INDIA

SOLAR
COMPASS
April 2014

Quarterly update
on the Indian
solar market

BRIDGE TO INDIA, 2014

Illustration by tiffinbox

BRIDGE TO INDIA, 2014

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Glossary
AD Accelerated Depreciation
APPC Average Pooled Purchase Cost
CAPEX Capital Expenditure
CSP Concentrated Solar Power
DCR Domestic Content Requirement
EPC Engineering, Procurement and Construction
GBI Generation Based Incentive
IPP Independent Power Producer
LOI Letter of Intent
NSM Jawaharlal Nehru National Solar Mission
NTPC National Thermal Power Corporation
OPEX Operational expenditure
PPA Power Purchase Agreement
PV Photovoltaic
REC Renewable Energy Certificate
RPO Renewable Purchase Obligation
SECI Solar Energy Corporation of India
TANGEDCO Tamil Nadu Generation and Distribution Corporation
TNERC Tamil Nadu Electricity Regulatory Commission
VGF Viability Gap Funding

BRIDGE TO INDIA, 2014

 BRIDGE TO INDIA, 2014

Executive Summary
a tepid start to 2014

The Indian solar market continues to rely heavily on policy driven projects
to meet capacity targets. Distributed generation market, constituting more
than 50% of total solar capacity in most countries around the world, has not
yet taken off in India primarily because of complex/ unviable open access
regulations, resistance from utilities and direct/indirect subsidies provided to
conventional power supply. Policy initiatives are (slowly) moving in the right
direction but to turn solar power into a true game changer, we need an urgent
overhaul of policy framework and transparent pricing of grid power.

Project Allocations
482 MW of PPAs
have been signed across
state policies and 750 MW
under the NSM in the
last quarter

The highlight of the last quarter (January 2014 March 2014) was allocation
of solar PV projects under batch one, phase two of National Solar Mission
(NSM). ACME, Azure Power and SunEdison emerged as the big winners with
100 MW each. Prominent players who missed out included Green Infra, Tata
Power, Mahindra Solar, Welspun (except for 5 MW), Renew Power and First
Solar amongst others. The bid levels were broadly as expected although quite
aggressive in our view. Our key takeaways and observations are as follows:
Domestic Content Requirement (DCR) has been a failure costing in
excess of M10 million/MW as local manufacturing has not gained anything
meaningful for the long-term. For the manufacturing sector to thrive,
we need investment in infrastructure, R&D, tax/labor reform and bigger
volumes.
Extremely competitive bidding means there will be too much pressure
on costs ie poor project quality. Although the Viability Gap Funding (VGF)
mechanism has been a relative success, a more performance focused
regime such as Generation Based Incentive (GBI) is far more favorable in
our view.
Considerable interest shown by foreign project developers and
Independent Power Producers (IPPs) is very welcome as it brings more
credibility to the market and hopefully, will result in much needed
international expertise in project execution and deliverability.
On the state policy front, 482 MW of new power purchase agreements
(PPAs) have been signed across four states in the last quarter - 42 MW in
Andhra Pradesh (against a target of 150 MW), 80 MW in Karnataka (after a
delay of six months), 110 MW in Uttar Pradesh (towards the tail end of the
preceding quarter) and 250 MW in Punjab. These projects are evenly split
between experienced and first time developers. A significant number of these
experienced players have in-house EPC capabilities, leaving lesser room for
pure-play EPC companies, which continue to struggle.
Another 300 MW of projects are expected to be allocated in UP after the
general elections in May. Madhya Pradesh expects to sign PPAs for 100 MW
solar PV projects in the ensuing quarter.

