Low prices for solar power seen in the Indian Market have a rationale. And potentially they can decline further for well designed, well financed, large scale solar capacities.

1.
Emergent
Ventures
India
(EVI)
©2015
Emergent
Ventures.
All
rights
reserved.
Confiden;ality:
The
concepts
and
methodologies
contained
here
in
are
proprietary
to
Emergent
Ventures.
Duplica;on,
reproduc;on
or
disclosure
of
informa;on
in
this
document
without
the
expressed
wriGen
permission
of
Emergent
Ventures
is
prohibited.
Solar
Power
In
India:
the
new
shining
opportunity
4th
Infraline
conference,
Hotel
Claridges
New
Delhi
3
Dec
2015
Presented
by
Vinod
Kala,
MD,
EVI

2. Structure
2
• Brief
Intro
to
EVI
• Emerging
Economics
of
Solar
Projects-­‐
is
there
a
ra;onale
to
current
pricing
• Challenges
and
key
areas
for
ac;on

3. EVI
-­‐
Work
Profile
Climate
Change
Renewable
Energy
Sustainability
Policy,
Strategy
Technology
Finance
200+
assignments
(India,
SE
Asia,
Africa,
La;n
America
etc.)
150+
Projects
registered
under
UNFCCC
CDM
Mechanism,
with
GHG
reduc;on
poten;al
of
140
million
T
of
Co2eq
Programs
(POAs),
small
scale,
large
projects;
C02,
CH4,
HFCs,
N20,
SF6
gases
VERs-­‐
20
million
VERs
traded
so
far
under
various
interna;onal
standards
.
One
of
the
largest
traders
in
the
world
Other
credits:
RECs,
ECERTS/PAT,
ODS
etc.
NAMAs,
NAPAs,
LEDS.
Wind,
solar,
Hydro
bio-­‐mass,
waste
projects
Wind:
-­‐ 5500
MW+
resource
assessments
and
technical
DD,
country
level
assessments,
off
shore
poten;al,
online
genera;on
assessment
tools
etc.
-­‐ 1800
MW+
as
owner’s
engineers
(PMC);
150
MW+
of
owner’s
engineer
for
maintenance
-­‐ 3050
MW+
of
technical
DD;
2000
MW+
as
Lender’s
engineers
Solar
300
MW+
of
grid
connected
projects.
Off
Grid-­‐
On
site
RE
program
design.
Solar
Cooling
Biomass
(combus;on,
gasifica;on,
pyrolysis);
Bio-­‐fuels
–
Country
plans
Hydro-­‐
large,
small
Hydro
(Dev-­‐
150
MW,
Policy)
Large
Renewable
Zones
(GW+)
Planning.
Preliminary
iden;fica;on
~50.
Country
level
sustainability
Programs
and
policies
-­‐ India,
Bhutan,
Sri
Lanka,
Laos,
Thailand,
Malaysia,
Kenya,
Mexico
5
yr.
India
Program
for
scaling
up
distributed
off
grid
genera;on,
financing
(renewables
and
energy
efficiency),
capacity
building
etc
.
70+
state/country
level
assessments,
policies,
program
design
etc.
Corporate
sustainability
-­‐
80+
assignments,
30+
clients
Sustainable
Transporta;on
-­‐
City
level
plans,
GHG
models,
Fuel
efficiency
standards
Green
Ra;ng
systems;
Green
finance
Green
Ci;es,
Green
Industrial
Zones-­‐
Frameworks.
Smart
Grids,
EE
etc.

4. The
cost
reduc=on
that
we
see
today,
hasn’t
come
through
squeezed
margins
and
compe==ve
intensity
only
and
is
therefore
sustainable
4
scale
Low
commodity
prices
Efficiency
Improved
availability
Reduced
capital
costs
Steel,
copper
others
Designs,
area
efficiency,
losses
(PRé),
and
net
gain
from
trackers
Well
designed
plants,
improved
grid
connec;vity,
opera;onal
controls
-­‐
àavailability
~98%+
Manufacturing,
development
costs,
EPC,
fabrica;on
interest
cost
debt:
equity
ra;o
equity
costs
EBIDTA
Margins,
Financial
Health
of
leading
suppliers
is
improving

