INDIA RENEWABLE ENERGY STATUS REPORT May 14. NOVONOUS

Transcription

1 INDIA RENEWABLE ENERGY STATUS REPORT 2014 May 14 NOVONOUS

2 Table of Contents 1. Executive Summary India s Energy Position Future Energy Requirements and Supply Options India s Electricity Demand Till Analysis of state-wise Renewable Purchase Obligation (RPO) Regulation across India State-wise Non-Solar and Solar RPOs ( to ) Need for Renewable Energy in India Energy Security Economic Viability Rural Electrification Wind Energy Market in India State-wise Wind Farmable Sites in India State-wise Wind Energy Potential in India (in MW) State-wise Wind Energy Installed Capacity in India (in MW) State-wise Wind Energy Capacity Utilization in India (in %) State-wise Contribution of Wind Energy Installed Capacity in India (in %) State-wise Regulation and Policy Comparison for Wind Energy in India EXIM Scenario in Indian Wind Energy Sector Export Scenario Import Scenario Key Growth Drivers and Inhibitors for Wind Energy Market in India Risks Associated With Wind Energy in India Credit Risk Policy Risk Technical Risk Challenges for New Players in Indian Wind Energy Sector Recommendations for Policy Makers Solar Energy Market in India State-wise Solar Energy Installed Capacity in India (in MW) State-wise Grid Connected Solar Power Projects under JNNSM State-wise Solar RPO Targets ( to )... 39

3 5.4 Solar Power Capacity Requirements (FY12 FY22) State-wise Regulation and Policy Comparison for Solar Energy in India EXIM Scenario in Indian Solar Energy Sector Export Scenario Import Scenario Growth Drivers and Inhibitors for Solar Energy Market in India Risks Associated with Solar Energy in India Credit Risk Policy Risk Technical Risk Application-wise Solar Energy Usage and Trends Rooftop Solar PV Programme Off-Grid Lighting Systems Solar City Scheme Solar Water Pumping Telecom Towers Solar Water Heating Systems Solar Cookers and Steam Generating Systems Industrial Process Heat Applications Solar Air Conditioning / Refrigeration Solar Water Purification / Desalination Concentrated Solar Power (CSP) Plants Challenges for New Players in Indian Wind Energy Sector Recommendations for Policy Makers Small Hydro Power Market in India State-wise Small Hydro Power Potential in India (in MW) State-wise Small Hydro Power Installed Capacity in India (in MW) State-wise Small Hydro Power Upcoming Capacity in India (in MW) State-wise Regulation and Policy Comparison for Small Hydro Power in India EXIM Scenario in Indian Small Hydro Power Sector Export Scenario Import Scenario Growth Drivers and Inhibitors for Small Hydro Power Market in India... 60

4 6.7 Risks Associated with Small Hydro Power in India Credit Risk Policy Risk Technical Risk Challenges for New Players in Indian Small Hydro Power Sector Recommendations for Policy Makers Biomass/ Bagasse Cogeneration Power Market in India State-wise Biomass Power Potential in India (in MW) State-wise Bagasse Cogeneration Power Potential in India (in MW) State-wise Regulation and Policy Comparison for Biomass Power in India State-wise Regulation and Policy Comparison for Bagasse Cogeneration Power in India Central Financial Assistance (CFA) for Biomass/ Bagasse Cogeneration Power Projects Fiscal Incentives for Biomass/ Bagasse Cogeneration Power Projects Growth Drivers and Inhibitors for Biomass/ Bagasse Cogeneration Power Market in India Challenges for New Players in Indian Biomass / Bagasse Cogeneration Power Sector Recommendations for Policy Makers Waste to Energy (WtE) Power Market in India State-wise Waste to Energy (WtE) Power Potential in India (in MW) for MSW State-wise Regulation and Policy Comparison for Waste to Energy (WtE) Power in India for MSW Central Financial Assistance (CFA) for Waste to Energy (WtE) Power Projects Capital Subsidy to Developers Incentives to State Nodal Agencies Financial assistance for promotional activities Growth Drivers and Inhibitors for Waste to Energy (WtE) Power Market in India Challenges for New Players in Indian Biomass / Bagasse Cogeneration Power Sector Recommendations for Policy Makers Company Information... 82

5 INDIA RENEWABLE ENERGY STATUS REPORT MAY 14, 2014 NOVONOUS 4

6 1. Executive Summary India has the world s fifth-largest electricity generation capacity which currently stands at 243 GW. The power sector in India is highly diverse with varied commercial sources for power generation like coal, natural gas, hydro, oil and nuclear as well as unconventional sources of energy like solar, wind, bio-gas and agriculture. The demand for power has been growing at a rapid rate and overtaken the supply, leading to power shortages in spite of manifold growth in power generation over the years. Focused efforts are going on to bridge this demand-supply gap by way of policy reforms, participation from private sector and development of the Ultra Mega Power Projects (UMPP). The power sector offers tremendous opportunities for investing companies due to the huge size of the market, growth potential and returns available on capital. Industrialization, urbanization, population growth, economic growth, improvement in per capita consumption of electricity, depletion of coal reserve, increasing import of coal, crude oil and other energy sources and the rising concern over climate change have put India in a critical position. It has to take a tough stance to balance between economic development and environmental sustainability. One of the primary challenges for India would be to alter its existing energy mix which is dominated by coal to greater share of cleaner and sustainable sources of energy. Renewable energy including large hydro constitutes for only 28.8% of overall installed capacity in India. The total renewable energy potential from various sources in India is 2,49,188 MW. India till 31 st March 2014 has been able to achieve only 12.95% of its renewable energy potential. The untapped market potential for overall renewable energy in India is MW which shows huge growth potential for renewable energy in India. Sector Potential (in MW) Installed Capacity (in MW) % Achieved Wind Energy Solar Energy Small Hydro Power (SHP) Biomass Bagasse Cogeneration Waste to Energy (WtE) Total The Ministry of New & Renewable Energy (MNRE), Government of India has set a target of achieving overall renewable energy installed capacity of 41,400 MW by As per NOVONOUS estimates, this creates an opportunity worth US$ billion for the renewable market in India till INDIA RENEWABLE ENERGY STATUS REPORT MAY 14, 2014 NOVONOUS 5

7 INDIA RENEWABLE ENERGY STATUS REPORT MAY 14, 2014 NOVONOUS 6

8 2. India s Energy Position As a developing country, India s energy market is still in a nascent/maturing stage. The percapita consumption of electricity is growing at a steady pace due to greater penetration of power grids, availability of more consumer electronic products and higher disposable incomes. However, it is still not at the stage of Russia, China or even Brazil, suggesting unmet demand for power. India - Per Capita Electricity Consumption kwh per person Exhibit 2.1 Per Capita Electricity Consumption in India Source: CEA, NOVONOUS Insights India s power market is estimated to grow at a CAGR of 7.5-8% till Power consumption is estimated to grow from ~1127 TWh in FY2013 to ~3793 TWh in FY2032 at a CAGR of 6%, while power generation has grown from FY2007 to FY2013 at CAGR of 5.5%. From April 2013 to March 2014, electricity generation grew at 5.96%. Electricity Production in TWh India - Electricity Production in TWh Exhibit 2.2 Year on Year Electricity Production Growth in India Source: NOVONOUS Insights INDIA RENEWABLE ENERGY STATUS REPORT MAY 14, 2014 NOVONOUS 7

9 2.1 Future Energy Requirements and Supply Options To meet the rate of consumption of electricity, 88.5 GW of electricity production capacity has been planned under the 12th Five Year Plan, and an estimated 100 GW will be scheduled in the 13 th Plan. Of the plants scheduled to be commissioned till , more than 80% are coal-powered plants. However, there is a coal supply deficit in India that is scheduled to grow over the years. While this can be met by importing coal, it will put pressure on the prices of electricity generated by thermal power plants. To meet the energy requirement, increase in renewable and non-conventional energy sources have been planned. The Wind Energy sector is scheduled to grow at 10-15% to meet the demand for power. Solar Energy is also estimated to reach 20 GW of energy capacity till 2022 due to heavy incentives offered by the government. The private sector is expected to play a major part, as by , the private sector is expected to account for more than 35% of the country s power generation. However, despite the persistent focus on renewable energy over the past few years, demand supply deficits have steadily worsened from ~5% in 2003 to ~11% in Despite the work being done to minimize transmission and distribution (T&D) losses (T&D loss has reduced from 32.5% in to 25.47% in ), the country still faced an average energy deficit of 6.7% in State/Region Requirement / Demand ENERGY Availability / Supply Surplus/ Deficit MU MU MU % Northern Western Southern Eastern North Eastern All India Exhibit 2.3 Region-wise Energy Deficit in India Source: CEA, NOVONOUS Insights As of 31 st March 2014, India had total installed capacity of MW. Thermal power plants (coal, gas and oil) had largest share at MW (69.23%) followed by hydro, nuclear and renewable energy sources. Renewable energy sources included are Small Hydro Project (SHP), Biomass Gasifier (BG), Biomass Power (BP), Urban & Industrial Waste Power (U&I) and Wind Energy. INDIA RENEWABLE ENERGY STATUS REPORT MAY 14, 2014 NOVONOUS 8

10 Nuclear % India -Source-wise Installed Capacity in MW RE Sources* % Hydro % Oil % Gas % Coal % Coal Gas Oil Hydro Nuclear RE Sources* Exhibit 2.4 Source-wise Installed Capacity in India (in MW) Source: CEA, NOVONOUS Insights 2.2 India s Electricity Demand Till 2032 The electricity demand in India is estimated to grow from ~1127 TWh in FY2013 to ~3793 TWh in FY2032 at a CAGR of 6%. NOVONOUS estimates that the electricity generation capacity will grow from about 243 GW today to 710GW by 2032 to meet the rising demand. This will require India to spend around US$ 550 billion in increasing power generation capacity and another US$ 400 to US$ 500 billion in upgrading the transmission and distribution (T&D) infrastructure which accounted for loss of 25.47% in Electricity Consumption in TWh India - Electricity Consumption in TWh (est.) Exhibit 2.5 Electricity Consumption in India by 2032 Source: NOVONOUS Insights INDIA RENEWABLE ENERGY STATUS REPORT MAY 14, 2014 NOVONOUS 9

11 2.3 Analysis of state-wise Renewable Purchase Obligation (RPO) Regulation across India State Favorable Policies Neutral/Negative Policies Andhra Pradesh Renewable energy sources' means renewable sources such as Co-generation (from renewable sources of energy like bagasse). The consumption of a Rural Electricity Supply Cooperative Society (RESCO) shall be taken into account for calculating the consumption of a distribution licensee for the purpose of these Regulations. There shall be no separate Renewable Power Purchase Obligation on the RESCOs. The State Agency shall submit quarterly status to the Commission in respect of compliance of Renewable Power Purchase Obligation (RPPO) by the obligated entity(s) Assam The State Agency shall submit quarterly status to the Commission in respect of compliance of renewable purchase obligation by the obligated entities in the format as stipulated by the Commission. "Average Pooled Power Cost" definition is in line with the CERC REC Regulation, 2010 Bihar The Certificates purchased by the obligated entities from the power exchange in terms of the regulation of the Central Commission shall be deposited by the obligated entities to the Commission within a month of the purchase of the certificate. The regulator has also defined a longer trajectory till for the solar RPO target with a base of 0.25% in and an increase of 0.25% every year till and 0.5% in and If the distribution licensee is unable to fulfill the obligation, the shortfall of the specified quantum of that year would be added to the specified quantum for the next year. However, credit for excess purchase from renewable energy sources would not be adjusted in the ensuing year. The State Agency shall submit quarterly status to the Commission in respect of compliance of renewable purchase obligation by the obligated entities in the format as stipulated by the Commission and may suggest appropriate action to the Commission if required for compliance of the renewable purchase obligation. "Average Pooled Power Cost" definition is in line with the CERC REC Regulation, 2010 Chhattisgarh The state has set a target of 0.5% for Solar RPO (by ) which is higher than that stipulated in the Policy. "Average Pooled Power Cost" definition is in line with the CERC REC Regulation, 2010 The State Agency shall develop suitable protocol for collection of information from various sources such as renewable energy generating companies, obligated entities, SLDC, chief electrical inspector etc., on regular basis and compile such information to compute the compliance of RPO target by such Obligated Entities. In the event of non compliance of the RPO by distribution licensees by any of the modalities, from Pooled Cost of Power Purchase does not include purchases based on liquid fuel, from traders, and shortterm purchases The state has set a RPO target of 0.25% till in line with policy but it has set a flat target of 0.25% till The state has set a RPO target of 0.15% till which is lower than policy targets. Also, the trajectory of RPO target is till which is 0.25% The regulation does not specify the min capacity for Captive consumers for applicability of RPO If solar certificates are not available in a particular year, then in such cases, additional non-solar certificate shall be purchased for fulfillment of the Renewable Purchase Obligation (RPO). The state has set a very short trajectory for RPO targets i.e. till INDIA RENEWABLE ENERGY STATUS REPORT MAY 14, 2014 NOVONOUS 10

