Bridge to India_india Solar Policy Brief_tamil Nadu

7/27/2019 Bridge to India_india Solar Policy Brief_tamil Nadu

1/18 BRIDGE TO INDIA, 2012 1

TAMIL NADUSOLAR POLICY

3,000 MWtargeted installed capacity

o solar power by 2015

304 MWsolar renewable purchase

obligation by 2015

2,247 MW17.5%

` 80.9 billionincome o DISCOMs in 2011

` 820/kWhLCOE o diesel power

` 7/kWhLCOE o solar power

current electricity prices/kWh

07

` 2.54

` 7.00` 5.50

` 5.75

APPC

COMMERCIAL

INDUSTRIAL

RESIDENTIAL

15 MWinstalled capacity osolar power in 2012

1,9002,100 kWh/m2solar irradiation per year

212 hourspower outages per day

8.9 m MWh/year10.5%

`

INDIASOLAR

POLICYBRIEF

The Tamil NaduSolar Policy

BRIDGE TO INDIA 2012

A detailed analytical outlook

on the opportunities and

risks under the

Tamil Nadu State Solar Policy


2/18 BRIDGE TO INDIA, 2012

DISCLAIMER 2012 BRIDGE TO INDIA Energy Pvt.

Ltd.

All rights reserved

November 2012, New Delhi

All reports are owned by BRIDGE TOINDIA and are protected by Indian

copyright and international copyright/intellectual property laws under

applicable treaties and/or conventions.The user agrees not to export any

report into a country that does not havecopyright/intellectual property laws

that will protect BRIDGE TO INDIAsrights therein.

BRIDGE TO INDIA hereby grants theuser a personal, non-exclusive, non-reundable, non-transerable license to

use the report or research purposesonly pursuant to the terms and

conditions o this agreement. BRIDGETO INDIA retains exclusive and sole

ownership o each report disseminatedunder this agreement. The user cannot

engage in any unauthorized use,reproduction, distribution, publication

or electronic transmission o thisreport or the inormation/orecasts

therein without the expressed writtenpermission o BRIDGE TO INDIA.

No part o this report may be used

or reproduced in any manner or inany orm or by any means without

mentioning its original source.

BRIDGE TO INDIA is not hereinengaged in rendering proessional

advice and services to you. BRIDGE TOINDIA makes no warranties, expressed

or implied, as to the ownership,accuracy, or adequacy o the content

o this product. BRIDGE TO INDIAshall not be liable or any indirect,

incidental, consequential, or punitivedamages or or lost revenues or

prots, whether or not advised o the

possibility o such damages or lossesand regardless o the theory o liability.

For urther enquiries, please contact:

Mr. Mohit Anand

[email protected]

Contact

BRIDGE TO INDIAN 117, Panchsheel Park

New Delhi 110017India

Visit our website to know more

about uswww.bridgetoindia.com

Read our blog or up-to-date

market insights and opinionswww.bridgetoindia.com/blog

Track the Indian solar market with

our FREE reportswww.bridgetoindia.com/

ourreports

Follow us on

This policy brie has been published

on December 7th 2012, and will be

updated as regulations change.



CONTENTS1. Overview 01

2. Utility scale projects 1,500 MW 03

High Tension HT customers through Solar Purchase Obligation

500 MW

03

Distribution companies DISCOMS through competitive bidding

1,000 MW

04

3. Rootop solar systems 350 MW 07

4. REC o take 1,150 MW

5. Policy summary 10

6. Glossary o terms 12

7. About the authors 13



B

RIDGETOIND

IA,2012

Source: BRIDGE TO INDIA

TAMIL NADU SOLAR POLICY3,000 MW

RENEWABLE ENERGYCERTIFICATE REC

PROJECTS

UTILITY SCALEPROJECTS

SOLAR PURCHASEOBLIGATION SPO

PROJECTS

High Tensionconsumers (33kV+) / SPOobligated entities

SPO o 3%/6%Frequent poweroutagesHigh cost odiesel

No penaltystructure toenorce SPOsNot all SPOs willbe bankable PPAsignatories

DISCOM(TANGEDCO)

FiT with stateProject sizesexpected at 5-50MWPro-active and

responsivemanagement bystate authorities

PPA bankabilityFiT auctionprocessunpredictable

Open-Access consumersDISCOMsRPO obligated entitiesSPO obligated entities

High returns under theREC mechanismNo size restriction oprojects

Enorcement o RPOs(demand or RECs)Medium-term pricing oRECs (bankability)Overall supply/demand oRECs in India

