loans incentives for spv

8/7/2019 Loans Incentives for SPV

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International Worksho on

"Solar Power Generation Technologies" PGT)

Policies / Loans / Incentives for SPV"

Dr. G. Giridhar

Ministry of New and Renewable Energy

ew e

[email protected]

ESCI, Hyderabad, 22nd February, 2011


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Don't get me wrong:I love nuclear energy!It's just that I prefer fusion to fission.And it just so happens that there's an enormousfusion reactor safely banked a few million milesyfrom us.It delivers more than we could ever use in justabout 8 minutes And it's wireless!about 8 minutes. And it s wireless!

William McDonough,

,


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THE SUN


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SOLAR ENERGY Is it Renewable?

Sun burns 5 million tons of Hydrogen/sec by fusion

It will burn and can deplete in 4.5 billion years

Strictly after 4.5 billion years, it is not renewable, butnobody knows


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1. Abundant Reserve

2. ract ca y Un m te

3. Available every where

4. Good Quality Green Energy

. 6. Energy Security


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Constraints of Solar Energy

Variable with Time and Place

Not Evenly Distributed

Low density

Not in Directly Useable Form and requires ConversionTechniques

Regularly intermittent by night fall and irregularly bypassing clouds, dust, haze, fog and weather changes


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Suitabilit for Solar Power Plants


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SOLAR TERMS

Beam Radiation or Direct Radiation (Ib):

Solar radiation received at earthsurface without change of direction and inline with sun.

Diffuse Radiation (Id):

o ar ra a on rece ve a ear sur acefrom all parts of skys hemispheres.

Global Radiation (IG):

It is the sum of beam radiation anddiffuse radiation

IG= Ib + Id

o ar rra ance or nso a on :

The rate at which solar energy reaches aunit area at the earth. w/m2 It isinstantaneous measure of rate and vary over

time.


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Solar output 11 year solar cycle

EarthSun distance 3.5 % annual variation

Water vapor Selective absorber

Air pollution 40 % less direct

Smoke from forest fires Natural or manmade

Volcanic ash Global effect for years

oca on

Time of day Solar position

Season


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Glance in India (as on 30062010)

Power from RenewablesI. Gridinteractive renewable power

potential(MW) (MW)

1 Wind power

45 195

12009.482 o power agro res ues anplantations)

3 Bagasse cogeneration

1 1

000

901.10

1 11.4 Small hydro power (up to 25 MW)

5 Energy recovery from waste (MW)

15 000

2 700

2767.05

72.46

o ar p o ovo a c power Total 84 776

12.2817173.90


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II. Captive/combined heat andpower/distributed renewable power

potential(MW)

1. Biomass/cogeneration (non

238.17

2. Biomass gasifier

3. Energy recovery from waste

125.44

2. 24. Aero generator/hybrid systems

Total

1.07

417.40

17591.30


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III Remote village electrification

potential 6867 villages

IV Decentralized energy systems

1. Family

type biogas plants

120 lakh

42.60 lakh2. o ar p o ovo a c sys ems

i. Solar street lighting system

ii. Home li htin s stem

m2

119634 nos

603 307 nosiii. Solar lantern

iv. Solar power plants

797 344 nos

2.92 MWp

v. Solar photovoltaic pumps 7334 nos


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3. Solar thermal systems

potential

i. Solar water heating systems

ii. Solar cookers

140 M. M2

3.53 M. M2

6.72 lakh4. n pumps


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JNNSM Mission Objectives

Jawaharlal Nehru National Solar Mission has been launched

un er e a ona ac on an on ma e ange w an

objective:

creating the policy conditions for its diffusion across

the country.Mission anticipates achieving grid parity by 2022 andparity will coal based thermal power by 2030.

To adopt a 3phase approach from 2010 to 2022.

m o e m ss on s o ocus on se ng up an ena ngenvironment for solar technology both at centralizedand decentralized level.


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Mission Strategy

To create necessar environment to attract industr andproject developers for investment in power generation,

manufacturing.

To work closely with State governments, regulators, powerutilities and local self government bodies.

