Notes on Solar Energy:

 As of September, 2017 the country's solar grid had a cumulative capacity of 14.77 GW. rooftop solar capacity is 1.6 GW
totaling.
 Also the slight relief for the developers is that the Ministry of New & Renewable Energy (MNRE) has issued the
Guidelines for Tariff Based Competitive Bidding Process for Procurement of Power from Grid Connected Solar PV Power
Projects which tries to cover the payment security for the developers and tries to stress upon the must run status for
solar projects.
 In January 2015 the Indian government expanded its solar plans, targeting US$100 billion in investment and 100 GW of
solar capacity (including 40 GW from rooftop solar) by 2022. India's initiative of 100 GW of solar energy by 2022 is an
ambitious target, since the world's installed solar-power capacity in 2017 is expected to be 303 GW.
 The country has a poor rural electrification rate; in 2015 only 55 percent of all rural households had access to
electricity, and 85 percent of rural households depended on solid fuel for cooking. Solar products have increasingly
helped to meet rural needs; by the end of 2015 just under one million solar lanterns were sold in the country, reducing
the need for kerosene.
 Major states in which there is growth of solar power: Telangana, Rajasthan, AP, Tamil Nadu, Gujurat,etc
 In Gujurat

 The state has commissioned Asia's largest solar park near the village of Charanka in Patan district.[38] The park is
generating 2 MW of its total planned capacity of 500 MW, and has been cited as an innovative and environmentally-
friendly project by the Confederation of Indian Industry.[full citation needed]
 To make Gandhinagar a solar-power city, the state government has begun a rooftop solar-power generation scheme.
Under the scheme, Gujarat plans to generate 5 MW of solar power by putting solar panels on about 50 state-
government buildings and 500 private buildings.
 It also plans to generate solar power by putting solar panels along the Narmada canals. As part of this scheme, the
state has commissioned the 1 MW Canal Solar Power Project on a branch of the Narmada Canal near the village of
Chandrasan in Mehsana district. The pilot project is expected to stop 90,000 litres (24,000 US gal; 20,000 imp gal) of
water per year from evaporating from the Narmada River.

 The average bid in reverse auctions in April 2017 is ₹3.15 (4.9¢ US) per kWh, compared with ₹12.16 (19¢ US) per kWh
in 2010, which is around 73% drop over the time window. The current prices of solar PV electricity is around 18% lower
than the average price for electricity generated by coal-fired plants. Competitive reverse auctions, falling panel and
component prices, the introduction of solar parks, lower borrowing costs and large power companies have contributed
to the fall in prices.
 The installed capacity of commercial solar thermal power plants (non storage type) in India is 227.5 MW with 50 MW in
Andhra Pradesh and 177.5 MW in Rajasthan.
 A power-purchase agreement (PPA) is not needed for solar plants with a battery storage system to serve ancillary-
service operations and transmit generated electricity for captive consumption using an open-access facility.[161]
Battery storage is popular in India, with more than 10 million households using battery backup during load
shedding.[162] Battery storage systems are also used to improve the power factor.

 Challenges and opportunities[edit]

 See also: Energy policy of India § Solar energy
 Land is scarce in India, and per-capita land availability is low. Dedication of land for the installation of solar arrays must
compete with other needs. The amount of land required for utility-scale solar power plants is about 1 km2 (250 acres)
 for every 40–60 MW generated. One alternative is to use the water-surface area on canals, lakes, reservoirs, farm
ponds and the sea for large solar-power plants.[167][168] These water bodies can also provide water to clean the solar
panels.[169] Highways and railways may also avoid the cost of land nearer load centres, minimising transmission-line
costs by having solar plants about 10 meters above the roads or rail tracks. Solar power generated by road areas may
also be used for in-motion charging of electric vehicles, reducing fuel costs.[170] Highways would avoid damage from
rain and summer heat, increasing comfort for commuters.[171][172][173]
 The architecture best suited to most of India would be a set of rooftop power-generation systems connected via a local
grid.[174] Such an infrastructure, which does not have the economy of scale of mass, utility-scale solar-panel
deployment, needs a lower deployment price to attract individuals and family-sized households. Photovoltaics are
projected to continue their cost reductions, becoming able to compete with fossil fuels. [175][176]
 Greenpeace[17][177][178] recommends that India adopt a policy of developing solar power as a dominant component of its
renewable-energy mix, since its identity as a densely-populated country[179] in the tropical belt[180][181] of the subcontinent
has an ideal combination of high solar insolation[180] and a large potential consumer base.[182][183][184] In one
scenario[178] India could make renewable resources the backbone of its economy by 2030, curtailing carbon emissions
without compromising its economic-growth potential.[185] A study suggested that 100 GW of solar power could be
generated through a mix of utility-scale and rooftop solar, with the realizable potential for rooftop solar between 57 and
76 GW by 2024