5. Cost
pathway
for
solar
power-­‐
large
scale
5
Power
costs
in
Rs/kWh
Reduc;on
in
cost
Rs/w
Module
–
3.8
Inverters-­‐
-­‐-­‐
3.0
Structure
-­‐-­‐
1.0
BOS
-­‐-­‐
2.5
Tracker
15%
gen
gain
at
an
addi;onal
Project
cost
~
Rs
3.5/w
0.68
0.39
6.5
Base
case
(2
yrs
before)
Project
Capacity
500
MW
CUF
20%
EPC-­‐
Rs
56.5/W,
Proj
cost:
Rs
60.7/W
Interest
–
12%
D:I
=
70%
Tenor-­‐
12
yrs
Exp
equity
return-­‐
16%
Interest
12%à10%
D:E
ra;o
70%-­‐-­‐à80%
Tenor
12
yr-­‐-­‐à
18
yr
0.26
0.19
0.30
0.19
Equity
ret
16%-­‐-­‐à
14%
4.15
Improvement
:
Modules
-­‐
$0.09/W
Improvement
in
gen
density,
cell
efficiency
-­‐
25%
-­‐-­‐-­‐à
Yr
3+
1.03
3.47

6. Challenges
to
be
met
6
Demand
Suppor=ve
Infrastructure
Financing:
Equity,
debt

7. Challenges
–
areas
of
ac=on
7
A
large
part
of
Renewable
Capacity
can
be
supported
if
Commercial
and
Industrial
Customers
can
buy
it
easily
and
directly
• Stronger
implementa;on
of
RPO
;
revamp
of
REC
scheme
• Easy,
cost
effec;ve
regime
of
Transmission
and
Wheeling;
New
Electricity
Act
points
the
way
• CTU
at
zero
charge
• Separa;on
of
‘wire’
and
‘content’
Suppor=ve
infrastructure
• Solar
Parks
to
be
made
available
at
bid
out
‘charges’
(/acre
or
/MW
capacity),
to
improve
compe;;on
and
reduced
costs
• Guarantee
on
grid
availability,
SLAs
for
other
services
• Green
Corridor
Areas
Clearly
iden;fied
and
likely
transmission
capaci;es
announced.
At
least
3
years
in
advance,
in
advance
for
beGer
planning,
specially
to
connect
awarded
solar
parks.
• How
will
the
grid
be
managed
with
large
scale
renewable
(40%
by
2030)
–
focus
on
energy
storage
and
grid
management
strategies
to
improve
the
cost
performance
ra@o
by
a
factor
of
5+
which
is
possible
and
is
being
targeted
globally

8. Challenges
–areas
for
ac=on
8
Financing
• Debt:
Green
Bonds
• Lot
of
interest
–
investors,
issuers
regulators.
Connect
with
UNFCCC
regimes
for
Green
Finance
-­‐
risk
mi;ga;on
products,
insurance
etc.
• Direct-­‐support
for
corporate
issuances
• Reduced
withholding
tax/tax
• Equity-­‐
Trusts/Yield
Cos
• Guidelines
issued
in
2014
• Difficul;es
–
• Tax
efficiency
• Transfer
of
assets
to
the
trust
• Pass
through
across
a
trust
structure
• Need
to
popularize
• Insurance
products
• Regulatory
risks,
credit
risks,
technology
risks,
resource
risks
etc.
• Can
bring
in
scale
investors
such
as
pensions
funds,
sovereign
funds,
insurers
etc.

9. Refinancing
of
RE
opera=ng
assets,
releases
value,
accesses
capital
9
Reduced risk profiles of operating
RE Assets
Resource assessment
risks
Site acquisition risks,
delays, costs, non
availability
Evacuation access
risks
Other permits and
consents related risks
e.g environment, local
community etc.
Project execution
risks, costs; delays
Technology
performance
risk
Credit Risk
LA
RA
EA
PC
PE
TP
CR
FM Force Majeure
Event risks
Development
RA
EA
TP
CR
FM
Operating Asset
Debt yields
- Δ 1-2% +
Equity yields
- Δ 2-4% +
Depending on tax
efficiency and
residual risk for
equity investors
Opera;ng
assets
can
be
held
by
large,
low
risk
investors,
releasing
value
and
giving
scaled
up
access
to
capital
Insurable

10. Summing
up
10
The
cost
reduc;on
seen
in
Solar
power
is
sustainable.
It
will
be
further
driven
by
• Innova;on
in
design,
scale,
financing
and
opera;onal
excellence
• We
may
expect
to
see
levels
of
Rs
3.5/KWh
in
<3
yrs
;me
• Infrastructure
improvement
to
absorb
capacity
would
be
cri;cal
• New
financing
mechanisms
like
Green
Bonds,
RE
InvTrusts,
Insurance
products,
can
alter
financing
‘cost’
and
‘access’
significantly

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:
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