JULY The Guide. To Renewable Energy Investing In India

Transcription

1 JULY 2010 The Guide To Renewable Energy Investing In India

2 Contents Section 1 WHY? 1. Why India? 2. Why invest in RE in India? Section 2 WHAT & WHERE? 3. What renewable energy sources should I invest in India? 4. Which regions have potential for what RE sources? Section 3 HOW & WHO? 5. How should I go about in India renewable energy sector? 6. Who s investing in RE in India? Section 4 HOW MUCH? 7. Costs (capex and opex), tariff rates and returns for the various RE source in India 8. Incentives provided by the Indian government for RE 9. Availability of debt and equity finance in India for RE APPENDIX A The Indian Electricity Grid APPENDIX B The Indian Regulatory Framework for Renewable Energy

3 Section 1 WHY? Why India? Why invest in RE in India?

4 Why should I invest in India? Why India? GDP Growth o India's gross domestic projection (GDP) is set to grow by four times over the next 10 years to Rs 205 trillion from Rs 53 trillion in FY 09 (Source: Edelweiss Capital) o 2004 $650 billion; 2006 $906 billion; 2009 $ 1.25 trillion; Large domestic market Growing middle class Skyrocketing industrial growth & capitalist friendly government policy since 1991 How future looks FDI growth o $24.6 billion o approx $28 billion in o : $4 billion o $ 6 billion India is the fifth largest economy in the world (ranking above France, Italy, the United Kingdom, and Russia) and has the third largest GDP in the entire continent of Asia. Many foreign firms are trying to set up factories in India because of cheap, English speaking labor (Finance ministry: India, among the European investors, is believed to be a good investment despite political uncertainty, bureaucratic hassles, shortages of power and infrastructural deficiencies Period GDP Growth Rate (%) Middle class volume and purchasing power is rising Year % of middle class in total pop In million In purchasing power parity (PPP) terms, India is the fourth largest economy, and will become the third largest by 2015.

5 India Model of Growth & Drivers (compared against East and SE Asia) India Domestic Services Consumption Medium to high tech East & SE Asia Exports Manufacturing Investment Low medium tech An economy driven by the domestic market Forex reserves include similar amounts of various international moneys including gold hence, projected weakness of the dollar will make far less difference in Indian liquidity situation Insulation from global downturns and less volatility in local markets The capitalist has been the driver for the Indian economy in the past two decades, with the state playing only a supporting role, unlike in China, where a large part of recent growth has been directed by the state, and the capitalist s role & profit has been comparatively smaller A vibrant private sector 100 Indian Companies have market cap of US$ 1bn 1,000 Indian Companies have received foreign institutional investment 125 Fortune 500 companies have R&D bases in India 390 Fortune 500 companies have outsourced software development to India 2% bad loans in Indian banks (v~20% in China) 80% credit goes to private sector (v~10% in China) Growth fell to 6.7% in 08 09; 7% in Pain from the economic downturn has been less than for many other countries What could impede India s growth? Lack of infrastructure has been the foreign capitalist s traditional complaint Fiscal Deficit Non cooperative Governance But none of these has stopped industrial growth in the 2 odd decades since 1991, which is the when the central government began the deregulation and liberalization of industry. What are India s advantages over many other countries with high growth economies? Scale of domestic consumption is higher Skilled and low wage labor is plentifully available Rule of law

6 2 Why invest in renewable energy in India? India s climate change initiatives and how they create opportunities? o India's climate change initiatives Total amount of CO 2 emitted by India, and its historical trend and future increase India's GDP growth, Industrial growth rate, Electricity consumption growth, oil and natural gas consumption growth How much primary energy would India need in 2012, 2015, 2020 and 2030? o Where will this energy come from? o What are the key disadvantages of using fossil fuel to fuel this growth?

7 India s Climate Change Initiatives and How they Create Opportunities In 2008, the National Action Plan on Climate Change released by the Indian government included a proposal for a national renewable energy trading scheme, which would be based on a National Renewable Portfolio Standard. In this scheme, states would be encouraged to promote the production of renewable power to exceed the national standard. They would then receive certificates for this surplus power, which would be tradable with other states which fail to meet their renewable standard obligations. It is expected that this proposal will come into force in 2009 or 2010, whereby states are expected to competitively encourage private including foreign participation in the renewable energy and electricity generation sectors. The possibility to register projects under the Kyoto Protocol s Clean Development Mechanism (CDM) has provided a further incentive to wind energy development in India. As of 1 February 2009, 270 projects were registered with the CDM Executive Board, accounting for 5,072 MW, second only to China. Carbon credits allow international polluters to make up for emissions by offsetting, reducing or displacing GHG in another place, typically where it is more economical to do so, like in India. Thus, India has generated approximately 30 million carbon credits and approximately 140 million in run, the 2 nd highest transacted volumes in the world. India s carbon market is growing faster than even information technology, biotechnology and BPO sectors, as 850 projects with a huge investment of Rs 650,000 million are in the pipeline. (Source: CO 2 Emitted by India Trends

8 India s total annual emissions 1.3 billion T in 2004 from fossil fuel consumption (United Nations Statistics Division 2007) : CO 2 emissions from large point sources: 721 million T, of which power plants were responsible for 467 million T CO 2 emissions of 1.28 metric tons per capita (2005 world bank) compare this to that of the USA, which has 19.5 metric tons per capita

9 Future Estimates for CO 2 Emissions in India The reasons for the CO 2 emissions increase are obvious Tot Ins Cap (1) (GW) Tot RE Ins Cap (2) (GW) Tot Elec. Pro (3) (Billion kwh) Tot RE Elec. Pro (4) (Billion kwh) Total elec. cons (5) (Billion kwh) (1) Total electricity installed capacity in India (2) Total electricity from renewable sources installed capacity (3) Total electricity produced (from renewable and non renewable together) (4) Total electricity produced from renewable sources (5) Total electricity consumed (from renewable and non renewable sources) (6) Total electricity consumed from renewable sources Total RE Elec. consumed (6) (Billion kwh)

10 From the above table, it can be seen that there has been a 50% increase in electricity consumption between 2000 and 2007, a CAGR of 6%. India's economic growth needs versus climate change initiatives

11 The above chart shows how India s electricity demand has increased significantly since And even after this increase, the World Bank says: More than 30 percent of Indian population and perhaps as much as 80 percent of the rural population live without access to electricity and other modern sources of energy. India's Energy Needs and Imperatives Though rich in coal and abundantly endowed with, among others, solar, wind, hydro, and bio energy, India has very small hydrocarbon reserves (0.4% of world s total). Being a net importer of energy, more than 35% of the country s primary energy needs are ensured through import. India s Use of Fossil Fuels India's primary energy demand will more than double by 2030, growing an average 3.6 percent every year. The total primary energy supply in India has grown at a compound rate of around 3.4 per cent since independence to reach 537.7Mtoe (million tons of oil equivalent) in the year 2005 (IEA 2007). While commercial primary energy grew at 5.3 per cent over the period, non commercial energy grew at only 1.6 per cent, which is a reflection of industrialization. Electricity generation capacity, most of it coal fired, is expected to more than treble from 2005 to 2030, but that will still be far too less to serve India s concomitant energy needs. About 96 percent of the population is to have access to electricity in 2030 from 62 % in India's peak power shortages are projected to worsen from a 17 per cent peak deficit in 2009 (shortfall of 23 GW of peak supply) to close to a 25 per cent peak deficit by 2015 and a resultant shortfall of more than 60 GW of peak supply. On coal, India s domestic production is short of her demand, even though India has large reserves of coal. Coal imports will increase almost seven fold, accounting for 28% of India's total coal needs in 2030 from 12% in (strangely, India has the fourth largest reserves of coal in the world) On natural gas, India s imports have been continuously increasing even though the country has been successful in identifying rich natural gas deposits in the last few years.

12 India imports most of her oil needs the country is projected to become the third largest net importer of oil before 2025 after the United States and China. Net oil imports are projected to rise to 6 million barrels per day in The above data makes it abundantly clear that India needs to do something, and fast, in order to get its energy supply chain in order. Let's look at what India is doing for the three main inputs coal, oil and natural gas. Coal For a country that is supposed to have coal for the next 200 years at current consumption rates (it has about 100 billion T of proven reserves), it is indeed surprising that the coal industry would be acquiring coal assets worldwide. But that precisely is what's happening the import of coal, a deleterious short term solution, is in fact reflective of the government s inability to invest in long term mining, owing to its inevitably gargantuan fiscal deficit, and its ensuing difficulty with long term investments in general, specifically investments in coal production capacity. Coal India, an Indian government s public sector undertaking, has for instance been acquiring coking and non coking coal blocks in Indonesia and Mozambique in the last few years. The current consumption of coal is about 600 million T per year. In the year , it imported about 60 million T and this number is only expected to increase it is expected to hit 100 million T within the next three years. What's the reason behind importing coal despite adequate reserves? Simply put, increased coal production will not come cheaply. The estimated investment need outlined in the government s Vision Coal 2025, is US$ billion, to enhance production capacity to over 1 billion T /year. The actual investments which have been put in so far have been much less than this required amount. Natural Gas India's natural gas demand is expected to nearly double to 320 million standard cubic meters per day by 2015, McKinsey said in a study. The company said that the current demand of 166 mmscmd (million cu meter per day), made up of nearly 132 mmscmd supplies from domestic fields, and the rest from imported LNG is likely to rise to at least a minimum of 230 mmscmd and a maximum of 320 mmscmd by 2015 The government s Hydrocarbon Vision 2025 envisages increasing the proportion of natural gas in total energy consumption from 8% now to 20% by To manage this impending growth in the natural gas industry, the industry will require investments of around $40 billion to $50 billion across the value chain. With these investments and the resulting growth in demand, the industry s revenue pool could double to $50 billion by 2015 from $25 billion today. Due to geostrategic instability in the Afghan/Pak regions, the India Iran natural gas pipeline, aka the IPI pipeline or the Peace pipeline, for which the government is desperate, may not as easily materialize, whereby India would be expected to seek, to an extent, alternatives to natural gas.