DISCOM(TANGEDCO)

Net meteringGenerationBased Incentive(GBI) availableRising power

costs

Little clarity onprocess as yetTechnicalchallenges(powerevacuation)

DISCOM(TANGEDCO)

Net meteringRising powercosts

Little clarity onprocess as yetTechnicalchallenges(powerevacuation)

COMPETITIVEBIDDING

PROJECTS

PRIVATEROOFTOPPROJECTS

GOVERNMENTROOFTOPPROJECTS

ROOFTOPPROJECTS

1,500 MW1,150 MW

50 MW1,000 MW500 MW 300 MW

350 MW

OFFTAKERS

OURVIEW

OPPO

RTUNITY

RISKS

MEDIUM TO HIGHlikelihood orealisation

MEDIUMlikelihood orealisation

LOWlikelihood orealisation

HIGHlikelihood orealisation

HIGHlikelihood orealisation



1. OVERVIEW

B

RIDGETOINDIA,2012

Source: BRIDGE TO INDIA

The Tamil Nadu Solar Energy Policy

2012 was announced in October 2012,making Tamil Nadu the seventh Indian

state out o 28 to announce a solar

policy. The operative period o thepolicy is rom 2012 to 2015, duringwhich it targets to add 3 GW o solar

power. No breakup between photovol-taic (PV) and concentrated solar power

(CSP) projects has been given.

Tamil Nadu already has signicant

experience with the generation andtransmission o renewable energy as

it has the highest installed capacity or

wind power in India (over 40% o totalinstalled capacity; a total o 6,613MWin December 2011)3.

At the same time, the state has a

signicant energy decit. The total

---------------------1 The original policy document envisaged 1,000 MW rom HT consumers and 500 MW rom salesthrough the TANGEDCO. The TANGEDCO portion had subsequently been increased to 1,000 MW. We

are assuming that this will lead to an equivalent reduction o the HT customer share (leaving theoverall target intact). TANGEDCO will also sell the procured power to the SPO obligated entities.2 To download the policy ollow the link given in the Policy Details table at the end o this document3 Ministry o New and Renewable Energy (MNRE) annual report nancial year 2011-20124 Load Generation Balance Report 2012-13; CEA. The annual peak power decit is calculated bysubtracting the highest availability at any point in time rom the highest demand at any point in timeduring that year.

Breakup o policy targets

Category O takers Capacity

addition MW

Utility Scale High Tension (HT) consumers [through

Solar Purchase Obligation (SPO)]

5001

TANGEDCO (DISCOM) (through

competitive bidding)

1,0001

Rootop Private buildings 50

Government buildings 300

REC RPO obligated entities/third party

consumers

1,150

The policy is targeting 1,500 MW o

capacity addition through utility scaleinstallations. O this, 1,000 MW will be

allocated through competitive bid-ding or sale to Tamil Nadu Generation

and Distribution Company Limited(TANGEDCO). The remaining 500 MW

will be driven by private power pur-chase agreements (PPAs) with power

consumers who need to ulll solarpurchase obligations (SPOs). A urther

350 MW capacity addition is being tar-geted rom rootop solar installations.

O this, 300 MW is expected rom therootops o government owned build-

ings, while 50 MW is expected romprivately owned or domestic rootops.

For both, net metering is allowed. Theremaining 1,150 MW o the total target

is to be added through Renewable En-ergy Certicate (REC) projects2.

annual electrical energy decit in the

nancial year 2011-12 was 8.9m MWhwith a peak monthly decit in March.

The peak power decit during thatyear stood at 2,247 MW or 17.5%. The

Central Electricity Authority (CEA)estimates that the annual electrical

energy decit will signicantly rise to27.4m MWh (29.6%) in the nancial

year 2012-13 with an anticipated peakpower decit o 4,123 MW (30.7%)4.

Power generation in Tamil Nadu comes

mostly rom wind, coal and hydropower plants. The states main indus-

tries are textiles and automotive.

Solar power could help reduce thedecit and the use o expensive diesel

or back-up gen-sets. The generationpotential in Tamil Nadu is high. Taking

Tamil Nadu alreadyhas signifcant experi-ence with the genera-tion and transmission

o renewable energyas it has the highest

installed capacity orwind power in India.

