Business Unit Solar Park Manual for SPIA BHC Project August 2015
Table of Contents Table of contents 1. Preamble 4 1.1. Objectives 4 1.2. Summary of the MNRE Solar Parks Scheme 4 1.3. Solar Park Implementation Models 5 1.4. Role of the State Government 6 1.5. Role of Solar Park Implementing Agency 6 1.6. Role of Solar Energy Corporation of India 7 1.7. Operative Period, Applicability and Eligibility 8 1.8. Facilities under the Solar Park 9 1.9. Capacity 9 2. Solar Park Development 11 2.1. Site Selection 11 2.2. Energy Yield Prediction 13 2.3. Impact Assessment 14 2.4. Land 16 2.4.1 Land Acquisition Procedure 17 2.4.2 Framework for allotting the land to developers 18 2.5. Statutory Permits and License for Solar Park Development 18 2.5.1 Permits for Power Evacuation and Grid Connection 21 2.5.2 Executing the Power Purchase Agreement 22 2.6. Infrastructure Planning 24 2.7.1 Road Linkages within the Solar Park 24 2.7.2 Water Supply 25 2.7.3 Drainage 25 2.7.4 Transmission facility including a pooling substation 25 2.7.5 Social Infrastructure 26 2.7. Operations and Maintenance 27 3. Business Model for Implementing a Solar Park 28 3.1. Implementation Functions 28 3.2. Framework for Project Development 28 3.3. Revenue Streams 30 3.4. Identifying Funding Sources for the Solar Park 31 4. Conclusion 32
Preamble PwC 3
Preamble 1. Preamble Energy is a prime mover of any economy. Conventional fuels like coal and oil have and still are the primary sources of energy in India and their long term availability has become a major concern. Additionally, increased usage of conventional fuels has led to the production of high concentrated greenhouse gases (GHGs) in the atmosphere, which is a global concern with respect to global warming and climatic changes. The Government of India (GoI) has acknowledged the increasing concerns towards global warming and climatic changes and identified specific measures to address these issues including promotion and large deployment of renewable energy. Today, renewable energy is increasingly becoming an integral part of energy security initiative in India. India is endowed with fairly high solar radiation of over 5.0 kwh/ sq.m/per day with over 275 days of clear sun for the installation of solar based power projects. 1.1. Objectives I. To comprehend the particulars of developing a solar park for setting up solar projects II. III. IV. To encourage participation of private, government and related entities to set up solar based power projects in proposed solar parks across India To lay down the benefits to potential developers and create a favorable atmosphere for setting up solar projects To establish best practices for the Solar Park Implementing Agency and relevant authorities for setting up a solar park In order to facilitate the increased deployment of solar projects across the country, MNRE has launched a solar parks scheme to decrease the burden on investors and developers while setting up solar projects. 1.2. Summary of the MNRE Solar Parks Scheme In order to promote the development of solar parks across India, MNRE has developed a scheme to set up solar parks and ultra mega solar power projects of a cumulative capacity of 20,000 MW over the next five years from 2014 15 till 2018 19. Under this scheme, 25 solar parks of a minimum capacity of 500 MW will be developed across various Indian states and a central financial assistance (CFA) of approximately INR 4,050 crores will be granted to ensure the development of the solar parks in a cost and time efficient manner. However, for states in the North-Eastern region, solar parks with a capacity of 50-100MW would be developed. The following are the main highlights of the scheme PwC 4
Preamble All Indian states and Union Territories are eligible for benefitting under this scheme Solar Energy Corporation of India (SECI) would be the central implementing agency on behalf of the MNRE. Solar parks across states will be developed in collaboration with the respective state nodal agency, relevant state authorities and SECI. Solar project developers, setting up projects within the solar park, shall enter in to power purchase agreements (PPAs) with central utilities/state utilities/discoms/3 rd parties/captive users who are willing to purchase power from these developers. The tariff for the sale of power could be either Central Electricity Regulatory Commission (CERC)/State Electricity Regulatory Commission (SERC) regulated price or through bidding process. Although, projects can be either set up under any central/state/ut government scheme/programmes or for 3 rd party sale, captive use or merchant sale. The power evacuation arrangement in a solar park will consist of two parts (i) pooling substations and network within the solar park and (ii) the transmission substation along the transmission line up to the CTU/STU substation. The solar park implementing agency would be responsible for part (i) and the respective CTU/STU would be responsible for part (ii). CFA from MNRE can be used for both these parts and/or loans from multilateral/bilateral agencies may also be used to fund the entire power evacuation infrastructure by the implementing agency and CTU/STU. If the capital expenditure is high, alternate funding from the National Clean Energy Fund (NCEF), Green Corridor Programme or any similar source can be used. MNRE is providing the following central financial assistance o INR 25 lakh per solar park would be