13 Oil This is obviously where India faces a steep problem. India has little oil as such. The country consumed 3 million barrels per day in 2009, up from about 1.2 million barrels per day in The production has however failed to catch up from 0.7 million barrels per day in 1990 to about 1 million barrels per day in (Source: EIA Govt of USA). The country thus imports about 70% of its oil, the main sources being S Arabia ( 23%), Iran (17%), Nigeria, Iraq, Kuwait & UAE (about 10% each). The recent findings of oil in KG Basin by Reliance and in Rajasthan by Cairn Energy are likely to add significantly to domestic production. (Cairn Energy estimates that it will be able to achieve peak production from its Rajasthan fields of about 0.24 million barrels per day in 2011). India is buying stakes in oil and natural gas fields worldwide, and is also working overtime to please many countries which have rich deposits of fossil fuels. For instance, India has offered to Nigeria help in building infrastructure, especially power plants, emulating China's strategy to secure access to oil and gas blocks in energy rich Africa. India is also actively scouting deals in countries other than Middle East and Africa. Recently, Oil & Natural Gas Corp., India's biggest energy explorer, has expressed an interest in buying oil sands assets in Canada. Short of capital, the Indian government has removed the earlier restrictive policies for private sector investments in oil fields for instance, the NELP (New Exploration Licensing Policy) has allowed private players to participate in the exploration of oil and gas fields). Thus: 1. In natural gas, India imports about 15% of its total consumption, but the imports could increase with the fast growth of industrialization, and there is a high likelihood that these imports will be expensive. 2. For coal, India imports a little over 10% of its requirements, and this again is likely to increase steeply over the next five years with production unable to keep pace with increase in demand 3. In oil, while India has been pleasantly surprised by the recent oil finds in Rajasthan, upper Assam, and the Krishna Godavari basin, it will predominantly (over 60%) rely on outside countries for oil for the foreseeable future, and India's oil imports are expected to more than triple from 2005 levels by So, what is India's strategy to ensure energy security, given that the slightest geopolitical uncertainties can seriously jeopardize the temporary security provided by the imports of oil, coal and natural gas? Clearly, oil, gas and coal, domestic production and foreign imports put together, cannot meet India s recently exploding energy needs in a reliable manner. The government of India knows that the real solution in the long term is building up capacity in renewable energy.

14 Drivers for renewable energy development The key drivers for the growth of the renewable energy in India are the following: Fast growth in overall energy needs The expansion of the overall energy demand supply gap due to the increase in the population s standard of living. The demand supply gap in power is currently at 8% and is one of the key drivers of renewable energy in the country. Pressure on industry and polity owing to the increasing GHG emissions India s increasing emissions of greenhouses gases has made it imperative for the government and industry to seek ways of GHG abatement. Need for a viable solution for rural electrification In 1999 to 2000, more than 85 percent of India s rural population was dependent on traditional fuels (biomass and cow dung cake) for their basic energy needs. The use of these fuels in inefficient cooking stoves led to high levels of indoor air pollution, causing widespread respiratory and eye diseases, particularly among women. India s goal is to provide cleaner fuels or other means of cooking to the entire population by Because of the high costs of connecting these remote villages to the national grid, it is economical to promote projects based on solar energy, biomass gasifiers and small hydro power plants. The government provides up to 90 percent financial assistance for nonconventional energy schemes in these areas. (The distributed nature of renewable energy also means that it is not dependent on extending the main grid until that point but could have a distributed grid in which power consumed locally is generated at the same location.) With a commitment to rural electrification, the Ministry of Power has accelerated the Rural Electrification Program with a target of electrifying 100,000 villages by The Ministry of Power has set an agenda of providing Power to All by 2012 Electricity Peak Demand Supply Gap o According to CEA, the peak demand in 2008 was 120 GW of power, while only 98 GW could be supplied. According to an analysis by the Indian PV project developer Aston field, this deficit is likely to grow to 25 GW by The targeted share of renewable energy is 24% for 2031, with the amount of solar energy increasing to 56 GW of installed power. The average electricity consumption in India is still among the lowest in the world at just 630 kwh per person per year, but this is expected to grow to 1000 kwh in the near future. The Ministry of Power has set an agenda of providing Power to All by It seeks to achieve this objective through a comprehensive approach to power sector development envisaging a six level intervention strategy at national, state, SEB, distribution, feeder & consumer levels. Niche industry segments having a clear need for renewable energy

15 o Specific industry segments have a clear need for renewable energy. For instance, emonth, 8 10 million new mobile phones are connected in India. This is has resulted in an interesting market segment for renewable energy (especially solar PV): thousands of new mobile towers desperately need off grid renewable sources to power them. As an example, mobile operator Idea Cellular powers its four mobile base stations using locally produced biofuels instead of the traditionally used diesel. Why should you explore investing in India s renewable energy NOW? To get an early mover advantage in the ripening renewable industry, which is far from maturity Enter early to get the best partnerships in joint ventures and sales partners To take advantage of a number of unique government incentives Updates on Indian Renewable Energy Happenings India is ranked the third most attractive country to invest in renewable energy, after USA and Germany, in the Ernst and Young Country attractiveness indices. India is the most developed renewable energy market in South Asia, with an annual turnover of about $500 million. The Indian Government expects the renewable energy sector to grow to $19 billion from 2008 to 2012, with renewable energy sources envisioned as making up 20% of the 70,000 MW of total additional energy planned from The Ministry of New and Renewable Energy has identified R&D as an important factor for developing the renewable energy sector. R&D subsidy is 100% of a project's cost for government R&D institutions, and 50% for the private sector. In special private sector cases, the R&D subsidy may be enhanced for the initial stages of long term investments, that is to say new technologies which have longer time horizons. Both National and State Governments have announced new policies to support solar PV manufacturing in special economic zones, including capital investment subsidies of 20 percent. These policies led to USD 18 billion in new solar PV manufacturing investment plans or proposals by a large number of companies. The Indian Government has received proposals worth $30 billion for solar PV power plants alone (as of Dec 2009) India is emerging as one of the largest potential sources of Certified Emission Reduction (CER). India has seen a 12% increase in investment in the renewable energy sector with an investment of $3.7 billion in That's an impressive investment indeed in absolute terms, but a 12% increase does scant justice to the massive energy needs which the country has from renewable energies. It is expected that this growth rate will be much higher in the near future. For instance, between 2008 and 2009, it grew almost 100% (from $3.7 billion to over $7 billion).

16 Section 2 WHAT & WHERE? Status of renewable energy sources in India Which regions have potential for what RE sources?

17 3 Status of RE Sources in India Solar o Solar PV o Solar CSP Wind o Wind Onshore o Wind Offshore Biofuels o Biodiesel o Ethanol o Second and Third Gen Biofuels Geothermal Hydro o Small Hydro o Large Hydro Ocean o Wave o Tidal Biomass based electricity Waste to Energy For each of the above, the following are discussed Total available potential Exploited potential (production/installed capacity) Future expected production/installed capacity Specific government incentives Amount of investments happening in this now, expected in future Key bottlenecks and barriers Cost of power generation and trends in the same over years

18 Solar PV In solar photovoltaic power plants, sunlight is converted into electricity. Solar photovoltaic uses photovoltaic (PV) cells arranged in the form of solar panels. The amount of solar energy produced in India is merely 0.4% compared to other energy resources. The Grid interactive solar power as of June 2007 was merely 2.12 MW. Government funded solar energy in India only accounted for approximately 6.4 megawatt years of power as of However, as of October 2009, India is currently ranked number one along with the United States in terms of installed Solar Power generation capacity. Moreover, India is positioned at the threshold of opportunity to grow and expand its role as a leader in the adoption, technology and manufacturing of progressively cheaper solar PV technology. Total available potential Exploited potential (production/installed capacity) Future expected production/installed capacity India lies in a sunny tropical belt (High insolation) Total theoretical potential annually over 5000 trillion kwh Exploited potential (production/installed capacity) is very little; total installed capacity (grid and off grid) is approximately only 105 MW, and of that only about 6 MW is grid connected For solar CSP and PV together, National Solar Mission attempts to reach an installed capacity of By 2013: 1 2 GW By 2017: 4 10 GW By 2020: 20 GW Moreover, a 35,000 km² area of the Thar Desert has been set aside for solar power projects sufficient to generate 700 to 2100 GW Specific government incentives Amount of investments happening in this now, expected in future National Solar Mission and other Generation Based Incentives (GBI) are available through Ministry of New and Renewable Energy Government is expected to spend $19 billion until 2022, Rs 4337 Crores out of which have already been allocated Key bottlenecks and barriers Cost of solar PV High population density (land scarcity) Technology obsolescence

19 Cost of power generation and trends in the same over years Current cost of production Rs 14/kWh. This includes O&M, amortized/depreciated capital costs, loan repayment costs, and other expenses such as insurance. Costs of production expected of Solar PV power plants in the near future: By By By Solar PV Potential for Short and Medium Term Growth: High Solar CSP CSP plants consist of two parts: one that collects solar energy and converts it to heat, and another that converts heat energy to electricity. CSP plants generate electricity from sunlight by focusing solar energy, collected by an array(s) of sun tracking mirrors called heliostats, onto a central receiver. Liquid salt (a mixture of sodium nitrate and potassium nitrate) is circulated through tubes in the receiver, absorbing the heat energy gathered from the sun. The heated salt is then routed to an insulated tank where it can be stored with minimal energy losses. To generate electricity, the hot molten salt is routed through heat exchangers and a steam generation system. The steam is then used to produce electricity in a conventional steam turbine. After exiting the steam generation system, the now cool salt mixture is circulated back to the cold thermal storage tank, and the cycle is repeated. Being a technologically evolving segment, CSP technical ideologies vary greatly. Total available potential Exploited potential (production/installed capacity) Total theoretical potential over 5000 trillion kwh annually. Solar thermal power plants have been called the offshore wind farms of the desert, and the Thar desert is conveniently located for this strategy. Negligible (though it is getting increasingly popular for specific heating and drying applications,