BRIDGE TO INDIA, 2014

Capacity Addition
In the first quarter of 2014, India added just 89 MW of new capacity - the lowest
since Q3 2012. Out of this, 55 MW has come from three state level projects with
the balance 34 MW being primarily driven by captive or third party sale projects
relying on accelerated depreciation (AD) and Renewable Energy Certificate
(REC) incentives.
Rajasthan: 20 MW project by Essel Mining (commissioned on time)
Madhya Pradesh: 25 MW project by EDF backed ACME
Andhra Pradesh: 10 MW renewable purchase obligation (RPO) project
by NTPC

In the first quarter

of 2014, India added just
89 MW of new capacity

As the REC market has failed to take off (around 6% of RECs managed to find
buyers on the Indian Energy Exchange in the first quarter of 2014), project
developers have moved away from selling power to local utilities at APPC
(typically M2.50-3.00/ kWh, $0.04-0.05/kWh) to finding private consumers with
tariffs in the range of M6 9/ kWh ($0.1-0.15/kWh). As an example, a 6 MW
project has been set up by a textile company for captive use and SunEdison
has set up an 18 MW solar park in Tamil Nadu. We expect this market to grow
rapidly as election fever subsides (reducing political pressure to keep tariff
increases low) and grid parity is attained across more states.

Distributed Generation
The rooftop market is slowly gaining momentum1 with Delhi and Kerala
(following on from Andhra Pradesh, Tamil Nadu) announcing net metering
policies in the last quarter (Delhi policy is still in draft stage). Keralas plan
of setting up 10,000 off-grid rooftop solar power plants by December 2014
appears to be well on track with around 6,000 sites already commissioned2.
At the central level, SECI continues to provide capital subsidies for rooftop
projects - it has allocated 25 MW till date and aims for a further 50 MW during
the year.
The policy support to the rooftop segment needs to be much bolder, especially
considering its future potential. Based on a study carried out by BRIDGE TO
INDIA for Greenpeace, Delhi alone has a rooftop solar potential for 2 GW3.

---------1 BRIDGE TO INDIA, along with Prayas, is working on a report on grid-connectivity issues for
distributed generation projects. This report is likely to be released in April 2014.
2 BRIDGE TO INDIA blog on the Kerala rooftop scheme, http://bit.ly/OzhHoS
3 Read our report: Rooftop Revolution: Unleashing Delhis Solar Potential
BRIDGE TO INDIA, 2014

2 Trends
2.1 Module Prices
In the last quarter (January 2014 March 2014), module prices have increased
2-3% in India (c-Si, Chinese). This increase has been driven by a rise in global
demand (especially in China). This development follows a 7-9% increase in
module prices in the last year that was driven mostly by the depreciation in the
Indian rupee. Since the second quarter of 2013, prices for thin film modules
have remained constant in dollar terms but have risen in Indian rupee terms.
Figure 2.1: Chinese C-Si and thin film module prices over
the last four quarters4

2.2 Inverter Prices

In 2013, the initial decline in the inverter market was triggered by the strategic
pricing by international players such as Hitachi. This decline in central inverter
prices continued in the first quarter of 2014 as well. Many companies, which
were previously holding on to their higher prices, have joined the bandwagon
and have reduced their prices to compete in the market. Going forward, the
prices are not expected to go down further significantly until and unless the
size of the order exceeds 100 MW. With orders of this size, industry players
believe that the prices can go down to levels as low as M3.0/Wp ($0.05/ Wp).

---------4 Source: BRIDGE TO INDIA analysis and industry interviews, PVinsights.com

BRIDGE TO INDIA, 2014

Figure 2.2: PV central inverter prices over the last four quarters5

2.3 Tariffs
The only new additions in tariffs bid for were under the Madhya Pradesh state
policy and the NSM. The tariffs in the Madhya Pradesh policy, although on
the lower side, are higher compared to the Karnataka phase II bidding even
though Madhya Pradesh has a better irradiation compared to Karnataka. The
average VGF bid for in the NSM, if seen in terms of tariff increase, translates to
an additional M1.05/kWh ($0.018/kWh) and M2.05/kWh ($0.034/kWh) under the
open and DCR categories respectively6.
Figure 2.3: Average tariffs across state policies in the last four quarters7 8