To attract banks and financial institutions to providenecessary finance for setting up solar power projects for

grid/ off

grid.To promote offgrid solar applications to meet light andpower requirements of energy poor by provision of low cost


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Mission Approach

Segment

201013

201317

201722

Utility grid1,000-2,000 4000-10,000 20,000

Off grid

Applications 200 1,000 2,000

Solar ThermalCollectors Area 7 15 20

. qm

ManufacturingBase (MW)

-- -- 4,000-5,000

Solar LightingSystems (MillionNos)

-- -- 20


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Research and Develo ment

To set up a solar research council to guide the overall

technology development strategy

To establish a national centre of excellence tomp ement t e p ans ormu ate y t e counc .

Ma n tas s w e test ng an cert cat on, eve op ngstandards and specifications, networking amongdifferent research institutions.


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Policy & Regulatory Framework

Solar Power Purchase Obligation

Solar specific RE Certificates

Incentivizing through NTPC Vidyut Vyapar Nigam Ltd. (NVVN) for

setting up of large solar power plants.

Designated as nodal agency for entering into PPA with Solar PowerDevelopers.

MoP allocating equivalent amount of MW to NVVN.

Sale of power as per CERC regulations (to provide Generation BasedIncentive)

KV grid with a remunerative feedin tariff ( routed through IREDA)


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SolarManufacturing

To establish low cost, high quality manufacturing

facility for solar PV with the targets of 45 GW by 2020.

To provide incentives to establish SEZ for solarmanu actur ng par s.

To provide soft loans for technology up gradation andworking capital through refinance facility from IREDA.


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Financing Mission Activities

Fund Sources

To provide budgetary support for the activities

To access International Funds under the UNFCCC

framework

Fund requirement for Phase II

Analysis of the efficacy of the model adopted


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Fin n i l In n iv

Soft loan at @ 2 % for domestic sector @ 3% for non

pro t organ zat ons an or pro t ma ng

organizations

5 years Annual Maintenance Contract

,

and for any end user

80% Depreciation for end user

Custom and Excise Exemptions

GBI based incentives @ Rs 18.45 for SPV and Rs.

. or so ar t erma power


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st ,

A maximum incentive with a 5% reduction and ceiling of Rs. 11.40 per

KWh.

The generation based incentive will continue to decrease as and when

the utility signs a PPA for power purchase at a higher rate.

Solar PV power generation plants of a minimum installed capacity of

1MWp per plant, either a single unit or modular units at a single location

will be eligible for generation based incentive.

However, 1 MWp capacity may be setup through modular units at a

single location.


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Rates

Secretary, MNRE, announced Quotes of the Winning Bids of SPV and ST

Solar PV:

NVVN reference price : Rs. 17.91/kWh

Lowest winning bid : Rs.11.18/kWh

Average bid : Rs 12.16/kWh

Solar Thermal:

NVVN reference price : Rs. 15.31/kWh

Lowest winning bid : Rs.11.14/kWh


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Fund Requirements

First stage Second Stage

A Grid Connected

1,100 MW 20,000 MW

Approximately Rs. 16500 crores Rs. 3,00,000 crores

rApplications

200 2,000

Approximately Rs. 5,000 crores Rs. 50000 crores

C Solar Thermalcollectors

7 million meter square 20 million meter square

x y . 7 . ,


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Authorized Share Capital :Rs 1000 Cr

Paid-up Capital :Rs 520 Cr

Net-worth :Rs 871 Cr

Domestic Borrowings :Rs 773 Cr

International Borrowings :Rs 1115.69 Cr

i l


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International Partners

Govt of Netherlands, 1991 : 18 Million Dutch Guilders

World Bank (1st LoC), 1993 : $ 145 Million

DANIDA, 1993 : $ 15 Million Asian Develo ment Bank, 1997 : $ 100 Million

KfW, Germany (1st LoC), 1999 : 61.35 Million

World Bank (2nd

LoC), 2001 : $ 110 Millionnd, ,

KfW, Germany(3rd LoC) : 19.9 Million

Lines of Credit in Pipeline

AFD (France) : 80 Million


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IREDA Financing Schemes

Project Financing Schemes

Equipment Financing Schemes

Financing Through Intermediaries

Rate of Interest - 11.25% to 12.75%

Repayment Period - Upto 13 Years

Channelization of Funds


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Funding under scheme Project mode.

Directly by MNRE (approved by PAC)

Scheduled commercial banks, NBFCs, FIs such as NABARD, NHB,SIDBI, IREDA etc.

Additional channels for supply and maintenance (RESCOs, FinancialIntegrators, System Integrators, MFIs, Government agencies etc.)