20 particularly in small industries) Future expected production/installed capacity Specific government incentives Amount of investments happening in this now, expected in future 50:50 priority for Solar PV/CSP under the National Solar Mission (explained under solar PV) thus, installed capacity may in the future follow a similar trend Under NSM, a tariff of Rs / kwh is proposed for solar CSP projects Rather than the typical investor routed financing procedure, Solar CSP is as of now, in India, typically funded by localized industrial initiatives. EAI estimate: committed investments of just about 250 MW (Most of the rest in solar PV) Key bottlenecks and barriers Cost Technology (including storage) still evolving Not as established as Solar PV Cost of power generation and trends in the same over years Rs 12 / kwh. This includes O&M, amortized/depreciated capital costs, loan repayment costs, and other expenses such as insurance. A 15% investment cost reduction can be expected in developing countries due to lower labor costs. A promising long term potential is that Rankinecycle trough plants can compete with conventional peaking to mid load Rankine cycle plants (coal or oil fired) at good sites like the Thar desert. Cost decline potential of direct steam generation trough technology is even greater in the long term. Solar Thermal for Heating Purposes A small illustration of the potential of solar thermal for India ST generates medium temperatures for industrial process heat applications: 100 to 250 C India uses 100 million tons of oil annually 40% of this oil is consumed by industry 60 to 70% of industrial energy use is in thermal form

21 70% of industrial thermal energy use in the range below 250 C Thus, 20% of total energy use, or about 15 million tons of oil, is used in industry below 250 C. 30% of this requirement can be met through solar thermal concentrators, leading to savings of about 4.5 million tons of furnace oil or diesel per year. Other Highlights of Solar Thermal for Heating/Drying Solar water heating, installed capacity in India: 140 million sq. meters Every year, over 20,000 solar water heaters are installed across India, according to some estimates. Some of the salient points about solar water heating in India o The payback period is less than 4 years o Typically, for an Indian make system with single BIS approved flat plate collector of 2 sq. m area (required for an average household), the current market costs are reported to be in the range of Rs. 15,000 20,000 o IREDA (Indian Renewable Energy Development Agency) provides soft loans at 2% to domestic users, 3% to institutional users not availing accelerated depreciation and 5% to industrial/commercial users availing depreciation. China now has 27 million households equipped with solar water heaters. The country has a solar water heater production of about 4,000 manufacturers, and the existing solar water heaters convert solar energy to the equivalent of the capacity of 49 coal fired power plants. This shows the potential India could hold for solar water heating and drying. Solar CSP Potential for Short and Medium Term Growth: Short Term Medium, Medium Term High Solar Thermal for Heating and Drying Potential for Short and Medium Term Growth: High Wind Energy Wind energy generators convert the energy of blowing wind to electricity. The development of wind power in India began in the 1990s, and has significantly increased in the last few years. The short

22 gestation periods for installing wind turbines, and the increasing reliability and performance of wind energy machines has made wind power a favored choice for capacity addition in India. Although a relative newcomer to the wind industry compared with Denmark or the US, India has the fifth largest installed wind power capacity in the world. Wind power accounts for 6% of India's total installed power capacity, and it generates 1.6% of the country's power. It is estimated that 6,000 MW of additional wind power capacity will be installed in India by The increasing number of component manufactories and rapid utilization of India s land for wind energy is proof of the private sector s faith in Indian wind. Total available potential Exploited potential (production/installed capacity) Future expected production/installed capacity Specific government incentives Amount of investments happening in this now, expected in future 90,000 MW approximately 11,000 MW India has set a target of adding 10,500 MW of wind capacity during the 11th Five Year Plan period ( ) Either of Accelerated depreciation benefits or Generation Based Incentives Investments in wind energy 2007 $2.2 billion 2008 $2.7 billion (63% of total RE investments) 2009 Over $3 billion (EAI estimate) Key bottlenecks and barriers Incentive Challenges Transmission Challenges Regulatory Challenges Structural Challenges Efficiency Challenges Cost of power generation and trends in the same over years Rs /kwh this includes amortized capital costs, O&M expenses, insurance, loan repayment costs. Industry insiders say that it could take 4 5 years before wind energy achieves costs comparable to fossil fuel, although incentives make wind a profitable investment opportunity in India even at this point of time.

23 Wind Potential for Short and Medium Term Growth: High Biofuels Biodiesel Biodiesel is made from vegetable oils, animal fats or recycled greases. Biodiesel can be used as a fuel for vehicles in its pure form, but it is usually used as a diesel additive to reduce levels of particulates, carbon monoxide, and hydrocarbons from diesel powered vehicles. Biodiesel is produced from oils or fats using transesterification and is the most common among all biofuels in Europe. Biofuels provided 1.8% of the world's transport fuel in Investment into biofuels production capacity exceeded $4 billion worldwide in 2007 and is growing. Total available potential Exploited potential (production/installed capacity) Future expected production/installed capacity India has up to 60 million hectares of non arable land available to produce biodiesel from second generation crops such as Jatropha 2008: 10 million gallons India vs. 3 billion gallons worldwide (0.3%) Largely dependent on the extent of mechanization introduced in the collection, extraction stages Specific government incentives 20% of fuel used should be biofuels by 2017 (National Policy on Biofuels, 2008) Mandatory 5% blending for ethanol and biodiesel (Nov 2009) Government agreed on a price of 34 rupees per liter of petrol for biodiesel purchase by oil companies (Nov 2009) Incentives for Jatropha cultivation (IREDA ) Amount of investments happening in this now, expected in future Over 40 companies were keen on setting up Jatropha biodiesel facilities in 2007, but interest has dwindled. Biggest investment seen so far was made by BP, in TATA s 8000 acre Jatropha acreage in Andhra Pradesh $9.4 million invested Bharat Petroleum, one of India s four national oil companies, announced a new venture, Bharat

24 Renewable Energy, which seeks to produce one million T of biodiesel from Jatropha by Key bottlenecks and barriers Supply of feedstock security Price fluctuations High man hour cost for Jatropha harvesting Lack of confidence due to delay in notifying, publicizing and explaining the government biodiesel policy Lack of seed collection / oil extraction infrastructure No minimum support price for seeds Cost of power generation and trends in the same over years Biodiesel production cost stands at about 40 per liter Jatropha Biodiesel First plantations started in the early part of this decade India was the first country to grow it on large scale Plantations now growing in other parts of Asia and Africa. No large scale Jatropha biodiesel production yet Jatropha Biodiesel Growth in India Year Area under Cultivation CAGR % % Jatropha Biodiesel Prospects and Problems Prospects Significantly reduce our fossil fuel dependency wind Utilize marginal lands Generate rural employment Problems Much lower yields than expected Lack of expert knowledge across entire value chain Not reliable enough for farmers to invest in it Biofuels Ethanol

25 Bioethanol is an alcohol made by fermenting the sugar components of plant materials and it is made mostly from sugar and starch crops. With advanced technology being developed, cellulosic biomass, such as trees and grasses, are also used as feedstocks for ethanol production. Ethanol can be used as a fuel for vehicles in its pure form, but it is usually used as a gasoline additive to increase octane and improve vehicle emissions. Bioethanol, or ethanol for short, is widely used in the USA and in Brazil. Total available potential Exploited potential (production/installed capacity) India produces about 440 million tons of crop residues annually; this translates to about 130 million T of ethanol per annum India has 63 million ha waste land; translates to a maximum potential of more than 500 million T of cellulosic ethanol per annum India s total crude oil import is about 115 million T per annum Fuel Ethanol 60 million gallons in India vs. 15 billion gal worldwide in 2008 (0.4%) Future expected production/installed capacity 1870 million liters of alcohol production in (surplus 530 million liters). Approx 2500 million liters in (surplus 900 million liters) Specific government incentives 20% biofuels by 2017 (National Policy on Biofuels, 2008) Mandatory 5% blending for ethanol and biodiesel (Nov 2009) Government recently announced a purchase price of Rs 27 per liter for the public oil companies for ethanol Amount of investments happening in this now, expected in future Tata commissioned India's first ethanol plant based on sweet sorghum. An initial investment of $10 million to develop a prototype unit will be followed by $150 million over the next 3 4 years. Many more isolated small investments Annual biofuels investment has lately decreased Key bottlenecks and barriers Environmental issues Food versus fuel debate Feedstock supply and price concerns (State governments control the movement of

26 molasses and often restrict molasses transport over State boundaries) India s characteristic problem with ethanol has been low cane yield per acre due to archaic farming practices, lack of irrigation and fertilizers, and use of old generation feedstock Depletion of ground water resources Excessive dependence on the monsoons, which can be fickle and unreliable Lack of utilization of advanced technology in ethanol manufacture Cost of fuel production and trends in the same over years Rs Rs per liter Biodiesel Potential for Short Term Growth: Short Term Low, Medium Term High Ethanol Potential for Short Term Medium, Medium Term Growth: High Geothermal Except for a few sporadic and half hearted attempts, India s Government has done practically nothing to exploit geothermal energy. And unlike in the sectors of wind and solar energy, few benefits or incentives have been formulated or announced to attract investment in geothermal energy. Given this state of affairs, it is not surprising that India does not figure anywhere on the geothermal map of the world. Total available potential Exploited potential (production/installed capacity) Future expected production/installed capacity Claimed to be 10,000 MW but experts are sure only to the extent of 100 MW Zero No such projections yet

