Transcript Analysis of Solar Power Solar Power Projects : Market “REC way” Presented by: Sh Giriraj Singh Sh Sanjeev Shrivastava Sh Manish Karna November 6,

Analysis of Solar Power
Solar Power Projects :
Market
“REC way”
Presented by:
Sh Giriraj Singh
Sh Sanjeev Shrivastava
Sh Manish Karna
November 6,
2015
Presentation Highlights :
 Global Scenario;
 Indian Scenario;
 Estimation of Project Cost based on various technologies;
 Business Proposition;
 Summary of Key Recommendations.
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GLOBAL
SCENARIO
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Installed Solar Power capacity (PV): 67.4 GW out of which is around 78% (52.57 GW) is based on C-Si Technology.
Source: World Bank, IMF, A.T. Kearngy Analysis 20.06.2012
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In EXAJOULE per Year (1 EXAJOULE =278 Billion kWhs)
Projected Share by Global Source of Energy Production :
Year
Source: German Advisory on Global Change
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INDIAN
SCENARIO
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Installed Power Capacity India as on March 31st 2013:
Total RES Installed Capacity: 26 GW
Thermal
Hydro
5%
7%
Nuclear
0% 5%
12%
RES
3%
14%
19%
Wind
69%
Small Hydro
66%
Biomass
Bagasse Co Gen
Waste to Power
Total Installed Capacity: 214.6 GW
Solar
Source: CEA, April 2012
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Policy & Regulatory Framework for Solar Power Generation :
 The Electricity Act, 2003 : RPO (Section 86-1.e & 61-h);
 National Tariff Policy : Separate RPO for Solar Power;
 State Wise RPO Orders by Regulators;
 Announcement of Solar Policies by various States;
 Jawaharlal Nehru National Solar Mission (JNNSM);
 Preferential Tariff for Solar PV and Solar Thermal;
 Renewable Energy Certificate (REC) Mechanism.
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Renewable Purchase Obligation:

Most of the states have announced their RPO in the range of 0.25% to 0.75% of the total annual energy requirement.

As per the RPO announced by various SERCs for 2012-13, Solar Capacity required (@ 19% CUF) shall be 1837 MW.