 Top 5 Solar Power plants in India

a. Bhadla Solar Park, Rajasthan
b. Kamuthi Solar Power Project, Tamil Nadu

c. Charanka Solar Park, Gujurat

d. Sakri Solar Plant, Maharashtra
e. Dhirubhai Ambani Solar Park, Rajasthan

Upcoming Solar Power Plants in India are 750MW solar power plant in Rewa district of Madhya Pradesh,Kurnool Ultra
Mega Solar Park,Ananthapuramu Ultra Mega Solar Park, biggest solar power plant in Tamil Nadu,India’s largest solar
park in Rajasthan,Reliance Group to develop more solar park in Rajasthan and also Karnataka to set up world’s biggest
solar park.

 To summarize, the new guidelines for tariff based competitive bidding process for procurement of solar power will
help :
o enhance transparency and fairness in the procurement process, while
o protecting consumer interests through affordable power.
o These guidelines will also provide standardization and uniformity in processes &
o Risk-sharing framework between various stakeholders involved in the solar PV power procurement.
o Help in reducing off-taker risk and thereby encourage investments,
o Enhance bankability of the Projects &
o Most importantly improve profitability for the investors

Some of the Key Reform Initiatives as per these Guidelines are as follows:
 Generation Compensation for offtake constraints thereby reducing offtake risks: The “Must-run” status
for solar projects has been stressed upon. Generation Compensation provided for following off-take
constraints:
1. Back-down – Min. Compensation 50% of PPA Tariff
2. Grid unavailability – Compensation by way of Procurement of Excess Generation / Outright
Compensation
 PPA: To ensure lower tariffs : Minimum PPA tenure has been kept at 25 years. Unilateral termination or
amendment of PPA is not allowed.
  Event of Default and the consequences thereof clearly defined to ensure optimal risk sharing between
Developer and Procurer. This has been done by clearly defining the generator and procurer events of default,
and describing the consequences thereof.
 Project preparedness to expedite and facilitate setting up of projects: Issues related to land, connectivity,
clearances etc. and the extension in case of delay, have been streamlined.
 Payment Security Mechanism: Risk of generator’s revenue getting blocked due to delayed payment / non-
payment by the procurers has been addressed through provision of Payment Security Mechanism through
instruments like Letter of Credit (LC), Payment Security Fund, State Guarantee, etc.
 Termination Compensation to increase bankability of projects by securing the investment by the
Generator and the lenders against any arbitrary termination of PPA. Quantum and modality for termination
compensation in case of both generator default and procurer default has been clearly defined.
 Change in Law provision to provide clarity and certainty to generators, procurers, and
investors/lenders – Change in Law provision, effective from the date of bid submission and covering any
change in law/Tax rate which has a direct effect on the Project (and not just taxes made applicable for supply
of power) has been provided.
 Rationalisation of Penalties: The penalties have been rationalised, so as to reduce the overall cost to the
Generator, while at the same time, ensuring compliance with the Commissioning Schedule/Scheme
Guidelines.
 Early Commissioning & Part-Commissioning for expeditious completion of projects – Early commissioning
and part commissioning have not only been allowed, but incentivised, by way of allowing the PPA for a
minimum 25 years from the Scheduled Commissioning Date.
 Repowering: Generators are free to repower their power plants. However, the procurer will be obliged to buy
power only within the CUF range in PPA.
 Bid structure and process: Bids have been allowed in both Power (MW) and Energy (kWh) terms. Also, e-
bidding has been emphasized to improve transparency.