27 Specific government incentives 10 year tax break Amount of investments happening in this now, Only one company, LNJ Bhilwara, has started any expected in future serious exploration into this Key bottlenecks and barriers Long gestation periods involved in site prospecting, getting licenses and testing Unproven in India Manpower and expertise for R&D and operations unavailable in India Cost of power generation and trends in the same over years Almost the same as that for coal based power generation, about 6 7 cents/kwh Leading Countries for Geothermal Philippines 1931 MW geothermal installed capacity (2005), around 2 GW 2009 USA Approximately 3000 MW geothermal (2009); 2544 MW (2005) Mexico 965 (2009) Geothermal Potential for Short and Medium Term Growth: Low Small Hydro Hydropower, the use of water resources for a nearly free energy due to absence of fuel cost, is characterized by the highest prime moving efficiency, and a spectacular operational flexibility. Hydro power contributes about 25% i.e. 36,877 MW of all power generated in India. Total available potential Estimated potential 15,000 MW Identified 10,265 MW through 4278 sites = Average 2.5 MW per site Exploited potential (production/installed Approximately 2500 MW (15% of total) capacity) Future expected production/installed capacity Target capacity addition in 11th plan ( ): 2000 MW Installed capacity grew from 1693 MW in 2005 to 2403 in (CAGR of 9.2%). Expected to grow even faster, at 13% for Specific government incentives PPAs with attractive tariffs

28 Amount of investments happening in this now, expected in future Capital subsidies Exemptions from taxations and duties No techno economic clearance is required for projects up to Rs.250 Crore investment 17 States have so far announced their policies to invite private sector to set up SHP projects. Over 2600MW capacity SHP sites offered/allotted to private sector by the States to set up SHP projects MNRE has created facilities at AHEC for SHP performance testing Small hydro investment in India grew by 300% $543 million in 2008 (15% of total RE investments) $140 million in 2007 Key bottlenecks and barriers Delays & Long Timelines Poor efficiency of transmission and distribution because of lack of local customers Geological and Social Uncertainties Regulatory Challenges Cost of power generation and trends in the same over years Rs per kwh. This cost includes O&M costs, insurance, depreciation, and loan repayment costs SHP is the second largest RE contributor to electricity in India Renewable energy source and its contribution to electricity generation (as a % of total renewable electricity) Wind 76% Small hydro 16% Cogen 4% Biopower 3% Others 3% High capacity factors Wind 25 30% Solar 17% Small hydro 35 45% Capacity addition for SHP in India

29 Small Hydro Potential for Short and Medium Term Growth: High Large Hydro Total available potential Exploited potential (production/installed capacity) Future expected production/installed capacity Specific government incentives Amount of investments happening in this now, expected in future India is endowed with economically exploitable hydro power potential to the tune of MW of installed capacity The total installed capacity of India is MW 15,627 MW is planned to be added in the 11 th five year plan ( ) New Hydro Policy 2008: stated objective of overcoming the problems experienced with respect to tariff based bidding for HEPs Trends%20in%20Bidding 24Sep08.ppt Major part of the investment is government dominated. Investment in the 11th five year plan is 28,000 Crores Key bottlenecks and barriers High capex Large gestation periods

30 Cost of power generation and trends in the same over years Geological surprises Societal and environmental impacts Inter state and inter regional disputes Uneven distribution of hydro resources and possible demand supply mismatch Generation cost in the first ten years could be about Rs 2 per unit but it decreases after that, and could be very low in future, given that these projects have lifespan of well over 50 years. Large Hydro Potential for Short and Medium Term Growth: Medium Wave & Tidal Energy Tidal Tidal power is the only form of energy which derives directly from the relative motions of the Earth Moon system, and to a lesser extent from the Earth Sun system. The tidal forces produced by the Moon and Sun, in combination with Earth's rotation, are responsible for the generation of the tides. Tidal power, sometimes also called tidal energy, is a form of hydropower that converts the energy of tides into electricity or other useful forms of power. Total available potential Most attractive locations (west coast) Gulf of Cambay Gulf of Kachchh on the west coast In these locations, the maximum tidal range is 11 m and 8 m with average tidal range of 6.77 m and 5.23 m respectively. East: The Ganges Delta in the Sunderbans in West Bengal also has good locations for small scale tidal power development. The maximum tidal range in Sunderbans is approximately

31 Exploited potential (production/installed capacity) Future expected production/installed capacity Specific government incentives 5 m, average range 2.97 m The identified economic tidal power potential in India is of the order of MW, with about 7000 MW in the Gulf of Cambay, about 1200 MW in the Gulf of Kachchh and less than 100 MW in Sundarbans. None No clear projections, but there is a 3.75 MW project coming up in the Sunderbans. None at the moment, though Gujarat government appears to move towards some incentives Negligible Amount of investments happening in this now, expected in future Key bottlenecks and barriers Cost The altering of the ecosystem at the bay Damages like reduced flushing, winter icing and erosion can change the vegetation of the area and disrupt the balance. Present designs do not produce a lot of electricity Similar to other ocean energies, tidal energy has several prerequisites that make it only available in a small number of regions Power is often generated when there is little demand for electricity, and limited number of construction locations Intermittent supply, tidal plant provides power for only around 10 hours each day, when the tide is actually moving in or out. Tidal barrages affect fish migration and other wildlife. Cost of power generation Tidal cents/kwh (no Indian estimates available) Proposed tidal power projects in India

32 Durgaduani Creek The country's first tidal power generation project is coming up at Durgaduani Creek of the Sundarbans. The 3.75 MW capacity Durgaduani Creek tidal energy project is a technology demonstration project and will span an area of 4.5 km. (Oct 2008 data). Gulf of Kachchh Tidal Power Project Ambitious 900 MW project (barrage), proposed almost 20 years back, but little progress since announcement of project. The proposed tidal scheme envisaged an installation of 900 MW project biggest in the world, located in the Hansthal Creek Wave Wave power is the transport of energy by ocean surface waves, and the capture of that energy to do useful work for example for electricity generation, water desalination, or the pumping of water into reservoirs. Wave energy efforts have scarcely found a foothold in India yet, and even abroad, after a few false dawns, wave machines like the Oyster 2 from Scotland have only just begun to look promising. Total available potential The potential along the 6000 Km of India s coast is about 40,000 MW. This energy is however less intensive than what is available in more northern and southern latitudes. In India the research and development activity for exploring wave energy started at IIT Madras in Estimates indicate that the annual potential along the Indian coast is between 5 to 15 MW per meter. However, the realistic and economical potential is likely to be considerably less. Exploited potential (production/installed None capacity) Future expected production/installed capacity No commercial projects Specific government incentives None Amount of investments happening in this now, Negligible expected in future Key bottlenecks and barriers Immature technology High costs Cost and trends in power generation Wave cents / kwh (no Indian cost estimates available) Wave energy projects in India A Prototype exists in Thiruvananthapuram, Vizhinjam Fisheries Harbor a 150 KW Plant

33 Wave Power Potential for Short and Medium Term Growth: Low Tidal Power Potential for Short and Medium Term Growth: Low Biomass based Power Being an agrarian country there is easy availability of agricultural based mass which can be used to generate energy by burning, the easiest, oldest, and the least efficient method of generating energy. But due to an underdeveloped grid, over 70% of the population of India, living in villages, receive neither electricity nor a steady supply of water, both of which are crucial to socio economic development and survival. Biomass can be intelligently tapped to provide not only electricity but also water to irrigate fields to further increase production of biomass, ensuring steady generation of electricity. As a bonus, waste biomass from the biomass gasifier plant can be used as fertilizer. In India more than 2000 gasifiers are estimated to have been established with a capacity in excess of 22 MW and a number of villages have been electrified with biomass gasifier based generators. MNRE has actively promoted research and development programs for efficient utilization of biomass and agro wastes and further efforts are on. Total available potential MW Exploited potential (production/installed Direct Biomass 794 MW capacity) Bagasse cogen 1048 MW installed; 1591MW under implementation (2009) Future expected production/installed capacity 578 MW Specific government incentives Customs Duty Exemption/Reduction on parts of Biomass Operated Electricity Generator Excise Duty Exemption on parts of Biomass Operated Electricity Generator Exemption in Central Sales Tax 100 % accelerated depreciation Income Tax Holiday for ten years (can be availed within 15 years). Power sector reforms have encouraged investment in grid connected biomass projects. Amount of investments happening in this now, expected in future In the current Five Year Plan period (2007 to 2012), the government s target for biomass power capacity is 1200 MW, 500 MW for cogeneration plants Key bottlenecks and barriers Feedstock supply and price security A less concentrated form of energy, making it

34 Cost of power generation and trends in the same over years less efficient The biomass is carbon neutral theory of the early 1990s has been superseded by more recent science which recognizes that mature, intact forests sequester carbon more effectively than cut over areas. In 2009 a Swedish study of the giant brown haze that periodically covers large areas in South Asia determined that it had been principally produced by biomass burning Emergent competing usage: Recently developed plastics from biomass are cheaper and meet or even exceed most performance standards, but lack the water resistance or longevity as conventional plastics. Cost of electricity production Rs / kwh. This includes all costs, including capital depreciation, O&M, insurance and interest costs. This cost could increase over the years as the cost of biomass increases Biomass Power Now and Future Parameter Now (2010) Future (2020) Distributed electricity generation Biomass has a minor contribution Biomass will be a major contributor Use in co firing in power plants Fewer than 1% of power plants use biomass A much larger % of utility power will be from biomass Use of feedstock Primarily waste biomass and assorted Dedicated energy crops Related revenue streams Some additional revenue streams already present A more established end user market for co products Standalone renewable electricity source? Primarily standalone mode Will be used in conjunction with other renewable

