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Astonfield Renewable Resources Ltd

Solar power plants in India : achieving 1 GW +


opportunities and challenges
July 2010

Note: The information contained here-in is proprietary and confidential.


Any unauthorized reproduction or distribution is forbidden.
India’s Power Sector : Points to Ponder

 Current power mix is fossil fuel dependent and has India’s Installed Generating Capacity
following negatives Total = 152,000 MW
 Price volatility/ subsidy dependent
 Energy security
 Impact on environment
 Long gestation period

 Utility scale “carbon-less” SOLAR POWER, with NIL


environment impact is need of the day to support
 Sustainable rural development (electricity in
rural areas)
 Use existing T&D network
 Decentralized power generation at remote
locations across the country
 Replacement for existing DG sets being used
for irrigation where subsidised cost is Rs 15
/kwh

Utility scale solar power addresses India’s growing energy needs

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India Faces Significant Energy Challenges in
Achieving Its Development Goals Over the Next 20 Years

Meeting
Meeting Rising
Rising Strengthening
Strengthening Electrifying
Electrifying
Power
Power Demand
Demand Energy
Energy Security
Security the
the Masses
Masses
•• Historically
Historically there
there has
has •• Traditional
Traditional thermal
thermal •• 42%
42% of
of the
the population
population
been
been aa 10GW
10GW power
power plants
plants supply over
supply over 60%60% has
has no access to
no access to
shortage
shortage perper annum,
annum, of
of the
the nation’s
nation’s current
current electricity
electricity (90
(90 million
million
with
with aa 10.5%
10.5% peak
peak time
time power
power households)
households)
electricity shortage
electricity shortage •• India
India imports
imports over
over 65%65% •• Most
Most traditional
traditional thermal
thermal
•• Over
Over the
the next
next 55 years,
years, of its current petroleum
of its current petroleum and
and hydro plants located
hydro plants located
per
per capita
capita consumption
consumption and
and coal
coal requirements,
requirements, far
far from
from distributed
distributed
is
is expected
expected toto jump
jump expected
expected to grow
to grow asas populations,
populations, contributing
contributing
from 580kWh
from 580kWh to to domestic
domestic coal reserves
coal reserves to
to high
high transmission
transmission
1000kWh,
1000kWh, driving
driving total
total diminish
diminish and
and distribution
distribution losses
losses
shortage above
shortage above 25GW 25GW of
of over 27%
over 27%
•• 25GW
25GW of of captive
captive diesel
diesel
generation
generation has sprung up
has sprung up
to
to support
support industrial
industrial
growth
growth –– 90+%
90+% of of fuel
fuel
imported
imported

Clean,
Clean, locally-sourced
locally-sourced renewable
renewable energy
energy will
will be
be essential
essential ifif India
India is
is to
to
achieve
achieve targeted
targeted long-term
long-term GDP
GDP growth
growth ofof 9-10%
9-10% p.a
p.a

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Source: Ministry of Power, President of India Energy Review
The Government of India Has Recognized That Renewable
Energy Must Play a Critical Role in Addressing the Energy Gap
President
President of
of India
India Energy
Energy Review:
Review:
Demand
Demand Increase
Increase Will
Will Drive
Drive Greater
Greater
Solar
Emphasis
Emphasis on
on Renewable
Renewable Energy
Energy

400,000MW

Solar 14%

Renewables 10%

Hydro 20%

Nuclear 6%

Solar <1% 147,716MW


Renewables 9%

Hydro 25%
Thermal 50%
Nuclear 3% • “With both a good solar resource and a large
Thermal consumer base in the same place, India’s long-
Diesel 1%
Gas 10%
term solar potential is perhaps unparalleled” —
Coal 52% Goldman Sachs
• With high solar insolation and abundant cheap
land, solar can be deployed across India to power
distributed populations

Source: Ministry of Power, President of India Energy Review


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Solar power will be a significant source of global energy mix in
future , with critical mass building after reaching grid parity

Geothermal
1,600
Other renewables
Solar thermal
1,400 (heat only)
Primary Energy Use (EJ/a)

1,200
Solar power
(photovoltaics and
1,000 solar thermal
generation)