The total annualelectrical energy

defcit in thefnancial year 2011-12was 8.9m MWh with a

peak monthly defcit inMarch.



the average o various cities in Tamil

Nadu, based on 2011 data rom theCentral Electricity Regulatory Com-

mission (CERC)5, we arrive at the ol-lowing data points:

Average irradiation: 5.36-5.67

kWh/m2/day6

Average ambient temperature:28.8 degree celsius

Expected plant output: 1,560 MWh/year/MW

Capacity Utilization Factor (CUF)or a year: 17.81%

The Tamil Nadu distribution com-

pany (DISCOM) is a high loss makingentity that can currently hardly aord

to purchase expensive solar powerover a long period o time through, or

instance, long term Feed-in-Taris(FiT). The policy refects this concern

to some extent by shiting part o thenancial burden rom the DISCOMs to

large power consumers.

The timing o the policy is good: Therst wave o installations under the

National Solar Mission (NSM) Phase Iand the Gujarat Solar Policy has cre-ated a spurt o growth rom almost

nothing to 1,000 MW between early2011 and mid 2012 with grid-connected

power plants being built mostly inthe states o Gujarat and Rajasthan

in Indias north-west. Since then, the

market has been very slow, waiting orthe second phase o the NSM and new

state policies such as the Tamil NaduSolar Policy to be announced.

So ar, the policy has attracted greatinitial enthusiasm rom a number onew entrants: project developers rom

south India as well as large power con-sumers (obligated entities). However,

the policy is still a work-in-progressand a number o essential aspects

such as implementation o SPOs andother aspects or a payment security

theme that ensure a realization o thetargets are under discussion or need to

be tackled.

The strongest part o the policy so aris the SPO, which nudges industrial

and commercial customers that are al-ready plagued by high and rising power

costs and low supply security towardsadopting solar power quickly. The

most interesting aspect o the policy isthe net metering or 350 MW o roo-

top projects as it has the potential tostructurally change the solar marketin Tamil Nadu and India as a whole

(i implemented successully). Mostdoubts come around the proposed

targets or REC-based projects.

The Tamil Nadu SolarPolicy attempts to shit

part o the fnancialburden rom the

DISCOMs to largepower consumers.

---------------------5 Perormance o solar power plants in India; CERC6 Solar irradiance data in Tamil Nadu; TEDA



2. UTILITYSCALE

PROJECTS

1,500 MW

HT CUSTOMERS(THROUGH SOLAR

PURCHASEOBLIGATION) -500 MW

Tamil Nadu has introduced a new

SPO mechanism. Under this, certainpower consumers have to purchase a

set quota o solar power. The SPO hasbeen xed at 3% till December 31st

2013 and 6% rom January 1st 2014 on-

wards. The obligated entities to whichthe SPO applies are dierent romthose specied by the national Renew-

able Purchase Obligation (RPO). SPOobligated entities include HT consum-

ers, who receive power rom the gridat a constantly maintained high voltage

level, o more than 11kV, transmit-ted though high tension lines. These

include special economic zones (SEZs),railway traction, registered actories7,

textile actories, tea estates, govern-

ment educational institutions, govern-ment hospitals, places o worship,consumers paying commercial elec-

tricity taris, cinemas and theaters,lit irrigation8 cooperative societies,

industries guaranteed with 24/7 powersupply, IT parks, telecom towers, all

colleges and residential schools andall buildings with a built up space o20,000 square meters or above. To

ulll their SPOs, obligated entities

can produce their own solar power,purchase power rom a solar plant,purchase RECs on any o the national

power exchanges or purchase powerrom TANGEDCO at the prevalent solar

tari.

The solar projects set up under the

SPO mechanism will not receive nan-

cial assistance rom the governmentin the orm o FiTs, Generation Based

Incentives (GBI), Viability Gap Funding(VGF), or capital subsidies. However,

there is a possibility that these proj-ects will be allowed to get RECs as

SPO requirements are supposedly notconficting with the RPO mechanism.

I allowed, this can have a signicantupside to such projects. More clarity is

needed on the subject. Also, accelerat-ed depreciation (AD) benets will apply.

The market tari or solar powerin India has already allen to ` 79(0.11)10/kWh , which is approximately

the same as the tari paid by commer-cial consumers in the state. I, as we

expect, the cost o solar power alls bya urther 40% till 201511, power could

be generated at ` 4.2 ( 0.06)/kWh.This implies that the power tari paid

in the state, which is between ` 4.5 (0.07)/kWh and ` 9.5 ( 0.15)/kWh or

the obligated entities (who comprise

o primarily commercial and industrialtari customers), will reach parity withsolar taris by 2015. Thus, Tamil Nadu

is preempting that buying solar powerinstead o conventional power will be

a viable option or HT consumers by2015 and is not making any long-term

nancial commitments, as it wouldhave done under a FiT scheme such as

that o phase one o the NSM.

