BRIDGE to INDIA_ India Solar Compass_October 2013

7/27/2019 BRIDGE to INDIA_ India Solar Compass_October 2013

1/29 BRIDGE TO INDIA, 2013 1


2/29 BRIDGE TO INDIA, 2013

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CONTENTS

1. Overview 01

2. Market Dashboard 022.1 Market Compass 022.2 India Solar Market Prices 02

2.3 Installed Capacity in India 03

3. Policy and Projects Outlook 043.1 National Solar Mission 04

3.2 State policies 05

Tamil Nadu 06

Andhra Pradesh 06

Karnataka 07

Madhya Pradesh 07

Rajasthan 07

Uttar Pradesh 07

Punjab 08

3.3 Renewable Purchase Obligation 08

3.4 REC projects 08

4. Industry4.1 Interview: Mr. HR Gupta, Managing Director, Indo Solar 10

5. Key question: How does the group captivemodel sale o solar power work in India? 125.1 Background 12

5.2 Denition 12

5.3 Regulations: Theopen access mechanism 12

5.4 Benets othe group captive model 15

5.5 Group captive power plants under an OPEX model 16

5.6 The business case or group captive power projects 17

5.7 Risks 21

5.8 Conclusion 22

6. Annexure 236.1 Glossary o terms 23



India added a meager 155 MW in

the previous quarter (July 2013 toSeptember 2013) as compared to the

cumulative 780 MW added in the rsttwo quarters o 2013.This slowdown is

primarily due to the lack o allocationslast year. In addition, or some projects

under the Karnataka and MadhyaPradesh state policies, the deadlines

have been extended without penalties.

The mood is urther suppressed,

because the eagerly awaited phasetwo o the National Solar Mission

(NSM) continues to be postponed. It iscurrently awaiting cabinet approval.

However, with elections coming up andconcerns over Indias high scal decit

remaining, the Request or Selection(RS) document might be urther

delayed.

While the NSM slacks, there has beensome activity on the state level. In the

last two quarters, new allocations ora cumulative capacity o 1.5 GW have

been proposed.There is still conusionabout how many Power Purchase

Agreements (PPAs) will actuallybe signed rom these allocations.

For example, out o the total 2 GWcapacity planned under Tamil Nadu

and Andhra Pradesh state policies,even government ocials assume that

only 50% might actually be realized.So ar PPAs or 60 MW have been

signed (all in Andhra Pradesh). The keyreasons or project delays have been

problems related to land acquisition,

delay in achieving nancial closureand delay rom developers end dueto the recent rupee devaluation.

The rupee devaluation has madeimported equipments and oreign

loans more expensive. Projects thatwere calculated too tightly or even

with alling equipment costs in mind,might not be viable to build under

current conditions. In act, Chinesemodule prices or Indian supplies have

stabilized, i not increased, in the last

couple o months. Thus delay might

also translate into abortion in somecases.

In spite o the various actors ordelay, government ocials in the

south Indian states o Tamil Nadu andAndhra Pradesh seem condent that

many more PPAs will be signed bythe end o this year. Projects would

then be commissioned between thelast quarter o 2014 and rst quarter

o 2015. Over and above that, AndhraPradesh is now inviting more interests

and wants to sign PPAs in excess o500 MW. I a signicant part o these

prospective PPAs get signed, theoverall outlook o the market appears

positive and we can expect a signicantcapacity addition over the next one

year.

Also, there has been some amounto new interest in the third party sale

o power through various businessmodels and we see the rst projects

coming up in this segment. Therevenue or such third party sale o

power is oten combined with therevenue rom Renewable Energy

Certicates (RECs) and/or the benetrom Accelerated Depreciation (AD).

Models such as group captive arebeing discussed or larger project

capacities. In this edition, we areproviding an in-depth assessment o

the group captive model in our keyquestion section.

Indias total installed PV capacity atpresent stands at 1.96 GW. Apart rom

that, around 1.5 GW is currently atdierent stages o development. I

PPA signing picks up or the projectsallocated under the Tamil Nadu and

Andhra Pradesh state policies andi the NSM is announced within this

year, then we can expect a cumulativeinstalled capacity o around 3.5 GW or

utility scale projects in India by the endo 2014.

1. OVERVIEW

India added a meager155 MW in the previous

quarter (July 2013to September 2013)as compared to thecumulative 780 MW

added in the frst two

quarters o 2013.

Indias total installedcapacity at presentstands at 1.96 GW.

Apart rom that, around1.5 GW is currently

under dierent stages

o development.



Source: BRIDGE TO INDIA

2. MARKETDASHBOARD

Indication Trend PV

Lowest FiT Decreased ` 5.51/kWh1

Interest Rate Unchanged 13%

Average Capex Decreased ` 65/Wp

c-Si modules (China, Taiwan) Decreased $ 0.58/Wp*

Thin Film modules (US and Malaysia) Decreased $ 0.53/Wp*

c-Si modules (Japan, Europe) Decreased $ 0.65/Wp*

Thin Film modules (Japan) Decreased $ 0.60/Wp*

B

RIDGETOINDIA,2013

----------------------1The lowest tari o ` 5.51/KWh (0.07/kWh, $0.09/kWh) has been mentioned by Sun Pharma underKarnataka bidding process. However, as per a governement ocial, who did not want to be namedthere is some dispute in the Karnataka bids and the process is on hold until urther clarity.

B

RIDGETOINDIA,2013

GROW

INGEM

ERG

IN

G

MATUR

ENAS

CEN

T

2.1 MARKET COMPASS

*$ rate has been used to avoid eect o currency fuctuations

All prices are or a reerence 10MW project

All prices are without duties and taxes

2.2 INDIAN SOLAR MARKET PRICES



2.3 INSTALLEDCAPACITY IN INDIA

BRIDGE TO INDIA, 2013




3. POLICY ANDPROJECTSOUTLOOK

We would describe the last quarteras being dominated by policy

instability: We have seen conusion inTamil Nadu over the tari proposed

by its regulatory commission; theannouncement o the creation o the

new state o Telangana rom AndhraPradesh, which put the allocations and

uture bankability o projects underquestion; Gujarat briefy contemplated

a retrospective tari revision; andnew allocations in Karnataka seem to

have been put on hold due to a dispute(reer below). Moreover, there has been

no penalty levied or delayed projectsunder the Madhya Pradesh and

Karnataka policies, which is settinga bad precedent or the upcoming

projects in those states. On the brightside, in the last quarter (July 2013 to

September 2013), the states o Punjab,Uttar Pradesh and Karnataka allocated

new projects.

