Solar Mango s India MW Solar Advisor Sample Report INDIA MW SOLAR ADVISOR. Sample Report

Transcription

1 2015 Solar Mango s India MW Solar Advisor INDIA MW SOLAR ADVISOR

2 Why Do You Need An Expert Guide for MW Solar Power Plants? The solar power sector is still quite new in India, just about 5 years old. Unlike many other traditional sectors, a number of aspects are unique to this sector technology, policy & regulations, and the competitive landscape that defines the business models. A 1 MW solar power plant costs upwards of Rs. 6 crores, a large investment for anyone. It hence is imperative that anyone interested in MW scale solar power plants gets a good understanding of the basics of this unique sector before making any serious investment decisions. India MW Solar Advisor from Solar Mango (a division of EAI), is India s only professional expert guide to investing in MW scale solar power plants. This advisor is written especially for those who are new to the solar power sector. Rather than overloading you with too much information, the Advisor explains in simple and clear language the most critical aspects that a developer needs to know the benefits, the risks, the constraints and of course the future possibilities. For a very small price, you get to understand the critical aspects of a huge investment. The report is presented in an interactive way, in many cases posing questions critical to an investor and answering those in a manner that facilitates action and decision making. This sample report provides those interested in buying the reports with a complete list of contents available in the Advisor, and brief samples of perspectives, inputs, data points and tables. India MW Solar Advisor costs Rs. 11,500 only, and can be purchased through credit card, bank transfer, or cheque. To purchase the India MW Solar Advisor, you can Do so from or Send an to enquiry@solarmango.com, with the subject: Purchase MW Solar Advisor with your contact details and we will get in touch with you immediately. Or contact Muthukrishnan for further information , muthukrishnan@eai.in Visit the official website for more information

3 Contents of the Report Introduction Contents 1. Business Models for Utility Scale Solar PV Sale to Utility Sale to Private Consumer Captive Consumption Pros and Cons of the Business Models Key Takeaways 2. Status of MW Solar Power Plants in India Prominent Developers Non-Developer Stakeholders Key Takeaways 3. Attractive Regions for MW Solar in India Prominent Regions for Solar Power Plants By Radiation By State Performance of Operating Plants Key Takeaways 4. Vendor & Component Selection Checklist Who is an EPC? Criteria to Choose EPCs Three Types of EPCs You Should Avoid Key Parameters for EPC Selection Top 5 criteria Other criteria Specific Expertise to Look for in Core EPC Team Engineering Procurement Commissioning 1

4 Planning for O&M & Monitoring and Control Systems Prominent Solar EPCs in India National EPCs Regional Solar EPC Players Component Selection Standards and Warranties Key Takeaways 5. State, Central Solar Policies Introduction to Solar Policies and Regulations Central Policy National Solar Mission Overview Status State Policies Andhra Pradesh Assam Bihar Chhattisgarh Gujarat Haryana Karnataka Madhya Pradesh Maharashtra Odisha Punjab Rajasthan Tamil Nadu Telangana Uttarakhand Uttar Pradesh Other States Key Takeaways Solar Mango s India MW Solar Advisor 2

5 6. Financing Options in India Overview Debt Financing Terms Domestic Financing International Financing Approaching a Financer Eligibility Criteria Documents Financial Institutions Equity Debt Details of Debt from Government Sources IREDA Power Finance Corporation (PFC) Constraints and Challenges for Getting Financial Closure for MW Solar Power Plants Key Takeaways Earlier Challenges Current Challenges Suggestions and Perspectives from the Financial Sector for Overcoming the Challenges and Making Solar Power Projects More Bankable 7. DPR Template for a Solar PV Power Plant Components of a Detailed Project Report Key Takeaways 8. Cost Break-up of Utility Scale Solar PV Power Plants Trends in Plant Cost Key Takeaways 9. Template for Financial Returns Revenues Costs Billable kwh Tariff 3

