THE INDIAN MARKET FOR RENEWABLE ENERGY THE 100 GW SOLAR INITIATIVE

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1 THE INDIAN MARKET FOR RENEWABLE ENERGY THE 100 GW SOLAR INITIATIVE PRESENTATION BY : MR KESHAV PRASAD MEMBER, DELEGATION OF THE CONFEDERATION OF INDIAN INDUSTRY (CII) & CHIEF OPERATING OFFICER, IL&FS ENERGY DEVELOPMENT COMPANY LTD 10 JUNE 2015 MUNICH, GERMANY

2 THE INDIAN ECONOMY The largest democracy Population 1.25 billion^ GDP USD trillion (nominal), GDP Rank: 7 (nominal) GDP Growth: 7.3% ( )* A liberal foreign investment regime FDI Inflows into India (equity + re-invested earnings + other capital)** Cumulative FDI Inflow : USD 365 bn (Equity inflow: 264 bn) Total FDI Inflow : USD 41.2 bn (Equity inflow: USD 28.8 bn) Abundant natural resources, a rich mineral base, self-sufficiency in agriculture Fifth highest investment in energy infrastructure projects to reach financial closure and serve the public Energy growth is critical for meeting GDP targets INDIA SECTOR-WISE GDP 56.9% 17.4% 25.8% Agriculture Industry Services ^ 2013, World Bank * World Economic Outlook Database, International Monetary Fund, April 2015 ** Reserve Bank of India, February 2015

3 THE INDIAN POWER SECTOR Total Installed Capacity: GW Total Installed Renewable Energy Capacity: 35.8 GW (13%) Total Renewable Energy Potential: 890 GW+ More than 25% of primary energy needs met by imports, mainly crude oil, gas and coal India has vast renewable energy resources: wind, solar, biomass and small hydro Present share of RE in electricity mix: 6% Target share of RE in electricity mix: 15% by 2020 Power For All : India to provide 24x7 electricity to all citizens by 2019 Target to add 175 GW of RE capacity by 2022 to meet growing power needs, ensure energy security, manage carbon footprint INDIA INSTALLED POWER CAPACITY (GW) Thermal Hydro Nuclear Renewables INDIA RENEWABLE ENERGY INSTALLED CAPACITY (GW) Data: April 2015, Central Electrical Authority, Ministry of Power, Government of India Wind Solar Bio-Energy Small Hydro

4 THE 100 GW SOLAR INITIATIVE o The 175 GW renewable energy capacity addition target: 100 GW solar / 60 GW wind / 10 GW bio / 5 GW small hydro o 100 GW solar will: Entail investment of USD 100 billion in 7 years Meet 9% of India s electricity need (up from present 0.5%) o India s solar energy potential: 749 GWp* o Most Indian states have approx. 300 sunny days per year Rajasthan, Gujarat have maximum insolation; then Tamil Nadu, Andhra Pradesh, Madhya Pradesh, Maharashtra, Chhattisgarh o Annual solar radiation: kwh/m2/day o Total Green Energy Commitment from industry: 273 GW Solar Energy Commitment: 156 GW (approx.) G U J A R A T R A J A S T H A N M A D H Y A P R A D E S H TOP 5 INDIAN STATES BY INSTALLED SOLAR CAPACITY (MW) M A H A R A S H T R A UP A N D H R A P R A D E S H M A H A R A S H T R A 8020 A N D H R A P R A D E S H STATE-WISE SOLAR TARGETS 2022 (MW) T A M I L N A D U G U J A R A T 5762 R A J A S T H A N *Ministry of New & Renewable Energy, February & March 2015

5 100 GW IMPLEMENTATION APPROACH 40 GW : Utility Projects 40 GW: Rooftop solar 20 GW: Grid-tied MW distribution transformer level implementation through young entrprenurs 10 GW worth utility projects are expected to be tendered through ebidding process (Tariff and VGF based) before March 2016 Tenders of about 3 GW currently in public domain Power Sale Options : o Regulated Market Feed-in-tariff Average Power Purchase Cost + REC o Open Market Sale RECs Voluntary green power purchasers Conventional Captive Plants