800

Wind
600 Biomass
(advanced)
Biomass
400 (traditional)
Hydroelectricity
Nuclear Power
200 Gas
Coal
Oil
0
2000 2010 2020 2030 2040 2050 2100

Solar subsidies Solar hits Solar cheaper than


required grid parity conventional energy
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Source: Climate Change
With government support starting in 2009, solar can
achieve Peak Grid Parity as early as 2014-15

PHASE I PHASE II
(Govt Policy (Post- Govt Policy)
very important)
7%
6%
5%
4%

Convergence /
India – Estimated price Peak Grid Parity
of peak electricity today:
Rs. 6.50/KWh

 Post 2014, India can substitute expensive sources such as diesel with solar to meet growing peak power demand
 Astonfield estimates that base load grid parity can be achieved by 2020-23* - beyond that point, abundantly
available domestic solar power will be cheaper than imported coal, positioning India to be energy independent

* Assumes that conventional power tariff escalates at roughly 5-7% per annum
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Source: Stephen O’Rourke/Deutsche Bank / Astonfield Analysis
Regulatory and Policy Developments in Recent Years Have
Increasingly Supported the Growth of a Solar Sector in India

• Prime Minister announces


Jawaharlal Nehru National
Solar Mission targeting
20,000MW by 2022, with
Phase 1 of 1,000MW by 2013
• Leading states announce
backed by Central budget
independent wholly
state-sponsored • Mission is treated as a core
programs: component of India’s National
Action Plan on Climate
– Gujarat 500MW
Change and as a critical
• Ministry of New and – Rajasthan 50MW enabler of sustainable growth
Renewable Energies (MNRE) • Tariffs declared by states
announces 50MW program • Tariff increases from
hover around the Rs. Rs.15/kWh to Rs.17.91/kWh
with tariff of Rs.15/kWh 15/kWh range

India
India has
has seen
seen aa movement
movement from
from dispersed,
dispersed,
small-scale
small-scale programs
programs toto aa cohesive,
cohesive, large-scale
large-scale national
national platform
platform

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Jawaharlal Nehru National Solar Mission

• Government of India announced Jawaharlal Nehru National Solar Mission in November


2009 to promote solar power in the Country

• Capacity addition in JNNSM envisaged in 3 phases

– Phase 1 : 2009 -13 : 1100 MW

– Phase 2 : 2013 – 17 : 3000 MW

– Phase 3 : 2017-22 : cumulative capacity addition of 20000 MW by 2022

• Under phase 1 , program designed as under :

– Equal split of 50: 50 between solar PV and solar thermal

– Existing projects under development meeting specified criteria eligible for migration
under JNNSM , balance capacity to be allocated on “Expression of Interest” basis

• Draft EOI guidelines limit capacity allocation to 5 MW per developer for PV : benefits of
economies of scale might be hampered

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Jawaharlal Nehru National Solar Mission : Challenges for
Developer

• Achieving Financial Closure :

– Bankability of the Power Purchase Agreement : Deemed Generation, Payment


Security Mechanism

– Economies of scale

– Sourcing restrictions under EOI

Tariff for solar PV plants in various states

JNNSM M.P. Rajasthan Gujarat Karnataka


Tariff (Rs / Rs 17.91 Rs 15.35 Rs 15.32 Rs 15 Rs 14.50
kwh) (year 1-12)
Rs 5 (year
13-25)

Duration 25 years 25 years 25 years 25 years 25 years

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JNNSM : structured to promote project viability and rapid
execution

Solar Independent NTPC Power State


Power Producer (IPP) Trading Company Utilities
• States to initiate solar • NTPC NVVNL is the sole • State utilities purchase
projects on allocation basis offtaker of grid-connected power from NTPC NVVNL
solar power: AAA rated at Rs ~5.5/kWh, the lower
• Final approval to be given credit pricing end of power trading
by Central stakeholders to Rs 17.91 Rs ~5.5 market rate in India
those developers with per kWh • NTPC NVVNL pays IPP at per kWh
strong technical and Rs 17.91/kWh tariff • Purchase allows states to
financial tie-ups Solar subsidized by $950 million Blended meet solar power purchase
Feed in dedicated Central budget Power obligations (currently stated
• IPP signs standard country- at 0.25%), with minimal
Tariff Trading
wide PPA with NTPC • NTPC NVVNL blends solar impact on state levelized
Rate
NVVNL (not 28 versions offtake with conventional tariff
across States) at Rs energy to achieve bundled
17.91*/kWh as per CERC rate of Rs ~5.5/kWh for • RECs allow states without
guidelines resale to States strong solar resource to
meet solar power purchase
obligation