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Components of Tariff

The following are the components of tariff for solar energy:-

1. Capital Cost

3. De-rating

4. Debt-equity ratio

5. Term of loan

6. Rate of interest.

8. Return on equity

9. Life of plant and machinery10. Rate of depreciation

11. Operation and maintenance expenditure

12. Auxiliary Consumption13. Accelerated Depreciation Benefit


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Capital Cost

The cost of a solar power project is mainly dependent on the cost of PV modules/ plant and machinery, technology adopted, location of the site and capacity

The Indian Renewable Energy Development Agency Limited (IREDA) has

recommended a capital cost of Rs.18 to 20 Crores per MW for Solar PV thin film.

technology

The Commission decides that the Infrastructure Development Charges (IDC) ofRs.25.75 lakhs per MW should be loaded to the capital cost. Accordingly, the

capital cost is refixed as Rs.17.1575 crores per MW.


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Solar PV has one of the highest capital costs of all renewable energy sources, but it

has relatively low operational costs, owing to the low maintenance and repair needs.

For a solar PV power plant, the approximate capital cost per MW is approximatelyRs. 16 crores the precise cost depends on scale.

s nc u es e cos o pane s, e a ance o sys ems, e cos o an an o er

support infrastructures.

Component Amount

(in Rs crores)

% of Total

Solar panel arrays 8 50

Inverter 2 12

Balance of System 2 13

Installation

Others (Infrastructure, Margins) 2 15


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Current Capital Cost for Solar PV

Capacity (MW) Capital Expenditure

(Rs Crores /MW)

15 17

510 16

1050 15.5

50100 15


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Capacity Utilization Factor (CUF)

s t e rat o o actua energy generate y t e o ar pro ect over t e yea

to the equivalent energy output at its rated capacity over the yearly period. CUF for

Solar PV project depends on solar radiation and number of clear sunny days.

The Indian Renewable Energy Development Agency Limited (IREDA) has

recommended a CUF of 15 to 20%.

The maximum solar radiation in Tamil Nadu is 5.8 kWh/Sq.mtr/day in the Solar

,Chennai as 5.37. Considering the above, the Commission adopts a CUF of 19% in

this order as adopted by the CERC


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De-rating

De-rating factor has not been foreseen by other StateCommissions / CERC. It is natural that any material used

in the PV module for energy conversion, loses its

efficiency due to aging

e ng a new area w ou n orma on on pas

performance parameters, fixation of de-rating factor for a

Solar PV Plant can only be an approximation. IREDA hasrecommended a de-rating factor of 0.5 to 1% per annum


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Terms ofLoan

The Commission fixed a tenure of ten years with

mora or um o one year n s ar r er ase on e

consideration that term loans sanctioned by IREDAstipulated this tenure. The Commission decides to retain

the same tenure in this order.

Rate of interestCERC has considered the long-term PLR of State

Bank of India plus 150 basis points as adequate. IREDA

period of 7-8 years.

e omm ss on cons ers a n eres ra e o12% is reasonable.


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The Central Electricity Regulatory Commission has included the followingcomponents in working capital in their Regulations, 2009:

(i) Operation and Maintenance expenses for one month;

(ii) Maintenance spares @ 15% of the O&M expenses,

(iii) Receivables equivalent to 2 months of energy charges for sale of

electricity calculated on the normative CUF;

considered in order of 2009 by the Commission along with the following working

capital component :

(i) Operation and Maintenance expenses for one month;

(ii) Maintenance spares @ 1% of the O&M expenses and

(iii) Receivables equivalent to 1 month of energy charges for sale ofelectricity calculated on the normative CUF.


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Return on E uit

The CERC has adopted RoE of 19% pre tax for the first ten years and 24%

.

adopt 19.85% pre-tax return on equity for this order.

Life of plant and machinery

The Commission decides to consider the solar PV lant life of 25 ears as

considered by CERC in their Terms and Conditions for Tariff determination

from Renewable Energy Sources Regulations, 2009.


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The CERCs regulations recommended Differential Depreciation Approach

Straight Line Method.

It is ro osed to ado t the rate rescribed in the CERCs re ulation i.e.

depreciation rate of 7% for the initial 10 years and 1.33% for the remaining

years.

Operation and Maintenance expenses

The O&M expense includes the expenditure on manpower, repairs, spares,

consumables, insurance and overheads.