35 electricity sources Total amount of energy crops available or waste biomass available

36 Biomass Power Potential for Short and Medium Term Growth: High Summary of Renewable Energy Sources Growth Potential in India RE Source Short Term Growth Potential Medium Term Growth Potential Solar PV High High Solar CSP Medium High Solar Thermal for Heating/Drying High High Wind High High Biofuels Ethanol Medium High Biofuels Biodiesel Low High Geothermal Low Low Small Hydro High High Large Hydro Medium Medium Wave Low Low Tidal Low Low Biomass Power High High

37

38 4 Regions with Potential for Renewable Energy Best regions in India for o Solar PV/CSP o Wind o Biomass Power o Small Hydro o Geothermal o Energy Crops for Biofuels o Wave and Tidal

39 Source: 1. Best regions in India for solar PV/CSP The southern states of Andhra Pradesh, Karnataka, Tamil Nadu and states in NW India like Gujarat, MP and Rajasthan has the best solar radiation in the country 2. Best regions in India for wind The wind farms are predominantly present in the states of Tamil Nadu, Maharashtra, Karnataka and Gujarat. Other states like Andhra Pradesh, Rajasthan, Kerala and Madhya Pradesh have good potential. 3. Best regions in India for biomass

40 Rajasthan, Punjab, Maharashtra and Haryana are states with high biomass potential. Together, they comprise close to 50% of the total estimated potential for biomass in India. 4. Best regions in India for SHP Potential for run of river schemes exist mainly in hilly areas of Jammu and Kashmir, Himachal Pradesh, Uttar Pradesh, West Bengal and North Eastern states of India.

41 5. Best regions in India for geothermal Geothermal provinces based on their occurrence in specific geotectonic, geological, and structural regions such orogenic belt regions, structural grabens, deep fault zones, active volcanic regions etc. In India, different orogenic regions are Himalayan geothermal province, Naga Lushai geothermal province, Andaman / Nicobar Islands geothermal province, while non orogenic regions are Cambay graben, Son Narmada Tapi graben, west coast, Damodar valley, Mahanadi valley, Godavari valley etc. Potential Sites: Puga Valley (J&K) Tatapani (Chhattisgarh) Godavari Basin Manikaran (Himachal Pradesh) Bakreshwar (West Bengal) Tuwa (Gujarat) Unai (Maharashtra) Jalgaon (Maharashtra) 6. Best regions for energy crops in India An answer to this can be extrapolated from states with high Jatropha production, since Jatropha needs conditions which are similar to those required by energy crops. In addition, Jatropha is likely to be the most widely used energy crop in India in future. The states with high potential are Andhra Pradesh, Chhattisgarh, Karnataka, Tamil Nadu, Rajasthan, and Maharashtra 7. Best regions in India for wave and tidal The most attractive locations are the Gulf of Cambay and the Gulf of Kachchh on the west coast where the maximum tidal range is 11 m and 8 m with average range of 6.77 & 5.23 m respectively. The Ganges

42 Delta in the Sunderbans in West Bengal also has good locations for small scale tidal power development. The maximum tidal range in Sunderbans is approximately 5 m with an average tidal range of 2.97 m. The identified economic tidal power potential in India is of the order of MW with about 7000 MW in the Gulf of Cambay about 1200 MW in the Gulf of Kachchh and less than 100 MW in Sundarbans.

43 Section 3 HOW & WHO Investing in RE in India Points to Note Who s investing in RE in India?

44 5 Investing in India Points to Note Government regulations for investing in renewable energy in India Few, if any, major regulations, unlike earlier 100% FDI allowed Amount of FDI that has flown into India for renewable energy $200 million in : $7.5 million Grown at a compounded growth rate of 200% Departments to contact for starting off Those who wish to invest in renewable energy power plants should approach the MNRE (Ministry of New and Renewable Energy), or their local branches (State Nodal Agencies) and submit applications. IREDA and rural government finance agencies may also be approached. The Joint Secretary Ministry of Non-conventional Energy Sources Block # 14, CGO Complex Lodhi Road New Delhi Tel./Fax (0) Web site The Managing Director Indian Renewable Energy Development Agency Core 4-A, East Court, 2 nd Floor India Habitat Centre Lodhi Road New Delhi Tel / Fax Web site Those exploring investments in renewable energy component manufactoring may investigate special economic regions like Fabcity in Hyderabad, where it may be possible, owing to incentives, to manufacture such components at a lower cost price.

45 Investing in India Things to Watch Out for Legal and procedural hurdles for firms investing in renewable energy in India Legal hurdles relating to land acquisition, obtaining the relevant concessions and contracts for captive raw materials or fuel supply, creating an enforceable security structure, and complying with onerous regional laws. Failure of states to uniformly apply the 2003 Indian Electricity Act with respect to third party sales. Tax regulations change frequently, with tax incentives regularly added and dropped. Recently, the Government of India Finance Ministry rolled back the 100% tax exemption on income earned by investors and lenders (interest) for investments and loans into infrastructure projects. However, the GOI continues to retain a 10 year tax holiday in a block of 20 years for undertakings engaged in developing / operating / maintaining renewable and other facilities. India s court system is plagued by delays. India only has 19 years experience in opening markets. The regulatory environment is still evolving. What are the other problems which foreign investors should beware of? Lack of credit worthiness of the State Electricity Boards Corruption is still rampant not so much top level corruption, but across the lower levels inspectors, meter readers, etc.

46 6 Who is investing in India RE? List of foreign companies investing in RE in India Name Sector invested in Amount invested Joint venture partners Goals for India Company background Abengoa Solar Abengoa SA Befesa Inabensa (Abengoa subsidiary) Centrotherm Photovoltaics AG Mola Solaire Produktions GmbH, US based Signet Solar CSP technology transfer, Solar Minjur desalination plant, Tamil Nadu 765 KV overhead transmission line (from Sipat thermal power plant to Seoni's substation Polysilicon processing factory five year contract to supply 125 MW of multicrystalline solar wafers to XL Telecom & Energy Ltd MOU with Tamil Nadu to Rs 70 Crores 91 million Euros Not available $3.18 billion Undisclosed estimated $500 million Maharishi renewable energy (MREL) IVRCL Infrastructures & Projects SREI Infrastructure Finance Ltd, Environ Energy Deck Services (together 50% stake) and Perseus (35%) Expects revenues of more than 600 million Euros over 25 years of operation. Plans to build three plants (1 Spanish, works in sustainable solutions for infrastructure, environment, and energy in technologies incl. nuclear power Planning, technology and engineering services for the design and process optimization of polysilicon, ingot and wafer manufacturing. German firm engaged mainly in manufacturing silicon ingots and wafers. Company wishes to "Develop

47 Vestas wind Gamesa esolar Siemens manufacture 300 MW of thin film PV modules Factory at Sriperumbudur to make turbine blades first, then wind electric generators. Indian subsidiary, to produce 850KW wind turbines, with an initial production capacity of 200MW a year, in the Red Hills area next to the city of Chennai. ACME will be the master licensee of esolar's modular, scalable technology. "esolar has produced the first solar energy that is competitive with fossil fuels," said Bill Gross, CEO of esolar. A wind turbine factory in India by The first wind turbines are scheduled to leave the plant in a little over two years. Rs 100 crore ACME buys $ 30 million equity stake in esolar, in return for representing esolar in India 70m None None ACME Group GW) in India over the next 10 years at multiple locations. 350 sets of blades in the first year, a number that would double to 700 sets the year after. Jorge Calvet, Gamesa s chairman: India has outstanding wind energy growth prospects where we have a undertaking significant long term commitment To build up to 1,000 MW of solar thermal power plants over the next 10 years. German electronics giant Siemens is to invest more than 250 million euros ($348 million) in India, mainly large area thin film modules with the lowest Levelized Cost of Electricity (LCOE) using proprietary technologies" Vestas is the world's leading supplier of wind power solutions A Spanish firm, Gamesa s objective is to be a leader in the design, manufacture, distribution and installation of sustainable energy solutions. Producer of modular, scalable solar power plants; has proprietary solutions to make a dramatic reduction in cost of solar thermal technology. Large scale Generalists

48 Germany s IBC SOLAR and India s Refex Energy TATA BP solar BP Enercon India Signed a MOU with State energy and petrochemical department for setting up a 50 MW solar PV power plant in Gujarat. Their Bangalore solar cell plant has a capacity of 52 MW, set to increase to 300 MW by 2010 project to demonstrate the feasibility of producing biodiesel from jatropha Enercon India Ltd set to exploit wind energy in Haryana. The sites selected are located at the Shivalik foothills and the catchment areas of the Aravali range. Rs 1000 Crores $ 300 million $9.4 million 790 crore (Silkhoh) Rs 395 crore, Madohgarh IBC solar (exclusively foreign partnership) Tata & British Petroleum TATA Energy and Resource Institute (TERI) Mehra Group in renewable energy. Plans to increase its workforce in India from 17,000 to 25,000 workers over next 2 years. Intends to become a World Class solar solution provider apart from cornering the Indian market. Involves using 8,000 hectares to grow Jatropha to produce 9 million liters/yr of biodiesel. Low cost exploitation of natural abundance of renewable energy sources IBC Solar is a Germany based Photovoltaics specialist, offers solutions for solar power. The British Petroleum Company is a global energy company which is the third largest global energy and the 4th largest company in the world. Enercon GmbH, from Germany, is the thirdlargest wind turbine manufacturer in the world and has been the market leader in Germany for several years.