12 non-solar renewable energy plants or solar power plants in the State, the distribution licensee whose purchase of renewable energy is maximum during the year shall be compensated by other distribution licensees so that percentage of renewable energy consumption by all the distribution licensees functioning in the State become equal. Delhi The state has considered off-grid generation also for fulfillment of RPO. There will an be automatic approval on year to year basis if tariff considering capital subsidies/gbi/carbon credits etc. is less than Average Power Purchase Cost (APPC) during a particular year. The Licensee(s) has/have to submit half yearly progress report to the Commission, on the capacity addition, generation and purchase of electricity from renewable energy sources in their area(s) of supply, which is used by generator itself or sold to the third party under open access, and also post them on their website. "Average Pooled Power Cost" definition is in line with the CERC REC Regulation, 2010 The regulation has guided state agency to submit a summary statement of renewable energy procurement and RPO compliance by different obligated entities. The same needs to be published by the State Agency on a cumulative basis every month by 10th day of the next month on its website. Gujarat The state has set a high Solar RPO target of 1% which is higher than policy targets. "Average Pooled Power Cost" definition is in line with the CERC REC Regulation, 2010 The State Agency shall submit quarterly status to the Commission in respect of compliance of renewable purchase obligation by the obligated entities in the format as stipulated by the Commission. Haryana It is clearly mentioned that Non-fossil fuel based cogeneration project shall qualify for Renewable Energy source. The State Agency shall submit quarterly status to the Commission in respect of compliance of renewable purchase obligation by the obligated entities in the format as stipulated by the Commission and may suggest appropriate action to the Commission "Average Pooled Power Cost" definition is in line with the CERC REC Regulation, 2010 Himachal Pradesh The state has set RPO target in line with policy. Also the state has defined a longer trajectory for In case the total off grid usage/generation capacity established under such schemes exceeds 10 percent of the total RPO obligation of Delhi Distribution Licensees in the relevant category, the Commission may re-fix the RPO obligations of the distribution licensees taking into consideration such off grid usage/generation capacity. The regulator has also defined a lower level of Solar RPO target i.e. 0.15% (by ) and 0.35%(by ) of the total power procured. The RPO regulations are not applicable on captive as well as open access consumers. As per the regulation the APPC of previous year would be applicable while determining the cost of power but in reality GUVNL freezes the APPC for the complete life projects. If the mentioned minimum quantum of power purchase from solar is not available in a particular year, then in such cases, additional wind or other energy, over and above their RPO, shall be utilized for fulfillment of the solar RPO. RPO trajectory beyond is not provided. In case of genuine difficulty in complying with the renewable purchase obligation because limited availability of renewable energy or non-availability of certificates, the obligated entity can approach the Commission for relaxation or carry forward of compliance requirement to the next year. This provision of seeking relaxation is not desirable. There is no provision requiring State Agency developing INDIA RENEWABLE ENERGY STATUS REPORT MAY 14, 2014 NOVONOUS 11

13 Jammu & Kashmir RPO targets (till ) in line with the Policy "Average Pooled Power Cost" definition is in line with the CERC REC Regulation, 2010 The State Agency shall devise appropriate protocol for collection of information from various sources such as renewable energy generating companies, obligated entities, SLDC, etc., on a regular basis and compile such information to compute the compliance of RPO target by such Obligated Entities. "Average Pooled Power Cost" definition is in line with the CERC REC Regulation, 2010 Generation from grid connected renewable energy sources with installed capacity of 250 kw and above shall alone be considered as eligible renewable energy sources. However, generation from grid connected renewable energy sources with installed capacity below 250 kw shall be considered as 'eligible RE source' provided suitable metering and communication arrangement with State Load Dispatch Centre is established by such renewable energy project Jharkhand The state has defined a high Solar RPO (1% for ) compared to other states in the country. The State Agency shall develop the formats for submission of quarterly progress report in respect of compliance of renewable purchase obligation by the obligated entities and get them approved by the Commission "Average Pooled Power Cost" definition is in line with the CERC REC Regulation, 2010 JERC(Goa &UT) JERC(Manipur & Mizoram) The commission has set a target higher (0.4% for ) than stipulated in the Policy. The regulation mandates the State Agency to submit quarterly status to the Commission in respect of compliance of renewable purchase obligation by the obligated entities in the format as stipulated by the Commission and may suggest appropriate action to the Commission if required for compliance of the renewable purchase obligation. "Average Pooled Power Cost" definition is in line with the CERC REC Regulation, 2010 The regulator has defined a Solar RPO target of 0.25% for in line with the Policy. The State Agency shall devise appropriate protocol for collection of information from various sources such as renewable energy generating companies, obligated entities, SLDC, etc., on a regular basis and compile such information to compute the compliance of RPO target by such Obligated Entities. "Average Pooled Power Cost" definition is in line with the CERC REC Regulation, 2010 Karnataka The State Agency shall submit quarterly status to the Commission in respect of compliance of renewable purchase obligation by the obligated entities in the format as stipulated by the Commission. "Average Pooled Power Cost" definition is in line with the CERC REC Regulation, 2010 methodology/reporting to commission regarding RPO compliance. There is no clarity on RPO targets beyond RPO on any person owning Standby (or Emergency backup) Captive Generating Plant facilities will not be subject to RPO. The state has defined a very short trajectory for RPO targets till In case of genuine difficulty in complying with the renewable purchase obligation because of non availability of Certificates, the Obligated entity can approach the Commission for carry forward of compliance requirement to the next year There is no long term trajectory (beyond ) of RPO targets. The regulation does not specify the min capacity for Captive consumers for applicability of RPO. There is no long term trajectory of RPO targets. Solar RPO is applicable only on DISCOMS which is 0.25%. There is no trajectory defined. There is no separate solar RPO on Captive and Open Access consumers. A distribution licensee may in case of non-availability of INDIA RENEWABLE ENERGY STATUS REPORT MAY 14, 2014 NOVONOUS 12

14 Kerala The state has set a longer trajectory for RPO (till ) targets which brings clarity to the investor. The State Agency shall submit quarterly status to the Commission in respect of compliance of renewable purchase obligation by the obligated entities in the format as stipulated by the Commission and may suggest appropriate action to the Commission if required for compliance of the renewable purchase obligation. "Average Pooled Power Cost" definition is in line with the CERC REC Regulation, 2010 Maharashtra It is clearly mentioned that eligible renewable energy sources shall include Non-fossil fuel (including bagasse) based co-generation projects (both, qualifying and non-qualifying co-generation projects) The summary statement of RE procurement and RPO compliance by different Obligated Entities shall be published by the State Agency on cumulative basis every month on its website. The State Agency shall submit quarterly status to the State Commission in respect of compliance of renewable purchase obligation by the Obligated Entities Each Distribution Licensee shall indicate, along with sufficient proof thereof, the estimated quantum of purchase from renewable energy sources for each year of the Operating Period under the Business Plan as well as under MYT Petition "Average Pooled Power Cost" definition is in line with the CERC REC Regulation, 2010 Meghalaya The state has defined a high Solar RPO compared to other states in the country. "Average Pooled Power Cost" definition is in line with the CERC REC Regulation, 2010 The State Agency shall develop the formats for submission of quarterly progress report in respect of compliance of renewable purchase obligation by the obligated entities and get them approved by the Commission solar power generated in the State of Karnataka procure from other renewable sources of energy or REC to the extent of shortfall in its RPO in any year. Captive users can sell their surplus power only to the distribution companies (ESCOMs) at a price not exceeding the APPC RECs accreditation can be achieved only to the generators selling the power to ESCOMS at pooled cost of power purchase as approved by the Commission for the previous year. The Solar RPO of the state is 0.25% constant till the end of the trajectory period. The regulation does not specify the min capacity for Captive consumers for applicability of RPO. Procurement of RE power generated within the State by Distribution Licensee at rate other than rate approved by the State Commission directly from generator or from trader shall not be considered as eligible quantum for fulfillment of renewable purchase obligation of such distribution licensee Captive user(s) consuming power from grid connected fossil fuel based cogeneration plants, are exempted from applicability of RPO target and other related conditions as specified in these Regulations. The state has set a RPO target of 0.25% in line with policy but it has set a flat target of 0.5% till The state has defined a very short trajectory for RPO targets till If the distribution licensee is unable to fulfill the obligation, the shortfall in the specified quantum for the year shall be added to the specified quantum for the following year, and credit for INDIA RENEWABLE ENERGY STATUS REPORT MAY 14, 2014 NOVONOUS 13

15 excess purchase shall not be adjusted in the ensuing year. Odisha The state declared a separate RPO for procurement from renewable energy as well as from cogeneration based stations. The state has defined a longer trajectory for RPO targets till Third Party Sale from renewable energy sources has been be exempted from the cross-subsidy surcharge The State Agency shall develop the formats for submission of quarterly progress report in respect of compliance of renewable purchase obligation by the obligated entities and get them approved by the Commission "Average Pooled Power Cost" definition is in line with the CERC REC Regulation, 2010 Punjab The State Agency shall develop the formats for submission of quarterly progress report in respect of compliance of renewable purchase obligation by the obligated entities and get them approved by the Commission "Average Pooled Power Cost" definition is in line with the CERC REC Regulation, 2010 Rajasthan At the end of each financial year, each obligated entity shall submit a detailed statement regarding total electricity drawn / consumed and renewable energy /REC purchased and duly certified by the auditors to the State agency on or before ensuing 30th September. Solar RPO target (on DISCOMS only) of 0.75% in is higher than policy target. Each Distribution Licensee shall indicate, along with sufficient proof thereof, the estimated quantum of purchase of renewable energy for the ensuing year in tariff/arr petition in accordance with Regulations notified by the Commission The State Agency shall submit quarterly status to the Commission in respect of compliance of renewable purchase obligation by the obligated entities in the format as stipulated by the Commission and may suggest appropriate action to the Commission if required for compliance of the renewable purchase obligation. The State agency shall develop methodology for The discoms are allowed for carrying forward the unfulfilled RPO but the captive and open access consumers are not allowed the same. The regulation does not specify the min capacity for Captive consumers for applicability of RPO. The state has a lower solar RPO (0.15% in ) compared to the target as stipulated in the Policy of 0.25% by The commission has set a very low RPO target compared to the policy targets. The Solar RPO target for year is 0.07% compared to the target as stipulated in the Policy of 0.25% by The RPO trajectory is till The commission has carried forward the non-compliance of RPO for to There is lack of clarity on the RPO applicable on the captive users in terms of capacity. As per, Rajasthan Electricity Regulatory Commission (Power Purchase & Procurement Process of Distribution Licensee) (2nd Amendment) Regulations, 2011 solar RPO in Rajasthan is applicable on DISCOMS only. RPO targets are till only. A longer trajectory may be desirable There is separate RPO for bio-mass and that can be fulfilled by purchase of power from biomass plant only and not by purchase of REC. In case of genuine difficulty in complying with the renewable power purchase INDIA RENEWABLE ENERGY STATUS REPORT MAY 14, 2014 NOVONOUS 14

16 collection of information from renewable energy generating company, obligated entities, SLDC etc. on regular basis, compile the information to compute the RPO fulfillment by the obligated entities indicating separately the direct purchase of renewable energy as well as purchase through REC mechanism. The information shall be placed on a cumulative basis for each quarter by the State Agency on its website. Tamil Nadu The State Agency shall submit quarterly status to the Commission in respect of compliance of renewable purchase obligation by the obligated entities in the format as stipulated by the Commission. Tripura 0.1 (%) percentage points out the renewable purchase obligation so specified shall be procured from generation bases on solar. The State Agency shall develop the formats for submission of quarterly progress report in respect of compliance of renewable purchase obligation by the obligated entities and get them approved by the Commission "Average Pooled Power Cost" definition is in line with the CERC REC Regulation, 2010 Uttarakhand The State Agency shall develop the formats for submission of quarterly progress report in respect of compliance of renewable purchase obligation by obligation because of nonavailability of renewable energy and/or certificates, the obligated entity can approach the Commission to carry forward the compliance requirement to the next year or seek its waiver. The shortfall in RPO obligation can be fulfilled by purchase of renewable energy and/or REC up to 30th June of the next financial year. 'Pooled Cost of Power Purchase' means the weighted average price at which the distribution licensee has purchased the electricity including cost of self generation, if any, in the previous year from all the energy suppliers, excluding short term power purchases and those based on renewable energy. The state have set a very low solar RPO target for i.e. 0.1% The RPO targets set under TN Solar Policy 2012 and TNERC are conflicting to each other. The state has clarified that purchases made from cogeneration units irrespective of the fuel type would be considered for fulfilling their RPO. The APPC defined as per TNERC excludes short term as well as purchases from liquid fuels for computation of APPC. Also according to draft amendment published by TNERC, the APPC should not exceed 75% of the preferential tariff of the respective technology. In case of genuine difficulty in complying with the renewable purchase obligation because of non availability of Certificates, the Obligated entity can approach the Commission for carry forward of compliance requirement to the next year There is no long term RPO trajectory beyond The commission has set a very low Solar RPO target of 0.05% for the year INDIA RENEWABLE ENERGY STATUS REPORT MAY 14, 2014 NOVONOUS 15

17 the obligated entities and get them approved by the Commission "Average Pooled Power Cost" definition is in line with the CERC REC Regulation, 2010 Uttar Pradesh Solar RPO target of 1% in is higher than policy target. The renewable purchase obligation specified for the year shall continue beyond until any revision is effected by the Commission in this regard. All captive consumers irrespective of capacity will be RPO complaint. Every distribution licensee shall, on a yearly basis on or before 15th March, submit to the State Agency under intimation to the Commission, the details of the estimated quantum of purchase from renewable energy sources for the ensuing year. The distribution licensee shall submit quarterly status to the State Agency in respect of compliance of renewable purchase obligation. West Bengal The regulator has clearly defined RPO target fulfillment by purchase of power both being originated from co-generation and/or renewable sources. RPO trajectory till is defined. To meet the RPO the licensee shall make advertisement in at least two widely published national English daily newspapers and at least one widely published Bengali daily newspaper every year. "Average Pooled Power Cost" definition is in line with the CERC REC Regulation, 2010 There is no long term RPO trajectory beyond Provided that in case of genuine difficulty in complying with the renewable purchase obligation because of nonavailability of certificates, the Obligated Entity can approach the Commission for carry forward of compliance requirement to the next year. The regulation does not specify the min capacity for Captive consumers for applicability of RPO. If the obligated entity has established the fact that the minimum quantum of purchase from solar energy is not available in the market either in the form of solar power or solar certificate in a particular year and the Commission is satisfied with this fact, then additional non-solar energy over and above current non solar RPO target shall be purchased for fulfillment of total renewable purchase obligation. The Commission may, either on its own motion or on recommendation of the State Agency or on receipt of an application from the obligated entity, revise for any year the percentage RPO targets as deemed appropriate. The commission in its regulation have defined RPO target from onwards. RPO targets till (0.6%) are not sufficient to meet policy targets There is no provision requiring State Agency developing methodology/reporting to commission regarding RPO compliance. The regulation does not specify the min capacity for Captive consumers for applicability of RPO. Exhibit 2.6 Analysis of state-wise RPO Regulation across India Source: MNRE INDIA RENEWABLE ENERGY STATUS REPORT MAY 14, 2014 NOVONOUS 16