released by MNRE to SECI for the preparation of a detailed project report of the proposed solar park o CFA of INR 20 lakh/mw or 30% of the total project cost, including grid connectivity whichever is lower would be released to SECI as per the milestones stated in the policy document o This monetary assistance will be handled by SECI, on behalf of MNRE, for which SECI will be given 1% of the total assistance released 1.3. Solar Park Implementation Models The solar parks, across various Indian states, will be developed in a combination with the state government, their relevant agencies and the central government. The nodal agency on behalf of the Ministry of New and Renewable Energy (MNRE) will be Solar Energy Corporation of India (SECI). The states applying under the central solar park scheme will have to designate an agency for the development of the solar park. As per the policy document, solar parks can be developed in the following modes PwC 5
Preamble Mode 1: The state designated nodal agency undertakes the development and management of the solar park. This agency could be a State Government Public Sector Undertaking (PSU) or a Special Purpose Vehicle (SPV) of the State Government. Mode 2: A joint venture (JV) company is set up between the designated state nodal agency and SECI for the development and management of solar park with 50% equity from SECI and 50% equity from the State Government Agency (state government may also allow more than one agency to contribute provided total equity from state government remains 50%). Mode 3: The State designates SECI as the nodal agency and SECI undertakes the development and management of solar park on behalf of State Government on mutually agreed terms. Mode 4: Private entrepreneurs promote solar parks without any equity participation from SECI, but may have equity participation from the state government or its agencies. 1.4. Role of the State Government Land for setting up of the solar park will be identified by the State Government unless the implementing agency has its own land. In order to provide for such a large tract of contiguous land with appropriate insolation levels, the State Government may prioritize the use of government waste/ non-agricultural land in order to speed up the acquisition process. The use of private land may be minimized. The price of the land is to be kept as low as possible in order to attract the developers and, therefore, the site should be selected in such a manner so that inexpensive land can be made available. If land cannot be made available in one location, then land in few locations in close vicinity may be taken. Possibility of using cold and hot deserts, sides of highways can also be actively explored. The solar parks are preferred to be closer to Central Transmission Utility (CTU). All infrastructural requirements outside the park such as connecting road, provision of water supply, construction electricity, etc. to make the park functional, will be the sole responsibility of the concerned State Government. The State Government will propose solar parks under the scheme including private solar parks. The State Government will also decide the solar power park developer (Implementing Agency) 1.5. Role of Solar Park Implementing Agency The SPIA is tasked with acquiring the land for the park, cleaning it, levelling it wherever considered desirable and allocating the plots for individual projects. CERC in its regulations, have included the SPIA as an applicant for getting connectivity and long term access (LTA) PwC 6
Preamble and have also defined their functions accordingly. Therefore, this Ministry shall authorize the SPIA to carry out the activities as required as per the amendments notified by CERC vide its notifications dated 15th May, 2015 in addition to actions being /to be carried out as the Scheme for Development of Solar Park and Ultra Mega Solar Power Projects. The SPIA will be responsible for creating the internal transmission network on behalf of the solar project developers. This network will connect with the Intra State Transmission System (ISTS) or State Transmission System. The transmission network within the solar park will be captive / dedicated transmission system of the solar project developers of the park. Following are the essential responsibilities of SPIA: Acquisition of land Getting land related clearances Developing approach road to each plot Developing internal transmission system and maintaining it. Making arrangement to connect to the grid i.e. ISTS or State Transmission Network. Providing basic drainage. Providing water supply (minimum essential quantity) Carrying O&M activity of the solar park. Following are the optional responsibilities of the SPIA: Levelling and developing of land (to be avoided as far as possible). Construction of offices, housing and common building infrastructures. O&M or related functions. Solar radiation data Road to all plots and within plots to each array Maintenance of internal power supply and water supply Security Cleanliness and waste disposal Technical support services (consultancy etc.) 1.6. Role of Solar Energy Corporation of India (SECI) Based on the mode of implementing the solar park, Solar Energy Corporation of India (SECI) may either assist or receive proposals in a prescribed format for setting up solar power parks and forward the same to MNRE with their recommendation(s). Upon receipt of proposal at MNRE in-principle approval will be accorded. SECI will ensure that the SPIA prepares and submits the DPR in 60 days after the fund for preparation of DPR is released by MNRE through SECI. PwC 7