Requirement of Annual Solar Capacity Generation considering the RPO mandate:
Energy Consumption
( MU) as per 18th EPS
2013-14
2014-15
2015-16
2016-17
2017-18
2018-19
2019-20
2020-21
2021-22
861189
938893
1022854
1117997
1202097
1291860
1388816
1493457
1607141
(Assuming constant solar RPO of 0.25% up to 2022)
Solar Energy requirement
(MU)
2153
2347
2557
2795
3005
3230
3472
3734
4018
Solar Capacity required
(MW) @19% CUF
1294
1410
1536
1679
1805
1940
2086
2243
2414
(Assuming increase in solar RPO from 0.25% in 2012-13 to 2.5% by 2021-22 @ 0.25% increase/annum)
Solar Energy requirement
(MU)
4306
7042
10228
13975
18031
22608
27776
33603
40178
Solar Capacity required
(MW) @19% CUF
2587
4231
6145
8396
10834
13583
16688
20189
24140
Source: www.forumofregulators.com
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Solar Map of India (Insolation Vs Installed Capacity)
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PROJECT COSTING
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BUSINESS PROPOSITIONS
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II. REC Route
Renewable Energy Certificates
 REC’s are regulated by CERC.
 1 REC = 1 MWh of Renewable Energy Generated
 Validity of RE Certificates : 730 days
 IEX & PXIL has already introduced REC Trading
There are two categories of certificates –
 Solar Certificates
 Non Solar Certificates
The floor and forbearance price as determined by CERC are as follows –
Particulars
Floor Price (Rs./MWh)
Forbearance Price (Rs./MWh)
Non Solar RECs
1500
3300
Solar RECs
9300
13400
Solar REC traded on Exchange:
Exchange
PXIL
IEX
Month
Feb
March
Feb
March
Buy Bid
(REC)
5
130
1,637
9,489
Sell Bid
(REC)
100
22
149
541
MCP
(Rs./REC)
13,000
12,506
13,000
12,750
MCV
(REC)
5
6
5
336
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Solar PV Projects registered for RECs:
Total Capacity (MW) = 23.16
Sr.
No.
1
2
3
4
State
RE Generator
Madhya Pradesh
Tamil Nadu
Rajasthan
Madhya Pradesh
M & B Switchgears Ltd.
Numeric Power Systems Ltd.
Kanoria Chemicals & Industries Ltd.
M/s Gupta Sons
5
Maharashtra
Jain Irrigation Systems Ltd.,
6
Madhya Pradesh
Omega Renk Bearings Pvt. Ltd
7
8
Maharashtra
Maharashtra
Jaibalaji Business Corporation Pvt. Ltd.
Enrich Energy Pvt. Ltd
Capacity (MW)
Date of Registration
2
1.055
5
0.5
4/4/2012
10/4/2012
20/04/2012
22/05/2012
8.5
22/05/2012
0.105
14/06/2012
1
1
25/06/2012
N/A
Total Installed capacity under REC mechanism would reach 100 MW by 2013-14
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Average Power Purchase Cost (APPC) of States:
Source: CERC order for floor and forbearance price under Petition No. 142/2011
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Scenario Analysis For REC Route
Input
Useful Life
Debt:Equity
Repayment Period
O&M Expenses
Escalation of O&M Expense
Depreciation rate
Interest on working capital
CUF
Tariff (Rs./kWh)
Discount Rate for NPV
Tariff of 4 Rs./kWh for rest of the project life
Capital Cost (Rs.Cr./MW)
Interest rate (%)
NPV (Rs. Cr.)
Equity IRR (%)
25 Years
70:30
12 Years
11 Lakhs/MW
5.72%
5.28% As per Companies Act
13.50%
19%
For First Five year
11.9 Floor REC price of 9.3 Rs./kWh
APPC price of 2.6 Rs./kWh (Rajasthan)
10.72%
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-45.05
4.86
8.5
10
-10.62
9.07
8
11.72
12.76
Conclusion:
Feasible scenarios – Equity IRR>16%
@ Rs.4/kWh – Not feasible
Represents feasible scenarios
Tariff of 5 Rs/kWh for rest of the project life
Capital Cost (Rs.Cr./MW)
Interest rate (%)
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NPV (Rs. Cr.)
-10.19
Equity IRR (%)
9.59
8.5
10
24.08
13.81
8
46.54
17.25
Tariff of 6 Rs/kWh for rest of the project life
Capital Cost (Rs.Cr./MW)
Interest rate (%)
NPV (Rs. Cr.)
Equity IRR (%)
Tariff of 7 Rs/kWh for rest of the project life
Capital Cost (Rs.Cr./MW)
Interest rate (%)
NPV (Rs. Cr.)
Equity IRR (%)
8.5
13
24.45
13.11
13
81.23
18.61
10
58.36
17.2
8.5
10
112.24
22.87
9
8
79.89
20.29
8
132.44
26.03
13
10.34
10.75
13
34.25
13.47
10
36.27
14.38
9
10
69.19
16.96
8
59.59
17.24
8
91.94
19.65
13
10.07
11.46
9.5
10
47.65
14.67
8
71.67
17.14
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Summary of Key Recommendations :

Contribution of Solar Energy is set to increase in the total energy portfolio worldwide.

India has charted out ambitious plans for Solar Energy & is promoting the same.

Government of Bihar should float a PPP model for solar power plant with REC mechanism in which it should stake claim of 26% equity portion. It
would benefit the government in following way:
1. It will enhance the bankability of the project and hence more investment, local job creation etc.
2. Profit shared out of the model can be passed on to the local community for development.

After analyzing various options it is recommended to go for REC route. However, Following are the concerns associated with it:
1. RPO has not been enforced effectively.
2. Mismatch in demand (RPO compliance) & supply (REC validity) regulations.
3. Lack of a long-term predictability of REC pricing.
4. Lack of Bankability of such projects due to uncertainty in revenue beyond 2017 (Control Period).
However, If Government of Bihar agrees to buy all the un sold REC at the end of its valid period even at floor price, it would give then the lending
would become easier that would optmize the prifitability
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REC
Eligibility Criteria for REC mechanism
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Pricing
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Facts – REC Mechanism
CERC REC REGULATION ,2010 SALIENT FEATURE
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Exchange Trading time line
Trading day
Market
Clearing
• Last Wednesday • Close Double
of every month side auction
Trading
Time
By 1530
By 1600
By 1630
• 1300 – 1500 Hrs • Verification by • Central Agency • IEX Finalize
Central Agency confirms REC
trade
for Valid REC
By 1700
By 1800
• Buyer & Seller • Invoice Raised
informed to
(Proof of REC
Central Agency trade)
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REC - Registration time line
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Thank You
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