18 2.4 State-wise Non-Solar and Solar RPOs ( to ) State Andhra Pradesh Arunachal Pradesh RE Technology INDIA RENEWABLE ENERGY STATUS REPORT MAY 14, 2014 NOVONOUS Non-Solar 4.75% 4.75% 4.75% 4.75% 4.75% 4.75% Solar 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% Total 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% Non-Solar 4.10% 5.45% 6.80% Solar 0.10% 0.15% 0.20% Total 4.20% 5.60% 7.00% Assam Non-Solar 2.70% 4.05% 5.40% 6.75% Solar 0.10% 0.15% 0.20% 0.25% Total 2.80% 4.20% 5.60% 7.00% Bihar Non-Solar 2.25% 3.75% 4.00% 4.25% Solar 0.25% 0.25% 0.50% 0.75% 1.00% 1.25% 1.50% 1.75% 2.00% Total 2.50% 4.00% 4.50% 5.00% Chhattisgarh Non-Solar 5.00% 5.25% Solar 0.25% 0.50% Total 5.25% 5.75% Delhi Non-Solar 1.90% 3.25% 4.60% 5.95% 7.30% 8.65% JERC (Goa & UT) Solar 0.10% 0.15% 0.20% 0.25% 0.30% 0.35% Total 2.00% 3.40% 4.80% 6.20% 7.60% 9.00% Non-Solar 1.70% 2.60% Solar 0.30% 0.40% Total 2.00% 3.00% Gujarat Non-Solar 5.50% 6.00% Solar 0.50% 1.00% Total 6.00% 7.00% Haryana Non-Solar 1.50% 2.00% 3.00% Himachal Pradesh Jammu and Kashmir Solar 0.00% 0.05% 0.10% Total 1.50% 2.05% 3.10% Non-Solar 10.00% 10.00% 10.00% 10.00% 11.00% 12.00% 13.00% 14.00% 15.00% Solar 0.01% 0.25% 0.25% 0.25% 0.25% 0.25% 0.50% 0.75% 1.00% Total 10.01% 10.25% 10.25% 10.25% 11.25% 12.25% 13.50% 14.75% 16% Non-Solar 2.90% 4.75% Solar 0.10% 0.25% Total 3.00% 5.00% Jharkhand Non-Solar 2.50% 3.00% Solar 0.50% 1.00% Total 3.00% 4.00% Karnataka Non-Solar 10% and 7% Solar 0.25% Total (Discoms only) 10.25% & 7.25% Kerala Non-Solar 3.35% 3.65% 3.95% 4.25% 4.55% 4.85% 5.15% 5.45% 5.75% Madhya Pradesh Solar 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% Total 3.60% 3.90% 4.20% 4.50% 4.80% 5.10% 5.40% 5.70% 6.00% Non-Solar 2.10% 3.40% 4.70% 6.00% Solar 0.40% 0.60% 0.80% 1.00% Total 2.50% 4.00% 5.50% 7.00% Maharashtra Non-Solar 6.75% 7.75% 8.50% 8.50% 8.50%

19 Solar 0.25% 0.25% 0.50% 0.50% 0.50% Total 7.00% 8.00% 9.00% 9.00% 9.00% Manipur Non-Solar 2.75% 4.75% Solar 0.25% 0.25% Total 3.00% 5.00% &Mizoram Non-Solar 5.75% 6.75% Solar 0.25% 0.25% Total 6.00% 7.00% Meghalaya Non-Solar 0.45% 0.60% Solar 0.30% 0.40% Total 0.75% 1.00% Nagaland Non-Solar 6.75% 7.75% Solar 0.25% 0.25% Total 7.00% 8.00% Orissa Non-Solar 4.90% 5.35% 5.80% 6.25% 6.70% Solar 0.10% 0.15% 0.20% 0.25% 0.30% Total 5.00% 5.50% 6.00% 6.50% 7.00% Punjab Non-Solar 2.37% 2.83% 3.37% 3.81% Solar 0.03% 0.07% 0.13% 0.19% Total 2.40% 2.90% 3.50% 4.00% Rajasthan Non-Solar 5.50% 6.35% 7.00% Solar 0.50% 0.75% 1.00% Total 6.00% 7.10% 8.20% Tamil Nadu Non-Solar 8.95% Solar 0.05% Total 9.00% Tripura Non-Solar 0.90% 1.90% Solar 0.10% 0.10% Total 1.00% 2.00% Uttarakhand Non-Solar 4.50% 5.00% Uttar Pradesh Solar 0.03% 0.05% Total 4.53% 5.05% Non-Solar 4.50% 5.00% Solar 0.50% 1.00% Total 5.00% 6.00% West Bengal Non-Solar 3.75% 4.70% 5.60% 6.50% 7.40% Solar 0.25% 0.30% 0.40% 0.50% 0.60% Total 3.00% 4.00% 4.00% 5.00% 6.00% 7.00% 8.00% Exhibit 2.7 State-wise Non-Solar and Solar RPOs ( to ) Source: MNRE INDIA RENEWABLE ENERGY STATUS REPORT MAY 14, 2014 NOVONOUS 18

20 INDIA RENEWABLE ENERGY STATUS REPORT MAY 14, 2014 NOVONOUS 19

21 3. Need for Renewable Energy in India Industrialization, urbanization, population growth, economic growth, improvement in per capita consumption of electricity, depletion of coal reserve, increasing import of coal, crude oil and other energy sources and the rising concern over climate change have put India in a critical position. It has to take a tough stance to balance between economic development and environmental sustainability. One of the primary challenges for India would be to alter its existing energy mix which is dominated by coal to greater share of cleaner and sustainable sources of energy. The total renewable energy potential from various sources in India is 2,49,188 MW. Bio-Power: Agro- Residues Small Hydro Power (up to 25 MW) Bio-Power: Cogeneration - Bagasse 5000 Wind Power WtE: Municipal Solid Waste 2600 WtE: Industrial Waste 1280 Solar Power Solar Power Wind Power Small Hydro Power (up to 25 MW) Bio-Power: Agro-Residues Bio-Power: Cogeneration - Bagasse WtE: Municipal Solid Waste WtE: Industrial Waste India - Total Renewable Energy Potential (in MW) Exhibit 3.1 Total Renewable Energy Potential in India (in MW) Source: MNRE, NOVONOUS Insights As of 31 st March 2014, the total installed capacity from renewable energy, both grid-interactive and off-grid/captive power, was 32,730 MW. Thus the untapped market potential for overall renewable energy in India is 2,15,922 MW. 3.1 Energy Security Energy security is interplay of demand and supply scenarios which are influenced by a number of factors that requires careful consideration and evaluation. Energy security is one of the key challenges confronting India. Energy is critical for the socio-economic development of a country. Hence, energy is considered as a strategic commodity and any uncertainty regarding its supply can affect the functioning of a country s economy. In this strategic sense, achieving INDIA RENEWABLE ENERGY STATUS REPORT MAY 14, 2014 NOVONOUS 20

22 energy security is considered to be of fundamental importance for India s economic growth and meeting the Millennium Development Goals (MDG) such as decreasing unemployment, alleviation of poverty, improving healthcare and increase the literacy rate. India wants to be self-reliable in energy production, because large import of coal, crude oil, natural gas or other energy sources is paid in foreign currencies which results in devaluating Indian currency and increase the inflation which would affect the economy. Even though India is the fifth largest producer of energy at 548 Million Tons of Oil Equivalent (MTOE) in the world as of 2012, the gap between production and consumption is huge and growing. As of 2012, the gap between production and consumption is 226 MTOE. The energy deficit of the country is around 30% as of Most of the deficit in the energy front is due to the fact that India is a net importer of oil. As per 12 th Five Year Plan, the total domestic energy production by will be MTOE and by it is expected to reach 844 MTOE. This will meet around 71 per cent and 69 per cent of expected energy consumption, with the balance to be met from imports, projected to be about MTOE by and MTOE by India continues to depend heavily on coal to meet most of the demand and it will continue to remain as the most important source of energy in the near future. Coal Supply Constraints and Pricing Risk: India has the fifth-largest global reserves of coal. However, coal imports are increasing. Coal imports now meet 18% of the country s demand and have been up from 9% five years back. Coal imports are likely to grow at a CAGR of 13% over FY12 to FY17 and meet 21% of demand in FY17. With international coal prices much higher than the domestic coal price, the performance of generators relying on imported coal has been adversely affected. Gas Shortage and High Price: India has less than 1% of the world s gas reserves. Over the past five years, domestic supply has increased 54%, but way below the government and industry expectations. Import gas prices remain to be high and making such projects economically unviable. Nuclear Facing Twin Challenges: Public opposition and the Nuclear Liability Bill are the two key challenges faced by the nuclear sector in India. Post Fukushima, lot of allegations regarding the safety and viability of this source of energy cropped up.the Kudankulum nuclear plant site in Tamil Nadu, where the construction was around 90% complete when the Fukushima disaster struck Japan in March 2011 faced lot of resistance to start operations. Water Stress Aggravating: India is a water stressed nation. According to available estimates by the Centre for Science and Environment, 88% of the country s industrial water demand is taken up by thermal power plants. The per capita availability of water in the country is 1545 cubic meters as per the 2011 census according to ministry of water resources. INDIA RENEWABLE ENERGY STATUS REPORT MAY 14, 2014 NOVONOUS 21

23 Power Supply Deficit: As per Central Electricity Authority (CEA), India currently has a peak deficit of 12GW, which is 6.7% of its demand. With electricity demand expected to grow and conventional power capacity facing its own challenges, we expect developers and investors to favor renewable capacity addition. With India s growing population coupled with increased industrialization the Demand supply gap will only keep on growing.at this rate it becomes imperative to look beyond conventional sources of energy and evaluate their economic viability. 3.2 Economic Viability The cost of electricity generation from major renewable sources like wind and solar is comparable to or cheaper than diesel or re-gasified liquid natural gas (RLNG). Only coal, hydro powered plants have cheaper cost per unit of electricity production. India - Source-wise Cost Per Unit of Electricity Production in INR Imported Coal Diesel Re-gasified Liquid Natural Gas (RLNG) Nuclear Solar Wind Hydro Exhibit 3.2 Source-wise Cost Per Unit of Electricity Production in India (in INR) Source: CEA, NOVONOUS Insights The initial capital cost of installation is higher in most of the renewable sources except hydro. But the cost of operation and maintenance is comparatively cheaper than thermal or nuclear power plants. Also since the cost of fuel is none for renewable energy sources. With increase in prices of coal, gas and other fossil fuels renewable sources will become comparable or cheaper than conventional power sources and will thus become economically viable. INDIA RENEWABLE ENERGY STATUS REPORT MAY 14, 2014 NOVONOUS 22

24 3.3 Rural Electrification As per 2011 census, around 742 million or 72.2% people in India live in villages. Also 43% of rural households still use kerosene to light their houses compared to 6-7% people in urban areas. As of 31 st March 2014 out of a total 5,93,732 inhabited villages, only 5,72,414 (96.4%) villages have got access to electricity. There are still 21,318 villages which have got no access to electricity. India - Electrified vs. Unelectrified Villages Unelectrified villages % Electrified Villages % Electrified Villages Unelectrified villages Exhibit 3.3 Electrified vs. Unelectrified Village in India Source: CEA, NOVONOUS Insights These communities are still waiting to see a bulb glowing in their homes. People are deprived of carrying on many activities after sunset which hampers their productivity as no economic activity can be carried in dark. It also affects the children as they cannot study during night. Over 85% of rural India is still using firewood, crop residue or cow dung as its primary source of fuel for cooking. These inefficient cooking stoves not only use more energy but also give rise to health problems as well as energy poverty. One of the major reasons for this situation lies in the location of the villages itself which are often time in remote areas. Also it takes a lot of investment is required in setting up transmission and distribution (T&D) mechanisms in the rural areas. Renewable energy become a very suitable candidate in these case as it is much more cost effective and less time consuming to set up in rural areas. INDIA RENEWABLE ENERGY STATUS REPORT MAY 14, 2014 NOVONOUS 23

25 INDIA RENEWABLE ENERGY STATUS REPORT MAY 14, 2014 NOVONOUS 24

26 4. Wind Energy Market in India India has an estimated wind power potential of 1,02,772 MW out of which the total installed capacity as of 31 st March 2014 was 21, MW. 4.1 State-wise Wind Farmable Sites in India Centre for Wind Energy Technology (C-WET), Chennai is responsible for identifying various wind farmable sites in India and also for validating and certifying various wind turbines in India. C-WET has identified 233 sites in India across 14 states and union territories after detailed surveys which are suitable for wind farms as they have wind power density (WPD) > 200 W/m2 at 50 m height. Exhibit 4.1 State-wise Wind Farmable Sites in India Source: C-WET, NOVONOUS Insights INDIA RENEWABLE ENERGY STATUS REPORT MAY 14, 2014 NOVONOUS 25

27 4.2 State-wise Wind Energy Potential in India (in MW) India has an estimated on-shore wind energy potential of 1,02,772 MW. India has a coastline of 7517 Km. thus offering a huge potential for off-shore wind energy as well. C-WET currently is working on mapping the off-shore wind energy potential in India. Exhibit 4.2 State-wise Wind Energy Potential in India (in MW) Source: C-WET, NOVONOUS Insights INDIA RENEWABLE ENERGY STATUS REPORT MAY 14, 2014 NOVONOUS 26

28 4.3 State-wise Wind Energy Installed Capacity in India (in MW) As of January 2014, India s wind energy installed capacity was majorly spread across 8 states Rajasthan, Gujarat, Madhya Pradesh, Maharashtra, Andhra Pradesh, Karnataka, Tamil Nadu and Kerala. Exhibit 4.3 State-wise Wind Energy Installed Capacity in India (in MW) Source: MNRE, NOVONOUS Insights INDIA RENEWABLE ENERGY STATUS REPORT MAY 14, 2014 NOVONOUS 27