6 Analysis 10. Resources Initial Capital Investment Inverter Replacement Operations & Maintenance (O&M) Insurance Debt Service Taxes Key Takeaways Key Takeaways 11. Key Aspects Every MW Solar Developer Should Know Key steps to arrive at an attractive business model How do you decide which is better for you? APPC+REC, sale to private parties, or sale to utility? Critical aspects to be considered to win bids from state or central policies Make sure you are absolutely clear what your financial targets are. Employ a chartered accountant or a financial expert before you arrive at the final bid. Ensure that the region (district) you are bidding for a power plant has high potential for solar output Be very realistic with costs Factor in the off-taker risk in your costs Mistakes to avoid while bidding or during implementation of the MW solar power plant Key Takeaways Don t quote too low Don t quote too high Make sure you read and reread all terms and conditions Understand the penalty clauses clearly 12. Frequently Asked Questions by Developers, and Answers 1. Is it a good idea to invest in a solar power plant? 2. What are the paybacks for MW scale solar power plants? 4

7 3. I have large amounts of land. Is this a good enough reason for me to get into solar power plants? 4. How can I get financing for my solar power plant? 5. What are the O&M costs for solar power plants? 6. Which state is the best for solar power plants? 7. How can I get a private PPA signed for my power plant? 8. I already have wind farms. Can I co-locate solar farms in the same land? 9. What will be the output from my solar power plant? 10. How much does a 1 MW of solar power plant cost, and how much area does it require? Key Takeaways 13. Terms You Should Know as a Developer of MW Solar Power Plants Technical and Operational Terms BOO Model (Build Own Operate Model) Capacity Utilization Factor Central Inverters Concentrating Photovoltaics Cross Subsidy Surcharge Crystalline Silicon/c-Si DNI (Direct Normal Irradiance) Feed In Tariff Gigawatt Grid-tied Solar Power System Grid Parity kwh Kilo Watt LCOE (Levelised Cost of Energy) Module Module Degradation Net metering Off-grid Solar 5

8 Open Access Photovoltaics Power Purchase Agreement Pyranometer PV array Reflection Losses in Solar Cells Silicon Wafer Shading of solar panels Smart Grid String Inverters Standard Test Conditions (STC) Temperature Coefficient of Solar Panels Thin Film Solar Cell Tracker Transformer Utility Watt Peak (Wp) Wheeling Charges Explanation of Key Financial Terms Payback Period Return on Investment (ROI) Net Present Value (NPV) IRR (Internal Rate of Return) Levelised tariff PPA Financial Closure Accelerated Depreciation Discounting Factor Hedging Moratorium 6

9 With recourse/without recourse Solar Apex Bodies & Organisations in India and their Roles MNRE CWET/NIWE SECI SESI NSEFI SERIIUS CSRI Components of a Solar Power Plant Solar Panels Mounting Structures Inverters BOS Site Selection 14. Action Plan Solar Mango Services for the Solar Power Sector MW Scale Solar Power Plants Rooftop Solar Power Plants EAI s Cleantech Consulting List of Tables Table 1: State-wise status of MW scale solar power plants as of December 2014 Table 2: Prominent locations with good radiation where solar plants/parks have been constructed Table 3: Estimated CUF and Generation Sample Data from Some States Table 4: Standards and Warranties for Critical Components Table 5: Solar RECs Sales During the Last Calendar Year Table 6: CERC benchmark cost breakup for a 1 MW ground mounted solar PV power plant Table 7: Comparison of CERC Benchmark Capital Cost (Rs. Lakhs) 7

10 Table 8: Comparison of CERC Benchmark Capital Cost (% of total cost) Solar Mango s India MW Solar Advisor List of Figures Figure 1: Business Models for MW Scale Solar Figure 2: Radiation Map of India Figure 3: Sources of Funds for MW Scale Solar Plants 8

