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Astonfield Renewable Resources, Ltd. Developer’s perspective on an enabling framework for renewable energy November 2009. Ravi Raina. INDIA’S POWER SECTOR : POINTS TO PONDER . Current power mix is fossil fuel dependent and has following negatives Price volatility/ subsidy dependent

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Astonfield renewable resources ltd

Astonfield Renewable Resources, Ltd.

Developer’s perspective on an enabling framework for renewable energy

November 2009

Ravi Raina


India s power sector points to ponder
INDIA’S POWER SECTOR : POINTS TO PONDER

  • Current power mix is fossil fuel dependent and has following negatives

    • Price volatility/ subsidy dependent

    • Energy security

    • Impact on environment

    • Long gestation period

  • Utility scale “carbon-less” SOLAR POWER, with NIL environment impact is need of the day to support

    • Sustainable rural development (electricity in rural areas)

    • Use existing T&D network

    • Decentralized power generation at remote locations across the country

    • Replacement for existing DG sets being used for irrigation where subsidised cost is Rs 15 /kwh

India’s Installed Generating Capacity Total = 147,716MW

Utility scale solar power addresses India’s growing energy needs


Solar power will be a significant source of global energy mix in future , with critical mass building after reaching grid parity

Geothermal

1,600

Other renewables

Solar thermal

(heat only)

1,400

1,200

Solar power

(photovoltaics and solar thermal generation)

1,000

Primary Energy Use (EJ/a)

800

Wind

600

Biomass(advanced)

Biomass(traditional)

400

Hydroelectricity

Nuclear Power

200

Gas

Coal

Oil

0

Solar subsidies required

Solar hits grid parity

Solar cheaper than conventional energy

2000

2010

2020

2030

2040

2050

2100

Source: Climate Change


Key issues impeding the growth of solar program mix in future , with critical mass building

Affordability of power (Outlook on grid parity)

Industry players (across the value chain)

Government Policy environment (subsidy)

Open access to consumers

Ground level issues (land, permitting)

Regulatory Framework (RPPO, tariff orders)

Central / State government need to support the solar program by way of feed in tariff subsidy and regulatory framework till grid parity is achieved


Holistic lifetime cost comparison of solar versus conventional energy rs kwh for 1 000mw
Holistic lifetime cost comparison of solar versus conventional energy (Rs. / kWh) for 1,000MW

8.93

Healthcare

(12.5 L people impacted)

0.03

Water Cost

O&M Escalation

Component

0.84

Rural jobs

created

(2.5 L jobs)

Fuel Escalation

Component

22.56

3.58

12.40

17.00

Transmission &

Wheeling Charges

0.68

PEAK POWER

Peak power premium

5.00

Effective

solar tariff

3.50

Base Thermal Tariff

4.60

Solar Tariff

Conventional Tariff

Source: Astonfield analysis / Public data


With government support starting in 2009 solar can achieve peak grid parity as early as 2013 15
With government support starting in 2009, solar can achieve Peak Grid Parity as early as 2013-15

PHASE II

(Post- Govt Policy)

PHASE I

(Govt Policy

very important)

7%

6%

Peak Electricity Prices (Rs/kWh)

5%

4%

Convergence /

Peak Grid Parity

India – Estimated price of peak electricity today: Rs. 6.50/KWh

  • Post 2013, India can substitute expensive sources such as diesel with solar to meet growing peak power demand

  • Astonfield estimates that base load grid parity can be achieved by 2020-23 - beyond that point, abundantly available domestic solar power will be cheaper than imported coal, positioning India to be energy independent

*

* Assumes that conventional power tariff escalates at roughly 5-7% per annum

Source: Stephen O’Rourke/Deutsche Bank / Astonfield Analysis


While Solar tariffs are more incentivized in Europe, large scale program can bring economies of scale to support low tariffs in India

Comparison of Feed-in Tariffs Globally (INR per kWh)

Scale of India’s Solar Program (MW)

Two States have now established independently funded programs of 500MW and 50MW respectively

In addition, Government of India expected to announce landmark 20,000MW solar program in 2009

15 -17 Rupees

22-24 Rupees

50MW experimental solar program announced by Government of India; more than 1500MW of applications

22-24 Rupees

2.5MW grid connected solar capacity in all of India

28-35 Rupees


Cerc tariff determination guidelines is a step in the right direction
CERC tariff determination guidelines is a step in the right direction…

SERCs needs to keep the above factors into account, while adopting the CERC guidelines at State level


Cuf needs to be customized for each state
CUF needs to be customized for each state direction…

India’s Solar Radiation Map

Varying solar insolation levels across the country (4-7 kwh / sqm/day) affects the project economics, hence CUF needs to be in accordance with insolation levels of each state


Solar rppos critical to ensure visibility of solar sector growth to attract up front investment
Solar RPPOs: Critical to Ensure Visibility of Solar Sector Growth to Attract Up-Front Investment

The rationale for Solar RPPO

Available Benchmarks

  • Demand is generated by State DISCOMs – in the absence of solar energy procurement targets, they will tend to opt for cheaper renewable power sources