 The real beauty & advantages of solar lies in distributed market i.e. individuals opting for rooftop solar installations as
energy is consumed at the same point where it is generated and no additional requirements of land coupling with
benefits of no transmission & distribution losses benefiting both generators and utilities.
Distributed / rooftop solar generation is “For the people” and more importantly “By the people” and not unlike utility
scale solar which would be setup only by the big business houses to make an ROI sense and beautify balance sheets.
Moreover it would also benefit a vast majority of more then 30%+ of Indian population deprived of even the electricity
grid.
 Challenges faced in Rooftop Solar arena across India :
Well the biggest challenge is mainly in terms of lack of awareness among consumers along with…
o Lack of consistent policy support from the states – Almost all the solar companies operating in rooftop segment
have faced this & knows this better
o Currently with over 20+ states have some or other form of solar net-metering policy, yet very few states have
demonstrated implementing hurdle fee net-metering rooftop solar systems.
o Many states which are extremely suitable for implementing solar net-metering schemes are not approving or
supporting solar rooftop deployment under the Opex / RESCO / BOO / BOOT model.
o While government (both central & state) are announcing ambitious policies & targets for rooftop solar, yet very
little attention is given to successfully implementing & enforcing the targets.
What is Accelerated Depreciation? What Benefits Does it Provide to a Solar Power Plant Developer?

In order to explain accelerated depreciation, let us first understand what depreciation means. Depreciation is a
financial tool used to account for the reduction in value of an asset over time. Any product’s value reduces in
value over time, and this decrease in value is termed depreciation. Depreciation is thus used to convert a fixed
cost (for example, an upfront, one-time payment for solar panels) into an annual expense. So, when you buy a
solar power system, due to reduction in efficiencies of solar panels and wear & tear of parts, its’ value decreases
over time. As mentioned earlier, this reduction in value is captured in depreciation, where upfront capital is
spread over time for tax accounting purposes. This depreciated value is made a part of expenses when you
include it in your accounts, thereby affecting net income. Therefore, depreciation affects Value of asset over time
Net Income (= Income – expenses) Example: Let’s say your company owns a solar plant which is expected to
produce useful electricity for a period of 25 years. If it costs a capital of $1 million to build the solar plant, a
simple, straight-line depreciation would depreciate it at $40,000 ($1000000/25) per year for 25 years. But what is
accelerated depreciation? But, accelerated depreciation (AD), as the name suggests, is a method of depreciation
wherein the value of the solar plant (your fixed asset) reduces at a faster rate in the early years – thus, the
depreciation is accelerated. What is the key benefit of accelerated depreciation for solar energy investors? It is
beneficial in reducing the taxable income during the early years of the solar power project and thus can be
considered to deliver cash profits during these early years, especially the first 2 or 3 years. Broadly, the
significance of ‘accelerated depreciation’ in the context of solar industry can be considered as follows:
Incentivizes investment in solar Accelerates profit-making by reducing the taxable income in the early years
Postpones higher taxes to a later period in time An example To appreciate the income tax benefits of AD, let’s say
your company spends $1 million on a 1 MW solar PV plant. Let’s say your company/business had made a profit of
$2 million in that year. Let us assume an accelerated depreciation of 80%, which implies that you can depreciate
80% of your asset’s value in the first year. An 80% accelerated depreciation for the 1st year will bring down the
taxable income to $1.2 million (Profits – Accelerated Depreciation = $2 million – (0.8*$1 million)). If an income
tax of 30% is considered, the actual money saved on income tax due to accelerated depreciation is $0.24 million
(30% * 0.8). How? Without factoring the accelerated depreciation, your company would have paid taxes of $0.6
million (30%*$2 million). With AD, you pay taxes of only $0.36 million (30%*$1.2 million), and thus you have
saved $0.24 million ($0.6 million – $0.36 million). Is accelerated depreciation applicable to all anyone investing in
solar? Not exactly. Firstly, accelerated depreciation as a financial incentive is only applicable to business entities;
thus, residential solar energy investors (for solar water heaters or rooftop solar PV systems) cannot benefit from
accelerated depreciation. Even if you are running a business, accelerated depreciation is a benefit only if you are
a profit making company. The reason is obvious – unless you are making profits, you are not paying taxes, and
accelerated depreciation essentially is a benefit you get through the lowering of your taxes. If you are a loss
making company and are not any way paying taxes, what financial difference can accelerated depreciation make?
Is accelerated depreciation unique to solar sector? No. Accelerated depreciation as a financial incentive has been
applied to many industrial sectors worldwide, and in many countries, is also available for the solar energy sector.