A capacity o close to 1.5 GW is

currently under dierent stages odevelopment across India. With this

proposed capacity addition we canexpect Indias cumulative PV capacity

or utility scale projects to reach atleast 2.5 GW by mid o 2014 and closeto 3.5 GW by the end o 2014. Earlier,

BRIDGE TO INDIA had predicted aninstalled capacity o 4 GW by the end

o 2014. However, due to delays in thesigning o PPAs in Andhra Pradesh

and Tamil Nadu and due to a no-show o phase two o the NSM until

now, we have revised our projections

downward.

In the upcoming quarter (October 2013to December 2013), the bulk o newly

commissioned projects will come notrom policies, but rom the private

sale o solar power under the RECmechanism.

3.1 NATIONALSOLAR MISSIONProject developers have been looking

orward to the new allocations underbatch one o phase two o the National

Solar Mission (NSM) or some timenow. The drat RS document was

released in April 2013 and the biddingprocess was originally expected

or May o this year. However, therehas been no ocial news since. As

per recent statements by ministryocials, the nalized policy and

related documents have now been

submitted to the Union Cabinet orapproval. However, with concernsabout Indias high scal decit and

with the model code o conduct orthe upcoming elections, it is unlikely

that the policy will be approved soon.I the allocations under the NSM are

not annonced within a month, thereis a high probability that it might be

postponed until ater the generalelections in May 2014. BRIDGE TO

INDIA, however, is optimistic that thebidding process or the NSM will begin

this year itsel.

In the last quarter, thestates o Punjab, UttarPradesh and Karnatakaallocated new projects.

The fnalized policy andrelated documents

or phase two o theNSM have now been

submitted to theUnion Cabinet or

approval.



Table 3-1: Overview o the state policies in India

Tamil

Nadu

Andhra

Pradesh

Karna-

taka

Punjab Madhya

Pradesh

Uttar

Pradesh

Rajasthan Total/aver-

age

Allocationdate

Jun-13 Jun-13 Apr-12 Jul-13 May-12 Jul-13 Mar-13 Most o theallocationshappened inthe rst halo 2013

PPAs signedas onSeptember2013 (MW)

0 60 60 0 225 0 75 420

Tari (INR/kWh)

6.48(with an

escalationo 5% p.a.or the rst10 years)

6.49 7.94 8.5(60 MW)

5.51 8.05 (130MW)

7.2 8.63 7.9-8.05 8.01 9.27 6.45 7.59

New PPAsexpected tobe signed bythe year end(MW)

500 80 100 230 0 120 0 1,330

Furtherallocations(MW)

None 500* None None None None RS or 1MW x 50announced

550

Delayedprojects(MW)

NA NA 50 NA 120 NA NA 170

Expectedcommi-ssioningdate oprojectsunderdeployment

Dec-2014 Dec-2014

Mar-14(50 MW)Dec-14(110MW)

Dec -14 Mar-14 Dec-14 Mar-14 250 MW byMarch 2014;1,240 MWby Dec-14

Expected

period oprocurem-ent

Jan 14

Mar 14

Jan 14

Mar 14

Ongoing Jan 14

Mar 14

Ongoing Jan 2014

Mar 2014

Ongoing Most o the

procure-ments willtake placebetweenJanuary-March 2014

Key Projects MohanBreweries(110 MW),UnitedTelecom(100 MW),Welspun(60 MW)

EsselMining(35 MW),KranthiEdice(30 MW), MahiraPower(20 MW)

EsselInra (10MW),HelenaPower(10 MW),SaiSudhir(10 MW)

Welspun(32 MW),Asopus (34MW), EsselInra-projects(30 MW)

Acme(25 MW),Moserbaer(25 MW),Welspun(25 MW)

EsselInra (50MW),Moserbaer(20MW), Srideveloped(20 MW)

RohaDyechem(25 MW),EsselMining(20 MW),EnergoEngineering(10 MW)

* Based on an interview with the Andhra Pradesh state department ocials, this will be based on direct allocation at

the pre- determined tari

B

RIDGETOI

NDIA,2013

Source:BRID

GETOINDIA



----------------------21 EUR = INR 80 and 1 USD = INR 603http://bridgetoindia.com/blog/?p=1605

Tamil NaduTamil Nadus tender in December2012 led to an issuance o Letter o

Intents (LOIs) or 690 MW o projects.As per our discussion with the

ocials, no PPAs have been signedas o September 2013 but all PPAs

are expected to be signed in thenext couple o months. The states

nodal agency, Tamil Nadu EnergyDevelopment Agency (TEDA), has

oered a tari o `6.48/kWh (0.08/kWh, $0.10/kWh) with a 5% escalation

or the rst 10 years. The Tamil NaduElectricity Regulatory Commission(TNERC), the regulatory agency that

is required to sanction all taris,has proposed a separate tari o

`5.78/kWh(0.07/kWh, $0.10/kWh)2without escalation. The PPA with the

developers is only bankable i TNERCapproves the tari being oered

by TEDA. TEDA has tried to assurethe project developers that the new

proposed tari will have no bearingon their projects and that TNERC

will provide a sanction or the tariscurrently being oered.

In a situation where the taris beingoered by TEDA are not approved by

TNERC, we can expect a majority othe project developers to back out. On

the other hand, i TNERC approvesthe older taris, the largest capacity

addition in 2014 can be expected romTamil Nadu. As there has been an

initial delay due to the concerns overthe tari revision, we might not see

300 MW projects being commissionedby June 2014 as predicted by us in the

July 2013 edition o the India SolarCompass. Instead, we expect a capacity

o 200 MW to be commissioned bySeptember 2014.

Andhra PradeshMost investors are currently skepticalabout projects in Andhra Pradesh

taking o anytime soon. One reason

is that the initial retrospective changein tari by the state3 has led to a

loss in condence in the processes

being ollowed. Out o the 1,700 MWo original applications submitted in

2013, applications or less than 150MW is expected to nalize. Another

reason or a poor response rom

investor and developers in the state isthe expected split o Andhra Pradeshinto two separate states (the new

state is to be called Telangana. As perour discussions with the government

ocials, they do not oresee theproposed division o the state to have

a considerable impact on the solarprojects.However, some developers

have their reservations. This isespecially true or those who have

projects in central Andhra Pradesh,where the distribution company might

be biurcated in the uture.

Around 61 MW o PPAs have alreadybeen signed and as per the ocials

o New and Renewable EnergyDevelopment Corporation o Andhra

Pradesh, another 80 MW o PPAs areexpected soon. As there is an incentive

or early commissioning in AndhraPradesh, project developers who have

a head start in terms o nalizing landprocurement and partner selection

or Engineering Procurement andConstruction (EPC) beore signing o

the PPAs, will be able to benet romthat. We expect that at least a capacity

o 60 MW will be commissioned aheado schedule and within the third

quarter o 2014.