---------5 Source: BRIDGE TO INDIA analysis and industry interviews

6 Assumptions:
Cost of power plant under open category INR 65 million/MW (USD 1.1 million/MW)
Cost of power plant under DCR category INR 75 million/MW (USD 1.3 million/MW)
Analysis done for projects not availing AD benefit
7 Source: State policies
8 Levelized tariff offered in Tamil Nadu has been calculated considering 5% escalation for
10 years. Discount rate of 15% has been assumed. Average tariff offered under various policies
are not weighted averages
BRIDGE TO INDIA, 2014

2.4 Capacity Addition

The capacity addition has been quite dismal, with just 89 MW added in the
previous quarter. Cumulative, India added 586 MW in the last four quarters.
In comparison, for the financial year of 2012-13 (April 2012 to March 2013),
India had installed a cumulative 994 MW. This was largely fuelled by the
capacity addition of 500 MW in Gujarat. However, what is encouraging is that
the non-policy market accounted for more than one third of the capacity added
in the last four quarters. It is commendable that a capacity of 214 MW has
been commissioned without any policy support. As the fundamentals for this
segment continue to improve, this segment cannot go anywhere but up.
Figure 2.4: Quarterly installations in the last four quarters9

---------9 Source: BRIDGE TO INDIA project database

BRIDGE TO INDIA, 2014

2.5 Installed Capacity In India

Figure 2.5

BRIDGE TO INDIA, 2014

10

Policy Outlook

Table 3.1: Projects delayed beyond original deadlines

Policy name

Karnataka Phase I

Madhya Pradesh

Rajasthan

SECI phase I

Allocation date

Apr-12

May-12

Mar-13

Apr-13

Allocated capacity

60 MW

225 MW

75 MW

5.5 MW

Delayed projects

42 MW

25 MW

55 MW

~1 MW

Scheduled date of
commissioning

Oct-13

Jun-13

Mar-14

Apr-14

Expected
commissioning
date

Q2 and Q3 of 2014

Q2 of 2014

Q3 of 2014

Q3 of 2014

Remarks

No penalties are being

levied on delayed
projects

Projects are delayed by

upto a year

Most of the projects are

behind schedule

Penalties to be levied
only in cases where
the developer is not
able to justify the time
extension

Only a 20 MW project by
ESSEL Mining has been
commissioned in time

While 1 MW
projects have been
commissioned,
3.5 MW are expected
to be commissioned by
April 2014

No projects have been

commissioned in the Q1
of 2014

A 25 MW project by
Moserbaer is still
pending completion

Project developers are

finding it increasingly
difficult to procure
projects under the OPEX
model

A 25 MW project by MK
solar energy has been
cancelled

* All details are based on information received from state authorities or project developers.

BRIDGE TO INDIA, 2014

11

Table 3.2: Ongoing Allocations

Policy name

Tamil Nadu

Andhra Pradesh

Madhya Pradesh
phase II

NSM

Allocation date

Jun 2013

Jun 2013

Feb 2014

Feb 2014

LOIs signed

708 MW

600 MW

100 MW

750 MW

PPAs signed as on
March 2014

180 MW
(138 MW in Q4 2013 and
42 MW in Q1 2014)

750 MW

PPAs expected to be
signed in the next
quarter

No clarity

100 MW

100 MW

Remarks

226 MW PPAs are

awaiting approval

The PPA signing

process has been quite
slow compared to what
the officials had earlier
forecasted for Q1 2014
(42 MW as against
150 MW)

19 companies had
participated in the bid

A total of 122 bids

totaling 2,170 MW were
received

Quarter over quarter

there is no clarity on
what is happening
under the Tamil Nadu
solar policy
PPAs were signed at
a tariff of M6.48/kWh
($0.11/kWh)
The Tamil Nadu
Electricity Regulatory
Commission (TNERC)
has proposed a tariff
revision to M5.78/kWh
($0.1/kWh)
Tamil Nadu Generation
and Distribution
Corporation
(TANGEDCO) is still
awaiting the approval
for the tariff of M6.48/
kWh ($0.11.kWh) by
the TNERC