The opportunity

The Tamil Nadu government has esti-

mated that through the implementa-tion o the SPO mechanism 500 MW o

solar power will be installed or directuse o or third party sale to SPO obli-

gated entities. This provides an oppor-

---------------------7 Factories registered under the Factories Act (1984)8 Lit irrigation is a method by which water or irrigation is lited with the help o pumps or other such

means which use electricity9 Conversion rate used in this document is 1 =65 `10` 7/kWh was the lowest winning tari bid or a solar project during allocations by the state oOdisha or 25 MW to Alex Green Power in February 2012. While the tari was ambitious then, webelieve that due to a recent all in polysilicon prices and the continuing oversupply in the market isits easible now. CERC estimates the current cost per kWh is at INR 7.48.11 BTI estimate based on the alling CAPEX or a solar plant

Solar projects set upunder the SPO

mechanism will notreceive fnancial

assistance rom the

government in the ormo FiT, GBI, VGF orcapital subsidies.

Tamil Nadu is preempt-ing that buying solar

power instead oconventional power

will be a viable optionor HT consumers by

2015 and is not makingany long-term fnancial

commitments.



tunity or project developers to enter

into private PPAs or the sale o solarpower to those obligated entities that

do not regard solar power as part otheir core business or that do not have

the nancial liquidity to set up a solar

power plant to ulll their SPO. For ex-ample, many commercial consumerswill not be equipped with the inra-

structure, space or technical knowl-edge to set up large solar power plants

themselves and on site. Thereore, theywill oten choose to buy power rom

private power producers by signing aPPA with them. Industrial consumers,

while having a lower power tari, aretypically larger single o-takers and

might have space locally available tobuild solar power plants. Obligated en-

tities can either have solar plants setup on site (under a captive model) or

o site (under an open access model).Project developers could supply power

to one customer or to many.

Another actor making solar a viableoption or the obligated entities is the

requent power outages and high die-sel prices or diesel-based gen-sets inthe state. Tamil Nadu has been acing

requent bouts o load shedding whichstretch up to 10 hours in the suburbs

and over 2 hours in the cities, suchas Chennai12. Diesel is already more

expensive than solar power, with a lev-elized cost o energy (LCOE) between `

8 ( 0.12)/kWh and ` 20 ( 0.31)/kWh13while solar has an LCOE o ` 7 ( 0.11)/

kWh to ` 9 ( 0.14)/kWh14. Thus, in astate with an energy decit o 18%15 in

its monthly energy requirement, buyingsolar power already makes nancial

sense or some commercial and indus-trial consumers.

The risk

In order to ensure that the SPO tar-

get is ully realized, the enorcemento the mechanism by the state has to

be stringent. For this the state has to

levy penalties, which are higher thanthe prevalent REC prices or entities,

who deault on their SPOs. The policydocument as it stands today does not

outline a penalty structure. For plants

that are located o site and supplysolar power through the grid, there arerisks related to charges (transmission

charges, transmission losses, wheel-ing charges, wheeling losses, cross-

subsidy charges) and related to thestability o the grid as such. As o now,

the policy just species that wheelingcharges will be as normal and tax con-

cessions as per the states industrialpolicy. Further inormation will likely

be provided in the Request or Selec-tion (RS) at a later point.

Outlook

We believe that under the currentpolicy structure around hal o the 500

MW o SPO installations will be con-structed. We reach this gure ater

discounting or those obligated entities(48%)16 whose current power tari has

not yet reached parity with solar tarisand who will deault on ullling their

SPO as long as there is no crediblepenalization. The realized capacity

addition would increase signicantly,i the state imposes a strict penalty on

the deaulters.

DISCOMS (THROUGHCOMPETITIVE BID-

DING) 1,000 MWThe Tamil Nadu Electricity Develop-

ment Authority (TEDA) as the nodalagency will be directly allocating 1,000

MW by 2015. The solar power producedrom these projects will be sold to the

state DISCOM, TANGEDCO, at a preer-ential FiT.

---------------------12 Outrage in Chennai over requent outages; The Hindu13 BRIDGE TO INDIA analysis14 BRIDGE TO INDIA analysis15 NLDC monthly report September 201216 A study on power scenario in Tamil Nadu; P. Jayabalan

Many commercial

consumers willnot have the

inrastructure, spaceor technical knowledge

to set up large solarpower plants them-

selves, and will otenchoose to buy power

rom private powerproducers.

In order to ensurethe SPO target is

ully realized, theenorcement o the

mechanism by the state

has to be stringent.


