emergent ventures international an integrated climate change and energy company solar projects –...

Emergent Ventures InternationalAn Integrated Climate Change and Energy Company

Solar Projects – Financial Levers & RisksDeepak Verma, Chief Operating OfficerJanuary 27, 2010

Solar – intrinsics of power market makes compelling case

Serious Shortage in Supply

• Approximately 145 GW of power generating capacity installed

• However only 55% of Indian households have electricity

• Electricity demand expected to grow @ 10% - 12% p.a for the next 15 years

• Huge gap between supply and demand

Immense Solar PotentialLow Penetration of Renewable Energy

• Renewable energy installations constitute only 9% of total power capacity

• ~160 GW of RE potential has been identified

• 92 % of available resources untapped as of now

• Solar Potential in India greatly exceeds potential from other renewable energy sources

• Good solar intensity 4 – 7 kWh/m2/d• More than 300 sunny days• However, solar has not taken off due to

high capital costs;

Levers affecting investor returns

• Solar PV• Panel costs have reduced substantially over the

past couple of years due to the financial crisis and abundant stocks

• Low-cost alternatives like thin-film are getting mainstream

• Project cost expected to reduce further as technology improves

• Tradeoffs between project cost, efficiency, reliability and bankability

• Solar Thermal• Innovative techniques required to reduce

projects cost• Indigenous manufacturing of components

would help in reduction of project cost

Project CostFinancing CostsTariff & IncentivesFuture: Renewable Energy Certificates

5% reduction in Project Costs increases equity return by 1.5%-2%


• Domestic debt expensive• Rates ranging from 9%-12%• Banks still uncomfortable with financing solar

projects• Government schemes available through IREDA and

REC for lower cost financing;• However limited capacity available• Most project proponents would have to look at

alternative means• International debt markets can provide cheaper

rates• EXIM Financing - ~3%-4%• International Debt Markets – ~5%-6%• Refinancing guarantee via ADB• However long-term hedging is expensive (3-6%

for 5-10 years)


1% reduction in Financing Costs increases equity return by .75%-1%


• National Solar Mission• Target of 20,000 MW by 2020• Base Tariff of INR 17.91 for solar PV• However Tariff bidding reduced the actual tariff

to INR 10.95 – INR 12.76• 150 MW allocated based on highest discounts

offered• Gujarat State Policy

• Phase 1 and 2 have a split tariff; INR 15 for 13 years INR 5 for the remaining 12 for solar PV

• Evacuation infrastructure provided to all proponents

• Over 900 MW of PPA’s signed with GUVNL• Small Solar Programme

• Tariffs ranging from INR 15-18 in various states• GBI to state electricity boards from IREDA• PPA signed for 100 MW

• Rajasthan State Policy• Wasteland provided at 10% of DLC on long-term

lease


An INR 1 increase in Tariff increases equity return by 2%-2.5%


• Renewable Energy Certificates (REC) announced by CERC• To be traded on the energy exchange• Separate solar specific REC set-up with floor

price of INR 12 and cap of INR 18• Solar generators not availing preferential tariffs

would be awarded RECs by a central regulatory body• Would be used to set-off Renewable Purchase

Obligations (RPO) of various state electricity boards• However

• as of date, there are no penalties to SEBs for not fulfilling RPOs;

• Markets for RECs not developed• Can become a potential revenue stream ensuring

project viability and returns• Achieving bankability with uncertain revenue

streams will be challenging


Risks to Solar Projects

• Aggressive discounts on tariff have been provided by project proponents under NSM

• Ground radiation likely to be lower than solar model forecasts

• Project proponents would have to seek creative ways to ensure projects remain afloat• Low-cost international financing• Long-term financing / re-financing options• Lower costs through various means

• Project Proponents may achieve only sub-par equity returns of 5%-8%

Aggressive biddingLow Quality ImportsFinancial Closure

Discounted tariffs have reduced equity returns by 7%-10%


• Investors may start looking at low quality imports to enhance returns; however:• Long-term guarantees from these vendors may

not be bankable• Performance of plants may deteriorate• Additional expenditure would be required for

replacements of modules and cells• Project Owners may also make design and

engineering choices to reduce cost, which in turn could impact medium to long-term reliability



• Domestic Banks still uncomfortable with the Solar growth story• Many projects which had signed PPAs in June

2010 are struggling to achieve financial closure• Transfer of government land is a very lengthy

procedure – causes delays to financial closure • Solar Projects is not in the priority lending sectors• Awareness of international debt options still very

low among the small project proponents• Options for carbon finance very limited • Small set of projects likely to receive non-recourse

financing


Most of the projects in the NSM programme would be ineligible for non-recourse project financing

Likely players

• Speculator• Opportunistic Investor/Operator• Developer• Independent Power Producer• De-risked Long-term Investor

Emergent Ventures InternationalAn Integrated Climate Change and Energy Company

Corporate ProfileJanuary, 2010

Emergent Ventures International (EVI)An Integrated Climate Change and Energy Company

Carbon Advisory

Sustainability Advisory

Clean Energy Business

A pioneer in the field of climate change mitigation with business interests in:

• Climate Change and Sustainability• Clean Technologies

Established in 2004, EVI has grown from a carbon advisory to offer comprehensive solutions that contribute to the key vision of the company “Sustainable Solutions for The Environment”.

Currently, EVI has more than 120 consultants working on over 300 client engagements in over 15 countries across 5 continents.

Technical Experience

EVI and its Affiliates are engaged in developing ~ 150 MW of bio-mass based power plants, 300 MW+ wind energy plants, 50 MW+ solar power plants, and 200,000 acres+ of plantations.

Partnership with Clients

EVI partners with the Clients to provide end-to-end services. Some of the services include project feasibility analysis, policy support, site selection, resource assessment, basic engineering design, project management, etc.

Projects

• Biomass: 132 MW in Bihar; 11.5 MW in Sri Lanka

• Waste-to-Energy: 5.6 MW in Haryana

• Wind: 300 MW projects in Tamil Nadu

• Solar: 50 MW in Rajasthan and Andhra Pradesh

Our Work @ Clean Energy Business We help organizations develop clean energy solutions

We partner with Clients to provide end-to-end services for the development of renewable energy projects across a variety of technologies (Wind, Solar, Biomass, Waste). We believe in maximizing the Client’s returns and work towards this goal. Our aim is to provide a one-stop shop for Clients wanting to enter / expand in the Renewable Energy Domain.

Renewable Energy Project Development

Engineering Services – Renewable Energy

Clean Energy Generation

Clean Energy Business Key Service Offerings

Renewable EnergyProject Development

• Prefeasibility analysis & survey; • Techno-economic viability study• Policy Support• Site analysis / selection• Power Sale / PPA• Vendor relations / development• Financial closure / Syndication• Carbon asset management for in-house

projects

Clean GenerationEngineering Services – Renewable Energy

• Engineering, procurement & construction services (EPC)

• Overall management of projects (Owners’ engineer)

• O & M of project (Management lease)

• Has identified attractive generation projects under development; includes biomass, waste to energy and wind farms

• Technologies include: Biomass, Waste-to-energy, Gasification, Solar PV, CSP and Wind

• Projects are diversified across fuel source and geography to build a balanced portfolio

Thanks Emergent Ventures International5th Floor, Universal Trade Tower, Sec-49, Gurgaon, [email protected] www.emergent-ventures.com @EVItweets

emergent ventures international an integrated climate change and energy company solar projects –...

Documents

project costs

solar generators

solar projects investors

mainstream project cost

solar pv panel costs

lower cost financing

solar projects domestic

project viability