Himgiri Energy
Ventures quoted
the lowest tariff of
M6.475/kWh ($0.11/
kWh), followed by
Today homes and
infrastructure M6.48/
kWh($0.11/kWh)
Renew Power managed
to secure a 30 MW
project at a tariff of
M6.97/kWh ($0.12/kWh)
Leading project
developers that did not
win any projects include
Azure, Acme, IL&FS,
Sunedison, Essel
infraprojects, Welspun
and Solairedirect

Prominent developers
which were allotted
projects include Acme
(100 MW), Welspun (5
MW), Azure (100 MW),
Sunedison (100 MW),
Solairedirect(20 MW),
IL&FS (40 MW)
More than half of the
projects chose their
location as Rajasthan
(~360 MW). Surprisingly
the second most
preferred location was
Madhya Pradesh ( ~200
MW) instead of Gujarat
(~50 MW)
The average bid under
the open category
was M10.1 million/
MW ($0.17 million/
MW) and DCR category
was M20.1 million /MW
($0.33 million/MW)
TATA power rejected a
partial allocation under
the DCR category (had
bid for 40 MW but was
offered part allocation
of 25 MW)

BRIDGE TO INDIA, 2014

12

Table 3.3: Projects under scheduled deployment (utility scale)

Policy name

Punjab

Uttar Pradesh

Karnataka

Andhra Pradesh

Allocation date

Jun-13

Jun-13

Jul-13

Jun-13

PPAs signed as
on March 2014

250 MW

110 MW

80 MW

180 MW

Expected date
of procurement
for projects

Q4 of 2014 and
Q1 of 2015

Q4 of 2014 and
Q1 of 2015

Q1 of 2015

Q4 of 2014 and
Q1 of 2015

Expected date
of procurement
for projects

April September
2014

March - August 2014

April September
2014

Ongoing

Remarks

In case of delays there Most of the projects

are penalties in place are owned by project
developers that do
There are two types of their own EPC. This
might lead to earlier
grace periods:
commissioning of
projects and relatively
1st grace period
better returns.
-December 2015
(Bank guarantees
100 MW project by
will not be returned
National Hydro Power
by Punjab Energy
Development Agency); Corporation is in the
2nd grace - March 2015 concluding stages of
(Liquidation damages finalizing shareholder
agreements
taken by the state
utility)

Out of the 130 MW

allocation, PPAs have
only been signed for
80 MW.

42 MW PPAs signed
in the current quarter.
Out of the 180 MW, a
70 MW project is by a
JV between Premier
Solar and New
Generation Power
(USA)

There was a delay

in PPA signing due
to confusion in the
lowest bids received
(please refer to
India Solar Compass
October
2013 edition)10

---------10 India Solar Compass October 2013 edition http://bit.ly/1hLVfRD

BRIDGE TO INDIA, 2014

13

Table 3.4: Projects under scheduled deployment (rooftop)

Policy name

SECI phase II

SECI phase III

Allocation date

Jul-13

Dec-13

PPAs signed as
on March 2014

11.3 MW

8.75 MW

Q3 and Q4 of 2014
Expected date
of procurement
for projects

Q1 of 2015

Ongoing
Expected date
of procurement
for projects

April October 2014

Remarks

Projects located in Coimbatore,

Chennai and Delhi

As several projects under SECI

phase I have been delayed, timely
completion of the phase II is also
unlikely
Allocations in new cities such as
Noida, Bhubhaneshwarand Raipur.

New project developers include

Ravano Green Energy, Waaree
Energies, Mahindra EPC and Enrich
Energies
First deadline to submit DPRs
was March 11th, this deadline has
been missed by most of the project
developers. An extension of one
month has been given by SECI.