11 1. Business Models for Utility Scale Solar PV This chapter provides clear insights on all the business models and revenue models for MW Scale solar power plants. It also provides a comparison of the pros and cons of each of the revenue models. This chapter is the most critical for the developer to understand because understanding who the buyer of your power is the most important aspect for a 25 year investment! For any business keen on investing in MW scale solar power plants, the first question they should ask themselves is: Who will buy the power? The answer to this question to a significant extent will decide the business and revenue model for the power plant, and also pretty much define the risk and return profiles. To a certain extent, the type of buyer could also determine the financial returns on the project. A utility scale Solar PV plant can be monetised through several avenues: Each of the above routes is discussed in detail. After the analysis, a table provides the Pros and Cons of the Business Models Biz Model Pros Cons Sale to Utility Sale to Private Consumer Captive Consumption 9

12 2. Status of MW Solar Power Plants in India India has about 3,000 MW of solar power plants with capacities of 1 MW and above. This has happened in the last 5 years. Thus, there is a reasonable amount of history and empirical data that can be used to understand this sector much better. This chapter reviews the status of MW Solar power plants in India, and analyses it along multiple dimensions to provide key, actionable insights to a prospective developer. India s total installed solar capacity stands at a little over 3 GW, including off-grid and rooftop solar plants. The status of MW scale solar plants for different states is given below. State/UT Andhra Pradesh Arunachal Pradesh Chhattisgarh Gujarat Haryana Jharkhand Karnataka Kerala Madhya Pradesh Maharashtra Odisha Punjab Rajasthan Tamil Nadu Telangana Uttar Pradesh Uttarakhand West Bengal Andaman & Nicobar Delhi Lakshadweep Puducherry Chandigarh Others State-wise status of MW scale solar power plants as of December 2014 Under JNNSM Under State Policy RPO REC Scheme CPSUs Total commissioned capacity 10

13 Prominent Developers Some of the prominent developers of MW scale solar projects in India (based on projects completed/bids won) are given. Non-Developer Stakeholders Other than the developers, several other stakeholders are key to the success of MW scale solar projects Government EPCs Component providers Financers Profiles for each of the above stakeholders are provided. 3. Attractive Regions for MW Solar in India Choosing an optimal location is one of the most important decisions for a MW Solar Power Plant developer. By analysing data from solar radiation from various regions, and from data available from existing solar power plants, this chapter provides actionable inputs on how developers can choose the right location for solar power plants. A solar plant should be located in a region where there is plenty of sunshine. A solar map of India that you can use to estimate solar radiation at the location of your site is provided. Prominent Regions for Solar Power Plants Details of the prominent regions for MW Solar power plants provided By Radiation By State Details of solar power plant CUF and generations from prominent states, based on real life data analysis are provided. 4. Vendor & Component Selection Checklist Once a developer has decided on the right business model and has also signed a power purchase agreement, it is time to appoint the right EPC and ensure that the best components are chosen. Both these actions will have a significant impact on the returns from a solar power plant. This chapter provides concise guidance on how to optimally choose the EPC and components for a MW Solar Power Plant. 11

14 Criteria to Choose EPCs In order to get clarity on how to choose EPCs, it will be instructive to first understand the Solar EPC Operational Value Chain. Expertise on All Solar EPC Value Chain Components The complete EPC Value Chain is explained in detail for the prospective developer to gain a clear understanding of the role and value additions from the EPC. Three Types of EPCs You Should Avoid Whatever other parameters you use while choosing your EPC, do not forget to follow these three rules: Do not go for lowest cost EPC Do not go for EPCs who are unwilling to involve you in decision making for key aspects of the project Do not go for EPCs who are not willing to introduce you to their key core and extended team members Key Parameters for EPC Selection The EPC contractor essentially guarantees completion of the plant on time and cost, and also plant performance, thus enabling the project developer to avail finance from their banking partners. Thus a thorough evaluation of the EPC is required before a choice is made. Top 5 criteria Other criteria Specific Expertise to Look for in Core EPC Team Engineering Procurement Commissioning Types of expertise required on each of the above three provided Planning for O&M & Monitoring and Control Systems EPC should be able to clearly explain how monitoring and control systems will be implemented, and how much O&M will be required. Monitoring and Control Systems Operations & Maintenance Prominent Solar EPCs in India National EPCs Regional Solar EPC Players Brief profiles of each are provided. 12