6 SOLAR PARKS o Key challenge for GW deployment: land and power evacuation o Strategy : MNRE has approved 25 solar parks of 500 MW capacity each plus ultra-mega solar power projects o Solar parks to be set up during 5 years (FY to ) in Public and Private partnership. IL&FS is developing 5000 MW Solar Park in state of Rajasthan o Solar Parks will enable: Implementation of single location large scale project size Individual project sizes 50 to 250 Mw Use of large tracts of available, inexpensive wastelands Savings on infrastructure: land, water, power, roads, construction, evacuation system Better network optimisation, grid integration, reduced transmission losses Accelerated deployment due to removal of regulatory hurdles

7 GREEN ENERGY TRANSMISSION CORRIDOR o Will evacuate renewable power from RE rich states to load centres o Will make RE generation grid interactive, reduce evacuation losses, allow grid-scale energy storage & management o Estimated investment requirement for development: INR 43,000 crore (USD 7 bn approx.) o State-owned Power Grid Corp to develop green corridors for 20,000 MW of upcoming solar and wind power projects

8 SOLAR ROOFTOPS o Installed capacity: 285 MW* 97 MW Commercial, 76 MW Industrial, 112 MW Residential o Target: 40 GW of Grid-Interactive Rooftop Solar PV Plants in 5 years o Rooftop plants in residential, commercial, industrial, institutional sectors o Capacity range: 1 kwp to 500 kwp o Government subsidy of 15% on solar rooftop plants o Plants economically viable as they produce clean electricity at approx. INR 7 per kw event without subsidy o Home and Home Improvement loans to individual borrowers to install rooftop panels on new and existing properties o Net metering available in states of Tamil Nadu, Karnataka, Andhra Pradesh, West Bengal and Uttarakhand; many more in implementation * October 2014, Bridge To India REPLACING DIESEL WITH SOLAR Power from diesel costs between INR 16-40/kWh, depending on the application India has about 7,000 MW of diesel based power production The price of diesel has increased 300% since 2002, 46% since 2010 Captive solar power costs INR 7-8.5/kWh; once plant is installed the cost of power is fixed for the next 25 years Captive solar PV power plants provide attractive equity IRRs and equity payback periods DATA: EAI, 2014

9 SOLAR MANUFACTURING: MAKE IN INDIA India has about 800 MW cell capacity, over 2 GW module capacity and Multi GW capacity in BOS Govt is committed to encourage domestic cells and modules industry Demand support for domestic industry: about 2000 MW will be allocated in two years; 700 MW order placed, rest under bidding Semiconductor policy for solar revived Industrial parks promoted to provide infrastructure for manufacturing MOUs/announcements by Indian & Foreign companies for manufacturing in India through JV route: MW capacity in cell and module

10 SKILLED MANPOWER o Estimated 2 million green jobs in the renewable energy sector in the next decade o Urgent need to create a pool of appropriately trained manpower o The Sector Skill Council for Green Jobs (SSCGJ) launched in May 2015 o Year 1 Target: To train 1500 trainers Accredit 60 training organisations in the sector Certify 10,60,000 students o Government allotted INR 220 cr (USD 34 mn) to skill 50,000 Surya Mitras (Friends of the Sun) i.e. trained solar equipment technicians in next 3 years o Government s GPS-backed mobile app to connect consumers with Surya Mitras for installation and maintenance of rooftop solar generators, heaters and cookers THE SECTOR SKILL COUNCIL FOR GREEN JOBS Joint initiative of : Ministry of New and Renewable Energy Ministry of Skill Development and Entrepreneurship National Skill Development Council Confederation of Indian Industry