IREDA has suggested a O&M charges of 0.5% of the capital cost. Commission

decides to adopt the rates prescribed in the CERC regulation. i.e. Rs.9.515 Lak

per MW for the first year of the Control period (2010-11) and shall be escalated at

the rate of 5.72% per annum for the remaining periods.


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The auxiliary consumption for solar PV power plant is to be

considered to meet the auxiliary power requirement for

equipments/devices for cooling of the power conditioning units, lighting

of office/station yard, water sprinklers, monitoring and control units,communication services etc.

Commission considers 2% of auxiliary consumption is reasonable for

solar PV power plants.

Accelerated Depreciation Benefit

For the projects availing the benefit of accelerated depreciation as per

.Education cess) has been considered.



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ccre tat on

Performance Monitorin

Refinancing

MoU signed by IREDA with NABARD, NHB and Central Bank ofIndia.


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Risk Factors in Funding Solar Projects


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Regulatory Risk Fixing of the tariff and assurance on the power sale

a reement

Technology Risk Technology yet to be proven on the ground

per schedule

Infrastructure Risk Inadequate evacuation facility and clearances on land.

Repayment Risk Non assurance of repayment from the utilities may

result in repayment risk to the developers/ FIs.

Political Risk Changes in fixing of unallocated power with respect to

change in political system.

Policy Risk Assurance of long term policy with greater accuracy

and uncertainties in development of the solar sector.


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Financial Risk In time financial closure by the project developer.Hi h cost so fundin from sin le source is a risk.Raising of equity

Guarantee and Lon term uarantee and warrant from theWarranty Risk technology providers for the new technology.


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Suggestions for Risk Mitigation tofinance Solar Projects


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Su estions for Risk Miti ation

Advocation for long term / stable/ consistent policies at centralstate level- to honor PPAs and MoUs.

Frequent / close interaction with all stake holders including-

based on capital cost.

Pro er Resource assessment studies.

Provision of partial risk guarantee fund from Govt.

mportance o t me y c earances approva s or so ar pro ects.

To create special single window clearance cell at state level.


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Su estions for Risk Miti ation Promoters to take advance actions to avoid delay of deliveries- to

meet targets under JNNSM.

To encourage establishment of more manufacturing units/suppliers in the country- to deliver indigenous cells and.

To establish a mechanism to have information exchange betweenvar ous s an an s- or co- nanc ng or consor umfinancing.

eta e s te survey reports to e un erta en t rougprofessional bodies- to maximize performance efficiencies.

To establish more training institutions for producing skilledmanpower-capacity building.


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Suggestions for Risk Mitigation

o stipulate suitable conditions for recovery of loan from

operations of solar projects in the event of failure of corebusiness (for non IPP projects).

Concurrent monitoring of projects by Fis by appointment of

lenders engineers.

Periodic inspection / monitoring of projects even afterimplementation. (TRA and Generation data)

Innovative financing models by accessing low cost funds frominternational institutions.


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Migrated JNNSM List of SPV Projects

Sr. No. Name of Applicant State Capacity(MW)

Maharashtra State Power Generation Co.Limited, (MAHAGENCO), Mumbai

2 Clover Solar Pvt. Ltd., Mumbai Maharashtra 2

3 Videocon Industries Ltd, Mumbai Maharashtra 54 Enterprise Business Solutions, USA Punjab 5

5 Azure Power (Punjab) Pvt. Ltd., Amritsar Punjab 2

6 Comet Power Pvt. Ltd., Mumbai Rajasthan 5

7 Refex Refrigerants Limited, Chennai Rajasthan 58 ston Field Solar Ra asthan Pvt. Ltd. Ra asthan9 Entegra Ltd, Ansal Bhawan, New Delhi Rajasthan 1

10AES Solar Energy Pvt. Ltd., Gurgaon,Haryana

Rajasthan 5

11 Moser Baer Photo Voltaic Ltd. New Delhi Ra asthan12

OPG Energy Pvt. Ltd., Chennai, TamilNadu

Rajasthan 5

13 Swiss Park Vanijya Pvt. Ltd. Rajasthan 5

ota 54


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Migrated JNNSM List of Solar-Thermal Projects

Sr. No. Name of Applicant StateCapacity

(MW)

1cme e e ower m te ,

GurgaonRajasthan 10

2Dalmia Solar Power Limited,

Rajasthan 10

3Entegra Ltd, Ansal Bhawan, New

Delhi

Rajasthan 10


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loans incentives for spv

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