Apart rom this, Andhra Pradesh has

provided an open oer or developersto take up projects at the existing

taris. Four to ve large projects (up to100 MW) are expected to take up this

oer.

TEDA has tried to

assure the projectdevelopers that thenew proposed tari

in Tamil Nadu willhave no bearing on

their projects and thatTNERC will provide a

sanction or the taris

currently being oered.

Out o 1,700 MW ooriginal applications

submitted in 2013,applications or less

than 150 MW areexpected to fnalize in

Andhra Pradesh.



Andhra Pradesh has also opened

up a window or new interests ordevelopers to set up solar projects at

the same tari that is being oeredto the existing projects (`6.49/kWh

(0.08/kWh, $0.10/kWh). As per our

conversations with the ocials, theyare expecting resh applications oaround 500 MW. However, given the

low taris in the state, BRIDGE TOINDIA thinks that their estimates are

too optimistic and we do not expectthat the resh additional capacity will

exceed 200 MW.

Karnataka

A capacity o 60 MW had been allocatedunder the Karnataka state policy inApril 2012. As per the PPA, these

projects were to be commissioned byOctober 2013. However, due to delay in

land acquisition and nancial closure,only one project with a capacity o 10

MW by Jindal Aluminum has beencommissioned on time. The ocial

deadline has been extended until2014 without nes or the delays.

According to unconrmed sources,

the recent allocation process or acapacity o 130 MW has been put onhold as some companies have disputed

the published taris, claiming someprocedural mistake. These allocations

are likely to remain on hold untilthere is more clarity. We think that

commissioning o any part o thenewly allocated capacity o 130 MW

within the next year is unlikely. Thelet over capacity o 50 MW rom the

allocations in 2012 is expected to becommissioned by the end o the rst

quarter o 2014.

Madhya PradeshIn Madhya Pradesh, our projects o

25 MW each, one project o 20 MW andanother o 105 MW were allocated in

May 2012. The 25 and 20 MW projectswere to be commissioned by June 2013

and the 105 MW project by December

2013. However, as o September 2013,only a 105 MW project by Welspunhas been commissioned ahead o

schedule. As so oten, the delay is citedas being due to diculties in achieving

nancial closure coupled with delays

in acquiring land or projects has led tosubstantial delay in the commissioning

o the remaining projects. One projectdeveloper commented that the delay

o their project has been due to the

recent rupee devaluation.

The deadline or the remainingcapacity o 120 MW has now been

extended until March 2014 and noneo the project developers is being

penalized. Hence, we expect a capacityo 80 MW to be commissioned beore

the new deadline.

RajasthanA capacity o 75 MW that has been

allocated in Rajasthan seems tobe on track. As per ocials in the

department, all projects are expectedto meet their deadline o March 2014.

Also, they mentioned that most othe projects have either secured

nancial closure or are in the processo nalizing it. Given the experience

under most solar policies and goingby the previous experinece o the

developers, we, however, expect thattwo to three projects with a capacity o

around 25 MW will be commissionedby the March 2014 deadline and the

remaining by around June 2014.

Uttar PradeshUttar Pradesh has nalized

agreements with seven projectdevelopers or a cumulative capacity

o 130 MW. The developers are:

Jakson Power (10 MW), Moser Baer(20 MW), Sree Developers (20 MW),DK Inracon (10 MW), Reex Energy

(10 MW), Azure power (10 MW) andEssel Inraprojects (50 MW). The

PPAs in the state are expected to besigned beore the end o the year.

The government has urther signed amemorandum o understanding with

National Hydro Power Corporation(NHPC) or a proposed 100 MW solar

project. It is not yet clear when thisproject is to be nalized. Most o the

mentioned project developers willlikely do their own EPC and might be

able to complete their projects ahead

The recent allocation

process in Karnataka,or a capacity o 130

MW has been puton hold as somecompanies have

disputed the publishedtaris.

Uttar Pradesh hasfnalized agreements

with seven projectdevelopers or a

cumulative capacity o130 MW.



----------------------4EPC providers are setting up solar parks specically or REC or captive projects. These parksprovide land and grid-connectivity assistance to solar project developers.

2014. This is because the time spent in

selecting an EPC partner will be savedand the allocation o internal resources

will be more ecient. Also, as allthe decisions regarding the technical

design, selection o equipment and

timelines will be taken by the projectdeveloper itsel, it is expected thatthere will not be any procedural delays.

PunjabPunjab has nalized agreementswith 26 project developers to develop

a cumulative capacity o 250 MW.Some o the key projects in the

state are: Asopus Inrastructure (34

MW), Welspun Solar (32 MW), EsselInraprojects (30 MW), MoserbaerClean Energy (30 MW), Azure Power

(30 MW), Solairedirect (20 MW), PunjLloyd (20 MW). The projects have been

given six months or nancial closureand 13 months or commissioning.

The average tari in Punjab is `8.28/kWh (0.10/kWh, $0.14/kWh).This

is higher than most other states,largely due to the high land costs and

relatively low irradiation in the state.

As the debt nancing is usually doneater the land has been bought, theseprojects will look more attractive to the

lenders at the time o debt nancing.Due to this reason, the debt nancing

or projects in Punjab is expected tobe relatively easier. None o the PPAs

have been signed until now and weexpect them to be signed by the end

o the year. As a result, it is unlikelythat there will be any major capacity

additions rom Punjab in the rst halo 2014. However, we might see an

additional capacity o around 100 MWby September 2014.

3.3 RENEWABLEPURCHASEOBLIGATIONRecently, there has been more

condence in the market with regards

to the enorcement o Renewable

Purchase Obligation (RPOs) inIndia. Delhi distribution companies

(DISCOMs), or example, have alreadyincluded the RPO compliance expenses

in the tari. The Madhya Pradesh

Electricity Regulatory Commissionhas mandated the DISCOMs tocomply with RPOs. Similarly, the

obligated entities in Punjab havebeen mandated to comply with the

RPOs o nancial year 2011-12 and2012-13. West Bengal is planning to

comply with its solar RPO by the endo 2013. These developments are an

indication that more states are gettingserious about implementing RPOs.

As more states begin to implementthe RPO mechanism the demand or

solar power will increase. This canprovide an additional impetus to the

solar market. For example, or thestates that are not currently meeting

their RPOs, National Thermal PowerCorporation is setting up various

power plants across the country orthe DISCOMs in these states. Many

o these projects are expected to becommissioned by March 2014. Thisincludes the 50 MW project in Madhya

Pradesh (EPC contracted to Tata PowerSolar), 10 MW and 15 MW project in

Uttar Pradesh (EPC contracted toBHEL) and 10 MW project in Orissa

(EPC contracted to BHEL).