Preamble Based on the application made by the SPIA to SECI for grant of up to Rs. 20 lakh/mw or 30% of the project cost including grid-connectivity cost, whichever is lower, SECI will forward a request to MNRE. After administrative approval is given, MNRE will release 5% of the grant to SECI, for onward release to the SPIA. Before the release of 20% of the grant, SECI will have to ensure that 50% of the land has been acquired by the SPIA, for which they will provide documentary evidence in support of the claim made by the SPIA. Similarly, SECI will also have to ensure financial closure is achieved by the SPIA, for which they will provide documentary evidence in support of the claim made by the SPIA, before release of next 20% of the grant. To achieve financial closure, SPIA has to mobilize funds to an extent of 90% of the total project cost as per the guidelines issued by Reserve Bank of India. SECI will coordinate with the SPIA for the construction of pooling substation, land development and other common facilities as per DPR and ensure completion as per timeline. SECI will also coordinate with Power Grid Corporation of India Limited (PGCIL) for construction of transmission line and grid connectivity and ensure that there is no mismatch in commissioning of solar projects and that of transmission lines. SECI will develop a web enabled monitoring system for monitoring progress of solar parks. This will also have a provision for uploading photographs of solar parks. 1.7. Operative Period, Applicability and Eligibility Operative Period shall state the notification date under the respective state and/ or central solar park policy. Applicability a) All solar energy based power project developers (Solar PV/Solar thermal) b) Only new plant and machinery shall be applicable for installation in the solar park c) Manufacturing companies of equipment and ancillaries related to solar power projects shall be applicable for benefits Eligibility For the development of solar projects in a specific solar park, any individual/firm/society/institution/registered company etc. shall be eligible to apply. The various categories of solar projects to be set up within a solar park can be Category 1 Projects selected under competitive bidding process for selling power on a per unit (kwh) basis to the under the Jawaharlal Nehru National Solar Mission (JNNSM) or central government based policy. PwC 8
Preamble Category 2 Projects set up under competitive bidding process under the state government policy Category 3 Projects set up under the Renewable Energy Certificate (REC) mechanism. Category 4 Projects set up for captive use or sale of power to 3rd party within or outside the state or for sale of power to other states through open access. 1.8. Facilities under the Solar Park The concept of a solar park is to provide specific and specialized services to stimulate further investments in to setting up solar projects by making the entire process more lucrative and easier for investors and developers. The solar park implementing agency (SPIA) can offer all or a combination of the following benefits, including and not confined to 1. Land acquisition including levelling and allocating plots for individual projects. The SPIA will be required to attain the necessary permits and approvals including change of land use etc. 2. Linkages including road and rail connectivity to the designated land parcel and individual plots. 3. Availability of power, water, drainage and telecommunication facilities for construction and operating requirements. 4. Mitigation measures for adverse or catastrophic situations, like floods, natural calamities, fire hazards etc 5. Storage, housing and warehouse facilities for construction and operation periods 6. Transmission facility consisting of a pooling substation to allow the connection of individual projects through a network of underground/overground cables to allow developers to evacuate power without the burden of solving power evacuation challenges. The idea of a solar park, which is primarily a large stretch of single land parcel with high solar insolation levels, is to reduce the burden on the developers to reduce the time taken by them to set up projects. Each of the services mentioned above are a significant benefit to the developer. However, these benefits come at a premium charged to the developers in a justifiable manner because of saving significant amounts of their time. 1.9. Capacity The SPIA in conjunction with the other relevant authorities shall set the minimum and maximum solar park capacity for development. The capacity could include the minimum and PwC 9
Preamble maximum capacity allocation for different types of solar technologies (mentioned in section 1.2) for both, power generation and equivalent manufacturing capacity. There will also be an individual unit capacity cap including a minimum and maximum (if required) capacity allocation to potential developers. Moreover, the relevant authorities should set a capacity cap for projects executed under the various categories, as explained in section 1.2. PwC 10