29 4.4 State-wise Wind Energy Capacity Utilization in India (in %) As of January 2014, states like Maharashtra, Rajasthan and Tamil Nadu had utilized their overall wind energy potential by more than 50%. Karnataka on the other hand has estimated wind energy potential of 13,593 MW spread across 26 wind farmable sites out of which it has been able to utilize only 17.01% of capacity. This is a huge opportunity for wind energy manufactures, plant developers and Government to expand this sector India - State-wise Wind Energy Capacity Utilization (in %) Exhibit 4.4 State-wise Wind Energy Capacity Utilization in India (in %) Source: MNRE, NOVONOUS Insights 4.5 State-wise Contribution of Wind Energy Installed Capacity in India (in %) Others 0.02% Tamil Nadu 35.85% Rajasthan 13.52% Gujarat 16.73% Maharashtra 17.17% Andhra Pradesh 3.20% Karnataka 11.43% Kerala 0.17% Madhya Pradesh 1.91% Andhra Pradesh Gujarat Karnataka Kerala Madhya Pradesh Maharashtra Rajasthan Tamil Nadu Others Exhibit 4.5 State-wise Wind Energy Installed Capacity in India (in %) Source: MNRE, NOVONOUS Insights INDIA RENEWABLE ENERGY STATUS REPORT MAY 14, 2014 NOVONOUS 28

30 4.6 State-wise Regulation and Policy Comparison for Wind Energy in India STATE / CENTRE CERC (FY13-14) Andhra Pradesh Gujarat Regulati ons / or Order or Draft Draft CERC Generic RE Order for FY ; CERC Regulati ons, 2012 Wind Order in respect of "New Wind Based Power Projects ( O.P No. 6/7 of 2009) Wind Order (Order No.2 of 2012, Aug 8, 2012) Control period FY (3 yrs) For WPP having entered into PPA btw May 1, 2009 to March 31, 2014 August 11, 2012 to March 31, 2016 (Rs/kWh) Wind power density = (Rs /kwh) <200 = 6.27, 5.78(with A.D) = 5.70, 5.25(with A.D) = 5.02, 4.63(with A.D) = 4.18, 3.85(with A.D) >400 = 3.92, 3.61(with A.D) For first 10 years-3.5 For next 10 yearsdetermined thereafter Gross - Rs 4.23/kWh Depreciation- Rs 0.38/kWh Net -Rs 4.23/kWh Capit al Cost (Rs. Lakh/ MW) (FY ) Capacity Utilisation Factor (%) Wind power density CUF <200 = 20% = 22% = 25% = 30% >400 = 32% Usef ul life (yrs) Subsidy and incentive by Central /State Govt 25 Shall be factored in the tariff on per unit benefit derived on levellised basis Taxes and Duties exclusiv e of taxes and duties, pass through allowed on actual basis Late Payme nt surchar ge 1.25% per month if payme nt delaye d beyon d 60 days % 20 N.A N.A N.A % 25 Takes into account benefit of depreciatio n. Shall take a view on GBI once MNRE announces the scheme N.A N.A Karnataka Order for determi nation of tariff for RE sources (Dec, 11,2009) 10 years Average tariff for first 10 years from signing of PPA= Rs 3.70/kWh % 25 Shall not take into considerati on incentives allowed by Govt for tariff determinati on Pass through on actual incurre d basis N.A INDIA RENEWABLE ENERGY STATUS REPORT MAY 14, 2014 NOVONOUS 29

31 Maharashtra Rajasthan Tamil Nadu Generic Order ( March 30, 2012) RERC (Terms and Conditi ons of ) Regulati ons, 2009, Draft Order on Wind Projects for FY Compre hensive Order on Wind Energy (Order No. 6 of 2012) dated July 31, 2012 FY April 1, 2009 to March 31, 2014 August 31, 2012 to March 31, 2014 Wind power density = (Rs /kwh) = 5.67 (including AD of 0.81/kWh) = 4.93 (including AD of 0.70/kWh) = 4.20 (including AD of 0.60/kWh) >400 = 3.78 (including AD of 0.54/kWh) 5.18 (without AD) 4.90 (with AD)-for projects in Jaisalmer, Jodhpur and Barmer districts 5.44 (without AD) 5.14 (with AD)-for other districts for FY 13 subje ct to index ation 530 for FY 13 Wind power density CUF =20% =23% =27% >400 =30% 21%- Jaisalmer, Jodhpur and Barmer districts 20%- Other districts 25 Takes into account benefit of depreciatio n. However shall not take into account GBI benefit into tariff determinatt ion 25 Any Policy support by way of capital subsidy /Capital Finance Assistance (CFA), higher depreciatio n benefit or GBI, which becomes available to the developer/ generator, needs to be passed on to the utilities. Pass through on actual incurre d basis Tax is not a pass through ; ROE comput ed on pre-tax basis 1.25% per month if payme nt delaye d beyon d 60 days 1.25% per month on daily basis for delay beyon d a period of 1.5 month from the date of billing 3.51 Rs/kWh % 20 Penalty of 1% per month shall be levied for delaye d payme nt by the license e Exhibit 4.6 State-wise Wind Energy Regulation and Policy in India Source: Various SERC Orders INDIA RENEWABLE ENERGY STATUS REPORT MAY 14, 2014 NOVONOUS 30

32 4.7 EXIM Scenario in Indian Wind Energy Sector Export Scenario India s export of wind generators was at US$ 0.78 million in which rose to US$ million in (Apr-Dec). India exported US$ million worth of wind generators and the overall exported quantity was 46,730 units between and (Apr-Dec). India - Export Value of Wind Generators(in US$ million) (Apr - Dec) Exhibit 4.7 Export Value of Wind Generators in India (in US$ million) from FY to FY Source: Dept. of Commerce, NOVONOUS Insights India - Export Quantity of Wind Generators (in thousands) (Apr - Dec) Exhibit 4.8 Export Quantity of Wind Generators in India (in thousands) from FY to FY Source: Dept. of Commerce, NOVONOUS Insights INDIA RENEWABLE ENERGY STATUS REPORT MAY 14, 2014 NOVONOUS 31

33 Import Scenario India s import of wind generators was at US$ 1.18 million in which rose to US$ 3.14 million in (Apr-Dec). India imported US$ million worth of wind generators and the overall imported quantity was 3,320 units between and (Apr-Dec) India - Import Value of Wind Generators (in US$ million) (Apr - Dec) Exhibit 4.9 Import Value of Wind Generators in India (in US$ million) from FY to FY Source: Dept. of Commerce, NOVONOUS Insights India - Import Quantity of Wind Generators (in thousands) (Apr - Dec) Exhibit 4.10 Import Quantity of Wind Generators in India (in thousands) from FY to FY Source: Dept. of Commerce, NOVONOUS Insights INDIA RENEWABLE ENERGY STATUS REPORT MAY 14, 2014 NOVONOUS 32

34 4.8 Key Growth Drivers and Inhibitors for Wind Energy Market in India Growth Inhibitors - High Initial Investment - Large Land Requirements - Variable Energy Outputs - Lack of Transmission Infrastructure - Delay in Payments - Lack of Strict Enforcement of RPOs Growth Drivers - Government Incentives - Cost Competitiveness of RE - Shift to Clean Energy - Distributed Electricity Demand - Favorable Foreign Investment Policy - Huge Untapped Potential Exhibit 4.11 Key Growth Drivers and Inhibitors for Wind Energy Market in India Source: NOVONOUS Insights 4.9 Risks Associated With Wind Energy in India Credit Risk Ernst & Young LLP ranked India as Asia s third-most attractive country for renewable investments as it plans to double its clean-energy capacity to 55 GW by Lack of affordable financing is a major hindrance in reaching this goal as the central bank is raising interest rates to combat inflation and commercial banks are wary about lending to new technologies. According to Bloomberg, the state-run Indian Renewable Energy Development Agency Ltd. (IREDA) raised about 7.2 billion rupees ($117.8 million) in the month of March 2014 by selling 10, 15 and 20 year tax-free bonds to help finance clean-energy projects. INDIA RENEWABLE ENERGY STATUS REPORT MAY 14, 2014 NOVONOUS 33

35 Currently Indian commercial banks offer 10 year loans with interest rates of varying from percent to renewable plants. As per Climate Policy and Indian School of Business study such unfavorable terms add as much as 32 percent to the cost of renewable energy in India compared to similar projects in other countries This study also found that India could cut the cost of subsidizing wind energy by as much as two-thirds by introducing new policies to allow projects to raise cheaper, longer-term loans. By helping wind farms and solar-power plants to reduce borrowing costs and obtain loans with terms as long as 20 years would be a cheaper way of supporting clean energy than existing policies. A cost-effective way for the government to support renewable energy would be through debtrelated policies, such as paying part of the interest-rate obligations of projects or lending funds below commercial rates or for longer tenors. According to Bloomberg, India witnessed increased investment in renewable power and energy smart technologies at $7.8bn in 2013, up from $7.6bn in It shows investors are still willing to invest in this sector which can further be improved with favorable policies. Policy Risk Almost all renewable energy projects are prone to policy risk, for example heavy losses could be incurred due to changes in the energy markets which can be because of changes in the price of other sources of energy including fossil fuels. In India s case, renewable project revenues currently depend more on policy support rather than on the prices of fossil fuels. Even minor reduction in the financial support may impact financing arrangements and hamper investor confidence in the sector. For example, both the accelerated depreciation (AD) and the generation based incentive (GBI), which comprised 10% of wind energy incentives, expired in March Although they were brought back in 2013, it affected the sector significantly. New mechanisms, including the Renewable Energy Certificate (REC) market can assist India s ambition to increase renewable energy installed capacity in near and long term but it s still in a nascent stage and the demand is overpowered by huge supply of REC s resulting in flooring of prices. Technical Risk Like any technology, wind energy also has its own risks. Some of the major areas related to technology are: Building and Testing Risk: The risk of property damage or third-party liability arising from accidents during building or testing of new wind power plants/equipments can prove to be dangerous. INDIA RENEWABLE ENERGY STATUS REPORT MAY 14, 2014 NOVONOUS 34

36 Operational Risk: The risk of unplanned plant closure, for example owing to unavailability of resources, plant damage or component failure. The wind power industry is still focusing on replacing smaller wind turbines with larger once. The major reason for this behavior is that all the best sites are already occupied, and increasing the wind turbine size is one of the few ways left to increase the output. This is already happening in leading states in terms of wind power like Tamil Nadu. So far, there are no offshore wind farms in India. C-WET and MNRE are working towards changing this scenario. In case of off-shore wind farms, the level of risk increases with size and location. Weather-Related Risk: The risk of a fall in volume of electricity produced due to lack of wind or high speed of wind. The complete dependence on climatic conditions leads to variability in power generation which acts as a major obstacle to recover costs. Supply Chain Risk: The shortage of component and increase in transportation costs put pressure on margins. The shortage of critical components like gearboxes, slew rings, pitch bearings, towers, control panels etc. can affect maximum power generation from wind turbines Challenges for New Players in Indian Wind Energy Sector Wind Turbine Manufacturers Component Manufacturer Wind Farm Operator Competition in the industry Product acceptance in the market Land acquisition Health of the distribution company High amount of technical support Huge investment for turn-key projects Difficulty in finances No past track record Evacuation of energy Acquiring skilled manpower Difficult to maintain cycle time Forest area permission Stability in currency exchange rate Quality control Hard to get clearances Exhibit 4.12 Challenges for New Players in Indian Wind Energy Sector Source: NOVONOUS Insights 4.11 Recommendations for Policy Makers 1. Improve short-term wind forecasting 2. Adequate Grid Connectivity 3. Increase PPPs to reduce risks to private investors 4. Solve institutional inefficiencies 5. Establish long-term markets for off-shore wind power 6. Provide flexible financing options to new players Exhibit 4.13 Recommendations for Policy Makers Source: NOVONOUS Insights INDIA RENEWABLE ENERGY STATUS REPORT MAY 14, 2014 NOVONOUS 35

37 INDIA RENEWABLE ENERGY STATUS REPORT MAY 14, 2014 NOVONOUS 36

38 5. Solar Energy Market in India India has an estimated solar power potential of around 1,00,000 MW out of which the total installed capacity as of 31 st March 2014 was 2,647 MW. 5.1 State-wise Solar Energy Installed Capacity in India (in MW) As of March 2014, India s solar energy installed capacity was majorly spread across 8 states Rajasthan, Gujarat, Madhya Pradesh, Maharashtra, Andhra Pradesh, Tamil Nadu, Karnataka and Uttar Pradesh. Exhibit 5.1 State-wise Solar Energy Installed Capacity in India (in MW) Source: MNRE, NOVONOUS Insights INDIA RENEWABLE ENERGY STATUS REPORT MAY 14, 2014 NOVONOUS 37

39 5.2 State-wise Grid Connected Solar Power Projects under JNNSM As of 31 st March 2014, India had MW of grid connected solar power projects which were commissioned under Jawaharlal Nehru National Solar Mission (JNNSM). This included MW projects by Ministry of New & Renewable Energy (MNRE), MW under various state government policies, 90 MW under renewable purchase obligation (RPO), under renewable energy certificate (REC) scheme, MW by private initiative (roof-top) and 25.2 MW by central public sector undertakings (CPSUs). This was an increment of MW over last year which ended with MW as of 31 st March Sr. No. State/UT Total MNRE Projects (in MW) State Policy (in MW) RPO (in MW) REC Scheme (in MW) Private Initiative (Roof top) (in MW) CPSUs (in MW) Total commissioned capacity till (in MW) 1 Andhra Pradesh Arunachal Pradesh Chhattisgarh Gujarat Haryana Jharkhand Karnataka Kerala Madhya Pradesh Maharashtra Orissa Punjab Rajasthan Tamil Nadu Uttar Pradesh Uttarakhand West Bengal Andaman & Nicobar Delhi Lakshadweep Pondicherry Chandigarh Others TOTAL Exhibit 5.2 State-wise Grid Connected Solar Power Projects in India under JNNSM (in MW) Source: MNRE INDIA RENEWABLE ENERGY STATUS REPORT MAY 14, 2014 NOVONOUS 38