3.4 REC PROJECTSOut o a capacity o 155 MW that has

been added in India in the previous

quarter, around 40 MW is or theprojects under the REC mechanism.With projects or third-party sale o

power gaining popularity and severalsolar parks4 coming up primarily

in the states o Madhya Pradesh andRajasthan, in the next one year, we

expect an additional capacity o 150MW or projects that use a combination

o revenue through RECs withindustrial or commercial taris.

Punjab has fnalized

agreements with 26project developers todevelop a cumulative

capacity o 250 MW.

Out o a capacity o155 MW that has been

added in India in theprevious quarter,

around 40 MW is orthe projects under the

REC mechanism.



Figure 3-1: Projected quarterly PV installations in India (in MW)

Source:BRIDGETOINDIA

B

RIDGETOINDIA,2013



As o today, with some exceptions,

most o the photovoltaic (PV)manuacturing capacity in India is

either lying idle or operating at a verylow capacity. Indian manuacturers

have largely been unable to competewith international module suppliers

on costs. To revive their ortunes,manuacturers are banking on the

implementation o anti-dumpingduties (ADD) and a domestic content

requirement (DCR). DCR is onlyapplicable or the NSM projects in

India and it is expected that batchone o phase two o the NSM would

have a capacity o around 200 MW

earmarked or domestic modules.This is despite the act that the UShas challenged DCR in the World

Trade Organization (WTO). However,this would be insucient to support

the 2 GW o manuacturing capacityin India. ADD on the other hand has

the potential to change the supplydynamics in the Indian solar sector

drastically. In the January 2013 editiono the India Solar Compass, BRIDGE

TO INDIA had orecast that going by theprocedure ollowed or ADD, an interim

order could be announced as early asJuly 2013. Given that no interim order

has been announced until date, it canbe assumed that this investigation is

taking longer than usual. This might bedue to the act that this is a high prole

case with considerable internationalscrutiny and pressure. As per the

normal procedure, the nal outcomeshould have been expected 23rd

November 2013 (one year rom thedate o initiation). However, given that

the nal outcome has to be precededby an interim order, the investigations

might well miss the deadline.

BRIDGE TO INDIA has maintained thatimposition o ADD would be negative

or the Indian solar sector as it willdrive up costs and slow down adoption

o the technology, which should be

the primary goal. Nevertheless, thisis a legal and not a political procedure

and i dumping has taken place, then

ADD will most likely be imposedirrespective o the implications on the

industry.

To present a contrarian view, we asked

HR Gupta, Managing Director o IndoSolar, to share his views on the Indian

solar manuacturing sector. Indo Solaris Indias largest cell manuacturer

with a current manuacturing capacityo 160 MWp. The company has plans to

increase the capacity to 360 MWp.

4.1 INTERVIEW: HR

GUPTA, MANAGINGDIRECTOR, INDOSOLAR1. What is the current state o the

Indian solar manuacturing industry?

Cell manuacturing in India ispractically idle. These acilities are

either underutilized or completelyshut. Module makers are mostly

catering to the o-grid requirementand are now also receiving some

enquires rom Europe. However,sizeable orders and visibility is not

there. Some module manuacturersare also developing their own projects

and using their own modules orthese projects to keep their plants

operational.

2. What can be expected in terms o

DCR and anti-dumping duties? By

when can we expect some clarity onthe subject?

My understanding on DCR is that the

documents or phase two o the NSMare awaiting cabinet approval.

On ADD, we are now in the 20th month

since we sought remedial action and10th month since initiation. There is a

high probability that the matter will bedecided next month.

4. INDUSTRY

An anti-dumping duty

has the potential tochange the supply

dynamics in the Indiansolar sector drastically.

HR Gupta,

Managing Director,Indo Solar



3. I anti-dumping duties are enorced,

the taris or solar power are

expected to go up. Do you agree? Is it

justied?

The cost o solar power on a dumping

basis has already wiped out aroundUS$ 80 Billion in market capital and

the supply side o the solar value chainhas been decimated globally.

I one allows only negative marginson the supply side, soon there will

be no supply side at all. In order tomaintain a stable production capacity

and allow or R&D, prices should

be commensurate to support thesustainability o the sector.

4. What would be your recipe to make

the manuacturing o solar modules

competitive in the long run?

I you closely analyze costs, aswas done by NREL and MIT, in the

US, you will see that operationalmanuacturing costs are similar

globally. In India, we have high costo debt and high power costs but

these can easily be optimized whenmanuacturers are bankable, can

borrow cheaper oshore and switch togrid power.

Manuacturing o solar cells and

modules is already competitive andthe bill o materials is anyway similaramongst all manuacturers.

In India, we have high

cost o debt and highpower costs but these

can easily be optimizedwhen manuacturers

are bankable andcan borrow cheaper

oshore and switch togrid power.

Errata rom the previous edition o the India Solar Compass (July 2013):

Correction is in the table on page 19. Satec Enviro supplied only the steel or the

trackers. They did not install the tracking system as reported by us. Insolare hasinstalled the trackers or their project.



5. KEYQUESTION: HOW

DOES

THE GROUPCAPTIVE MODELWORK?

5.1 BACKGROUNDUntil now, the Indian solar markethas been dominated by policy basedprojects that rely on government

incentives or obligations. However, aall in the cost o solar power and a

rise in the cost o conventional powerhave prompted many companies to

explore business models whereinsolar power can compete in the

power market without governmentsupport. India is currently in a situation

where parity or many industrial andcommercial consumers is within reach.

In such a situation, viability enablers

such as accelerated depreciation, anyadditional revenue through the RECmechanism or any other incentive such

as a waiver o open access charges orelectricity duty can tilt the balance to

make solar power an attractive optionor power consumers and investors

alike. Several new business modelsare evolving in India to tap into this

opportunity. Generation o solar powerunder the group captive model is one

o most talked about business modelsin the Indian market at present.

5.2 DEFINITIONThe group captive model is based onthe Electricity Act 2003. The act allowsor a structure or supply o power to

a group o consumers, treating themas captive consumers, as long as the

ollowing conditions are met:

i Not less than 26% o the ownershipis held by captive consumers.

ii Not less than 51% o the aggregate

electricity generated in such plant,determined on an annual basis, is

used or captive consumption.

5.3 REGULATIONS:THE OPEN ACCESSMECHANISMTypically, group captive power projectshave to operate within the ambit o

the open access mechanism. Openaccess allows large power consumers

(typically with a connected load o 1

MW and above) to buy power directlyrom the open market.