2. Solar Park Development In order for a solar park to move from concept to construction, it must pass through a number of development phases focusing on key considerations which mainly comprise of expenditure and risk. Therefore, the development of a solar park can be broken down in to the following stages Pre Feasibility Study is the first assessment of the project. This comprises of a high level study of the most crucial aspects of the project including solar resources assessment, grid connection and construction in order to evaluate the feasibility of moving forward with the concept and project. Feasibility Study If the result of the pre feasibility study is positive, a detailed feasibility study is carried out. This consists of a significantly more detailed assessment of all aspects of the project. The purpose of the feasibility study is to explore the project in enough detail for the interested parties and stakeholders to make a commitment to proceed with its development. Development The development phase takes the project from the feasibility study to financial closure. This involves moving the project forward on a number of fronts including outline design and selection of contractors. Detailed Design The key systems and structures will be designed in detail. This will generally be completed by a contractor. Construction The physical construction of the project. This section will primarily focus on the feasibility and development stage of setting up a solar park and provide guidelines to the relevant authorities on the steps to be followed while setting up a solar park. 2.1. Site Selection Selecting a suitable land parcel is a critical component for developing a solar park. Viable projects have been developed in locations that may seem unlikely on first look, such as on high gradient mountain slopes, within wind farms and on waste disposal sites. In general, the process of site selection must consider a number of factors and the impact they will have on the cost of the electricity generated. The main constraints include: a. Solar Resource: Having a high annual Global Horizontal Irradiation (GHI) is the most basic consideration for identifying a stretch of land to develop a solar park. Higher the resource, higher is the energy yield on a per MWp basis. A critical factor to account for while assessing the GHI at a particular location (land parcel) is shading which could be due to mountains, hills or any natural obstacles. Avoiding shading, through a shading PwC 11
analysis, is critical as even small areas of shade may significantly impact modules or a string of modules. b. Available Area: The total area required depends on the various forms of activity that are going to take place in the solar park. Nowadays, relevant authorities are using solar parks not only for power generation but also for manufacturing and skill training. Therefore, it is essential to finalize the total capacity from power generation, manufacturing and any other activity to deduce the total area required. It is also important to keep in mind that the area required per MWp of installed power varies with the technology chosen. For utility scale projects, land requirement greatly varies with the solar technology being used. For solar PV projects, there are primarily two main types of PV modules being used crystalline silicon and thin film. The land requirement, based on the module technology, varies. On the other hand, different concentrating solar power technologies require different areas. The table below summarizes the rough land requirement for setting up projects using different solar generation technologies Technology Solar PV Area (Acres/MWac) Crystalline Silicon (Fixed) ~ 6 Thin Film (Fixed) ~ 7.5 Concentrating Solar Power Parabolic Trough ~ 6.2 Tower ~ 8.9 Dish Stirling ~ 2.8 Linear Fresnel ~ 2.0 Source: NREL c. Local Climate: In addition to high solar resource and a large continuous stretch of land, the local climate of the proposed solar park should not suffer from extreme weather or harsh climatic conditions. Specific weather incidents may have an adverse impact on the solar park, like Flooding can damage the support structures and foundations of a solar project High wind speeds: Locations with high wind speeds should be avoided as modules, mounting structures and other equipment get severely damaged in the event of any natural calamity associated with high wind speeds. Temperature: High power output is not directly associated with the ambient temperature. If a high temperature location is being chosen, necessary measures PwC 12
need to be taken as most developers will opt for technologies with a low temperature coefficient for power. It is of utmost importance that the SPIA and relevant authorities gather data on weather patterns and climatic conditions of the proposed location in order to evade or take preventive measures from being adversely affected by weather catastrophes. d. Topography: For the development of any solar project and associated activities, the site should be flat or on a slight south facing slope (in the northern hemisphere). Such topography makes the installation of solar projects for developers easy and reduces the cost of technical modifications. e. Geotechnical: The relevant authorities setting up a solar park should perform a geotechnical survey of the entire land parcel prior to final selection. This survey help assess the ground conditions to ensure the mounting structures will have adequate foundations. Boreholes or trial pits should be made at regular intervals and at a depth appropriate for foundation design which would assess: groundwater level, resistivity and ph of the soil, load bearing properties of the soil and presence of rocks or other obstructions. f. Accessibility: It is very essential for the proposed site to have required road and rail linkages for trucks and other vehicles to deliver plant and other construction material during the development of the project and to allow mobilization through a proper road network within the solar park area. The reason for this requirement is to safeguard expensive equipment being transported to the various plots as they are susceptible to damage. The proposed solar park should be located where there is little risk of damage from either people or wildlife and where security and maintenance personnel can respond quickly in case of such events. g. Soiling: Modules are adversely affected by particulates and results in decreased efficiency. Due to this, it is essential to take in to account local weather, building activity, agricultural activity or dust storms. Areas close to natural reserves, bird breeding areas and lakes should be carefully assessed. h. Water Availability: A main water supply, ground water, stored water or access to a mobile water tank may be required; the cost of the various options will have an impact on the project economics. The degree to which water availability is an issue as the requirement will depend upon the expected level of module-soiling, the extent of natural cleaning due to rainfall and the required cleaning frequency 2.2. Energy Yield Prediction After factoring in the various components of selecting the site, energy yield prediction is an important step is assessing the final feasibility of the solar park project in order to attract developers and investors to set up projects. Energy yield prediction is calculates the electrical PwC 13
energy expected from the total capacity of the solar park and is used as a basis for calculating project revenues. The primary aim of this process is to predict the average annual energy output for the life of the solar projects (25 years). To accurately estimate the energy produced from a PV power plant, information is needed on the solar resource and temperature conditions of the site in addition to the layout and technical specifications of the plant components. However, since a solar park is spread over a massive area, the relevant authorities would have to predict the energy yield across the entire land parcel. A mixture of sophisticated software simulation and grounded weather monitoring systems/met data should be used to predict the energy yield of a solar park. The following are the steps to predict the energy yield of a solar park Sourcing modeled or measured (ground) data such as irradiance, temperature and wind speed. Calculating the irradiation incident on the collector plane based on the geographical location of the solar park Modelling the performance of the plant with respect to varying irradiance and temperature to calculate the energy yield prediction in each time step Applying respective losses using detailed knowledge of the inverters, PV module characteristics, the site layout, DC and AC wiring, module degradation, downtime and soiling characteristics Applying probabilistic statistical analysis of resource data and assessing the uncertainty in input values to derive appropriate levels of uncertainty in the final energy yield prediction. 2.3. Impact Assessment The objective of an impact assessment is to prepare a document based on anticipated environmental or social impact due to setting up of the solar park to generate power through solar projects. This task is performed to make sure there are no potentially significant adverse and irreversible social and environmental impacts. Every infrastructure or development project is espoused with multiple risks and hazards. In order to mitigate the associated risks; it is necessary to undertake a details study of environmental and social impact of any proposed project (solar park) under the Environment Protection Act 2006 of Government of India. The solar park is essentially being developed for Solar PV power projects which work on solar energy which is nonpolluting source of energy; however there might be several dimensions of project implementation where ESIA and SIA aspects are essential to address as per the applicable acts. PwC 14
The SPIA would have to appoint any agency (viz. NEERI, AECOM etc. or any one empaneled by QCI - MoEF for infrastructure projects) to carry out the environmental impact study and the social impact assessment should follow the guidelines laid down by ADB, IFC etc. for the entire solar park area. This exercise will be helpful for project developers to get the loan for their projects from international financial institutions like IFC, ADB etc. which gives significant emphasis on impact studies of solar PV power projects as per their guidelines. Environmental Impact Assessment (EIA) In India, The Ministry of environment and Forest (MoEF) has excluded solar PV based power projects from their purview of environmental clearance and EIA as such projects are based on clean energy source and do not cause any pollution especially air pollution. Further the use of water for operation of the project is very small as compared with the conventional (thermal power projects). The water used for cleaning of solar PV modules (dust removal) dimply discharge on the ground; hence there is no effluent from solar