11 POLICY AND REGULATORY SUPPORT o Electricity Act, 2003 Provides for policy formulation by Government of India; mandates State Electricity Regulatory Commissions (SERCs) to promote renewable and non-conventional sources of energy within their jurisdiction o National Electricity Policy 2005 Aims to exploit potential of RE resources, reduce capital costs, promote competition and private sector participation o National Tariff Policy, 2006 Mandates a minimum percentage of RE procurement; preferential tariffs to be determined by SERCs o National Action Plan of Climate Change, 2008 The Jawaharlal Nehru National Solar Mission Targets of 5% RE purchase for FY , with 1% increase each year to reach 15% RE penetration by 2020

12 POLICY AND REGULATORY SUPPORT o Renewable Purchase Obligation (RPO) Electricity (Amendment) Bill, 2014 strengthens penalty provisions related to RPOs manifold to make them stringent Amendment proposes that SERCs be obliged to purchase 8% of their power generation from solar sources by March 2019 (up from 3% by 2022) New RPO target implies an aggregate solar capacity of 69 GW by 2019, equal to 87% growth per annum o Renewable Generation Obligation (RGO) Electricity (Amendment) Bill, 2014 has proposed that companies setting up new power projects be obligated to generate 10% renewable energy component

13 TAX-BASED INCENTIVES FOR RENEWABLE ENERGY PROJECTS INCENTIVE Income Tax Holiday Accelerated Depreciation Deemed Export Benefits Service Tax on Negative list Customs and Excise Laws Reduced Value Added Tax Additional One-Time Allowance Tax-free Grants DETAILS 100% for 10 consecutive years - 20% to apply Accelerated 80% on solar assets Additional 20% on new plant/machinery in the first year Available to specified goods manufactured and not actually exported Advance authorisation from Directorate General of Foreign Trade Deemed export drawbacks Exemption/return of Terminal Excise Duty Certain services exempted: transmission or distribution of electricity by an electricity utility Various duty concessions and exemptions to RE Sector Certain states allow reduced VAT rates (5%) on RE projects in Budget 2014 on new plant and machinery Grants received from holding company engaged in generation, distribution or transmission of power

14 NON-TAX INCENTIVES FOR RENEWABLE ENERGY PROJECTS INCENTIVE Priority Sector Lending Feed-in-tariffs Rebates Favourable land policies Government R&D Programmes Bank Loans DETAILS Bank loans up to INR 15 crore to borrowers for solar and biomass power generators, wind mills, micro-hydel plants, and non-conventional energy based public utilities For individual households, loan limit INR 10,00,000 lakh per borrower When RE generators sell to state utilities under the MoU route Rates decided by the Central and State Electricity Regulatory Commissions Available on the manufacturing of solar and wind components Targeted at specific types of RE technology Include subsidies and rebates on capital expenditures By state governments for RE development Reduce capital costs and favour ease of land allocation Improve RE technologies Lead to growing performance, importance and reducing costs Low cost financing Home and Home Improvement loans to individual borrowers to install rooftop panels

15 FOREIGN INVESTMENT IN RENEWABLE ENERGY PROJECTS FOREIGN DIRECT INVESTMENTS JOINT VENTURES 100% FDI under the Automatic Route Liberalised foreign investment approval regime Does not require approval from the Government of India The Indian Company receiving FDI must: Report FDI receipt to the Reserve Bank of India within 30 days File Form FC-GPR within 30 days of issue of shares Shares issued to investor within 180 days of FDI receipt Financial and fiscal advantages such as preferential tariff or payment security mechanism Government encourages transfer of foreign technology Automatic approval for up to 74% foreign equity participation 100% foreign investment as equity is permissible with approval of Foreign Investment Promotion Board (FIPB) Investors can set up liaison office in India Investors encouraged to set up RE power generation projects on Build-Own-Operate basis Various Chambers of Commerce, industry associations to guide investors towards appropriate partners

16 THANK YOU! 2015 Confederation of Indian Industry