On the basis o the type o contract,open access is categorized as: Short

term open access (STOA), mediumterm open access (MTOA) and long

term open access (LTOA). Typically,solar power plants under the group

captive model opt or the LTOA basedagreements.

While open access consumers can

buy directly rom the group captiveproject or the open market, they

are subject to several charges that

are incurred or using the alreadyavailable transmission and distributioninrastructure. These include:

i Connectivity charges These are

recurring, xed charges payableby a consumer or the electricity

connection provided by thedistribution licensee DISCOM. This

varies with the connected loadand is chargeable within a range

o ` 15/kW/per month (0.19/kW/

per month, $0.25/kW/per month)to ` 500/kW/month (6.3/kW/per month, $8.3/kW/per month)

depending on the category oconsumer.

ii PoC charges Point o connectioncharges are transmission charges

introduced to recover the xedcosts o the transmission network.

They take into consideration thedistance o the customer rom the

load center (generator) and thedirection o the node in the grid.

These charges and the relatedlosses are applicable to captive

generating plants and consumersconnected to a central or state

transmission network (66 kVA or132 kVA) or a DISCOM network

(11kVA and 33 kVA). Generally, thecharges are in the range o `0.08

0.16/kWh (0.001 0.002/kWh,$0.001 0.003/kWh)

iii Transmission charges These

charges are payable to thetransmission licensee (state

transmission unit) or using thetransmission inrastructure.

Typically, group captivepower projects haveto operate within the

ambit o the open

access mechanism.Open access allows

large power consumersto buy power directly

rom the open market.

While open accessconsumers can buy

directly rom thegroup captive project

or the open market,they are subject to

several chargesthat are incurred orusing the already

available transmissionand distributioninrastructure.



Figure 5-1: Key charges and losses taken or an average case ogroup captive sale o power in India

These charges are in the range

o `50,000 to 200,000/MW/month (625 2,500/MW/month,

$833- 3,333/MW/month or LTOAconsumers and in range o `0.10

0.50/kWh (0.001 0.006/kWh,

$0.002 0.008/kWh) or STOAconsumers.

iv Transmission losses Losses

are considered or the assumedelectricity units lost in the

transmission line between thegenerator and the consumer.

Typically, these are in the range o2 6 %.

v Wheeling charges These chargesare payable to the distributionlicensee or using the distribution

network. They are applicable to allpower generating plants connected

to the distribution grid at 33 kV orbelow and availing open access.

They are typically in the range o`0.10 0.80/kWh (0.001 0.01/

kWh, $0.002 0.013/kWh).

vi Wheeling losses These are the

losses incurred while transportingelectricity through the distribution

network. They are determined bythe State Electricity Regulatory

Commissions (SERCs) or eachconsumer categories and typically

range rom 4 10 %.

vii Cross Subsidy Surcharge These

are charges payable by consumerswho opt or supply through open

access. In India, industrial andcommercial clients cross subsidize

electricity rates or agricultural

and residential consumers. When aconsumer opts or open access, thedistribution licensee loses a high

value consumer who would havesubsidized low paying consumers.

This surcharge is designed to makeup or the lost cross subsidy.

viii SLDC/RLDC charge Theseare charges payable by STOA

consumers who avail services o

the state/regional load dispatchcenter (SLDC/RLDC). Such services

include scheduling, revisions inscheduling and energy accounting.

They are typically in the range o`1,500 2,500 (19 31, $25 42)

per day or part o the day.

The largest impact is that o the Cross

Subsidy Surcharge (CSS), wheelingcharges and transmission charges.

CSS, however, is waived o or group

captive projects. Thereore, we areonly concerned with the wheeling andtransmission charges. These charges

currently vary between zero and`2.12/kWh (0.03/kWh, $0.04/kWh)

depending on the state.

The largest impact,

amongst all the openaccess charges isthat o the Cross

Subsidy Surcharge,wheeling charges andtransmission charges.

Transmission andwheeling losses vary

signifcantly acrossstates.

BRIDGE TO INDIA, 2013




As we can see in the Figure 5-2 the

impact o open access charges andlosses will be the lowest in Andhra

Pradesh, Uttar Pradesh and Delhi andthe highest in Maharashtra, Himachal

Pradesh and Odisha. The overall

impact can vary between `0.63/kWh- 2.74/kWh (0.008 0.03/kWh, $0.01-

0.5/kWh).

Figure 5-2: State-wise costs associated with the open accessmechanism (without any concessional benets, in INR/kWh)

0.0

0.5

1.0

1.5

2.0

2.5

3.0

Additional cost impact on solar power under the open access mechanism(without any concessional charges)

Open accesslosses (impactin INR/kWh)

Open accesscharges

Delhi

Madhy

aPradesh

Andhr

aPradesh

Bihar

Karnataka

Utta

rPradesh

Chhattisgarh

TamilNadu

Gujarat

WestBengal

Haryana

Punjab

Rajasthan

Kerala

Ma

harashtra

Himacha

lPradesh

Odisha

Andhra Pradesh and Uttar Pradesh, or

example, have completely waived othese charges or the solar projects.

Odisha and Himachal Pradesh, on theother hand, have the highest charges

among all states. Transmission andwheeling losses also vary signicantlyacross states.

A combination o these can vary rom7.74% to 12.25% o the total power

supplied. The tari orders in Karnatakaand Rajasthan account or the lowest

losses in India, Punjab and MadhyaPradesh account or the highest.

In some states,developers can avail

concessional open access charges.For example, Andhra Pradesh and

Uttar Pradesh have waived o theopen access charges or solar power

and Madhya Pradesh, Punjab andGujarat are known to provide some

concessions in terms o charges and

losses considered.

However, according to Central

Electricity Regulatory Commission(CERC) guidelines, RECs cannot be

claimed i concessional wheeling anddistribution charges are being availed.

Thereore, developers must choosebetween the two benets.

Source:

BRIDGETOINDIA

B

RIDG

ETOINDIA,2013

The impact o open

access charges andlosses will be thelowest in Andhra

Pradesh, UttarPradesh and Delhiand the highest in

Maharashtra, HimachalPradesh and Odisha.