field. In most of the solar power policies in India (states) and Jawaharlal Nehru National Solar Mission (JNNSM) the project developers need to obtain No Objection Certificate (NOC) Consent to Establish from State Pollution Control Board (SPCB) The SPIA should ensure the proper technique required to dispose the waste material from a solar project especially broken solar PV modules. These arrangements of decomposition of the material should be done with the supplier/ manufacturer and the project developer. There are no specific guidelines developed by MNRE/ MoEF for solar PV power projects for EIA of solar PV power projects and solar parks. However, International Finance Corporation (World Bank) and Asian Development Bank (ADB) have developed their guidelines for all types of power projects and categorize the project primarily according to the significance and nature of its impacts. Social Impact Assessment (SIA) Social impacts are the impacts of developmental interventions on human environment. The impacts of development interventions take different forms. While significant benefits flow in from different development actions, there is also a need to identify and evaluate the negative externalities associated with them. Such impacts not only need to be identified and measured but also need to be managed in such a way that the positive externalities are maximized and the negative externalities are minimized. Social Impact Assessment (SIA) is a methodology to review social effects of infrastructure projects and other development interventions. SIA is often carried out as a part of, or in addition to, the EIA. The following are the key activities in the SIA process PwC 15
Describing and obtaining an understanding of the proposed intervention (type, scale, location), the settlements and communities likely to be affected by the proposed project Collecting baseline data on the current social and economic environment Identifying the key potential social issues associated with the proposed solar park. This requires a site visit to the area and consultation with affected individuals and communities. Assessing and documenting the significance of social impacts associated with the proposed intervention Identifying alternatives and mitigation measures 2.4. Land A solar park predominantly requires large continuous aggregations of land. Therefore, it would be the responsibility of the SPIA in conjunction with relevant state and central authorities to aggregate this land or make it available for the development of a solar park. The SPIA and relevant authorities are encouraged to identify sites which have good solar insolation and are located in areas close to transmission capacities (preferably spare) and water availability. The SPIA with the help of the local state authorities shall identify land parcels preferably of non forest and non agricultural barren land which is ideal for the development of a solar park. The SPIA should preferably identify land owned by the government for setting up the solar park. Private land or a mixture of government and private land can also be identified. In case of government land, the same shall be referred to the district collector or the synonymous local/state authority for verification. If the land qualifies for the purpose of solar power generation, the collector shall transfer the land to the development of the solar park. In short, the following factors should be considered while selecting land for a solar park Distance to the Grid Sub Station (GSS) GSS Capacity and Availability Land size, shape and topography Accessibility to site Price of Land (or lease) Water Availability Number of land owners PwC 16
2.4.1 Land Acquisition Procedure On a broad scale, land can be categorized as government land and private land. As mentioned earlier, the SPIA should preferably take government land on lease from the government for a specified period of time and can extend the lease later as required. Land lease tenures in various states of India differ from one state to another. Therefore, depending on the particular state, the SPIA should decipher the lease tenure. Procedure to acquire government land and private land is quite different but the basic and major difference is the land usage. Government allocated land is ready to use for industrial purpose immediately after the purchase whereas available private land is most of the times agricultural land which cannot be used for industrial purpose. To use agricultural land for industrial purpose it must be converted (land conversion) to industrial usage from agricultural usage in the government records. The procedure for Govt. land allotment is 1. Identification of the suitable land parcel 2. Local village authority (patwari) to be notified of the land parcel 3. Secure land documents (land titles) 4. Deposit these documents to the state nodal renewable energy agency 5. The district official (collector) intimates the village authority for confirmation a. The village authority prepares the land report and submits the same to the district official 6. The district official forwards the report to the Revenue Minister for approval 7. District official gives a demand note to buyer to purchaser to deposit the amount 8. Lease agreement executed between buyer and district official for a certain number of years 9. Village authority gives possession of land and changes the ownership in the revenue document The procedure for private land acquisition and conversion to industrial use 1. Identification of land 2. Notify village authority (patwari) of the land khasra no. 3. Purchase the land and get the ownership transferred 4. Secure land documents 5. Submit land conversion application to District official (Collector) PwC 17