40 5.3 State-wise Solar RPO Targets ( to ) State Andhra Pradesh 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% Arunachal Pradesh 0.10% 0.15% 0.20% Assam 0.10% 0.15% 0.20% 0.25% Bihar 0.25% 0.25% 0.50% 0.75% 1.00% 1.25% 1.50% 1.75% 2.00% 2.50% 3.00% Chhattisgarh 0.25% 0.50% Delhi 0.10% 0.15% 0.20% 0.25% 0.30% 0.35% JERC (Goa & UT) 0.30% 0.40% Gujarat 0.50% 1.00% Haryana 0.00% 0.05% 0.10% Himachal Pradesh Jammu and Kashmir % 0.25% 0.25% 0.25% 0.25% 0.25% 0.50% 0.75% 1.00% 2.00% 3.00% 0.10% 0.25% Jharkhand 0.50% 1.00% Karnataka 0.25% Kerala 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% Madhya Pradesh 0.40% 0.60% 0.80% 1.00% Maharashtra 0.25% 0.25% 0.50% 0.50% 0.50% Manipur 0.25% 0.25% Mizoram 0.25% 0.25% Meghalaya 0.30% 0.40% Nagaland 0.25% 0.25% Orissa 0.10% 0.15% 0.20% 0.25% 0.30% Punjab 0.03% 0.07% 0.13% 0.19% Rajasthan 0.50% 0.75% 1.00% Sikkim Tamil Nadu 0.05% Tripura 0.10% 0.10% Uttarakhand 0.03% 0.05% Uttar Pradesh 0.50% 1.00% No regulation issued for RPO by the Power Department West Bengal 0.25% 0.30% 0.40% 0.50% 0.60% Exhibit 5.3 State-wise Solar RPO Targets ( to ) Source: MNRE 5.4 Solar Power Capacity Requirements (FY12 FY22) As per the National Policy, it is envisaged that the targets for Solar RPO shall be 0.25% by extending to 3% by The Jawaharlal Nehru National Solar Mission has been the first step towards achieving these targets. The following table illustrates the Solar RPO requirement by FY 2022 on the basis of expected demand in India. Assumptions: Average CUF for Solar Power Technologies to be 19%. INDIA RENEWABLE ENERGY STATUS REPORT MAY 14, 2014 NOVONOUS 39

41 Year Energy Demand (MU)* Solar RPO (%) Solar Energy Requirement (MU) for RPO compliance Solar Capacity Requirement for RPO compliance (MW) (A) (B) (A)X(B) ,53, % 2,385 1, ,22, % 2,556 1, ,95, % 5,478 3, ,74, % 8,806 5, ,58, % 12,582 7, ,48, % 16,855 10, ,43, % 25,258 15, ,44, % 34,761 20, ,53, % 41,343 24, ,70, % 48,678 29, ,94, % 56,842 34,152 Exhibit 5.4 Solar Power Capacity Requirements (FY12 to FY22) Source: National Electricity Plan for Generation January State-wise Regulation and Policy Comparison for Solar Energy in India STATE Regulations / or Order or Draft Control period (Rs/kWh) Capit al Cost (Lakh /MW) Capa city Utilisa tion Facto r (%) Auxiliary Consum ption (%) Use ful life (yrs ) Subsi dy and incen tive by Centr al /State Govt Taxes and Duties Late Paym ent surcha rge CERC (FY13-14) Draft CERC Generic RE Order for FY ; CERC (Terms and Conditions for determination from Renewable Energy Sources) Regulations, 2012 FY (3 yrs) Lev AD After AD (FY ) 19% 25 Shall be factor ed in the tariff on per unit benef it deriv ed on levelli sed basis exclu sive of taxes and duties, pass throu gh allow ed on actu al basis 1.25% per month beyon d a delay of 60 days Andhra Pradesh IA No 17 of 2010, dated July 14, and (Without AD) (With AD) 25 INDIA RENEWABLE ENERGY STATUS REPORT MAY 14, 2014 NOVONOUS 40

42 Gujarat GERC Order 1 of 2012 dated Jan 27, 2012 Jan 29, 2012 to March 31, 2015 For MW Scale Plants: Jan 2012-March 2013: (Without AD), (With AD), FY : 9.64 (Without AD), 8.63 (With AD), FY : 8.97 (Without AD), 8.03 (With AD) For kw scale Plants Jan 2012-March 2013: (Without AD), (With AD), FY : (Without AD), (With AD), FY : (Without AD), 9.63 (With AD) 1000 (MW scale Plants ), 1200 (kw scale plants ) 18% with 1% annu al degr adati on 0.25% 25 Karnata ka KERC Order on Solar Power Determination dated July 13, 2010 Upto March 31, 2013 commissio ning 14.5 (Including rooftop and small solar PV plants) % 25 Madhya Pradesh Order for Solar Based Power Generation dated Aug 01, 2012 Aug 2012 to March (capacity >2 MW), (Capacity upto 2 MW) 1025 (capa city >2 MW), 1050 (capa city upto 2 MW) 19% with 1% annu al derat ion from 3rd yr onwa rds 0.25% % per month beyon d a delay of 30 days Mahara shtra MERC RE tariff regulayions,20 10,Case No 10 of 2012 (Mar 30, 2012) FY (5 years from the date of commenc ement ) Lev ( RT & SSPGP) AD (1.65) after AD (10.01) 1000 (FY ) 19% NA 25 Shall be factor ed in the tariff on per unit benef it deriv ed on levelli sed basis exclu sive of taxes and duties, pass throu gh allow ed on actu al basis 1.25% per month beyon d a delay of 60 days INDIA RENEWABLE ENERGY STATUS REPORT MAY 14, 2014 NOVONOUS 41

43 Rajasth an RERC (Determination of benchmark capital cost for solar PV and Solar thermal power projects) dated 13 may (Plant comissioned by 31 Mar 2014) with AD (Roof top and SSPG comissioned by 31 mar 2014) % with derat ion of 0.5% PA after 2nd year 0.25% 25 GBI Tamil Nadu TNERC (tariff order for projects covered under JNNSM) dated 27/05/10 FY (till 31/05/12) Lev AD After AD % with a derat ion of 1% every year after ten years. 2% 25 AD benef it shall be factor ed in the tariff 1% per month for paym ent after 30 days of billing Uttar Pradesh UPERC (Captive and Nonconventional Energy generating plants )regulati on 2009 FY (5 years) 15 (comissioned by Dec 2011,not covered under GOI incentive scheme) 1.25% per mont h beyo nd a delay of 60 days Exhibit 5.5 State-wise Solar Energy Regulation and Policy in India Source: Various SERC Orders 5.6 EXIM Scenario in Indian Solar Energy Sector Export Scenario India currently has an overall production capacity of 1GW for cells and 2MW for modules. This production capacity exceeds the present PV installation capacity in the country significantly and will remain so in the coming years considering the annual growth rates witnessed in the past. India s export of solar PV cells was at US$ million in which rose to US$ million in (Apr-Dec). India exported US$ million worth of solar PV cells and the overall exported quantity was million units between and (Apr-Dec). India s exports of solar PV cells and modules have fallen after FY majorly due to fall in prices by about 80% (US$ 3/watt to US$ 0.6/watt) during The major reason behind this was the huge increase in capacity buildup by Chinese manufacturers backed by a US$ 43 billion subsidy and soft loans from Chinese government. INDIA RENEWABLE ENERGY STATUS REPORT MAY 14, 2014 NOVONOUS 42

44 India - Export Value of Solar PV Cells (in US$ million) (Apr - Dec) Exhibit 5.6 Export Value of Solar PV Cells in India (in US$ million) from FY to FY Source: Dept. of Commerce, NOVONOUS Insights India - Export Quantity of Solar PV Cells (in thousands) (Apr - Dec) Exhibit 5.7 Export Volume of Solar PV Cells in India (in thousands) from FY to FY Source: Dept. of Commerce, NOVONOUS Insights Import Scenario India s import of solar PV cells was at US$ million in which rose to US$ 539 million in (Apr-Dec). India imported US$ million worth of solar PV cells and the overall imported quantity was million units between and (Apr-Dec). INDIA RENEWABLE ENERGY STATUS REPORT MAY 14, 2014 NOVONOUS 43

45 The major import locations were China, Taiwan and USA. Due to the availability of cheap Chinese solar PV cells, the import from China is on the rise compared to other countries India - Import Value of Solar PV Cells (in US$ million) (Apr - Dec) Exhibit 5.8 Import Value of Solar PV Cells in India (in US$ million) from FY to FY Source: Dept. of Commerce, NOVONOUS Insights India - Import Quantity of Solar PV Cells (in thousands) (Apr - Dec) Exhibit 5.9 Import Volume of Solar PV Cells in India (in thousands) from FY to FY Source: Dept. of Commerce, NOVONOUS Insights INDIA RENEWABLE ENERGY STATUS REPORT MAY 14, 2014 NOVONOUS 44

46 5.7 Growth Drivers and Inhibitors for Solar Energy Market in India Growth Inhibitors - High Initial Investment - Large Land Requirements - Variable Energy Outputs - Lack of Transmission Infrastructure - Delay in Payments - Lack of Strict Enforcement of RPOs - Poor State of R&D - Cheap Solar Imports from Countries Like China Growth Drivers - Huge Demand-Supply Gap in Power Sector - Government Incentives - Cost Competitiveness of RE - Shift to Clean Energy - Distributed Electricity Demand - Huge Untapped Potential Exhibit 5.10 Key Growth Drivers and Inhibitors for Solar Energy Market in India Source: NOVONOUS Insights 5.8 Risks Associated with Solar Energy in India Credit Risk The credit risk for India s solar power sector is considerably high due to high interest rates (upto 13%) and low loan periods (10 years). Also there is counter party risk which arises in the form of inability of distribution companies (DISCOMS), who are the buyers of solar power, to pay for the power they purchase. To meet their renewable purchase obligations (RPOs), DISCOMS in India are mandated to purchase renewable power, but the high cost of power from solar compared to other renewable sources is making the situation more difficult. INDIA RENEWABLE ENERGY STATUS REPORT MAY 14, 2014 NOVONOUS 45

47 In the phase I of national solar mission (NSM), the low-cost financing from foreign sources resulted in success of initial phase. Due to this financial institutions have gained confidence that the solar projects can become operational and be profitable. Policy Risk Almost all renewable energy projects are prone to policy risk and solar energy projects are not and exception to this phenomenon. For example heavy losses could be incurred due to changes in the energy markets which can be because of changes in the price of other sources of energy including fossil fuels. In India s case, since renewable project revenues currently depend more on policy support rather than on the prices of fossil fuels, any uncertainty in policies for the sector can prove to be troublesome for the sector. This can range from policies related to land allocation, government clearances, electricity rates and most importantly contribution of solar energy in RPOs for various DISCOMS. The regulatory environment in India is still not very mature. The current policy initiatives related to renewable energy certificate (REC) mechanism, domestic content regulation, protection of local solar manufacturing from dumping from countries like China, strict implementation of RPOs leaves a lot be desired. Technical Risk Some of the major technology related risk areas related to solar power are: Operational Risk: This risk is more in case of solar thermal technology compared to solar PV. The parabolic trough technology is the widely used solar thermal technique. Such projects require large area of land, direct solar radiation and large amount of water as well as human resources. It is difficult to maintain these parabolic dishes on a rugged terrain as the chances of mechanical failure are high. Also the mirrors require constant cleaning due to dust accumulation which reduces their life. Thus the risk of unplanned plant closure, for example owing to reduced efficiency of power generating equipment is high. Weather-Related Risk: There is a risk of fall in volume of electricity produced due to lack of solar radiation. The complete dependence on climatic conditions leads to variability in power generation which acts as a major obstacle to recover costs. Grid Integration Risk: The variable nature of power output by solar energy systems poses a risk while trying to integrate them with existing power transmission infrastructure. INDIA RENEWABLE ENERGY STATUS REPORT MAY 14, 2014 NOVONOUS 46

48 5.9 Application-wise Solar Energy Usage and Trends Jawaharlal Nehru National Solar Mission (JNNSM) was started to establish India as a global leader in solar energy, by creating the policy conditions for its large scale usage across the country as quickly as possible. The Mission has been planned in 3-phases, beginning in the 11th Plan and first year of the 12th Plan (up to ) as Phase I, the remaining 4 years of the 12th Plan ( ) as Phase II and the 13th Plan ( ) as Phase III. The targets set by the JNNSM are as follow: Sector Phase I Phase II Phase III Utility Grid Power including rooftop (in MW) Off Grid Solar Installations (in MW) Solar Collectors (in million square meters) 1,100 4,000 10,000 20, ,000 2, Exhibit 5.11 JNNSM Targets for Phase I, II and III in India Source: MNRE The major applications under JNNSM are: Rooftop Solar PV Programme A rooftop solar PV system can be used in both grid connected and off-grid model. In case of grid connected solar PV system the power is fed to the grid using either 11 KV three phase line or using 220V single phase line. These systems generate power in day time which is used for captive power needs and the excess being fed to the grid. If there is drop in the power generation due to say cloud cover, then the captive demand can be met by drawing power from the grid. Thus these systems work in net metering basis. The off-grid rooftop solar systems are used mostly where the grid connectivity is not available. As per 2011 census, India had 330 million houses of which 166 million were having electric connectivity. According to MNRE estimates, there are 140 million home with proper roofs made of either concrete or asbestos/metal sheets which can accommodate about 1-3 kwp of roof top solar systems. On the other hand large rooftops of industrial sector are capable of accommodating capacities in the range of kwp. As per NOVONOUS, the total market potential for rooftop solar for residential sector is worth INR billion. Under phase II of JNNSM the government is planning to achieve 1000 MW of rooftop solar PV installations for both off-grid and grid connected levels. INDIA RENEWABLE ENERGY STATUS REPORT MAY 14, 2014 NOVONOUS 47