Additional cost impact on solar power under the open access mechanism(with concessional charges)

Open accesslosses (impactin INR/kWh)

Open accesscharges

States withconcessionalcharges

UttarPradesh

AndhraPradesh

Delhi

MadhyaPradesh

Bihar

Gujarat

Karnataka

Chhattisgarh

Punjab

TamilNadu

WestBengal

Haryana

Rajasthan

Kerala

Maharashtra

HimachalPradesh

Orissa

0.0

0.5

1.0

1.5

2.0

2.5

3.0

Figure 5-3: Cost associated with the open access mechanism orselcted states at currently available concessional charges (inINR/kWh)

5.4 BENEFITSOF THE GROUPCAPTIVE MODELApart rom the incentives such as a

waiver o CSS, power banking acilitiesand concessional open access charges,

group captive consumers also have theollowing benets:

i The key benet o the group captive

model is that bankability risks othe o-taker can be minimized by

spreading it across multiple powerconsumers. Along with that, in case

a power consumer stops buyingpower, another o-taker can easily

be accommodated instead.

ii Smaller power customers can come

together to build a larger project,

thereby benetting rom economieso scale.

iii In some states, it is also possibleor power consumers to get

additional power entitlement.This means that users are usually

entitled to draw a certain amounto power rom the sub-station andin case they need more power, they

would need to get an additionalsanction at a one-time cost or, in

some cases with revised tari.A group captive model can help

provide an additional entitlementwithout changing the sanctioned

load rom the sub-station.

iv Accelerated depreciation (AD)

benets and revenue throughthe sale o RECs might provide

additional nancial incentives.

Source:BRIDGETOINDIA

B

RIDGETOINDIA,2013

The key beneft o the

group captive model isthat bankability risks

o the o-taker can beminimized by spreading

it across multiplepower consumers.

Smaller powercustomers can come

together to build alarger project, thereby

beneftting romeconomies o scale.



----------------------5Accelerated depreciation reers to any one o several methods by which a company, or nancialaccounting or tax purposes, depreciates a xed asset in such a way that the amount o depreciationtaken each year is higher during the earlier years o an assets lie. As this is subtracted rom thecash fow, it allows the company to avoid paying taxes on the depreciated amount. An accelerateddepreciation o 80% in the rst year is allowed or inrastructure projects under section 80 (I) o theincome tax act.

Figure 5-4: Financial structuring or a group captive projectwhere the power consumer is not the investor

Capital cost o the project

Debt (70%) Equity (30%)

Preerentialstock (99%)

100% o the participative,cumulative & convertiblepreerence shares will be

held by the investor

Commonstock (1%)

26% o the commonstock will be held bythe power consumer

The remaining 74%o the common stock will

be held by the investor

5.5 GROUP CAPTIVEPOWER PLANTSUNDER AN OPEXMODELGroup captive solar power projects

may be an attractive option or captiveconsumers who can not only buy power

at cheaper rates rom the plant but canalso, by investing into the project, avail

accelerated depreciation5 benets.

Third party investors and independentpower producers (IPPs) who wish to

oer an Operating Expense (OPEX)model (i.e. sale o power rather than

sale o a power plant) can also availthe AD benets by adopting a certain

nancial structure.

In such a case, a Special Purpose

Vehicle (SPV) can be ormed with

joint holding o the investor (the

developer) and the power consumer.The project will be owned by the SPV.

I a third party investor wants to havethe maximum AD benet, the equity

structure o the SPV could be as

ollows:

i 1% common equity

ii 99% preerential equity

In such a structure (reer to the Figure5-4), the power consumer just invests

the equity portion (30%) o the required26% o the common stock (1%) into

the SPV. This means that or a 1 MWproject to be set up with a capital

cost o e.g. ` 70 million (875,000,$1,166,667), the power consumer just

needs to invest ` 54,600 (683, $910)to make the project eligible or the

group captive scheme. The investor orIPP can provide the remaining equity.

BRIDGE TO INDIA, 2013Source: BRIDGE TO INDIA

Third party investors

and independent powerproducers (IPPs)

who wish to oer anOperating Expense

(OPEX) model can alsoavail the group captive

benefts by adoptinga certain fnancial

structure.

The power consumerjust needs to invest

` 54,600 (683, $910)to make the project

eligible or the groupcaptive scheme.



There is no rule to speciy the split

between the preerential stock andthe common stock and it can vary

rom project to project. The groupcaptive regulations states that the 26%

minimum share required or the power

consumer is o the equity (or commonstock).

Disclaimer: Most project developers

claim that this fnancial structuring is

completely legal and ollowed or several

power projects or other sources o

power. However, some government

ofcials are known to have raised

concerns over the legality o such a

model.

As a new SPV is created or thepurpose o the project and does not yet

have a prot on its balance sheets, itcannot avail the benets o accelerated

depreciation (AD) on the SPVs assets.

Based on common understanding o

the accelerated depreciation benet,it does not make sense or a newly

created SPV to claim the benet as ithas no existing prot on its balance

sheets that it can oset against thedepreciation claimed. However, one

o the project developer pointed usto a Supreme Court ruling which

said that accelerated depreciationcan be claimed by the part or ull

owner o the SPV. Based on theinormation provided, we understand

that Section 32 (I) o the Income TaxAct was amended in 1997 and there

is a Supreme Court ruling rom the

case o Seth Banarsi Dass Gupta v.CIT 166 ITR 783, that says that basedon the changes in section 32 (I) o the

Income Tax Act, an owner or a ractionowner o the SPV is entitled to claim

depreciation on the asset owned by aSPV. However, based on our discussion

with tax experts, we do not believethat there is any viable way or a SPV

to claim AD. Moreover, General Anti-Avoidance Rules (GAAR) under the

Direct Tax Code (DTC), which is likely to

be implemented rom April 2015, willmake it extremely dicult or anyoneto carry out nancial manipulations

just rom the taxation perspective.

Thereore, investors looking to sell

power (OPEX model) using the groupcaptive mode should not expect to avail

the benets o AD.

5.6 THE BUSINESSCASE FOR GROUPCAPTIVE POWERPROJECTSA group captive project must be

able to supply power to a consumerat a tari that is below the existingalternative cost o procuring power.

Solar will always compete with othersources o power that can be bought

using the open access mechanism.However, as the availability and price

o other sources o power may vary bylocation and circumstances, we have

not included such a comparison in ouranalysis.

The main parameters or the analysisare as ollows:

i For the grid tari or industrial andcommercial consumers,we have

chosen HT 33 kVA consumer tarisor our analysis.

ii LTOA transmission charges andwheeling (distribution) charges

or HT 33 kV consumers wereconverted into `/kWh.

iii The intra state transmission andwheeling losses are considered and

the percentage values have beenconverted into `/kWh.

iv Equally, the open access chargesand losses have been converted intoINR/kWh.

v The viable solar PPA tari iscalculated or our dierent REC

scenarios (no RECs sold, 25% o theRECs sold, 50% o the RECs sold

and 75% o the RECs sold). For eachscenario, we have calculated an

option with and without AD benet.We have let out the scenario or

100% o the RECs being sold aswe think that there is no realistic

possibility o that happening.