Table 3.5: Expected Future Allocations

Policy name

Uttar Pradesh

Karnataka
phase III

SECI phase IV

Haryana

Uttarakhand

Expected allocation
date

Q3 of 2014

Q3 of 2014

2014

2014

2014

Expected allocation
capacity

300 MW

50 MW

50 MW

50 MW

50 MW

Expected PPA
signing date

Q1 of 2015

Q1 of 2015

Not known

Not known

Not known

Expected
commissioning date

Q2 of 2016

Q2 and Q3 of 2016

Not known

Not known

Not known

BRIDGE TO INDIA, 2014

14

Projects Outlook

Projected quarterly PV installations in India (in MW)

BRIDGE TO INDIA, 2014

15

5 Things we got wrong in

the last four quarters
5.1 Our projections across previous editions
of Solar Compass compared to actual market
performance over the last four quarters

Despite our best efforts, the solar PV landscape in India is usually difficult
to forecast due to policy uncertainties. In the figure, we have depicted our
quarterly projections over various editions benchmarked against actual
capacity additions. In certain quarters our projections have been close, while
on certain occasions, we have been wrong with significant margins. The
rationale behind the misjudged predictions has been mentioned in the table.
Having learnt from our misjudgments in the past, our endeavor is to do better
in the future.
Historically, we have found that projects for parity with or without
REC benefits tend to exceed our expectations, projects under the NSM are
usually on target and projects under various state policies are inevitably
behind schedule even though we have been fairly pessimistic about them to
begin with.

BRIDGE TO INDIA, 2014

16

Policy

Rationale for variation

Parity based projects

with or without REC
benefits

In the preceding quarters, we witnessed renewed interest in

these projects and forecast another 60 MW capacity to come
through. Typically, revenue from such projects is combined
with AD benefits and/or RECs. Over the past quarter, around
29 MW of such projects were commissioned, lower than the 60
MW we forecast in the previous edition of the solar compass.
Projects for about 100 MW continue to be under deployment.

RPO projects

In the previous edition of the solar compass, we had forecast

that 40 MW of RPO projects will come up in the first quarter.
This was based on the presumption that the NTPC would
at least partially commission its 50 MW project in Madhya
Pradesh (EPC contracted to TATA Power Solar) which was due
to be commissioned by the end of March 2014. Only 10 MW
of NTPCs project in Andhra Pradesh has been commissioned
(updated as on 20th March 2014).

State Policies

No projects were commissioned under the state policy in

Karnataka where we expected 12 MW to come up during the
quarter.
As mentioned previously, under the Karnataka state policy,
deadlines were extended without penalties. Until and unless
the delayed projects are fined with strict time bound penalties,
the delays can be expected to be a regular phenomenon.

BRIDGE TO INDIA, 2014

17

Our Blogs From The Last Quarter

National-level solar initiatives

Acme, Azure Power and SunEdison get the biggest share of the NSM
How will financing of NSM projects work?
Indias subsidy scheme for de-centralized solar to stay subdued in 2014
as well
National Solar Mission to miss capacity targets for the year by
a significant margin

State-level solar initiatives

Keralas rooftop programs - Lessons for other states

Kerala announces a draft net-metering policy
Is solar in Tamil Nadu back?
Tamil Nadu solar market in peril
Jammu & Kashmir signs an agreement for a 7,500 MW solar power plant

Market analysis

As international solar manufacturing companies boom, India gets

left behind
Solar Power Developers Association meets Dr. Farooq Abdullah
Should Indian developers be worried about rising solar costs in 2014?
Restricting open access power purchase- a regressive move?

Thought leadership

Indias energy future BPs thoughts and ours

What are Indias strategic energy options? Part 1: The energy demand
What are Indias strategic energy options? Part 2: Comparisons with the
US, Germany and China
What are Indias strategic energy options? Part 3: Cost trajectories of fossil
and renewable energy
What are Indias strategic energy options? Part 4: A game changing shift
to solar

BRIDGE TO INDIA, 2014

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