15 Component Selection Standards and Warranties Choosing the right components is critical in ensuring a reliable and high performing solar plant. Components that don t comply with standards may have a high failure rate and compromise both energy generation and revenue from the plant. A detailed table outlines the standards that must be complied with and typical warranties offered for most components of a solar plant. Equipment PV Modules Power Conditioner Units (PSUs)/(Inverter) Mounting Structures Cables Switches/Circuit Breakers/Connectors Junction Boxes/Enclosures Standards(Applicable IEC/Equipment BIS standard) Warranty 5. State, Central Solar Policies Government solar allocations are highly sought after by solar developers. In this chapter we examine the salient features of the policies by Central Government and for all states that have released MW scale solar policies. We also analyse the recent allocations for each state and the tariff won by developers. Solar policies have been prepared and implemented both at the Central and State Government levels. We take a look at the various features of each. Central Policy National Solar Mission Overview& Status The National Solar Mission was launched in 2010 with an original target of 20,000 MW of grid connected solar power (both PV and thermal) by This was to be achieved in various phases Phase I 1,000 MW ( ) Phase II 9,000 MW ( ) Phase III 10,000 MW ( ) About833 MW has been commissioned as of with Rajasthan alone accounting for about 594 MW. Details provided for current branches and tranches. State Policies Detailed inputs provided for the solar policies and allocations for the following states. Details include perspectives on the solar policy per se, allocations so far and details of the PPAs and winners announced so far. Data and inputs are also provided for the various solar power plant incentives in terms of waivers etc. (wheeling charges, cross subsidy charges), for each state. 13

16 Andhra Pradesh Assam Bihar Chhattisgarh Gujarat Haryana Karnataka Madhya Pradesh Maharashtra Odisha Punjab Rajasthan Tamil Nadu Telangana Uttarakhand Uttar Pradesh Goa Jharkand West Bengal Brief inputs are provided for the following states 6. Financing Options in India MW solar plants in India are often financed by the promoter or through the promoters balance sheet. This chapter examines the opportunities for external funding of solar projects (equity, as well as with recourse and non-recourse debt) including foreign funding. Typical terms are analysed, and challenges are discussed; solutions for overcoming some of these challenges are also provided. Overview MW scale solar plants in India are financed through a mixture of debt and equity, from various sources. 14

17 Detailed inputs are provided for each of the above: Interest rates Tenures Collaterals and other eligibility criteria A comprehensive list of financial institutions for each of the above is provided: List of banks List of equity financing providers List of NBFCs List of international funding sources - multilateral agencies, trade development agencies Constraints and Challenges for Getting Financial Closure for MW Solar Power Plants Key Issues/challenges in Solar PV Financing as by Various Stakeholders Financial Health of utilities may cause non-payment or delayed payment With reverse bidding, compromise in quality for cost cutting Delay in land acquisition Delay in Power Evacuation facility (ROW, Projects Cluster &Feasibility) Non- availability of stable grid below 66KV Lack of established best practices of O&M Manuals Trend of not opting for third-party EPC Contracts Wide variations in costs of PV Modules 15

18 More time taken for obtaining important clearances, such as for NA, PCB, evacuation, etc. Inadequate irradiance data of project site Lack of RPO enforcement Uncertainty of REC mechanism beyond 2017 Challenges in Financing Challenges for Third Party PPA Challenges for Private Equity Investment in Solar Challenges for Debt from Banks Challenges for Debt from Multilateral Agencies Challenges for Debt through Trade Finance Suggestions and Perspectives from the Financial Sector for Overcoming the Challenges and Making Solar Power Projects More Bankable Solar resource assessment based on ground data for at least one year period Generation projections to be realistic considering project site specific parameters Pooling stations & evacuation facilities for clustered projects All clearances/approvals including land acquisition, contracts, suppliers, vendors etc. to be ready for faster financial closure Adopt Modular Design to maximize yield & ease of construction and also based on PPA/Policy Evaluation of Past performance record /downtime of off-take substation All contracts including supply/epc/ O&M should be structured for proper guarantees/warranties Strict compliance of RPO will ensure more projects under REC. Exchange of actual project performance among the stakeholders/banks 7. DPR Template for a Solar PV Power Plant DPRs are a critical component in getting funds from financial institutions, but many developers are unaware of how a DPR should be prepared. This chapter takes a detailed look at how a DPR should be prepared and what it should contain to justify the projections in the DPR and persuade the financer to fund you. All financial institutions will require a detailed project report (DPR) from the solar power plant developer. While in some cases, especially in cases where you have an excellent relationship with a bank and you have been doing good business with them for a long time, the DPR might not be the most critical component in the financing process. 16