9/18



the country with a net internal loss o` 80.9 billion ( 1.25 billion) in 2011,which has gone up to ` 500 billion (

7.7 billion) by March 2012 (estimated)20.

Due to TANGEDCOs poor nancial

condition and past record or delayedpayments, the strength o its PPA isbeing questioned by investors and

banks. There is currently no provisionor a payment security scheme except

or a Letter o Credit (LoC) to cover thepayment o taris to the 1000 MW o

solar projects that is to be allocatedthrough bidding. Thus, project devel-

opers might nd it dicult to obtainnancing or their projects in the state.

In countering critical questions rom

prospective bidders at the TEDA con-sultation meeting o November 23rd

2012, Mr. K Gnanadesikan oTANGEDCO said that you can tell

your bankers that there is absolutelyno problem in getting the payment.

So ar, however, the only guarantee opayment is a standard one year, revolv-

ing letter o credit, which wind parkoperators also hold but do not redeemin order not to jeopardize their longer

term payments.

An additional risk inherent in thepolicy as it currently stands is the

bidding process. By this, all bidderswill be asked to match the lowest bid

(although irradiation varies between5.36 and 5.67 kWh/m2/day across the

states districts). This provision, andthe per-district limitations on project

sizes, will make it dicult or biddersto estimate what could be a winning

bid and how the state would handleover-subscription.

We expect that there will be signi-

cantly more discussion and detailingo the process. BRIDGE TO INDIA can

help developers to participate in the

process by providing them with key

planning related insights that will helpthem to get an allocation. Also, we can

oer our project development servicesor a proessional and timely execution

o plants.

Outlook

We estimate that under current condi-tions, only a small amount o projects

will be realized.

At the moment, TANGEDCO would re-ceive a high (solar) tari rom those

obligated SPO entities that decide toact upon their SPO but do not buy solar

power under direct PPAs with projectdevelopers, develop own solar projects

or buy RECs. In theory, this could coverthe costs o a solar FiT that TANGEDCO

pays to project developers sellingpower to it directly.

However, there is no direct connection

between the FiT and the solar taripaid by the obligated entity. The extra

solar tari income would be absorbed

by the overall nancials o TANGEDCO,where it would make little dierence.Thus, payment uncertainties remain.

Some project developers might choose

to build plants (probably initially -nanced purely on equity) under a PPA

and, in case o deault, see the RECmechanism as a allback option. They

would be betting on a strengthening oeither the TANGEDCO PPA or the REC

mechanism in the uture to allow them

to renance the project ater commis-sioning.

Any credible payment guaranteescheme or a direct link between the

solar tari paid by an obligated entityand the solar power producer would

signicantly strengthen this projectoption.

The only guarantee o

payment is a standardone year, revolvingletter o credit, which

wind park operatorsalso hold but do not

redeem in order not tojeopardize their longer

term payments.

The per-districtlimitations on project

sizes will make itdifcult or bidders to

estimate what could bea winning bid and how

the state would handleover-subscription.



The Tamil Nadu policy is targeting acapacity addition o 300 MW rom roo-

tops o government owned buildings

and 50 MW rom rootops o privatelyowned buildings. In order to encour-age installations in the rootop space

the policy allows net metering at 240V,415V and 11KV. This is signicant, as

the state is the pioneer in allowing netmetering in India on a MW scale.

Under the mechanism, two meters are

set up along with a rootop solar sys-tem: one which calculates the units o

conventional power that is consumedby the owner o the rootop system and

another which calculates the amounto solar power the rootop solar system

eeds back into the grid. The ownero the rootop system ultimately pays

or the net dierence o the powerconsumed, as calculated by the meter.

(This mechanism is also oten calledgross metering). For net metering to

unction eciently, the local grid has tobe responsive and stable, which is not

the case everywhere in the state.

In addition to allowing net metering theprivate rootops with solar systems in-

stalled beore March 31st 2014 are alsoeligible to receive a GBI. The GBI starts

o with ` 2 ( 0.03)/kWh or the rsttwo years rom the date o installation

(independent o the year o installa-tion), ` 1 ( 0.02)/kWh or the next two

years and ` 0.50 ( 0.01)/kWh or the

last two years. However, 50 MW servesas both a targeted capacity additionrom domestic rootops and also as a

cap or the GBI or this category.