Based on common

understanding othe accelerated

depreciation beneft, itdoes not make sense

or a newly created SPVto claim the beneft as

it has no existing profton its balance sheets

Solar will alwayscompete with other

sources o powerthat can be bought

using the open accessmechanism.



----------------------6http://bit.ly/mVPsSl

vi The equity IRR expectation is taken

as 15%.

vii Irradiation level has been taken as

averages or each state.

The ollowing assumptions have been

made or the analysis:

i Wheeling and transmission chargesare usually given in percentage

terms. We have converted it intoINR/kWh or a better understanding

and analysis (generation o 1.6million units/MWp installed has

been used or this conversion).

ii For all other calculations, the

capacity utilization actor (CUF) or

each state has been used as perCERC6.

iii Size o solar power plant is 10 MW.

iv RECs traded at the foor price until2017, post which no urther REC

revenue

v Plant lie and PPA period o 25

years

vi No escalation o the tari

throughout the PPA period

vii CAPEX o ` 65 million/MW

(812,500/MW, $1,083,333/MW).

viii O&M costs o ` 1 million/MW/year

(12,500/MW/year, $16,667/MW/year)

ix Debt Equity ratio o 70:30

x When no RECs are sold, the

concessional open access chargeshave been considered as ollows:

o Andhra Pradesh, Uttar Pradesh:transmission and wheeling

charges exempted

o Punjab, MadhyaPradesh:concessional wheeling

losses o 2%

Based on our modeling, i up to 25% o

RECs are sold, group captive powerplants can be viable in the ollowing

states: Delhi and Maharashtra.

I 50% o the RECs are sold; group

captive power plants can be viable inthe ollowing additional states: Andhra

Pradesh, Karnataka, Punjab, Rajasthanand Tamil Nadu.

I 75% o the RECs are solar, groupcaptive power plants can be viable in

the ollowing additional states: BiharKerala and West Bengal.

I up to 25% o RECs are

sold, group captivepower plants can be

viable in the ollowingstates: Delhi and

Maharashtra.



Table 5-1: State-wise viability o group captive solar projects in India

Assumption

on RECs being

sold

State Type o

consumer

or whom

solar power

through open

access is vi-

able

Viable solar

PPA tari

that can be

oered to

consumers

(INR/kWh)

Existing tari

being paid by the

consumers (INR/

kWh)

Dierence be-

tween existing

tari and viable

solar PPA tari

(INR/kWh)

RECs not

being availed

(concessional

charges or

open access

considered,

where

applicable)

With ADDelhi

Only

commercial

7.15 7.5 0.35

Maharashtra 8.73 9.83 1.1

Without AD


25% o the

RECs are being

sold at foor

prices

With AD

Maharashtra Only

commercial

7.91 9.83 1.92

Delhi Industrial &

commercial

6.33 6.6 (industrial),

7.5 (commercial)

0.27 (industrial),

1.17 (commercial)

Without ADDelhi Only

commercial

7.04 7.5 0.46


50% o the

RECs are being

sold at foor

prices

With AD

Andhra

Pradesh

Onlycommercial

5.6 6.28 0.68

Karnataka 6.36 7.00 0.64


Punjab 6.04 6.58 0.54

Rajasthan 5.93 6.25 0.32

Tamil Nadu 6.51 7.00 0.49

Delhi Industrial &commercial

5.51 6.6 (industrial),7.5 (commercial)

1.09 (industrial),1.99 (commercial)

Without AD

MaharashtraOnly

commercial

7.79 9.83 2.04

Andhra

Pradesh

6.27 6.28 0.01

Delhi Industrial &

commercial

6.22 6.6 (industrial),

7.5 (commercial)

0.38 (industrial),

1.28 (commercial)Source: BRIDGE TO INDIA

B

RIDGETOINDIA,2013



Assumption

on RECs being

sold

State Type o

consumer

or whom

solar power

through open

access is vi-able

Viable solar

PPA tari

that can be

oered to

consumers

(INR/kWh)

Existing tari

being paid by the

consumers (INR/

kWh)

Dierence be-

tween existing

tari and viable

solar PPA tari

(INR/kWh)

75% o theRECs are being

sold at foor

prices

With AD

AndhraPradesh

Industrial &commercial

4.78 5.3 (industrial),6.28

(commercial)

0.52 (industrial),1.5 (commercial)

Bihar 5.27 5.5 (industrial),

5.5(commercial)

0.23 (industrial),

0.23 (commercial)

Delhi 4.69 6.6 (industrial),

7.5 (commercial)

1.91 (industrial),

2.81 (commercial)

Maharashtra 6.27 6.33 (industrial),

9.83(commercial)

0.06 (industrial),

3.56 (commercial)

Punjab 5.22 6.33(industrial) ,6.58(commercial)

1.11 (industrial),1.36(commercial)

Rajasthan 5.11 5.50 (industrial),

6.25(commercial)

0.39 (industrial),

1.14 (commercial)

Karnataka Only

commercial

5.54 7.0 1.46

Kerala 6.04 6.5 0.46

Tamil Nadu 5.69 7.0 1.31

West Bengal 5.87 6.2 0.33

Haryana 5.54 5.85 0.31

UttarPradesh

5.63 6.0 0.37

Without AD

DelhiIndustrial &

commercial

5.4 6.6 (industrial) ,

7.5 (commercial)

1.2 (industrial), 2.1

(commercial)

Punjab 5.89 6.33 (industrial),

6.58(commercial)

0.44(industrial),

0.69 (commercial)

Karnataka Onlycommercial

6.25 7.0 0.75


Tamil Nadu 5.77 7.0 1.23AndhraPradesh

5.45 6.28 0.83

Source: BRIDGE TO INDIAB

RIDGET

OINDIA,2013

State



5.7 RISKSApart rom all the generic risksassociated with solar power projects

(reer to our report called, Bankabilityand Debt Financing or Solar Projects

in India (April 2013) or details)7, thereare some risks specic to the group

captive model. These risks can becategorized as ollows:

i Annual revision o open access

charges and rules Open access

charges and rules are otenunclear. On top o this, they are

subject to change every year. Insuch a scenario, assessing the

nancial viability o a long termproject always has an element o

uncertainty attached. The risk isheightened in a scenario where

utilities eel threatened becausetheir high paying customers move

to other power procurementsources. We have already seen

utilities in the US complainingabout the impact o solar power on

their business. In the same manner,the threat perception among Indian

utilities may also increase, whichmay result in higher open access

charges. This risk might be reducedby the overall policy support or

solar power and the power decit inIndia.

ii Structural changes in the powersupply More secure availability o

power can be a signicant driveror consumers opting or power

purchases rom group captive

plants. The South Indian stateso Andhra Pradesh and TamilNadu, or instance, have very high

power decits. As a result, thecost o power on the open access

market regularly reaches as highas ` 8/kWh. However, structuralchanges such as the connection o

the southern grid to the northerngrid, which is expected soon, can

signicantly alter the demand

and supply situation and thus theprices on the open access market.