6. District official s office verifies the application and generates a challan of a certain amount per application. 7. After the challan submission, the file is forwarded to village authority for a report on ownership through State District Magistrate (SDM) and Tehsildar. 8. Village authority then prepares a report and gets an NOC from the concerned area and forwards the same to the District official. 9. Collector forwards the file to Revenue department for conversion order. 10. After verifying the file, the revenue department issues the conversion orders. 11. This order is sent to the District official and issues a demand note to the purchaser. 12. After submission of the stipulated charges, the orders are provided. 2.4.2 Framework for allotting the land to developers In the current scenario, scheme of the projects coming under the central policies are eligible to develop projects inside the solar park. Initially the plots are identified and earmarked for developing the solar projects under the scheme. The allotment of plot to developers should depend on the bid price and size of the project. The bidders are required to mention their preference of the plot in the decreasing order of the choice along with the technical bid. The selected bidder to whom the LOI has been issued and has quoted the lowest tariff would be allotted the plot first based on his choice. After allocating the plot to the first bidder, the next bidder (second in the list of selected bidders) will be allotted his choice from the remaining unallocated plots and so on till all plots are allotted. The size and technology of the project also plays a vital role for plot allocation. The SPIA may have blocks segregated within the solar park for larger and smaller capacities to attract all kinds of developers and investors to set up projects (Ex: Block A will consist of minimum capacity of 50 MW and maximum capacity of 500MW and Block B will consist of minimum capacity of 5 MW and maximum capacity of 50 MW etc). Similarly, solar PV and solar thermal projects should preferably not be developed in adjacent areas for various technical and practical reasons. Once the plots have been allotted to the successful bidders, the SPIA executes the lease agreement with the project developers. 2.5. Statutory Permits and License for Solar Park Development It has been observed that permit and licensing requirements vary, depending on the location of the project but the key permits, licenses and agreements typically required for solar park apart from land lease contract and EIA assessment include: PwC 18
Building permit/planning consent Grid connection contract Power purchase agreement The authorities, statutory bodies and stakeholders that should be consulted also vary from country to country but will usually include the following organisation types: Archaeological agencies/departments Forest Departments (Ministry of Forestry) Civil aviation authorities (if located near an airport) Local communities Health and safety agencies/departments Electricity utilities Military authorities Early engagement with all relevant authorities is highly advisable to minimize risk and maximize the chances of successful and timely implementation of the project. Table 1: List of permits and approvals to set up solar park in India Name Land conversion to industrial use Transmission Agreement (TA) Section 68 Approval of Transmission Line Description Once land has been bought, and the registry & mutation completed, the application for conversion of private (agricultural) land for nonagricultural use (in our case, industrial use) is to be submitted. For land parcels under 10Ha, the District Collector has sanctioning authority; for land area greater than this, the sanction must come from the Revenue Department of the State Government (although the conversion order is still issued by the DC). The application for transmission agreement has to be filed with the state nodal renewable energy agency in their prescribed format. The agreement is executed once the agency forwards the application for transmission agreement to the STU. However, the state nodal RE agency normally sends the applications in bulk, i.e. after having collected a significant number of applications to send together. This is only done once the land is finally allocated and the lease agreement(s) signed. The application for Section 68 approval (ROW - Right Of Way) for transmission line has to be filed with the state nodal agency which should include route survey, transmission line technical details, undertaking for not passing through inhabitant area, STU approval and grid connectivity charges payment slip. The state nodal RE agency sends the applications to the State Energy PwC 19