The opportunity

The highest tari o residential cus-

tomers in Tamil Nadu is currently `5.75/kWh (above 500 kWh/month). A

residential customer with around 25

m2

o rootop space could set up a 2 kW

plant. This would cost approximately` 300,000 ( 4,700), including the

solar meter. Assuming that all power

would be ed into the grid, that powertaris escalate by 5% per annum (asthey have done on average or the last

years), and assuming that such a sys-tem would be ully unded by equity, we

do not arrive at a positive return. For a100 KW system (with 70% debt nance

at 12% interest), the project IRR wouldbe at only around 5%.

Installations on government owned

buildings can also use net meter-ing but are not eligible or a GBI. This

space is ideal or project developers tobuild rootop systems by signing a PPA

with the government, as the rootopspace available in these buildings is

oten large and the policy implemen-tation will likely be stringent. There

might be a specic tender coming outor government rootops (as has been

the case in Gujarat).

The risk

This is the rst attempt at large scalenet metering in India and hence a

pioneering eort. There are alwayscertain risks associated with being

a rst mover. In specic, TANGEDCOmight nd it dicult to monitor the

erratic supply o solar power rommultiple rootops while simultaneously

maintaining the stability o the local

grid, which is already acing dicultyin handling the supply rom variouswind arms.

However, i handled well and i spreadevenly throughout the grid, this new

tail-end generation might even have a(mild) stabilizing eect on the distribu-

tion grid. See the recently publishedreport by Prayas on Solar Rootop PV

in India or more details21.

---------------------21 Ashwin Gambhir, Shantanu Dixit, Vishal Toro, Vijaypal Singh (Prayas): Solar Rootop PV in India,November 2012

3. ROOFTOPSOLAR

SYSTEMS-

350 MW

Tamil Nadu is thepioneer in allowing net

metering in India on aMW scale.

Net metering, ihandled well and

spread evenly through-out the grid, mighteven have a (mild)

stabilizing eect on thedistribution grid.



Outlook

We believe that the 350 MW will

be constructed in Tamil Nadu. Thegovernment can directly control the

construction o 300 MW on publicbuildings. We believe that despite thecurrently low IRR, the 50 MW o private

rootops will also be built by solarenthusiasts.

The size o the batch is also good to

allow TANGEDCO to experiment andgain experience with net metering. I

net metering works, we see this as apotential game changer in the Indian

solar market and believe that thecapacity additions in Tamil Nadu can

signicantly exceed the current target.

On the market side, the main driver orthis will be the rising cost o power

both o grid power as well as back-up

(diesel) power. The central govern-ment, suering rom a signicant bud-

get decit itsel, has set aside undsto bail out DISCOMS only under the

condition that they take the politically

unpopular step o increasing powerprices. Given the size o TANGEDCOsdecit, this could lead to a signicant

rise in taris in Tamil Nadu.

In addition, given the o-take securitythat net metering provides, solar will

increasingly start to replace dieselback-up power generation (even with-

out storage). I the REC mechanismworks and i it is adapted to become

more suitable (registration costs andprocesses, sales mechanism) to small

generators, this would add a sig-nicant incentive to the installation o

these rootop systems.

Given the o-takesecurity that net

metering provides,solar will increasinglystart to replace diesel

back-up powergeneration.



The policy aims to add 1,150 MW o

solar through REC projects. Under thisroute, the solar power plant owners

enter into a PPA with either a DIS-COM at average pooled purchase cost

(APPC) or a private consumer at amutually greed tari and additionally

generate RECs to be traded on eitherthe Indian Energy Exchange (IEX)

or the Power Exchange o India Ltd.(PXIL). Such projects could be o any

size but would typically be o 10 MW orabove, eeding power into the grid.

The opportunity

The REC mechanism allows a proj-

ect developer to have a dual incomestream: the income rom the sale o

power produced and the income romselling REC certicates (1 REC = 1

MWh). Until 2017, the project ownerwill receiving at least the foor price o` 9,300 ( 143)/REC.

The Tamil Nadu Solar Policy sets ahigh target o 1,150 MW or REC proj-

ects (by comparison: the states owntotal RPO and SPO requirements by

2015 amount to 1.304 MW, but not allRPOs will be met through the purchase

o RECs). The state does not oer anyadditional benets or REC projects in

the orm o land acquisition benets,exemption on wheeling and transmis-

sion charges or tax rebates. Thus, theopportunity in the state or REC proj-

ects is the same as the opportunitiesin the country as a whole22.

The risk

So ar, only 18 MW o REC projectshave been registered nationally with

the National Load Dispatch Center(NLDC) or the State Load Dispatch

Centers (SLDC). The low number oREC projects can be attributed to the

lack o price visibility or RECs beyond

2017. This makes it dicult or projectdevelopers to raise debt rom banks

and other nancial institutions or RECprojects.