What are the Incentives Available for Rooftop Solar Installations in India?

25 While solar power is fast approaching what is called “grid parity” in some regions of the world – a situation
where the cost of unsubsidized solar power is less than or equal to the cost of grid power – solar power still costs
more than grid power for substantial parts of the world. This is the case for many parts of India too, where
currently the cost of solar power is higher than that of grid power. For these regions, this disparity of solar power
being costlier than the grid is likely to exist for the next 3-4 years. Until that time, external incentives, usually
from the central and/or state government, are likely to play a vital role in the growth of solar power adoption for
these regions Thus, one of the frequently asked questions is – What are the incentives available for rooftop solar
installations in India? Well, the answer for this of course could vary with time as policies and regulations change,
but as of end Jul 2015, the following are the four most prominent rooftop solar incentives:

-Accelerated Depreciation

-Capital Subsidies

-Renewable Energy Certificates

-Net Metering incentives

Accelerated Depreciation

For profit making enterprises installing rooftop solar systems, 80% of total investment can be claimed as
depreciation in the first year. This will significantly decrease tax to be paid in Year 1 for profit making companies.
Let us say your company has total profits of Rs 3 crores. Let us also say you are investing in a rooftop solar power
plant of 200 kW that costs approximately Rs 2 crores. 80% of your capital investment can be depreciated the first
year which implies that you can bring down the taxable profits by Rs 1.6 crores (thus you need to pay taxes only
on Rs 1.4 crores, 3 – 1.6). At the corporate tax rate of 35%, this profit reduction amounts to an actual cash saving
of about 56 lacs (1.6*0.35) for the first year of the installation. Look at it another way. For a total project cost of
Rs 2 crores, you would be putting in an equity of about 30%, which amounts to 60 lacs, Through accelerated
depreciation, you are able to recover almost all that amount in the very first year – your equity payback period is
thus just one year (or less, depending on when you implemented the project)! Accelerated Depreciation (or AD as
it known in its short form), had been one of the prime movers of wind energy capacity addition in some parts of
India, especially the state of Tamil Nadu. Now, it appears that AD is all set to play an important role in the growth
of the solar power sector as well. Note however that AD as an incentive is applicable only for commercial entities
and not for the residential sector. Besides, in order to benefit from the AD benefit, a commercial entity needs to
be making profits, as AD essentially is a tax saving device, and there is no tax to save if a company is not making
profits.

Capital Subsidies

The concept of capital subsidies is really simple – the government gives back a certain % of the upfront capital
cost. Thus, if your total capital cost is Rs 1 lac and the government gives back 30%, your effective capital cost is
only Rs 70,000 (1 lac – 30%* 1 lac). Capital subsidies are applicable to rooftop solar power plants, up to a
maximum of 500 kW. While the original capital subsidy was 30%, it has recently been reduced to 15% for the
residential rooftop sector, citing the reason of reduced cost of solar panels. This is applicable for Systems ranging
between 1 kWp to 500kWp. Further, recent policy announcements by MNRE (the Ministry of New & Renewable
Energy) have abolished capital subsidies for rooftops for commercial and industrial sectors, and the reduced
capital subsidy mentioned above will be available only for select residential and a few other related segments.

How does the Government fare in disbursing these subsidies?