49 Biogas Nord SunTechnics Efficient biogas plants installed by Biogas Nord are based on a flow storage process, and convert bagasse to biogas. The Shree Tatyasaheb Kore Warana, is a sugar factory that produces 40,000 tons of bagasse a year. Subsidiary in India with 40 employees. In Northern India, the installation of photovoltaicwind hybrid plants with a total capacity of 50 kilowatts is being realized. Successfully started 2 biogaselectricity plants in Kerala. 1.8 million Euros Rs. 12 crores + 25 crores more in future Local sugar factories Looking at the 165 sugar factories in Maharashtra, which is about half the number in India Wishes to set up offices all over India; wishes to increase the workforce to over 100 employees in the region. The Group's principal activities are the development, planning, construction and operation of biogas plants. SunTechnics is a brand of the Conergy Group, one of the world s largest companies solely dedicated to renewable energy. A Sample Analysis for a Company Exploring Entry into Indian Renewable Energy Objective To assist the company (ABC) in adding value to the Indian market through either utilizing its existing assets or through the creation of new assets Background ABC is a leading supply chain and logistics service provider in the petroleum and petro chemical industries. It s based in the UAE, a unique strategic location located between three continents. ABC is keen to participate in the fast growing Indian renewable energy segment. It hence approached EAI for marketing and business development assistance.

50 Business Opportunity Spectrum for ABC 1. Exploit existing expertise ABC can use its existing logistics and supply chain expertise to explore if it could use them to the fast growing Indian renewable energy segment (for e.g., as a logistics support provider for the Indian renewable energy segment) 2. Leverage partnerships ABC can consider using its business contacts and alliances to explore if it could be an equipment/solutions supplier for the Indian renewable energy industry (for e.g., ABC could be an importer and supplier of inverters for the solar and wind energy industries.) 3. Innovate within its domain ABC uses its acquaintance of the petroleum and petrochemicals industry to explore if it could be a clean technology solutions provider for these industries in India (for e.g., ABC imports and provides renewable energy products like solar panels that can be used in the petroleum and petrochemicals industries in India). 4. Climbs the value chain ABC can also consider if it could enter the Indian renewable energy segment as a power producer in its own right (e.g., ABC enters into a PPA and becomes an independent power producer based on wind energy). 4 Value Addition As can be observed from the illustration above, each of the four options represents varying levels of value addition/vertical integration for ABC. Based on market research for each of the four options, and after doing a SWOT analysis for each, it was recommended that it was best for ABC to start off at the base (where it can use its available expertise) and gradually move up the value chain. The client is most likely to accept the recommendation.

51 Section 4 HOW MUCH? Incentives provided by the Indian government for RE Costs (capex and opex), tariff rates and returns for the various RE source in India Availability of debt and equity finance in India for RE

52 7 Incentives Provided by for RE in India Introduction In the early 1980s, the Indian government established the Ministry of New and Renewable Energy (MNRE) to encourage diversification of the country s energy supply, and satisfy the increasing energy demand of a rapidly growing economy. A network of nodal agencies has been established; one in each state. These agencies are responsible for facilitating power purchase agreements and other infrastructural requirements. The 2003 Electricity Act unbundled the vertically integrated electricity supply utilities in the Indian States and set up State Regulatory Commissions (SERCs) in charge of setting electricity tariffs. The Electricity Act also required the SERCs to set Renewable Portfolio Standards for electricity production in their state, and the MNRE issued guidelines to all state governments to create an attractive environment for the export, purchase, wheeling and banking of electricity generated by wind power projects. 10 out of the 29 Indian States have now implemented quotas for a renewable energy share of up to 10% and have introduced preferential tariffs for electricity produced from renewable sources. These states are Kerala, Rajasthan, Tamil Nadu, Karnataka, Andhra Pradesh, Maharashtra, Madhya Pradesh, West Bengal, Gujarat and Haryana. In addition, several states have implemented financial incentives for renewable energy generation, including: energy buy back (i.e. a guarantee from an electricity company that they will buy the renewable power produced); preferential grid connection, transportation charges, and electricity tax exemptions. Incentive details discussed for the following o Small hydro o Biofuels o Geothermal o Wind Energy o Solar PV and Thermal/CSP Small Hydro State Incentives Incentives for detailed survey and investigation Incentives for Detailed Project Report preparation Interest subsidy for commercial projects Financial support for renovation, modernization and capacity up rating of old SHP stations Financial support for development / up gradation of water mills

53 13 States in India (Himachal Pradesh, Uttar Pradesh, Punjab, Haryana, Madhya Pradesh, Karnataka, Kerala, Andhra Pradesh, Tamil Nadu, Orissa, West Bengal, Maharashtra and Rajasthan) have announced policies for setting up commercial SHP projects through private sector participation. The facilities available in the States include wheeling of power produced, banking, and attractive buy back rate etc. Tax incentives such as enhanced capital allowances are available to developers of hydro projects and low interest rate government finance is available to support hydro schemes. Schemes can be structured with 25% equity and 75% debt. Incentives for Biofuels India has a new Biofuel Policy with an emphasis on biodiesel production from Jatropha. In 2004, it was decided, as a first step, to mandate 5 percent blending of petrol with ethanol. A MOU between the Indian sugar Mills Association and Indian Oil Corporation is designed to ensure uninterrupted supplies of ethanol for the program. The target is a 20 percent blend by the year The biodiesel market is

54 estimated at nearly U.S. $32 Billion in installed projects by A National Bio diesel Board has been created to promote, finance and support organizations that are engaged in the field of oilseed cultivation and oil processing leading to bio diesel production. India s Bio diesel Purchase Policy prescribes that public sector oil marketing companies should purchase bio diesel of prescribed specification from authorized suppliers at a uniform price that will be reviewed every six months. State Incentives for Biodiesel Usually via the respective state renewable energy development agency Support price of oil seeds Fix up remunerative support prices for purchase of different oil seeds suitable for production of Biofuels. Incentives for raising commercial plantations For raising commercial plantations, different categories of cultivators can avail different forms of financial assistance (subsidy, soft loans) under back ended credit linked subsidy program of National Oilseed and Vegetable Development (NOVOD) Board under the Ministry of Agriculture, Government of India. Establishment of Seed collection centres and buy back arrangements Government /private /NGO managed seed collection centres with adequate infrastructural facilities shall be established at well connected locations for seed collection/preservation. Such collection centres shall have facilities to determine the oil content of seeds, grade and certify the seeds on the basis of their oil content, and purchase the same from the farmers at support prices determined by government. Establishment of Bio diesel production centres Bio diesel production can be low tech, and isn t capital intensive. Bio diesel production does not require economy of scale. There is no minimum size for a bio diesel facility, and small decentralized bio diesel facilities do not require dedicated technical staff support; they can be operated by locally trained nontechnical staff. Eligible entrepreneurs shall be entitled to subsidy as per the special package offered under Self Employment Program implemented by the Industries Department. Preparation of Detailed Project Reports Standard priced DPRs for different capacities of Bio diesel Plants shall be made available to the selected entrepreneur by the renewable energy development agencies. Subsidy given for planting material 50% subsidy shall be given on planting material for biofuels crops such as Jatropha and the subsidy available to agro processing industry shall be extended to bio fuel and bio diesel extraction plants. Credits and finance resources Financial institutions shall be roped in to support the activities by providing timely financial assistance for bio fuel plantations establishment of expelling units, storage sheds, refineries etc. Government shall

55 provide suitable budgetary support for interest subsidy for bio fuel plantation lending. Agricultural Insurance Companies shall be advised to develop suitable insurance cover for bio fuel plantations. Incentives for Geothermal 10 year tax holiday Incentives for Wind Energy 10 year tax holiday Low customs duty on imported components Developer can go for either of 2 benefits Accelerated Depreciation (AD) and Generation Based Incentive scheme (GBI). Most wind energy project developers, as long as they are profitable enough to pay a sufficiently high amount of taxes to the government, prefer to go for the Accelerated Depreciation Scheme, which offers a relatively high cash flow in the first few years. In June 2008, the MNRE announced a national generation based incentive scheme for grid connected wind power projects under 49 MW, providing an incentive of 0.5 rupees per KWh (0.7 Euro cents) in addition to the existing state incentives. Investors which cannot draw any benefit from accelerated depreciation under the Income Tax Act because of their small size or lack of tax liability can opt for this alternative incentive instead. Some states have introduced feed in tariffs for wind generation, which are higher than that for conventional electricity. In Karnataka, for instance, the tariff for wind generation is about 3.50 rupees/kwh (5.5 Euro cents) compared to only 1.50 rupees/kwh (2 Euro cents) for coal power. RPS (see Appendix B) and Tariffs for wind power: State (Order date) Wind Energy Tariff INR/KWh Wheeling/Transmission charges Specified RPS for wind Madhya Pradesh (21/11/07) Rs 4.03 in first year, gradually reduced to 3.36 in 5th years and thereafter up to 20 years (to be revised) 2% of tariff 6% Andhra Pradesh (1/5/2009) Rs 3.50 for 10 years 5% of tariff 5% Gujarat (30/1/2010) Rs.3.56 fixed for 25 years 4% of tariff 2% Karnataka (11/12/2009) Rs fixed for 10 year 2% of tariff 2%

56 Rajasthan (16/7/2009) Maharashtra (24/11/2003) Rs : Jaisalmer, Jodhpur, Barmer District Rs : Rest of 3 Districts : fixed for 20 years Rs for the first year and thereafter 15 paisa escalation every year: for 13 years (to be revised) 10% of tariff 5% 7% of tariff 6% Kerala (27/02/2008) Rs 3.14 for 20 years Nil 5% Tamil Nadu (20/03/2009) Rs 3.39 for 20 years 5% of tariff 14% Haryana (15/05/2007) Rs 4.08 applicable for 5 years with annual escalation of 1.5% from Nil 3% Punjab (13/12/2007) Rs (Base Year ) with annual 5% up to West Bengal (25/3/08) Rs fixed for 5 years and as cap INR.3 per KWh 8% Incentives for Solar PV, Solar CSP, and semiconductor manufacturing A number of incentives announced under National Solar Mission that plans to take India s solar energy installed capacity to 20 GW by 2022 from negligible amounts in These incentives hinge on either accelerated depreciation or generation based incentives, some tax breaks, capital subsidies in some cases and customs duty exemptions on components. 1. Incentives for Solar CSP & Solar PV The structure of the different incentive schemes available for solar power developers is shown below.