49 The government has already announced its plans to install 23,500 units of 1 kwp systems for domestic households in Rajasthan, Andhra Pradesh, Kerala, Tamil Nadu, Chattisgarh and other selected states at an estimated project cost of INR 4.93 billion during Off-Grid Lighting Systems In rural areas more than 76 million homes were still using kerosene as a source of lighting. In this backdrop off-grid solar lighting systems become more suitable solutions for such a requirement. The off-grid solar PV lighting systems are used to store electrical energy during daytime in batteries which are used during night time to produce light using LED lights. During phase II of JNNSM the government has set a target to achieve installation of 1million offgrid solar PV lighting systems. The government has already announced its plans under JNNSM to install solar PV off-grid lighting systems at an estimated cost of INR 3.67 billion during Solar City Scheme The solar city scheme aims at minimum 25% reduction in projected demand of conventional energy at the end of five years, through a combination of enhancing supply from renewable energy sources in the city. It is aimed to promote renewable energy as a power source to local governments. Government is planning to implement this scheme in 100 cities across India under phase II of JNNSM. MNRE has already given sanctions for 31 cities which have received in-principle approvals and they have engaged consultants for preparation of master plan. These cities are: Agra, Moradabad, Rajkot, Gandhinagar, Nagpur, Kalyan-Dombiwali, Kohima, Dehradun, Chandigarh, Gurgaon, Faridabad, Thane, Panaji City & Environs, Bilaspur, Raipur, Imphal, Itanagar, Jodhpur, Jorhat, Guwahati, Agartala, Ludhiana, Amritsar, Shimla, Hamirpur, Haridwar & Rishikesh, Vijaywada, Aizawl, Mysore, Hubli and Gwalior. Apart from this a draft Master plans have been prepared for 18 cities which are Guwahati, Surat, Thiruvananthapuram, Kochi, Aurangabad, Nanded, Shirdi, Indore, Bhopal, Rewa, Dimapur, Bhubaneswar, SAS Nagar (Mohali), Ajmer, Jaipur, Coimbatore, Chamoli-Gopeshwar and Howrah. Solar Water Pumping Solar PV systems can be also used to pump water for irrigation or drinking purpose. Solar pumps operate directly on DC without power storage mechanism like batteries and thus are cost effective and low-maintenance systems. INDIA RENEWABLE ENERGY STATUS REPORT MAY 14, 2014 NOVONOUS 48

50 Government has planned for deployment of 25,000 solar pumps in phase II of JNNSM. The plan to install 10,000 solar pumps across India in next two years has already been announced by the Government at a cost of INR 2.28 billion. Telecom Towers As per Telecom Regulatory Authority of India (TRAI) study on Green Telecommunication published in March 2011, India had more than 3.10 lakh telecom towers and 60% of their power requirements were met by diesel generators. These generators about 2 billion litres of diesel fuel each year and result in 5.3 million tonnes of CO2 emission. If all these cell phone towers switch to solar energy then it could save significant amount of fossil fuels and also reduce carbon foot print of the Indian telecom industry to a significant extent. Thus the government under phase II of JNNSM has planned to focus on developing special schemes for promotion of solar telecom towers and would target around solar integrated telecom towers. Solar Water Heating Systems Solar water heating systems are used to heat water for industrial and residential use using a collector based system and an insulated storage tank. Government has planned to achieve 8 million square meters of collector area during phase II of JNNSM. Government has already announced its plans to install 4,00,000 square meters collector area in next two years at a cost of INR 3.6 billion. This project will be executed under National Clean Energy Fund (NCEF). Solar Cookers and Steam Generating Systems Solar cooker system uses parabolic dish to concentrate solar energy for cooking applications. These systems use manual tracking and thus had to be adjusted during cooking process. The other system is direct cooking system which allows users to cook food indoors in the kitchen itself. Solar steam generating systems are either of fixed receiver based systems or of fully tracked receiver on dish technology based systems. These systems are normally used for large scale cooking requirements like those found in hotels, hostels, hospitals, ashrams, defense outposts etc. This system can also be used to clean clothes in textile industry, hotels etc. Government has planned to achieve installation of 50,000 units of solar cookers during phase II of JNNSM. INDIA RENEWABLE ENERGY STATUS REPORT MAY 14, 2014 NOVONOUS 49

51 Industrial Process Heat Applications Concentrated solar thermal (CST) technology is used to focus the sunlight at receiver to achieve high temperatures for various applications. This technology requires regular tracking of the sun for optimal performance thus they are usually based on singe axis (E-W) tracking as well as dual axis (E-W & N-S) tracking. There is huge potential for this technology in sectors like textiles, chemicals, plastics etc. The system can be used along with other conventional boiler heating systems in these industries. Under phase II of JNNSM, government has planned to install at least 400 CST systems of 250 square meters on an average thus achieving total 1,00,000 square meters of CSTs for heating applications in various industries. Solar Air Conditioning / Refrigeration Solar Air Conditioning Systems use solar heat from the sun to superheat the refrigerant and deliver it directly to the condenser bypassing the compressor. The superheated refrigerant makes it possible for the compressor to work less. Solar air conditioners also do away with the chlorofluoro carbons (CFCs), hydro chlorofluoro carbons (HCFCs) which constitute a major reason for destruction of ozone layer. During phase II of JNNSM, the government has planned to install at least 200 systems of 30 ton of refrigeration (TR) covering 60,000 square meters area for air conditioning or refrigeration purpose. As per NOVONOUS, the market potential for solar air conditioning and refrigeration in phase II of JNNSM is INR 420 million. Solar Water Purification / Desalination Solar water purification system can function without the support of any external energy source. It is composed of solar PV modules connected to set of batteries which are connected to the inverter system. For the backup power source a wind turbine or diesel generator is used. During the day solar energy is captured by the photo-voltaic panels which powers the purification installation and charges the batteries. When the sun disappears, the batteries continue to run the installation during the night. The batteries are designed for 1 day period of autonomous working. If there is no availability of sufficient sunlight for more than a day, the system would be operated using the backup power source. Concentrated Solar Power (CSP) Plants Concentrated solar power plants use the concept of using lenses or mirrors to focus a large amount of sunlight into a small concentrated beam. The concentrated heat is then used as a heat source for conventional power plant. The two popular technologies in use are parabolic reflectors and concentrating linear fresnel reflectors. INDIA RENEWABLE ENERGY STATUS REPORT MAY 14, 2014 NOVONOUS 50

52 The JNNSM phase I had a target of 470MW worth of grid connected CSP projects but as on March 2013, only around 50MW had been commissioned. The main reason behind this was the lack of proper Direct Normal Incidence (DNI) data, dusty condition and supply issues with heat transfer fluid (HTF). In phase I of JNNSM, both solar PV and CSP based power systems were allocated in equal proportion of 50:50 as targets. While most of the PV projects were commissioned as per schedule, most of the CSP are yet to be commissioned. The reduced cost of solar PV compared to CSP has prompted MNRE to cut down on the proportion of allocation of projects of grid connected CSP to PV from 50:50 to 70:30 in phase II of JNNSM. The revised allocation is as shown below: Description Capacity (in MW) Central Schemes (in MW) State Schemes (in MW) Solar PVs Solar Thermal Total Exhibit 5.12 JNNSM Targets for Phase II for Solar PV and CSP Source: intersolar.in 5.10 Challenges for New Players in Indian Wind Energy Sector Solar Manufacturers Component Manufacturer Solar Farm Operator Foreign competition in the industry Product acceptance in the market Land acquisition Health of the distribution company High amount of technical support Huge investment for turn-key projects Difficulty in finances No past track record Evacuation of energy Acquiring skilled manpower Difficult to maintain cycle time Forest area permission Stability in currency exchange rate Quality control High cost of solar power Exhibit 5.13 Challenges for New Players in Indian Solar Energy Sector Source: NOVONOUS Insights Recommendations for Policy Makers 1. Implementation of Domestic Content Regulation 2. Imposition of Anti Dumping Duties to shield local (DCR) industry from cheap import from China etc. 3. Proper Enforcement of Solar RPOs 4. Provide access to low cost funds 5. Timely Release of Subsidies 6. Support in Accessing / Developing New Technologies Exhibit 5.14 Recommendations for Policy Makers Source: NOVONOUS Insights INDIA RENEWABLE ENERGY STATUS REPORT MAY 14, 2014 NOVONOUS 51

53 INDIA RENEWABLE ENERGY STATUS REPORT MAY 14, 2014 NOVONOUS 52

54 6. Small Hydro Power Market in India India has an estimated small hydro power (less than 25 MW) potential of around 20,000 MW out of which the total installed capacity as of 31 st March 2014 was 3, MW including both offgrid and grid connected power plants. 6.1 State-wise Small Hydro Power Potential in India (in MW) Exhibit 6.1 State-wise Small Hydro Power Potential in India (in MW) Source: MNRE, NOVONOUS Insights INDIA RENEWABLE ENERGY STATUS REPORT MAY 14, 2014 NOVONOUS 53

55 6.2 State-wise Small Hydro Power Installed Capacity in India (in MW) Exhibit 6.2 State-wise Small Hydro Power Installed Capacity in India (in MW) Source: MNRE, NOVONOUS Insights INDIA RENEWABLE ENERGY STATUS REPORT MAY 14, 2014 NOVONOUS 54

56 6.3 State-wise Small Hydro Power Upcoming Capacity in India (in MW) There are a total of MW small hydro power (SHP) plants under construction in India. Exhibit 6.3 State-wise Small Hydro Power Upcoming Capacity in India (in MW) Source: MNRE, NOVONOUS Insights INDIA RENEWABLE ENERGY STATUS REPORT MAY 14, 2014 NOVONOUS 55

57 6.4 State-wise Regulation and Policy Comparison for Small Hydro Power in India STATE Regulations / or Order or Draft Contr ol perio d (Rs/kWh) Capital Cost (lakh/m W) Capacity Utilisation Factor (%) Auxi liary Con sum ptio n (%) Usef ul life (yrs) Subsidy and incentiv e by Central /State Govt Taxes and Duties Late Pay ment surch arge CERC (FY13-14) Draft CERC Generic RE Order for FY ; CERC (Terms and Conditions for determination from Renewable Energy Sources) Regulations, 2012 FY (3 yrs) HP, Uttarakhan d and NE States (Below 5MW) (without AD), 4.02 (with AD) (5MW- 25MW)- 3.74(without AD), 3.42 (with AD) Other States (Below 5MW) (without AD), 4.74 (with AD) (5MW- 25MW)- 4.39(without AD), 4.01 (with AD) HP, Uttarak hand and NE States (Below 5MW) (5MW- 25MW) Other States (Below 5MW) (5MW- 25MW) HP, Uttarakha nd and NE States - 45% Other States- 30% 1% 35 Shall be factore d in the tariff on per unit benefit derived on levellise d basis exclusiv e of taxes and duties, pass through allowed on actual basis 1.25 % per mont h beyo nd a dela y of 60 days Aruna chal Prades h Regulations (Dated 9/4/2012) 9/4/2 012 to 8/4/2 017 NA 700 (<=5 MW) & 630 (5-25 MW) 45% 1% 35 passed on to utility/c onsume r passed on to utility/c onsume r 1.25 % p.m. beyo nd 60 days Himac hal Prades h HPERC( Promotion of Generation from Renewable Energy sources and Terms and conditions of ) Regulations, 2012 (Dec 17, 2012) 18/12 /2012 to 31/3/ 2017 NA 780 (100kW - 2MW), 750 (2-5 MW) & 700 (5-25 MW) % 40 passed on to utility/c onsume r passed on to utility/c onsume r 1.25 % p.m. beyo nd 60 days Jamm u and Kashm ir Draft RE Regulations to NA 770 (<=5 MW) & 700 (5-25 MW) 45% 1% 35 passed on to utility/c onsume r 1.25 % p.m. beyo nd 60 days INDIA RENEWABLE ENERGY STATUS REPORT MAY 14, 2014 NOVONOUS 56

58 Karnat aka RE Order (Dated 11/12/2009) NA Rs 3.40/kWh for the first 10 years after signing the PPA % 1% NA NA passed on to utility/c onsume r not include d in the tariff NA Madh ya Prades h SHP Regulations (Dated 30/06/2010) 30/06 /2010 to 31/03 /2013 Refer Table 1 below 700 for Run of the river, 600 for canal based generat ion 35% for Run of the river, 30% for canal based generatio n 1% 30 NA NA NA Mahar ashtra Regulations (Dated 07/06/2010) to NA (<=5 MW) & (5-25 MW) 30% 1% 35 passed on to utility/c onsume r passed on to utility/c onsume r 1.25 % p.m. beyo nd 60 days Uttara khand Regulations (Dated 06/07/2010) NA 700 For 0-5 MW, 685 For 5-10 MW, 670 For MW, 650 For MW & 630 For MW 45% 1% 35 75% passed onto utility/c onsume r passed on to utility/c onsume r 1.25 % p.m. beyo nd 60 days Uttar Prades h Regulations (Dated 22/03/2010) to UPERC specifies 'year of operation' based fixed cost and financial year based tariff. It does not specify the parameters for tariff determination. NA passed on to utility/c onsume r 1.25 % p.m. beyo nd 2 mont hs Exhibit 6.5 State-wise Small Hydro Power Regulation and Policy in India Orders Source: Various SERC INDIA RENEWABLE ENERGY STATUS REPORT MAY 14, 2014 NOVONOUS 57

59 6.5 EXIM Scenario in Indian Small Hydro Power Sector Export Scenario India s export of water turbine generators was at US$ 0.01 million in which rose to US$ 0.22 million in (Apr-Dec). India exported US$ 4.85 million worth of water turbine generators and the overall exported quantity was 1470 units between and (Apr- Dec) India - Export Value of Water Turbine Generators (in US$ million) (Apr - Dec) Exhibit 6.6 Export Value of Water Turbine Generators in India (in US$ million) from FY to FY Source: Dept. of Commerce, NOVONOUS Insights India - Export Quantity of Water Turbine Generators (in thousands) (Apr - Dec) Exhibit 6.7 Export Volume of Water Turbine Generators in India (in thousands) from FY to FY Source: Dept. of Commerce, NOVONOUS Insights INDIA RENEWABLE ENERGY STATUS REPORT MAY 14, 2014 NOVONOUS 58