BRIDGE TO INDIA believes that the

overall decit in power availabilitywill continue to increase and that

taris will continue to rise over themedium and long-term. However,

structural shits may occur on

specic locations.

iii Bankability o the o-taker Incase one o the power consumer

stops buying power rom thegroup captive project and no other

consumer is willing to step in, thisamount o power might have to

be sold to the power distributioncompany at the Average Pooled

Purchase Cost (APPC) o power,probably at a lower price. Some

o the projected revenue would belost.

iv Risk associated with RECs The

REC market in India has notdeveloped as hoped. Even though

the RPO mechanism itsel mightpick up, i states are serious about

implementation, the REC marketwill still remain subdued as the

dierence in the cost o solar powerand the cost o an REC (essentially

solar without power) hasincreased signicantly. While solar

power is now available or third-party sale at ` 7 8/kWh (0.09

0.10/kWh, $0.12 0.13 /kWh),the base price o an REC, where

the obligated entity does not evenget the power component is priced

at a minimum rate o ` 9.3/kWh(0.12/kWh, $0.16/kWh). Moreover,

under current regulations, most

REC demand is still expected onlytowards the end o the nancialyear, when some obligated entities

are looking to meet their RPOs orthe given year. The cash-fow or the

project has to be managed careully,especially with respect to a debt

repayment plan. Developers should,thereore, only assume a limited

sale o RECs in their nancialcalculations and within that too, the

revenue should be expected to belargely concentrated towards the

end o the nancial year.

Open access charges

are subject to changeevery year. In such ascenario, assessing

the fnancial viabilityo a long term project

always has an elemento uncertainty attached.

Even though the RPOmechanism itsel

might pick up, i statesare serious about

implementation, theREC market will still

remain subdued as thedierence in the cost

o solar power and thecost o an REC

----------------------7 http://bridgetoindia.com/our-reports/india-solar-decision-bries#



5.8 CONCLUSIONBased on the above analysis, BRIDGETO INDIA thinks that the group

captive model is viable in some stateswith/without RECs. Even in the states

where it is viable, it might not be thebest option or the power consumer

as solar power would still need tocompete with other available sources

o power.

The key benet o the group captive

model is that it provides a good wayor solar project developers to reach

the needed scale, it helps reduce thePPA risk by having multiple o-takers

and it also helps reduce legal risks asthe asset can be located outside o the

power consumers premises, vis--vis a single customer captive project,

where the project is typically located atthe customers premises.

In a number o states, a group captiveplant might be able to sell solar power

at taris o around ` 5.50 7.00/kWh (0.06 0.07/kWh, $0.09 0.12/

kWh),up to 50% o the RECs can be

sold. Currently, the sale o powerthrough the group captive and openaccess mechanism is viable without

RECs only in Delhi and Maharashtra.Until now, none o the solar projects

have taken group captive route. Statessuch as Andhra Pradesh, Karnataka,

Punjab, Rajasthan and Tamil Naduwould become viable, i 50% o the

RECs can be sold at the foor price till2017.

There are several scenarios with a

slight deviation rom the above analysisthat can help this model become a

more viable business proposition.These are as ollows:

i An encouraging development isthat open access charges are

being waived o under most newsolar policies. We have already

noted this in Andhra Pradesh

and Uttar Pradesh, where openaccess charges have been waivedo entirely. Madhya Pradesh and

Punjab also oer concessional

open access charges. We expect

this trend will continue. I CERCallows RECs to be availed along

with these concessional charges,as Andhra Pradesh has petitioned

it to , the equation would change

considerably in avor o the groupcaptive model over co-locatedprojects.

ii In the above analysis, no escalationhas been considered. However,

most industry observers believethat power prices in India will

continue to rise. In the wake odebt-structuring plans or the state

distribution companies, drasticupward tari revisions can be

expected. We have already seenupward tari revisions in excess

o 30% in states such as TamilNadu and Uttar Pradesh over the

last year alone. I a developer canconvince power consumers to agreeto an annual increment in the price

o solar power even lower tariscan be oered to the consumers.

Several projects or third-party saleo power are currently being planned

across India under the group captivemodel. Judging by the taris being

oered, many o these projects areexpected to be considering an overly

optimistic scenario or the revenuethrough RECs. We expect that such

projects will not see the light o the dayas it will be extremely dicult or them

to arrange debt. Whether or not groupcaptive projects become mainstream

in India is still an open question.

Compared to the projects on the powerconsumers location, currently, theopen access charges are too high to

provide or any real benet o scale.The key to the short to medium term

success or such projects is regulatorysupport in terms o lower open access

charges or solar power plants. Mostnew policies, are already taking the

steps in this right direction. I morestates ollow this trend, we can expect

to see an increased viability or thegroup captive model in the uture.

Currently, the sale

o power through thegroup captive and open

access mechanism isviable without RECs

only in Delhi andMaharashtra.

The key to the short tomedium term success

or such projects isregulatory support in

terms o lower openaccess charges or

solar power plants.



6. ANNEXURE6.1 GLOSSARY OF TERMS

AD Accelerated Depreciation

ADD- Anti-dumping duties

APPC Average Pooled Purchase Cost

CAPEX Capital Expenditure

CERC Central Electricity Regulatory Commission

CSP Concentrated Solar Power

CUF Capacity Utilization Factor

DCR- Docmestic Content Requirement

DISCOM State Distribution Company

EPC Engineering, Procurement and Construction

FiT Feed-in-Tari

IPP Independent Power Producers

LoI Letter o Intent

LTOA Long Term Open Access

MTOA Medium Term Open Access

MNRE Ministry o New and Renewable Energy

NHPC National Hydro Power Corporation

NSM Jawaharlal Nehru National Solar Mission

O&M Operation and Maintenance

OPEX Operational Expense

PoC Point o Connection

PPA Power Purchase Agreement

PV Photovoltaic

REC Renewable Energy Certicate

RS Request or Selection

RLDC Regional Load Dispatch Centre

RPO Renewable Purchase Obligation

SERC State Energy Regulatory Commission

SLDC Regional Load Dispatch Centre

SPV Special Purpose Vehicle

STOA Short Term Open Access

SECI Solar Energy Corporation o India


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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.

[email protected]

www.bridgetoindia.com

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Documents

BRIDGE to INDIA_ India Solar Compass_October 2013