57 Generation Based Incentives NVVN scheme State tariff incentive for solar PV power projects Certain states offer preferential tariff rates for solar power plants to cater to those solar projects which are not eligible to apply under the NVVN scheme. The details of various states offering incentives in the form of preferential tariff are given below: Tariffs for Solar CSP Name of the Electricity Regulatory Commission (ERC) Rajasthan ERC Uttar Pradesh ERC Chhattisgarh ERC Karnataka ERC Gujarat ERC Tariff for Solar Thermal Power Plants Rs 15.60/kWh Rs 13.00/kWh (for 20 years, commissioned before ) Rs 13.26/kWh (commissioned up to , levelized up to ) Rs.12.90/unit (commissioned after ) valid for 10 years. Projects commissioned before (Rs 10/kWh for 12 year; Rs 3/kWh from 13th to 25th year) Other projects commissioned before (Rs 9/kWh for 12 year;

58 Rs 3/kWh from 13th to 25th year) Himachal Pradesh ERC Rs.12.37/unit (commissioned after ) valid up to 11th plan period with annual 5% Tariffs for Solar PV States Solar PV Tariff (INR/KWh) Andhra Pradesh 7 Karnataka * Kerala Maharashtra 3+12* Rajasthan 15.7 TN 3.15 West Bengal 11 Haryana NVVN Scheme The NVVN (NTPC Vidyut Vyapar Nigam) Scheme was introduced under the NSM. Under this, NVVN (owned by NTPC) would buy the power from new Solar Project developers at an incentivized tariff (Up to Rs per unit for Solar PV power plants, and up to Rs 15.4 per unit for Solar CSP plants bidding through competitive tenders, so that developers charging lowest tariffs are selected for NVVN). A few of the kind of requirements which the NVVN scheme mandates are shown below: For each project of Solar Photo Voltaic technology, the minimum Project capacity is 5 MW and the maximum capacity is 25 MW. The Net Worth of the company should be equal to or greater than Rs 2 Crores per MW project capacity. The Project Developer should have made arrangements for at least 50% of the area of the land required for the project at the time of submitting EoI to NVVN. For this purpose, the land requirement shall be considered as 2 Hectares/MW. It is proposed that deployment must use modules manufactured in India and it is also proposed to mandate the use of the cell manufactured in India. Time Frame for implementation of the process Sl.No Event Date

59 1 Notice for Invitation of Expression of Interest Zero date 2 Submission of Applications with documents for Registration 3 Selection of Projects by Central Empowered Committee 3 months from zero date 2 3 months after submission of applications 4 Signing of MOU 15 days from selection of projects by Central Empowered Committee 5 Signing of PPA and PSA 1 month after signing of MOU 6 Financial Closure of the Project 3 months from date of signing of PPA 7 Commissioning of the Project 12 months from the date of signing of PPA Time Schedule for the NVVN Process, Source: MNRE 2. Incentives for Solar thermal for industrial purposes A Subsidy of up to 30% is available from MNRE on solar furnace components 80% Accelerated depreciation is available, so profitability can be maintained from 1st year onwards CO2 emissions reduction can be traded with CDM mechanism IREDA provides soft loans for Solar Thermal projects under 2 different schemes o Direct User Scheme Customers who wish to install larger capacity solar water heating system can directly avail IREDA soft loan facility. Minimum loan amount eligible for sanction under this category is Rs.5 Lakhs. o Intermediary Scheme Any Financial Institutions, Banks, Solar Thermal Manufacturers, Corporate Bodies, NBFCs, State Nodal Agencies, reputed NGOs can become IREDA intermediaries for lending soft loan to different end users for different applications. Minimum loan eligible for sanction is Rs 10 Lakhs. For solar water heaters, soft loans at interest rates of 2%, 3%, and 5% are provided to domestic, institutional, and commercial users respectively. SNAs can be approached for capital subsidies of Rs 1900 for domestic, Rs 1750 for institutional, and Rs 1400 for commercial establishments, per sq. meter of installed solar water heating.

60 3. Incentives for semiconductor manufacturing In March 2007 the Indian Government announced a semiconductor policy under its Special Incentive Package Scheme (SIPS). According to this policy, the government or its agencies will provide 20 percent of the capital expenditure during the first 10 years for semiconductor industries, including manufacturing activities related to solar PV technology located in Special Economic Zones (SEZ), and 25 percent for industries not located in an SEZ. Inspired by the semiconductor policy, the Andhra Pradesh state government has set up FabCity in the capital, Hyderabad, at an estimated cost of US$3.18 billion. Spread over 1,200 acres (486 hectares), FabCity will house semiconductor manufacturing companies working to meet the needs of the electronic hardware sector and fabrication units for solar PV. FabCity is the largest investment ever made in India in the technology sector. It marks the first step towards India becoming a $33.6 billion semiconductor market employing some 3.6 million people by the year 2015, according to Frost & Sullivan. Incentives for Biomass Power Plants Fiscal Incentives by Central Govt. for Biomass power plants Indirect Taxes Customs Duty Exemption/Reduction on parts of Biomass Operated Electricity Generator. Excise Duty Exemption on parts of Biomass Operated Electricity Generator. Exemption in Central Sales Tax. Direct Taxes 100 % accelerated depreciation. => Income Tax Holiday for ten years (can be availed within 15 years). Summary of Incentives A summary of the key strategic and operational incentives provided by the government of India (or intended to be provided soon) for the renewable energy industry are: Up to 80 percent accelerated depreciation for renewable energy investments Relief in customs duty, excise duty and sales tax Exemption from Central Sales Tax, and customs duty concessions on the import of material, components and equipment used in RE projects Soft loans

61 Generation based incentives especially for solar and wind power projects Government policies covering wheeling, banking, buy back, and third party sale of power Income tax exemption for any single 10 year period in the first 15 years of a wind farm

62 8 Costs & Returns Costs (Capex and Opex) of renewable energy sources (approximate estimates) Capex ($ million/mw, unless mentioned otherwise) All estimates are India specific Opex (US cents per kwh, unless mentioned otherwise) Tariff (cents /kwh, unless mentioned otherwise) Equity IRR (%) Payback Period (years) Solar PV (1) 5 7 (1) Solar CSP (1) 5 7 (1) Solar Thermal for Heating / Drying Ethanol Biodiesel $200/sq m (2) $0.3/annual liter $0.25 / annual liter 1 cent/thermal kwh Cellulosic: 40 cents/liter Corn: 16 cents/liter NA cents/liter Corn: 13 Sweet sorghum :19 12 cents/liter 75 cents/liter Currently, equity IRRs for biodiesel projects fall in a wide range of 5 20 owing to the diverse feedstocks and processes. For example, it has been estimated by some that the equity IRR for a Jatropha project with the current yields and cost structures will be only about 10 12%, though 7 years reported for a case of solid substrate fermentation, ethanol from sweet sorghum Consequent to a wide range for the equity IRRs, the payback period estimates also fall in a wide range of 4 15 years.

63 these numbers are likely to become far more attractive in future with higher R&D spends. Small Hydro Large Hydro (3) Wind Geothermal (4) Wave NA 8 9 (5) (5) Tidal (stream) NA (5) 9 10 (5) (1) Varies, depending on the incentive structures provided; 20%, under the National Solar Mission incentives (2) 1 sq m produces about 400 thermal kwh per year (3) High Opex in the initial years, owing to high maintenance and setting up costs, Opex decreases significantly over years (4) $1.1 million /MW for flashed steam technology, and $ 1.8 million/mw is for binary technology (5) Preliminary estimates made with limited empirical data Who determines the electricity tariff structure in India? The tariff for electricity in India is determined by the Central Electricity Regulatory Commission (CERC ) at central levels, and State Electricity Regulatory boards at state levels. Levelized Cost of Electricity (LCoE) of some electricity sources

64 Let s consider the approximate costs of electricity generation from various sources today (in Rs/kWh) Energy Source Levelized cost of electricity production* (Rs/kWh) Coal / natural gas 2.5 Wind Biomass 3.25 Diesel generator sets 15 Solar PV Solar CSP *: Levelized cost denotes the total cost, after taking into account all direct and indirect variable expenses such as insurance, and depreciation of capital costs. All investments assume a 70:30 debt:equity split.