19 But with financial institutions concerned about some of the uncertainties in this nascent sector, we strongly recommend that you get the DPR done from an expert organisation and ensure that the DPR contains the following components. Just to let you know, we have seen DPRs that are nothing but copy-paste of some Internet pages. It is critical you avoid such DPRs. Components of a Detailed Project Report a complete list of contents 8. Cost Break-up of Utility Scale Solar PV Power Plants The cost of the solar plant is critical in achieving the required IRR and payback period, but going too low creates quality issues that compromise the generation from the plant. This chapter provides critical information to investors on benchmark costs for various solar plant components as well as their pricing trend, allowing investors to build reliable estimates for MW scale solar plants. The cost of a MW scale solar PV plant is about Rs Crores/MW. The Central Electricity Regulatory Commission (CERC) has finalised the benchmark cost for a solar PV plant for FY , which is provided below with break-up. We recommend increasing the below cost by 5%when budgeting for solar PV plants below 10 MW in capacity. CERC benchmark cost breakup for a 1 MW ground mounted solar PV power plant - Table Component Module cost Land cost Civil and general works Mounting structures Inverters Cables & transformers Interest cost during construction Approvals, preliminary and operative expenses, transport and logistics expenses Total capital cost Capital cost considered (Rs.Lakh/MW) % of total 17

20 Trends in Plant Cost CERC s Benchmark Cost for MW scale solar plants for the last 6 years is provided. Solar Mango s India MW Solar Advisor Component Modules Land Civil and General Work Mounting Structures Inverters Cables & Transformers Preliminary & Preoperative Expenses Total CERC s Benchmark Cost as a % of total cost for the last 6 years is also provided. Component Modules Land Civil and General Work Mounting Structures Inverters Cables & Transformers Preliminary & Preoperative Expenses Total 9. Template for Financial Returns Calculating critical parameters, such as IRR and Payback Period, requires accurate modelling of revenue and costs through the lifetime of the plant. This chapter provides detailed inputs on how to build a financial model projecting revenues and costs (initial and recurring) over 25 years. This chapter provides a detailed template for calculating financial returns, and calculations are based on assumptions and approximations. Inputs are provided for calculating the following Revenues Costs Billable kwh Tariff Initial capital investment Inverter Replacement 18

21 Taxes Analysis Operations & Maintenance (O&M) Insurance Debt Service 10. Resources This chapter focuses on providing vital links to resources and updates on the latest regulations, policies, and allocations that are of importance to solar developers. The URLs below can be accessed for the latest information on policies, tariffs and charges, RfS/RfQs, tenders, and regulations from Central and State energy development agencies, Electricity Regulatory Agencies (ERCs), and Distribution Companies (DISCOMs). Category National Solar Mission Andhra Pradesh Assam Bihar Chhattisgarh Goa Gujarat Haryana Jharkhand Karnataka Madhya Pradesh Maharashtra Orissa Punjab Rajasthan Tamil Nadu Telangana Uttarakhand Uttar Pradesh West Bengal Resource List 19

