guidelines will have no bearing on the
projects which were selected in the First Batch in 2010-11. There are several
changes in the guidelines for Batch 2 compared to the guidelines of Batch 1. Click here for Batch 2 policy
factsheet.
Project sizes
for Batch 2 have increased to 20MW from
5MW to facilitate cost reductions through economies of scale and companies (or
group of companies) can now bid up to 50MW worth of projects each.
India chose
to extend its domestic content clause requiring crystalline silicon cells along
with modules to be manufactured in India. Its domestic content clause has
already driven away project developers from crystalline silicon (c-Si) panels
towards thin film and adding the requirement of c-Si cells to be manufactured
in India will only further drive the market towards thin film as long as thin
film remains price competitive. With
high borrowing costs in India, project developers are increasingly looking
towards U.S. and other foreign financial institutions for funding and the domestic
content requirement will be a big obstacle, especially if these lender
countries cannot sell their own products in the Indian markets. The U.S. Export-Import Bank for example has
been very active but will only fund projects based on equipment and panels
purchased from U.S. companies.
Bidding for
Batch 2 is predicted to get very aggressive just as it did for Batch 1,
especially since PV panel prices fell 45 to 50 percent since the last auction
was announced. The challenge for MNRE will be again to balance the bidding range to
encourage competition but not drive it down to unviable levels.
One component
that is still lacking is a qualification requirement. In Batch 2, anyone can bid, regardless of
experience level. Until this element is
corrected, there will always remain a doubts as to the ability and quality of
projects developed by inexperienced bidders.
Batch 2
Highlights:
- Projects offering the maximum discount in Rs/kWh will be selected first
(bidding)
- Maximum capacity of a single PV plant increased to 20
MW from 5 MW
- Plant capacity can be in multiples of 5MW (from 5MW to 20MW)
- A company can bid for a maximum of 3 projects totaling 50MW.
- Deadline for achieving financial closure increased to 7 months from the 6
months.
- The timeline for commissioning of projects is extended to 13 months from 12
months.
- Partial commissioning of a project shall be accepted by NVVN subject to the
condition that the minimum capacity for acceptance of partial commissioning
shall be 5MW and in multiples thereof.
- Controlling shareholders of the project must maintain at least 50 percent control
for 1 year compared to 26 percent.
- Domestic requirement - it will be mandatory for all crystalline silicon projects
to use cells and modules manufactured in India. PV Modules made from thin film
technologies or concentrator PV cells may be sourced from any country.
- The Net Worth of a bidding company should be equal to or greater than Rs 3
Crore (~$639K) for project capacity up to 20MW. For every MW additional
capacity beyond 20MW, additional net worth of Rs. 2 Crore (~$426K) would need
to be demonstrated.
Solar Capacity in India
Cumulative
grid connected solar PV capacity in India as of the end of September amounts to
only 46MW, and approximately 52MW if CSP projects are included. However, projects announced under JNNSM,
Gujarat State program and other state programs put India’s solar pipeline, including CSP projects, to
well over 2GW. It still remains to be
seen what percentage of these projects will be successfully commissioned, but a
growing pipeline like this could potentially place India in the spotlight as
one of solar’s emerging markets.
Solar in India
With policies
like JNNSM being implemented and renewable energy gaining importance as a
future energy source in India, understanding the perceptions of consumers about
renewable energy is a vital factor for these policies to succeed.
Mercom Capital Group
recently conducted a survey in India to gauge the awareness and perceptions
of Indian consumers towards renewable energy and solar titled 'India Renewable Energy Awareness Survey. According to the survey results only 56
percent of Indian consumers have heard of 'renewable energy' or 'clean energy',
and only 27 percent of consumers have heard of 'energy efficiency'. Although awareness was low, 71 percent of
Indian consumers surveyed are willing to pay higher rates for electricity from
renewable energy sources, which is a big positive. Solar was the most
identified form of renewable energy among consumers.
Some of Mercom's survey findings
included:
- When asked about benefits of renewable energy, 81 percent pointed out 'good
for environment' as a benefit, 54 percent said 'no power cuts' and 47 percent
said 'lower energy bills' were benefits of renewable energy.
- Solar was the most identified
form of renewable energy with 92 percent of the consumers having heard of it,
mainly due to the prevalence of solar water heaters. Only 49 percent of
consumers had heard of wind energy.
- 82 percent of survey respondents overwhelmingly support renewable energy
projects and 90 percent said government should support renewable energy.
Overall we found a general lack of education and understanding about renewable
energy and energy efficiency. For any policy or program to achieve broad
success, there needs to be a sustained education and communications initiative
to get the consumers' buy-in.
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