* CERC solar PV feed-in-tariff guideline for FY2010-12


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Each State ERC can ensure strong foundations for solar sector
rollout even as JNNSM is being rolled out

• Initiate study to confirm CERC solar tariff guidelines (with adoption of


specific CUF assumption for each state)

• Declare a tariff for Solar power

• Pursue allocation approach rather than competitive bidding in early years of


the program (incubation is still required)

• Declare an RPPO with solar-specific carve out

• Work with Discoms to standardize bankable PPAs for solar projects <25MW

The states that have already gone through this process or that can
complete it by Q310 will establish early leadership of solar sector

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Key issues impeding the growth of solar program

Affordability of Industry players Government Policy


power (Outlook on (across the value environment
grid parity) chain) (subsidy)

Open access to Ground level issues Regulatory


consumers (land, permitting) Framework (RPPO,
tariff orders)

Central / State government need to support the solar program by way of


feed in tariff subsidy and regulatory framework till grid parity is achieved

11
To realize potential of solar power, India should have
capabilities across PV Value chain

Crystalline Value Chain


(%) = relative weight of cost structure

Polysilicon Ingot Wafer Cell Module Balance of System

35% 7% 7% 8% 13% 30%

Thin film Value Chain


PV Raw Materials PV Deposition & Module Integration Module Encapsulation

Glass that is used as substrate Thin-Film manufacturing line where deposition Schematic diagram of a CdTe module
and integration take place

India can be a global solar PV manufacturer , though presence across the value
chain is imperative

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Robust solar policy and right regulatory framework required to
stimulate demand for solar power generation

3. With an established downstream demand, investment in


R&D and talent flow into the sector, helping India
become a global solar technology hub
Growth of
the value
chain begins 2. As demand is created, a vibrant manufacturing
downstream base opens up, creating domestic jobs and
fueling overseas exports
• Drive manufacturing of all solar technologies
and create export base market

1. Stimulating generation creates domestic


demand for solar manufacturing and fulfills
nation’s electricity needs
• 15-20 GW of demand stimulation to
attract large scale cost efficient
manufacturing

Stimulating generation lays the foundation for long-term viability of the sector

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Enabling regulatory framework is a must at state level based on
CERC notified norms
Solar Program
Development Required: Why this is necessary:

Accelerate Adoption of CERC  Gives developers and manufacturers line of sight to


Guidelines at State Level standardized project return expectations across
States and facilitates early installations

Renewable Power Purchase  In the absence of an RPPO mandate for PV solar ,


Obligations states will steer towards cheaper renewable energy
sources and subsidies will be compromised

Ensure Administratively Simple  Development delays are costly barriers for


Processes developers - land assistance, permits should be
granted through a single window clearance

 Given fast implementation cycle for solar, serious


Streamline Central Subsidy
developers can accelerate new capacity addition if
Application and Payment Process
subsidy process is streamlined

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With Government Concessions Across the Country, Astonfield
is the Largest Diversified Renewable Energy Company in India

Haryana
3MW
• Concessions in hand in 7
Solar states and active business
development across 13
Rajasthan Bihar states
30MW Solar 300MW Solar
100MW Biomass
• 20MW of solar and 10MW of
biomass in execution in 2010
Gujarat
200MW Solar
• Total of 803MW of solar and
110MW of biomass currently
West Bengal in the MOU/Allocation stage
2x 5MW Solar
10MW • Close to 2,000MW of pre-MOU
Biomass
opportunities currently in the
Andhra Pradesh
250MW Solar public sector pipeline
Karnataka
10MW Solar • Three offices across India and
Astonfield Office global HQ in New York City

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THANK YOU

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