  • In addition to targets, there must also be penalties on DISCOMs that fail to achieve these targets

  • Path to Grid Parity is dependent on creating visibility through RPPO to build manufacturer and developer confidence in economies of scale

Global Experience

EU : 20/20/20 (20% cut in emission norms, 20% renewable energy portfolio, 20% cut in energy consumption by 2020)

Germany : solar accounts for 4% of renewable portfolio

Indian Experience

Gujarat : Solar specific RPPO ( 1.5% in 2009, increasing to 2.5% by 2011)

Maharashtra : 0.5%

CERC can play a critical role in guiding the SERCs to declare solar-specific RPPO targets


To realize potential of solar power india should have capabilities across pv value chain
To realize potential of solar power, India should have capabilities across PV Value chain

  • Crystalline Value Chain

(%) = relative weight of cost structure

Polysilicon

Ingot

Wafer

Cell

Module

Balance of System

  • 35%

  • 7%

  • 7%

  • 8%

  • 13%

  • 30%

  • Thin film Value Chain

PV Raw Materials

PV Deposition & Module Integration

Module Encapsulation

  • Glass that is used as substrate

  • Thin-Film manufacturing line where deposition and integration take place

  • Schematic diagram of a CdTe module

India can be a global solar PV manufacturer then presence across the value chain is imperative


TECH capabilities across PV Value chain

MANUFACTURING

GENERATION

Successful solar sector begins with robust solar policy and right regulatory framework stimulating demand for solar power generation

3. With an established downstream demand, investment in R&D and talent flow into the sector, helping India become a global solar technology hub

Growth of the value chain begins downstream

2. As demand is created, a vibrant manufacturing base opens up, creating domestic jobs and fueling overseas exports

  • Drive manufacturing of all solar technologies and create export base market

  • Stimulating generation creates domestic demand for solar manufacturing and fulfills nation’s electricity needs

    • 15-20 GW of demand stimulation to attract large scale cost efficient manufacturing

Stimulating generation lays the foundation for long-term viability of the sector


To realize the potential of the large scale solar program, a robust regulatory framework is a must at state level based on CERC notified norms

Solar Program Development Required:

Why this is necessary:

Accelerate Adoption of CERC Guidelines at State Level

  • Gives developers and manufacturers line of sight to standardized project return expectations across States and facilitates early installations

  • In the absence of an RPPO mandate for PV solar , states will steer towards cheaper renewable energy sources and subsidies will be compromised

Renewable Power Purchase Obligations

  • Development delays are costly barriers for developers - land assistance, permits should be granted through a single window clearance

Ensure Administratively Simple Processes

  • Given fast implementation cycle for solar, serious developers can accelerate new capacity addition if subsidy process is streamlined

Streamline Central Subsidy Application and Payment Process


Each State ERC can ensure strong foundations for solar sector rollout even as details of National Solar Mission become more understood

  • Initiate study to confirm CERC solar tariff guidelines (with adoption of specific CUF assumption for each state)

  • Declare a tariff for Solar PV (framework can be declared contingent on National Solar Mission subsidies)

  • Pursue allocation approach rather than competitive bidding in early years of the program (incubation is still required)

  • Declare an RPPO with solar-specific carve out

  • Work with Discoms to standardize bankable PPAs for solar projects <25MW

The states that have already gone through this process or that can complete it by 1Q10 will establish early leadership of solar sector


India has a small window of opportunity to capture global attention on solar sector development
India has a small window of opportunity to capture global attention on solar sector development

  • EUROPE

  • Spain has already cut back program

  • Germany should be a steady market but no more than 15% global manufacturing offtake

  • Italy potentially to re-evaluate feed-in-tariff in next 18 months

CHINA

Has declared target of rolling out 20GW of solar by 2020 but specifics on incentives and budget are still largely unclear

UNITED STATES

Still questions on budget /capital availability for solar rollout

Global manufacturers are looking for a secure long-term market at the moment and will sacrifice margin for scale


Astonfield has become the largest diversified renewable energy company in India

Jammu & Kashmir

Phase I Solar

Uttar Pradesh

Phase I Solar / Biomass

Haryana

3MW Solar

  • Total of 338MW solar project currently in the MOU/Allocation stage

  • Close to 1000 MW of pre-MOU opportunities currently in the public sector pipeline

  • Of that pipeline, at least 500MW expected to convert into formal concession by 1Q10 with remainder by 1Q11

  • In addition Astonfield is in process of finalizing 400MW in pipeline from four leading industrialists in India under co-development structure

Madhya Pradesh

Phase I Solar

Rajasthan

5MW Solar

Bihar

Phase I solar

Bihar

100MW Biomass

Rajasthan

Phase 2 Solar

West Bengal

2x 5MW Solar

10MW Biomass

West Bengal

Phase 2 WTE / Biomass

Gujarat

200MW Solar

Orissa

Karnataka

10MW Solar

Andhra Pradesh

Karnataka

Phase 2 Solar

MOU/ Allocation

Tamil Nadu

Pipeline

Initial Dialogue


THANKS FOR YOUR ATTENTION energy company in India


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