The risks involved with the REC mech-

anism in the state are the same as therisks involved in the mechanism all

over the country. The REC mechanismhas so ar experienced only limited

success in the Indian market, primar-ily because o the diculty in obtain-

ing nancing or projects. Also, most

states do not have a penalty structurein place or non-compliance o RPO. IRPOs were to be stringently enorced,

the demand or RECs would increase,encouraging more active trading o

RECs on the exchanges and more RECprojects.

Outlook

Considering the current conditions othe REC mechanism in India, unless

there are additional benets or projectdevelopers (such as e.g. provision o

a allback revenue option), we do notexpect that the states target or REC

projects will be met. However, as peran ocial at TEDA, the REC target o

the policy is still being discussed andmight undergo a change.

I RPOs were to be enorced stringently

and the CERC were to stabilize REC

prices over a longer period o time,then REC projects would become moreattractive to pursue in the whole o

India, including in Tamil Nadu.

4. REC OFFTAKE -

1,150 MW

---------------------22 Please reer to our report BRIDGE TO INDIA; INDIA SOLAR DECISION BRIEF: The REC mechanism,Sept 2012 or more inormation

The state does not oerany additional beneftsor REC projects in the

orm o land acquisitionbenefts, exemption

on wheeling and

transmission chargesor tax rebates.

The risks involved withthe REC mechanism inthe state are the sameas the risks involved in

the mechanism all overthe country.

This policy brie has been published

on December 7th 2012, and will be

updated as regulations change.



Period o operation 2012-2015

Target 3,000 MW

Allocation Timeline 2013 2014 2015 Total

Utility Scale (MW) 750 550 200 1,500

Rootop (MW) 100 125 125 350

Renewable EnergyCerticate (REC) (MW)

150 325 675 1,150

Total (MW) 1,000 1,000 1,000 3,000

O takers Tamil Nadu Generation and Distribution Company Limited (TANGEDCO)

Obligated entities under the Renewable Purchase obligation (RPO)

Obligated entities under the Solar Purchase obligation (SPO)

Open Access (OA) consumersObligated entity High Transmission (HT) consumers as dened by the Solar Purchase

Obligation (SPO)

3% till December 31st 2013

6% rom January 1st 2014

Financialincentives

Feed-in-tari (FiT) or projects allocated through competitive bidding

Generation Based Incentive (GBI) or rootop installations

or domestic consumers installed beore March 31st 2014

rom the date o installation

Till the 2nd year

` 2 ( 0.03)/unit

Till the 4th year

` 1 ( 0.02)/unit

Till the 6th year

` 0.50 ( 0.01)/unit

For SPO obligated entities No nancial incentives. Tax and duty rebates as per the states Industrial Policy 2007

Nodal agency TEDA

State DISCOM TANGEDCO

Links Tamil Nadu Solar Energy Policy - 2012 http://www.teda.in/pd/tamilnadu_solar_energy_policy_2012.pd

Tamil Nadu Industrial Policy 2007 http://www.tidco.com/images/industrialpolicy_e_2007.pd

TEDA http://www.teda.in/

TANGEDCO www.tangedco.gov.in

Minutes o the TEDA meeting, November 23rd 2012 http://www.teda.in/pd/pd1.pd

Evacuation capacity per district http://www.teda.in/pd/pd3.pd

Irradiation data per district http://www.teda.in/pd/pd2.pd

ContactThiru Sudeep Jain, IAS,Chairman & Managing Director,Tamil Nadu Energy Development Agency,E.V.K.Sampath Maaligai, 5th Floor, College Road, Chennai 600 006.044-28222973 | [email protected]

Single windowclearance

Tamil Nadu Energy Development Agency (TEDA)

Domestic ContentRequirement

None

PV/CSP break up None given

Exemption on wheeling/open access/transmission charges

None

Electricity duty Up to 100% exemption or 5 years

Net metering Allowed For (voltage) 240 V 415 V 11 kV

Size



HOWBRIDGE TO INDIA

CAN SUPPORTYOU

BRIDGE TO INDIA, 2012Source: BRIDGE TO INDIA

BRIDGE TO INDIA provides servicesalong the project development

value chain. Our approach to projectdevelopment is to make projects

protable and bankable.