65 9 Availability of Finance for RE Investments Financing Models in RE The most common structures used to finance projects are Project, Corporate, and Lease Financing. Project financing refers to financing structures wherein the lender has recourse only or primarily to the assets of the project and depends on cash flows from the project for repayment. It can be limited recourse financing when besides the project cash flows the lender has some recourse to the balance sheet of the promoter by way of issuance of corporate guarantees. Non recourse finance is used when there is no recourse to the balance sheet of the promoter and therefore the lender takes a higher financing risk, and may therefore charge a higher rate of interest, and/or put stricter norms in place. Corporate financing involves the use of internal company capital to finance a project directly, or the use of internal company assets as collateral to obtain a loan from a bank or other lender. Lease financing involves the supplier of an asset financing the use and possibly also the eventual purchase of the asset, on behalf of the project sponsor. Assets which are typically leased include land, buildings, and specialized equipment. A lease may be combined with a contract for operation and maintenance of the asset. Sources of Finance Equity financing refers to the use of retained earnings otherwise paid to stockholders, and the issuance of stock. Both forms of equity financing use funds invested by the current or new owners of the company. The equity financiers returns are usually paid in dividend payments and depend on the growth and profitability of the business. Debt Financing includes both short term borrowing from financial institutions and the sale of long term bonds, wherein money is borrowed from investors for a fixed period. Lenders have right to interest and principal payment or to be repaid at a particular date. General Eligibility Criteria for Renewable Energy Loans Who Can Apply? Public, Private Ltd companies, NBFCs and registered Societies Individuals, Proprietary and Partnership firms (with applicable conditions) State Electricity Boards which are restructured or in the process of restructuring and eligible to borrow loan from REC/PFC Eligibility Profit making companies with no accumulated losses. Debt Equity Ratio not more than 3:1 (typically 5:1 in case of NBFCs)

66 No default to any government agency (IREDA/PFC/REC) and other FIs / Banks No erosion of paid up capital. Typically, applicants who are loss making/ not meeting the criteria relating to accumulated losses/ debt equity ratio shall be eligible for financing if Bank Guarantee is provided as security for the entire loan. Role of banks in renewable energy financing While there are no specific mandates for banks, organizations such as IREDA provide soft loans for renewable energy projects through certain designated banks. Other highlights of investing, debt & equity finance availability for the Indian renewable energy sector The energy infrastructural sectors of power generation, transmission, trading and distribution are open to foreign direct investment (FDI) through the automatic route. Under this route, Indian companies can issue shares (often up to 100%) of their paid up share capital to foreigners. No approvals from the government or the Reserve Bank of India (RBI) are required. Investors must simply present the necessary documents to the appropriate regional office of the RBI within 30 days of receipt of inward remittances (and 30 days of the issue of shares to the foreign investors). Foreign Direct Investment (FDI) is permitted as under 4 forms of investments: Through financial collaborations through joint ventures and technical collaborations through capital markets via Euro issues through private placements or preferential allotments. Financing: o On top of the financing spectrum is IREDA, the Indian Renewable Energy Development Agency, an apex nodal agency for RE development in India, the funding arm of the Ministry of New and Renewable Energy. Its key objective is to give financial support to specific projects and schemes for generating electricity and / or energy through new and renewable sources, and also projects for conserving energy through energy efficiency. o The Power Finance Corporation has established a large loan fund (over $500 million) for renewable energy projects. o Rural Electrification Corporation Limited is a public sector enterprise owned by the government of India its main objective is to finance and promote rural electrification projects all across the country. ( ) The government s Renewable energy fund (announced in Feb 2010): Indian Government plans to impose a clean energy tax, of 50 rupees ($1) a metric ton on domestic / imported coal. The tax will be used for a national fund to finance renewable energy projects.

67 Private Public Partnerships (PPPs) with combinations of Indian Government, private sector, multi lateral and bi lateral, etc., debt and equity providers. Funds can also be raised through the Indian and foreign capital markets. Project Finance Models range from 80%/20% to 60%/40%. All equity finance (through private equity, venture capital, strategic partners, etc.) with debt finance should be brought in only after the commercial operations date, which permits better loan terms lower interest rates, longer tenures, etc. due to risk mitigation. Bank with loans for renewable energy projects Prominent domestic banks that fund renewable projects are IDBI, ICICI, IFCI, SBI, and PNB among others. Foreign banks such as Standard Chartered, ABN Amro & Rabobank are also focused on renewable financing. Regional banks also provide micro credit for stand alone units. List of Indian Insurances active in RE Companies Active in RE Bajaj Allianz General Insurance, ICICI Lombard General Insurance, IFFCO Tokio General Insurance, National Insurance Company, Oriental Insurance Company, The New India Assurance Company, Reliance General Insurance Company, Royal Sundaram Alliance Insurance Company, TATA AIG General Insurance Company, United India Insurance Company Dedicated international funds and schemes for renewable energy KfW Bankengruppe: 1) Special Facility for Renewable Energies and Energy Efficiency has an endowment equal to EUR 500 million financing renewable energy projects worldwide, on behalf of the German Government, from 2005 to Asian development bank: Renewable energy takes 5% of funding provided by Asian Development Bank April 8 th, 2010 The International Finance Corporation (IFC) is looking to invest about $150 million to renewable energy focused private equity funds and may authorize further commitments in the near future. The World Bank has allotted $4 billion in loans for India s renewable energy projects. Details of investments in renewable energy and clean technologies Total Investment in Indian RE sector (in billions) CAGR $.7 $.8 $1.1 $3.3 $3.7 50%

68 Stages of Investments India Prominent Clean technologies VC Investments Company Region Deal size Industry segment Period Investors ($US mill) Moser Baer PV North 100 Energy gen Q GIC Special Invtms, GDC Group, IDFC PE Vestas RRB North 54.5 Energy gen Q Merrill Lynch ICSA South 52 Manufacturing/industrial Q Citigroup, Goldman Sachs Auro Mira South 50 Energy Generation Q Baring PE Praj Industries West 29.3 Materials Q Kleiner, Perkins, Caufield and Buyers, Khosla Ventures

69 India Clean technologies VC Investments by Segment (2008) Segment # of deals Amount invested ($ US million) Energy Gen Energy Storage Agriculture 2 4 Water & wastewater 2 9 Energy infrastructure 1 52 Transportation 1 20 Recycling & waste 1 8 Energy efficiency *: Data from all deals not fully available Prominent M&A Deals Company Industry Period Amount ($ Acquirer million) REPower Wind power generation Q Suzlon Shell Solar power generation Q Environ Energy Tech NEPC Wind energy generation Q Reliance ADAG, Enam, Morgan Stanley & Quantum M Winwind Oy Wind power generation Q Sterling Infotech NaanDan Systems Manufacturing/industrial smart production Q Jain Irrigation The Project finance route makes up about 65 70% of all renewable energy investments worldwide. In India, it is even higher (about 80% or more)

70 Prominent investments made in Indian renewable energy The International Finance Corporation is investing in India's first commercially viable solar power project, giving a vote of confidence to ambitions to develop the technology there. Azure Power Private is India's first "megawatt scale" solar power developer, and the IFC is set to invest $10m ( 7.4m, 6.7m). 2. A consortium of funds, including Morgan Stanley Infrastructure Partners, General Atlantic and Goldman Sachs Investment Management, invested $425m in Asian Genco, a Singapore based company that is building power plants in India. That was one of India's biggest private equity deals in the past two years and will include a large hydropower project in Sikkim state. 3. India s largest oil refiner, the state owned Indian Oil Corp. Ltd, or IOC, will invest around Rs 2,000 crore to develop a wind power generation capacity of 200MW and a solar power generation capacity of 50 MW 4. L&T plans to invest around Rs 8,000 crore for setting up MW of hydro power projects in Himachal Pradesh, Uttarakhand and Arunachal Pradesh, according to a senior executive. The projects would go on stream in the next four five years. 5. Option Energy India Private Limited would set up 1000 cu.m. biogas fertilizer plant at Shri Haryana Goshala, Hansi, Hisar at a cost of Rs lakh. The plant would have high rate biomethanation digester fitted with special patented technology called induced Blanket Reactor (IBR) developed by the Utah State University, USA. 6. Hyderabad s Ind Barath Power Infra Pvt. Ltd raised $100 million in funding from Sequoia Capital India, Bessemer Venture Partners and Citi Venture Capital International (CVCI). IDFC Project Equity has been a prolific deal maker in the space by closing investments in Essar Power Ltd, Adhunik Power and Natural Resources Ltd and GMR s GMR Kamalanga Energy SPV Ltd last year. 7. A large investment in renewable energy sources, launched by Airvoice Group with a $50 billion investment over a 10 year period.indian project for 13,000 MW of renewable energy in Karnataka Indian based Airvoice Group announced an ambitious project, which is said to be the largest single investment in the world in renewable energy sources. Airvoice Group has proposed to set up a renewable energy sector project in Karnataka. (10,000 MW of Solar Power and 3,000 MW of wind power). Specifically, PV systems for 10,000 MW and wind turbines for 3,000 MW will be installed in a dozen sites covering about 20,000 hectares of marginal wasteland in the State of Karnataka (south west India). 8. CLP Power is executing a 1,320 MW thermal power project at Jhajjar in Haryana. The project is expected to be commissioned by the end of The company is also betting big on renewable energy and would be investing $800 million (over Rs 3,700 crore) to augment its power generation capacity from renewable resources to 650 MW by the end of this year (2010). 9. German engineering giant Siemens is looking to throw some money at solar and wind power in India now. It is going to invest $346 million in India s renewable energy sector over the next three years. The firm will increase its Indian workforce by about 50 per cent to 25,000 people and about a third of the investment will be for development of wind turbine technology.

71 10. Fidelis Energy Inc. yesterday announced a $25 million agreement with Esar Solar Power Pvt. Ltd. (ESP), a Jaipur based company, to develop and construct the first of several solar energy projects located in the Thar Desert near Jaisalmer, India Soham Renewable Energy India (SREIPL), a Bangalore based company involved in power generation in the renewable sector is close to raising Rs 90 crore from FE Clean Energy, a private equity firm investing in mid market energy efficiency space. The company expects the process to be completed by the end of January US based private equity firm, Global Environment Fund, has completed its $49 million investment in the Indian based clean energy provider; Greenko PLC.Greenko is one of India's largest independent power producer that focuses exclusively on renewable energy generation through the construction and operation of hydro and biomass fired plants. 3. July, 2009: Major US renewable company Astonfield is set to invest a massive $2 billion in India over the next five years, the largest single cash injection in renewable energy ever seen in the subcontinent. The deal will generate about 1,000 MW of power, most of it from solar sources In 2007, the biggest ever PE Investment of USD 100 million for solar technology was done by a consortium led by IDFC Private Equity, GIC Special Investments, CDC Group plc and Infrastructure Development Finance Company (IDFC) in Moser Baer Photo Voltaic technology.

72 APPENDIX A The Indian Electricity Grid Electricity Transmission Map of India