60 Import Scenario India s import of water turbine generators was at US$ 2.08 million in which became to US$ 0.50 million in (Apr-Dec). India imported US$ million worth of water turbine generators and the overall imported quantity was 90 units between and (Apr- Dec) India - Import Value of Water Turbine Generators (in US$ million) (Apr - Dec) 0.50 Exhibit 6.8 Import Value of Water Turbine Generators in India (in US$ million) from FY to FY Source: Dept. of Commerce, NOVONOUS Insights India - Import Quantity of Water Turbine Generators (in thousands) (Apr - Dec) 0.03 Exhibit 6.9 Import Volume of Water Turbine Generators in India (in thousands) from FY to FY Source: Dept. of Commerce, NOVONOUS Insights INDIA RENEWABLE ENERGY STATUS REPORT MAY 14, 2014 NOVONOUS 59

61 6.6 Growth Drivers and Inhibitors for Small Hydro Power Market in India Growth Inhibitors - Heavy Dependency on State Policies Since Water is a State Issue - Remote Terrain and Small Project Size - Lack of Transmission Infrastructure - Delay in Approvals and Clearances from Government Growth Drivers - Huge Demand-Supply Gap in Power Sector - Government Incentives - Cost Competitiveness of RE - Shift to Clean Energy - Distributed Electricity Demand - Huge Untapped Potential - Useful for Captive Power in Remote Areas Exhibit 6.10 Key Growth Drivers and Inhibitors for Small Hydro Power Market in India Source: NOVONOUS Insights 6.7 Risks Associated with Small Hydro Power in India Credit Risk Hydropower projects have a high gestation period (6-7 years) before they become profitable and are highly susceptible to geological and hydrological risks. There is also a risk of underestimation of revenue project costs and over-estimations of energy production potential, failure or delay in the execution of the project due to factors such as lack of infrastructural facilities like road and communication, land acquisition problems, environmental clearance issues, law and order problem, paucity of funds etc. leading to cost overruns for developers. Policy Risk Government policies and benefits like Feed-in- and Accelerated depreciation are only given for Solar and Wind projects currently. Even the state governments are reluctant to INDIA RENEWABLE ENERGY STATUS REPORT MAY 14, 2014 NOVONOUS 60

62 accelerate the development of hydropower projects due to the proposal for them to fund the high initial investment required to develop the basic infrastructure like roads and communication. Also since water is a state issue, individual state policies play a crucial role in driving small hydro power projects. Many states are yet to come up with policies related to small hydro power or lack clarity in their current policies. Thus the hydropower sector faces the risk of being marginalized and not being able to fulfill its enormous potential. Technical Risk Small hydro power projects face technical constraints due to the geological nature of the project sites. Lack of detailed investigation of the project site and inadequate assessment of the impact of the projects could lead to under utilization of the installed capacity. This is also due to the lack of hydrological data and fluctuations in the water supply due to change of seasons. 6.8 Challenges for New Players in Indian Small Hydro Power Sector 1. Lack of experience & project management skills 2. Land acquisition 3. Difficulty in finances 4. Huge investment for turn-key projects 5. Long Gestation Period for SHPs 6. Evacuation of energy 7. Unstable returns from RECs 8. Forest area permission Exhibit 6.11 Challenges for New Players in Indian Small Hydro Power Sector Source: NOVONOUS Insights 6.9 Recommendations for Policy Makers 1. Speedy implementation of policies by states 2. R&D activity for provide accurate hydrological and site data 3. Speedy clearances for small hydro power 4. Provide access to low cost funds projects 5. Timely Release of Subsidies 6. Support in Accessing / Developing New Technologies Exhibit 6.12 Recommendations for Policy Makers Source: NOVONOUS Insights INDIA RENEWABLE ENERGY STATUS REPORT MAY 14, 2014 NOVONOUS 61

63 INDIA RENEWABLE ENERGY STATUS REPORT MAY 14, 2014 NOVONOUS 62

64 7. Biomass/ Bagasse Cogeneration Power Market in India India has an estimated biomass power potential of around 17,536 MW out of which the total installed capacity as of 31 st March 2014 was 1, MW including both off-grid and grid connected power plants. For bagasse cogeneration power, India has a potential of around 5,000 MW out of which the total installed capacity as of 31 st March 2014 was 2, MW. 7.1 State-wise Biomass Power Potential in India (in MW) Exhibit 7.1 State-wise Biomass Power Potential in India (in MW) Source: MNRE, NOVONOUS Insights INDIA RENEWABLE ENERGY STATUS REPORT MAY 14, 2014 NOVONOUS 63

65 7.2 State-wise Bagasse Cogeneration Power Potential in India (in MW) Exhibit 7.2 State-wise Bagasse Cogeneration Power Potential in India (in MW) Source: MNRE, NOVONOUS Insights INDIA RENEWABLE ENERGY STATUS REPORT MAY 14, 2014 NOVONOUS 64

66 7.3 State-wise Regulation and Policy Comparison for Biomass Power in India STATE CERC (FY13-14) Gujar at Harya na Regulati ons / or Order or Draft Draft CERC Generic RE Order for FY ; CERC (Terms and Conditio ns for determi nation from Renewa ble Energy Sources) Regulati ons, 2012 Bagasse Order - Order No. 5 of May 17, 2010 Haryana RE (Biomass ) Order Cont rol perio d FY (3 yrs) to years (till FY 13- FY15) (Rs/kWh) Andhra Pradesh( 5.58), Haryana (6.09), Maharas htra(6.18 ), Punjab(6.28), Rajastha n(5.55), Tamil Nadu(5.5 1), Uttar Pradesh( 5.64), Others (5.83) with AD 4.49 (with AD) 4.54(w/o AD) 5.59 (for waterco oled) 5.88 (for aircoole d condens er) Capi tal Cost (lakh /MW ) 462 (FY 13-14) Specifi c heat rate (kcal/ kwh) Auxi liary Con sum ptio n (%) Calo rific Valu e (kc al/k g) Plant Load Factor (%) % % during stabilisat ion period, 70% for remaini ng stabilisat ion period of 1st year and then 80% from 2nd year onward % % for 1st year & 80% from 2nd year onwards. 445 (airc oole d con dens er) % % for 1st year & 80% from 2nd year onwards Fuel Cost (Rs/ MT) Andhra Pradesh Haryana Mahara shtra Punjab Rajasth an Tamil Nadu Uttar Pradesh Other States (5% esc) FY (5% esc) Us ef ul life (yr s) Subsi dy and incen tive by Centr al /State Govt 20 Shall be facto red in the tariff on per unit bene fit deriv ed on levelli sed basis 20 Norm ative capit al cost, Accel erate d Depr eciati on, Corp orate inco me tax rate. 20 Norm ative capit al cost, Accel erate d Taxes and Duties exclusi ve of taxes and duties, pass throug h allowe d on actual basis Pass throug h on actual incurre d basis subjec t to produ ction of docu menta ry evide nce by the gener ating comp any. Pass throug h on actual incurre d basis subjec t to Lat e Pay me nt sur cha rge 1.25 % per mo nth bey ond a del ay of 60 day s 1.25 % per mo nth, bey ond 60 day s 1.25 % per mo nth, bey ond 60 INDIA RENEWABLE ENERGY STATUS REPORT MAY 14, 2014 NOVONOUS 65

67 Karna taka RE Order( ) (wat er cool ed con dens er). Depr eciati on, Corp orate inco me tax rate. NA NA 487 9% 75% 1280 FY ( 5% esc) produ ction of docu menta ry evide nce by the gener ating comp any. day s 20 NA NA NA Keral a Madh ya Prade sh Maha rashtr a No tariff Order Biomass Order_ March 2, 2012 MERC suo motu Order dated No tariff Orde r Marc h 2012 to end of FY FY and FY No tariff Order No tariff Orde r No tariff Order No tariff Ord er No tariff Ord er No tariff Order % 3612 During stabilisat ion : 60 % (ii)durin g the remaini ng period of the first year of operatio n of the plant (after stabilizat ion) : 70% (iii)from 2nd Year onwards : 80% % % before stabilisat ion period, 70% for remaini ng stabilisat ion period of 1st year and then 80% from 2nd year No tariff Order No tar iff Or de r No tariff Order No tariff Order No tarif f Ord er NA NA NA Passe d on to utility/ cons umer exclud ed from the tariff NA INDIA RENEWABLE ENERGY STATUS REPORT MAY 14, 2014 NOVONOUS 66

68 onward Rajast han Tamil Nadu RERC Regulati on 2009 dated January 23, 2009, Order dated Dec 21, 2012 Compre hensive Order for Biomass Power Plants, Order No 8 of 2012 dated July 31,2012 FY to FY Augu st1, 2012 to July 31, 2014 FY Revised for water cooled / 5.42 for Air cooled / during stabilis ation and 4200 after stabiliz ation / 4540 before stabiliz ation and 4440 after stabiliz ation 10.5 % duri ng s and 10% after tabili zatio n / 12.5 % duri ng s and 12% after tabili zatio n % before stabilisat ion period, 70% for remaini ng stabilisat ion period of 1st year and then75% from 2nd year onward for FY ( with 5% esc) 20 Passe d on to utility/ cons umer % % Passe d on to utility/ cons umer exclud ed from the tariff NA NA inte rest of 1% per Mo nth Uttar Prade sh UPERC (Captiv e and Non- Conven tional Energy Generat ing Plants) Regulati ons, 2009 (hereina fter referred to as CNCE Regulati ons, 2009). Octo ber 1, 2009 to Marc h 31, NA NA NA NA NA NA N A passe d on to utility/ cons umer NA 1.25 % p.m. bey ond 2 mo nths Exhibit 7.3 State-wise Biomass Power Regulation and Policy in India Orders Source: Various SERC INDIA RENEWABLE ENERGY STATUS REPORT MAY 14, 2014 NOVONOUS 67

69 7.4 State-wise Regulation and Policy Comparison for Bagasse Cogeneration Power in India STATE Regula tions / or Order or Draft Contr ol perio d (Rs/kWh) Capi tal Cost (lakh /MW ) Statio n heat rate (kcal /kwh ) Auxili ary Consu mptio n (%) Calo rific Valu e (kc al/k g) Pla nt Lo ad Fa cto r (%) Fuel Cost (Rs/ MT) Us ef ul life (yr s) Subsidy and incenti ve by Central /State Govt Taxes and Duties Late Pay men t surc harg e CERC (FY13-14) Andhr a Prade sh Bihar Draft CERC Generi c RE Order for FY ; CERC (Terms and Condit ions for deter minati on from Renew able Energy Source s) Regula tions, 2012 Order (Date d 31/03/ 2009) Order on Deter minati on for Bagass e based FY (3 yrs) to Years ( to ) Andhra Pradesh( 5.42), Haryana( 6.16), Maharas htra(5.83 ), Punjab(5.69), Tamil Nadu(4.9 5), Uttar Pradesh( 5.73), Others (5.58) with AD FC /kWh VC /kWh with 5% annual escalatio n in fuel cost (For FY 13-14) % 2250 UP &A P - 45 % TN & Ma ha - 60 % Ot her Sta tes - 53 % % % % % Andhr a Prade sh Harya na Mahar ashtra Punja b Tamil Nadu Uttar Prade sh Other States Shall be factore d in the tariff on per unit benefit derived on levellise d basis Passed on to utility/c onsum er 1583(5 % esc) 20 exclusiv e of taxes and duties, pass through allowe d on actual basis over and above the determi ned tariffs, to be reimbur sed by the DISCO Ms 1.25 % per mon th bey ond a dela y of 60 days - INDIA RENEWABLE ENERGY STATUS REPORT MAY 14, 2014 NOVONOUS 68

70 Cogener ation Plants to be commi ssione d in to Gujar at Karna taka Maha rashtr a Punja b Tamil Nadu Bagass Order - Order No. 4 of May 31, 2010 RE Order( ) Regula tions (Date d 07/06/ 2010) & RE Order March 31, 2012 Order (Date d 19/07/ 2012) Order (Date d 31/07/ 2012) three years from 1st June, 2010 to 31st May, (with AD) 4.71(w/o AD) % % NA NA % % to /0 8/20 12 to 31/0 7/ (F.C) (V.C) = 4.79 (for FY ) Rs 5.32/kWh (Without AD) & Rs 5.2/kWh (With AD) % % % % NA % % 1200(5 % esc) 1025( with 5% esc) 20 Normat ive capital cost, Accele rated Deprec iation, Corpor ate income tax rate Passed on to utility/c onsum er Passed on to utility/c onsum er Pass through on actual incurre d basis subject to produc tion of docum entary eviden ce by the genera ting compa ny. Passed on to utility/c onsum er Passed on to utility/c onsum er 1.25 % per mon th, bey ond 60 days 1.25 % p.m. bey ond 60 days 1.25 % p.m. bey ond 60 days NA NA 1% p.m. bey ond 30 days INDIA RENEWABLE ENERGY STATUS REPORT MAY 14, 2014 NOVONOUS 69