It is critical for the Ministry to disburse subsidies on time. The subsidies create an expectation among the
beneficiaries and if timely dispersal does not occur, it could significantly affect the cash flows and working capital
expenses of the installers. For instance, the budgetary allocation for Installation of Solar Power Generators
above 3 kWp up to size of 100 kWp under the Central Financial Assistance (CFA) scheme was delayed for a
considerable period of time, adversely affecting the sector. It was only on 12 August 2014 that MNRE finally
received the allocation to proceed with the sanctioning of the 30% capital subsidy. The above mentioned delays
in capital subsidy disbursements hamper the implementation of the rooftop scheme severely. The ministry now
has asked project developers to go ahead with their projects without waiting for subsidy allocation via Aadhaar
Linked Account or interest subvention.

Renewable Energy Certificates

Renewable Energy Certificates (RECs) are tradable certificates that provide an incentive to those who generate
green power by providing financial incentives for every unit of power they generate. These are available
separately for solar power as well. While it appears to be an attractive avenue for solar power generators, two
aspects make it challenging for rooftop solar power producers: One, there are restrictions that enable only some
rooftop solar power generators eligible for RECs Two, the demand for solar RECs in the exchanges have been
quite poor since these were introduced, though this could change in future with recent tightening of regulations
and enforcements. Owing to the above two, Solar Mango feels that RECs could provide attractive financial
incentives in future, but for now, rooftop solar owners should not expect much from these.
Net Metering Incentives

Let us consider a grid-tied rooftop solar system that is synchronized to work with the grid – this is the
architecture commonly used by industries and commercial units. Such a grid-tied system does not usually have
batteries. For this system, when there is excess power generated over and above required by the load, the power
is exported to the grid. So far so good. But the question is, do you as the rooftop solar owner get incentivized for
the power that you are now supplying to the grid? This is where things get interesting. Whether you get
incentivized and how much you get incentivized depend on two aspects: Whether a Net Meter is installed
Incentive policy of the utility company (in India, typically, the state electricity board)

Net Meter – A Net Meter is a measurement meter that measures how much electricity you have exported to the
grid after your internal consumption (as the name implies, it is a meter that measures electricity Net of
consumption). Unless you have a Net Meter installed, your utility will not be able to measure how much
electricity you have exported to the grid.

Incentive Policy – Even if you are able to measure the amount of electricity exported to the grid, it is necessary
for the utility company to have a contractual agreement that it will pay a certain amount of rupees for every unit
exported. Depending on the type of incentive policy, the incentive could either be a reduction in your electricity
bill corresponding to the number of units exported by you, or it could be a special tariff provided by the state for
the number of units your rooftop solar power system feeds to the grid. Net Metering incentive policy / feed in
tariff is not yet common in India and has made a start in a few states such as Tamil Nadu and Karnataka. Thus, if
your state has a Net Metering incentive policy and if a Net Meter is in your rooftop, you stand to get financial
incentives for the power generated even when your establishment is not working.

What are the additional measures taken by the Government to promote the rooftop solar sector?

As per the current Home Loan and Home Improvement Loan schemes, Solar PV is not covered among items
against which loan can be availed. The Ministry of Finance has issued following advisory to all Public Sector Banks:

“All banks are advised to encourage the home loan/ home improvement loan seekers to install rooftop solar
PVs and include the cost of such equipment in their home loan proposals just like non solar lighting, wiring and
other such fittings”

This will reduce the dependence on private investors who are a little hesitant towards investing in Solar projects,
and will enable owners to plan their Home Loan with inclusion of capital cost for installing Solar Rooftop, based
on the available space and requirement. This is mainly aimed at encouraging residential, commercial, industrial
and institutional setups to adopt viable Grid Interactive Solar Rooftop Systems for their own consumption, and
inject surplus electricity into the grid. Solar Rooftop Regulation/Policies/Schemes in states like Delhi, Rajasthan,
Haryana, UP, Uttarakhand, Kerala and Karnataka will further attract investors and residential consumers towards
Solar Rooftop Power. Summary The following table provides a quick overview of the four types of rooftop solar
incentives, and also to which segments these are applicable Rooftop Solar Incentives Residential Sector
Commercial & Industrial Accelerated Depreciation Not applicable Applicable if the entity is profit
making Capital Subsidies Applicable Not Applicable Renewable Energy Certificates Applicable in
very select cases Applicable in select cases Net Metering Incentives Applicable, if the state has the
relevant policy Applicable, if the state has the relevant policy