DEVELOPMENTCONSTRUCTION &

OPERATIONIDENTIFICATION

Site identifcation& assessment

Project registration Site supervision

Quality management

Stakeholdermanagement

Cost controllingand reporting

Management o permits andapprovals

Bid strategypreparation

Land securitization

Power PurchaseAgreement (PPA) acilitation

Renewable EnergyCertifcates (REC) consulting

Technology evaluation& selection

EPC tendering andselection

Project structuringand documentation

Techno-commercialeasibility studies

Detailed Project Report (DPR)preparation

Our unique combination o adaptingan international quality and local-

knowledge makes us the rightpartners or executing your solar

projects in Tamil Nadu.

Mr. Akhilesh Magal

Head o Project [email protected]

+91 813 033 0011

+ 91 (11) 46 08 15 79

I you would like to discuss our project development services, please contact:



5. ANNEXUREGLOSSARY OF TERMS

APPC Average Pooled Purchase Cost

AD Accelerated Depreciation

CEA Central Electricty Authority

CERC Central Electricity Regulatory Commission

CSP Concentrated Solar Power

CUF Capacity Utilization Factor

DISCOM Distribution Company

FiT Feed In Tari

GBI Generation Based Incentive

HT High Tension

IEX Indian Energy Exchange

IWTMA Indian Wind Turbine Manuacturing Association

LCOE Levelized Cost o Energy

LoC Letter o Credit

NSM Jawaharlal Nehru National Solar Mission

NLDC National Load Dispatch Center

PPA Power Purchase Agreement

PV Photovoltaic

PXIL Power Exchange o India Ltd.

REC Renewable Energy Certicate

RS Request or Selection

RPO Renewable Purchase Obligation

OA Open Access

SEZ Special Economic Zone

SLDC State Load Dispatch Center

SPO Solar Purchase Obligation

TANGEDCO Tamil Nadu Generation and Distribution Company LimitedTEDA Tamil Nadu Energy Development Authority

VGF Viability Gap Funding



Ms. Ratnottama SenguptaConsultant

[email protected]

Ratnottama analyzes the ast

developing policy and regulatoryramework or solar power in

India. She also looks at how themarket grows and expands into new

segments. She holds a mastersdegree in Economics rom Bangalore,

India where her areas o studyincluded macro and developmental

economics within the Indian economy.Her prior work experience is as a

risk and nancial analyst at GoldmanSachs Pvt. Ltd.

Dr. Tobias F. EngelmeierManaging Director

[email protected]

Tobias ounded BRIDGE TO INDIA in

2008. He is deeply concerned withthe energy use o Indias rapidly

growing economy and believes innding business-driven and India-

specic business models to copewith this. Over the past years, Tobias

has advised many investors andbusinesses on the Indian energy

market. Prior to setting up BRIDGETO INDIA, he has worked or ve years

in the energy sector or a leadingstrategy consultancy and written a

book on Indian political culture. HisPhD is in political science rom the

South Asia Institute in Heidelberg,

Germany.

ABOUT THEAUTHORS

Expertise: Business model

development, frst mover

strategies, long term growth,

stakeholder management

Expertise: Policies, market

regulations, market demand

projections

As part o Market Intelligence at

BRIDGE TO INDIA, we provide ourclients with the most comprehensive,

analytical and up-to-date research

and analyses on the Indian market

compiled through the joint expertise

o our team o experts. Through

our oering o various products, we

oer our clients a range o business

intelligence solutions that enable them

to take strategic decisions that directly

impact their success.

We are knowledge driven. We seek

to understand the larger dynamics o

the Indian market, especially in our

core elds: renewable energy policies,

projects, nancing and manuacturing.

Further, we are certain that a deep

understanding o the underlying social,

political and economic trends is crucial

or business success in India.

Our team combines various expertise,

experiences and skill sets rom

diverse academic backgrounds to

provide clients the best analysis in the

industry.


18/18

BRIDGE TO INDIA is a consultingcompany with an entrepreneurialapproach based in New Delhi,Munich and Hamburg. Foundedin 2008, the company ocuses onrenewable energy technologies inthe Indian market. BRIDGE TO INDIAoers market intelligence, strategicconsulting and project developmentservices to Indian and internationalinvestors, companies and institutions.Through customized solutionsor its clients, BRIDGE TO INDIAcontributes to a sustainable world byimplementing the latest technologicaland systemic innovations where theirimpact is the highest.

Contact

[email protected]

www.bridgetoindia.com

Follow us on acebook.com/bridgetoindia

www.bridgetoindia.com/blog

Bridge to India_india Solar Policy Brief_tamil Nadu

Documents

Transcript of Bridge to India_india Solar Policy Brief_tamil Nadu