71 Uttar Prade sh Regula tions (Date d 22/03/ 2010) to refer workshe et 'Addition al Data', Table 1 UPERC specifies 'year of operation' based fixed cost and financial year based variable cost. It does not specify the parameters for tariff determination. NA Passed on to utility/c onsum er 1.25 % p.m. bey ond 2 mon ths Exhibit 7.4 State-wise Bagasse Cogeneration Power Regulation and Policy in India Source: Various SERC Orders 7.5 Central Financial Assistance (CFA) for Biomass/ Bagasse Cogeneration Power Projects MNRE had defined various incentives for biomass and bagasse cogeneration power projects in India under central financial assistance (CFA) scheme. Some of the highlights of this scheme is as follows: Project Type Special Category States(NE Region, Sikkim, J&K, HP & Uttaranchal) Other States Biomass Power projects INR 2.5 million X(Capacity in MW)^0.646 INR 2.0 million X (Capacity in MW)^0.646 Bagasse Co-generation by Private sugar mills Bagasse Co-generation projects by cooperative/ public sector sugar mills 40 bar & above 60 bar & above 80 bar & above INR1.8 million X(Capacity in MW)^0.646 INR4.0 million* INR5.0 million* INR 6.0 million* Per MW of surplus (maximum support INR 80 million per project) INR1.5 million X (Capacity in MW)^0.646 INR 4.0 million* INR 5.0 million* INR 6.0 million* Per MW of surplus (maximum support INR 80 million per project) *For new sugar mills, which are yet to start production and existing sugar mills employing backpressure route/seasonal/incidental cogeneration, which exports surplus power to the grid, subsidies shall be onehalf of the level mentioned Power generated in a sugar mill (-) power used for captive purpose i.e. net power fed to the grid during season by a sugar mill. The CFA for bagasse cogeneration project in cooperative/ public sector sugar mills implemented by IPPs/state government undertakings or state government joint venture company / special purpose vehicle (Urja Ankur Trust) through BOOT/BOLT model is as follows: Project Type Minimum Configuration Capital Subsidy Single coop. mill through BOOT/BOLT Model 60 bar & above 80 bar & above INR 4.0 million/mw of surplus power * INR 5.0 million/mw of surplus power* (maximum support INR 80 million/ sugar mill) INDIA RENEWABLE ENERGY STATUS REPORT MAY 14, 2014 NOVONOUS 70

72 The CFA for bagasse cogeneration project in existing cooperative sector sugar mills employing boiler modifications is as follows: Project Type Minimum Configuration Capital Subsidy Existing Cooperative Sugar Mill 40 bar & above 60 bar & above 80 bar & above INR 2.0 million/mw of surplus power * INR 2.5 million/mw of surplus power* INR 3.0 million/mw of surplus power* *Power generated in a sugar mill (-) power used for captive purpose i.e. net power fed to the grid during season by a sugar mill. 7.6 Fiscal Incentives for Biomass/ Bagasse Cogeneration Power Projects MNRE has declared following incentives and benefits for biomass and bagasse cogeneration power projects in India: Area Accelerated Depreciation Fiscal Incentive / Benefits 80% depreciation in the first year can be claimed for the following equipment required for co-generation systems: 1. Back pressure, pass-out, controlled extraction, extraction cumcondensing turbine for co-generation with pressure boilers 2. Vapour absorption refrigeration systems 3. Organic rankine cycle power systems 4. Low inlet pressures small steam turbines Income Tax Holiday Customs / Excise Duty General Sales Tax Loans 10 years tax holidays. Concessional customs and excise duty exemption for machinery and components for initial setting up of Biomass power projects. Sales tax exemption is available in certain states Loans for setting up biomass and bagasse cogeneration power plants in available from Indian Renewable Energy Development Agency (IREDA). Exhibit 7.5 Financial Incentives for Biomass / Bagasse Cogeneration Power in India Source: MNRE INDIA RENEWABLE ENERGY STATUS REPORT MAY 14, 2014 NOVONOUS 71

73 7.7 Growth Drivers and Inhibitors for Biomass/ Bagasse Cogeneration Power Market in India Growth Inhibitors - Non-Availability of Feedstock - Unorganized Nature of Market - Volatility in Feedstock Prices - Long Gestation Periods - Limited Successful Commercial Demonstration Exhibit 7.6 Key Growth Drivers and Inhibitors for Biomass / Bagasse Cogeneration Power Market in India Growth Drivers - Huge Demand-Supply Gap in Power Sector - Financial Incentives / Subsidies - Low Plant Setup Cost Compared to Coal Powered Plants - Huge Untapped Potential - Useful for Captive Power in Industries Source: NOVONOUS Insights 7.8 Challenges for New Players in Indian Biomass / Bagasse Cogeneration Power Sector 1. Lack of experience & project management skills 2. Land acquisition 3. Difficulty in securing feedstock 4. Long Gestation Period 5. Limited access to funds from Financial Institutions 6. Lack of grid connectivity infrastructure 7. Difficulty in securing clearances 8. Lack of skilled manpower Exhibit 7.7 Challenges for New Players in Indian Biomass/ Bagasse Cogeneration Power Sector Source: NOVONOUS Insights INDIA RENEWABLE ENERGY STATUS REPORT MAY 14, 2014 NOVONOUS 72

74 7.9 Recommendations for Policy Makers 1. Creation of biomass/bagasse cogeneration related policies by all states 2. Setting up of fuel depots 3. Regularization of feedstock prices and availability 4. Provide access to low cost funds to new players 5. Timely Release of Subsidies 6. Support in Accessing / Developing New Technologies Exhibit 7.8 Recommendations for Policy Makers Source: NOVONOUS Insights INDIA RENEWABLE ENERGY STATUS REPORT MAY 14, 2014 NOVONOUS 73

75 INDIA RENEWABLE ENERGY STATUS REPORT MAY 14, 2014 NOVONOUS 74

76 8. Waste to Energy (WtE) Power Market in India India has an estimated waste to energy power potential of around 3,880 MW out of which of potential from municipal solid waste (MSW) is 2,600 MW and industrial waste is 1,280 MW. The total installed capacity as of 31 st March 2014 was MW. 8.1 State-wise Waste to Energy (WtE) Power Potential in India (in MW) for MSW Exhibit 8.1 State-wise Waste to Energy (WtE) Power Potential in India (in MW) for MSW Source: MNRE, NOVONOUS Insights INDIA RENEWABLE ENERGY STATUS REPORT MAY 14, 2014 NOVONOUS 75

77 8.2 State-wise Regulation and Policy Comparison for Waste to Energy (WtE) Power in India for MSW STATE Projects (Project name) Technol ogy (Inciner ation/ Biometh anation / Gasific ation) Order (Rs/kW h) Capita l Cost (lakh/ MW) Station heat rate (kcal/ kwh) Auxilia ry Consu mption (%) Calorif ic Value Range (kcal/ kg) Plant Load Factor (%) Fuel Cost (Rs/ MT) Useful life (yrs) Andhra Pradesh Delhi Gujarat Karnatak a Maharas htra NA - Order (dt 31/03 /2009) Timarpur Okhla Waste Manage ment Co. Ltd. (16 MW) Hanjer Green Power Pvt. Ltd. (15 MW) Srinivasa Gayathri Resource Recovery Ltd. (8 MW) Solapur Bioenerg y Systems Pvt. Ltd. (2.83 MW) Incinera tion & Biomet hanatio n Incinera tion Incinera tion Biomet hanatio n Order dt 20/01 /2011 order (dt 30/07 /2011) Order (dt 28/02 /2012) Order (dt 03/09 /2010) 4.04 in and 5% escalat ion thereaf ter till Rs 2.49/k Wh for the first year and Rs 2.833/k Wh from the second year onward s Projec t Param eters not specifi ed in the order Projec t award ed throug h tariff based comp etitive biddin g. (Auxilli ary Consu mptio n of 22%) Projec t Param eters not specifi ed in the order Projec t award ed throug h tariff based comp etitive biddin g. (Auxilli ary Consu mptio n of 22%) Projec t Param eters not specifi ed in the order Projec t award ed throug h tariff based comp etitive biddin g. (Auxilli ary Consu mptio n of 22%) Projec t Param eters not specifi ed in the order Projec t award ed throug h tariff based comp etitive biddin g. (Auxilli ary Consu mptio n of 22%) Projec t Param eters not specifi ed in the order Projec t award ed throug h tariff based comp etitive biddin g. (Auxilli ary Consu mptio n of 22%) % % for the first year and 80% from the secon d year onwar ds Rs 4.15/k Wh Rs 4.88/k Wh Projec t Param eters not specifi ed in the order Projec t award ed throug h tariff based comp etitive biddin g. (Auxilli ary Consu mptio n of 22%) Proje ct Para meter s not specif ied in the order % % NA % % - 20 INDIA RENEWABLE ENERGY STATUS REPORT MAY 14, 2014 NOVONOUS 76

78 Uttar Pradesh West Bengal NA - Regul ations (Date d 22/03 /2010) NA - Draft Regul ations (Date d 10/08 /2012) Rs 2.89/k Wh for existing project s and Rs 3.21 for new Projects under the head 'Other NCE Projects ' Cappe d at Rs 5.1/kW h upto August 10, 2022 The regula tions have the provisi on of deter mining the tariffs of new projec ts on casetocase basis No param eters specifi ed The regula tions have the provisi on of deter mining the tariffs of new projec ts on casetocase basis No param eters specifi ed The regula tions have the provisi on of deter mining the tariffs of new projec ts on casetocase basis No param eters specifi ed The regula tions have the provisi on of deter mining the tariffs of new projec ts on casetocase basis No param eters specifi ed The regula tions have the provisi on of deter mining the tariffs of new projec ts on casetocase basis No param eters specifi ed The regula tions have the provisi on of deter mining the tariffs of new projec ts on casetocase basis No param eters specifi ed The regul ations have the provisi on of deter minin g the tariffs of new proje cts on casetocase basis No para meter s specif ied Exhibit 8.2 State-wise Waste to Energy (WtE) Power Regulation and Policy in India for MSW Source: Various SERC Orders 8.3 Central Financial Assistance (CFA) for Waste to Energy (WtE) Power Projects Capital Subsidy to Developers Waste/Processes/Technologies Capital Subsidy 1. Power generation from municipal Solid Waste INR 20 million/mw (Max. INR100 million/project) 2. Power generation from biogas at Sewage Treatment Plant or through biomethanation of Urban and Agricultural Waste/residues including cattle dung or production of bio-cng. INR 20 million/mw or bio-cng from m 3 biogas/day (Max. INR 50 million/project) 3. Biogas generation from Urban, Industrial and Agricultural Wastes/residues INR 5 million /MW eq. (12000 m 3 biogas /day with maximum of INR 50 million/ project) 4. Power Generation from Biogas (engine / gas turbine route) and production of bio-cng for filling into gas cylinders INR 10 million/mw Or bio-cng from m 3 biogas (Max. INR 50 million/project 5. Power Generation from Biogas, Solid Industrial, Agricultural Waste/residues excluding bagasse through Boiler + Steam Turbine Configuration INR 2 million/mw (Max. INR 10 million/project) Exhibit 8.3 CFA for Waste to Energy Power in India under 12 th Five Year Plan Source: MNRE INDIA RENEWABLE ENERGY STATUS REPORT MAY 14, 2014 NOVONOUS 77

79 Incentives to State Nodal Agencies State Nodal Agencies would be provided an incentive / service 1% of MNRE subsidy restricted to INR 0.05 million per project, in order to facilitate development of projects and their monitoring during implementation / post commissioning. Financial assistance for promotional activities Financial assistance would be provided for organizing training courses, business meets, seminars / workshops, and publicity / awareness on case-to-case basis, subject to a maximum of INR 0.03 million per event /activity. 8.4 Growth Drivers and Inhibitors for Waste to Energy (WtE) Power Market in India Growth Inhibitors - Lack of Appropriate Technology - High Manpower Cost - Delay in Approvals and Clearances from Government - Public Reaction Related to Plant Safety Growth Drivers - Huge Availability of Municipal Solid Waste - Financial Incentives / Subsidies - Huge Untapped Potential - Tax Holiday for 10 Years Exhibit 8.4 Key Growth Drivers and Inhibitors for Waste to Energy (WtE) Power Market in India Source: NOVONOUS Insights INDIA RENEWABLE ENERGY STATUS REPORT MAY 14, 2014 NOVONOUS 78

80 8.5 Challenges for New Players in Indian Biomass / Bagasse Cogeneration Power Sector 1. Lack of experience & project management skills 2. Land acquisition 3. Difficulty in raw material 4. Long Gestation Period 5. Difficulty in securing clearances 6. Lack of skilled manpower Exhibit 8.5 Challenges for New Players in Indian Waste to Energy (WtE) Power Sector Source: NOVONOUS Insights 8.6 Recommendations for Policy Makers 1. Creation of Waste to Energy related policies by 2. Setting up of fuel supply chain all states 3. Provide access to low cost funds to new players 4. Support in Accessing / Developing New Technologies 5. Increase Public Awareness towards Waste to Energy 6. Increase FDI in this sector Exhibit 8.6 Recommendations for Policy Makers Source: NOVONOUS Insights INDIA RENEWABLE ENERGY STATUS REPORT MAY 14, 2014 NOVONOUS 79

81 Notes INDIA RENEWABLE ENERGY STATUS REPORT MAY 14, 2014 NOVONOUS 80

82 Notes INDIA RENEWABLE ENERGY STATUS REPORT MAY 14, 2014 NOVONOUS 81

83 Company Information NOVONOUS helps organizations differentiate themselves, break entry barriers, track investments, develop strategies and see through corporate fog by providing business intelligence that works for their business. For more information about how we can help you with your market research needs, please contact us and we will be glad to help you. AMBARISH KUMAR VERMA CEO AMITAVA SEN VP SALES & MARKETING CHRISTY D COSTA VP PROJECTS & OPERATIONS ambarish@novonous.com Mob: amitava@novonous.com christy@novonous.com Address NOVONOUS No. 579, Ground Floor, 16 th Cross, 10 th Main, ISRO Layout, Bangalore, Karnataka, India Tel: Fax: DISCLAIMER This report has been prepared from sources and data, which we believe to be reliable, but we make no representation as to its accuracy or completeness. Any decision or action taken by the recipient based on this report shall be solely and entirely at the risk of the recipient. Opinions and information provided are made as of the date of the report issue and are subject to change without notice. In no event shall NOVONOUS have any liability to any party for special, incidental, tort or consequential damages arising out of or in connection with this report, even if NOVONOUS has been advised of the possibility of such damages. Copyright 2014 NOVONOUS. All Rights Reserved. Reproduction without written permission is completely forbidden. INDIA RENEWABLE ENERGY STATUS REPORT MAY 14, 2014 NOVONOUS 82

84 India Renewable Energy Status Report 2014 INDIA RENEWABLE ENERGY STATUS REPORT MAY 14, 2014