22 11. Key Aspects Every MW Solar Developer Should Know A solar project requires many factors to come together harmoniously to be successful. We have identified 3 key aspects that a solar developer should pay particular attention to that can make or break the project. Solar Mango s strategy team has put together its perspectives on three key aspects Key steps to arrive at an attractive business model o How do you decide which is better for you? APPC+REC, sale to private parties, or sale to utility? Critical aspects to be considered to win bids from state or central policies Mistakes to avoid while bidding or during implementation of the MW solar power plant 12. Frequently Asked Questions by Developers, and Answers Based on our experience working with various solar developers, EPCs, governments, and other stakeholders, we have compiled a list of the questions we are most frequently asked and provided practical, actionable answers to them. We have compiled a list of the top 10 frequently asked questions by developers, and provide concise answers to these. 1. Is it a good idea to invest in a solar power plant? 2. What are the paybacks for MW scale solar power plants? 3. I have large amounts of land. Is this a good enough reason for me to get into solar power plants? 4. How can I get financing for my solar power plant? 5. What are the O&M costs for solar power plants? 6. Which state is the best for solar power plants? 7. How can I get a private PPA signed for my power plant? 8. I already have wind farms. Can I co-locate solar farms in the same land? 9. What will be the output from my solar power plant? 10. How much does a 1 MW of solar power plant cost, and how much area does it require? Answers to the above questions are based on real-life insights from existing solar power plants, and based on in-depth interactions with prominent stakeholders such as EPCs, small and large developers, government officials, component and technology solutions providers, and more. 20

23 13. Terms You Should Know as a Developer of MW Solar Power Plants A solar developer should be familiar with many terms that are widely used in the solar industry, in order to make the right decisions for a variety of aspects. We have compiled a list of such terms, subdivided into Technical and Financial sections, to help you comfortably navigate any solar discussion. Additional information on key solar organisations, components, and site selection. Solar Mango has compiled a list of critical terms that a solar developer should be familiar with, and provided brief explanations for each. Each of the terms is explained in an easy-to-understand manner. We have taken extra care to provide relevant data or insights in the Indian context for many of these, so that a prospective developer can understand and use these in a practical manner. Technical and Operational Terms BOO Model (Build Own Operate Model) Capacity Utilization Factor Central Inverters Concentrating Photovoltaics Cross Subsidy Surcharge Crystalline Silicon/c-Si DNI (Direct Normal Irradiance) Feed In Tariff Gigawatt Grid-tied Solar Power System Grid Parity kwh Kilo Watt LCOE (Levelised Cost of Energy) Module Module Degradation Net metering Off-grid Solar Open Access Photovoltaics Power Purchase Agreement Pyranometer PV Array 21

24 Reflection Losses in Solar Cells Silicon Wafer Shading of solar panels Smart Grid String Inverters Standard Test Conditions (STC) Temperature Coefficient of Solar Panels Thin Film Solar Cell Tracker Transformer Utility Watt Peak (Wp) Wheeling Charges Key Financial Terms Accelerated Depreciation Discounting Factor Financial Closure Hedging IRR (Internal Rate of Return) Levelised Tariff Moratorium Net Present Value (NPV) Payback Period PPA Return on Investment (ROI) With recourse/without recourse Solar Mango s India MW Solar Advisor Solar Apex Bodies & Organisations in India and their Roles CSRI CWET/NIWE MNRE NSEFI SECI SESI SERIIUS Components of a Solar Power Plant Solar Panels Mounting Structures Inverters Site Selection 22

25 14. Action Plan For developers and investors looking for a clear plan of action to implement a MW Solar power plant, we provide an easy-to-follow action and decision chart that distils the critical content in this report into an implementation diagram. A schematic is provided that outlines the varies steps to be taken by a developer to arrive at attractive financial returns from a MW Solar Plant based on Drivers four key drivers that decide the success of your MW Solar power plant Criteria list of criteria to use for each of the success drivers Actionables specific actionables for each of the drivers Interested in Buying this Report? India MW Solar Advisor costs Rs 11,500 only, and can be purchased through credit card, bank transfer or cheque. To purchase the India MW Solar Advisor, you can Do so from or Send an to enquiry@solarmango.com, with the subject: Purchase MW Solar Advisor with your contact details and we will get in touch with you immediately. Or contact Muthukrishnan for further information , muthukrishnan@eai.in Visit the official website for more information