PTCC (Power and Telecommunication Coordination Committee) Clearance Consent to Establish (CTE) Labour License CEIG (Chief Electrical Inspector to Government) Clearance Factory Act License Consent to Operate (CTO) Borewell Approval Department after which frequent following up is required. This transmission line approval is needed when the line passes through a forest, river, canal, railway track and/or aviation authority areas. In this case, the application for transmission agreement has to be filed with Regional Office of the PTCC. Application should have clearance from each of above authority with the STU certificate in prescribed format. A line falling under this category can only be charged once the PTCC clearance is obtained. This is to be obtained by the SPIA/developer from the State Pollution Control Board (SPCB) prior to construction. One can approach the SPCB directly without going through the state nodal RE agency. The application for labour license has to be filed with the regional office of Labour Inspector in their prescribed format. SPIA/Developer has to get license as principle employer and responsibility of Health, Safety, and Environment and Labour compliance for all working manpower. Application includes details of land ownership documents, list of contractors, contract duration, total manpower working at site, site manager detail along with the affidavit for responsibility of all site activities. Labour compliance is a must by contractors for any periodical Inspection by Labour Department. The contracting project company is to be registered under the Labor act as Principle Employer. The EPC is to be registered as Principle Contractor under Labor Act, since they directly employ the labor. The application for CEIG approval has to be filed with the regional office of CEIG in their prescribed format. Documents should include EPC contractor declaration, contractor license, electrical license for supervisor, electrical SLD for HV system, details of transformer- HT breaker control and relay panel line protection all Mechanical and Electrical Safety etc. In first phase all documents and technical details are reviewed by CEIG for compliance and post this, a site inspection is carried out before release of NOC (No Objection Certificate). NOC is a prerequisite for commissioning clearance of electrical installation. This is to be done for both substation and transmission Line The application for the Factory Act license has to be filed with the regional office along with details of installation and activities involved in the operation. If the manpower engaged during O&M is less than 10, then this registration requirement is waived off. Factory Act registration required for O&M of Plant. This is to be obtained by the developer form the State Pollution Control Board (SPCB) prior to operations. One can approach the SPCB directly without going through the state nodal RE agency. This is to be obtained for digging a borewell at the site to extract ground water. The approval is provided by the Central Ground Water Board. If the site is located in an over-exploited area, the approval becomes relatively more difficult to obtain. PwC 20
2.5.1 Permits for Power Evacuation and Grid Connection The availability and capacity of power evacuation infrastructure in the remote areas can be a major issue for development of solar projects, as it could result in additional burden on solar project developer on grid connectivity infrastructure. With capacities of the solar park being large, it has been observed that existing bays in the sub-station are fully utilized and new bays need to be constructed, in case the proposed solar park is set up, for the purpose of evacuation. This may require purchase of extra land for setting up the new bay for connecting the proposed solar park. Securing Right of Way (RoW) for the transmission line from the proposed location can be an issue that will require further examination. The benchmarked procedure for setting the power evacuation arrangement for the solar park has been presented below: Following the creation of the necessary infrastructure to evacuate power, it is imminent on the part of the SPIA as well as their responsibility to undertake the responsibility of PwC 21
providing connectivity of the park to the created infrastructure. However, to carry out the inter connection to the evacuation infrastructure; the standardized procedure to be followed is as follows: 2.5.2 Executing the Power Purchase Agreement It has been established that traditionally solar parks are being developed under the central scheme- where the power procurement is done by the central agency, i.e NTPC (in case of the bundling of the solar power with conventional power) and SECI (under the state specific VGF route). For projects participating under the central scheme, a standardized PPA to be executed between the project developer and the procuring agency has been issued by MNRE which is to be adhered upon by the project developers and the procuring utility. However, solar parks can also house projects under other schemes. These can be projects which could be selling power to the state DISCOMs, projects being developed under the REC regime as well as under the third party/captive route. With regards to sale to DISCOMs, it is time tested traditional market model for ensuring off-take arrangement for the solar based power project. With the existence of supportive framework for development of RE in terms of mandatory RPO targets, selling of the solar power to the distribution licensee enables them to fulfill the RPO. PwC 22
Establishing of the power purchase agreement is an important requirement for ensuring the viability of the project. The long term off-take arrangement with licensees offers certainty of off-take and facilitates availing finance for the project from banker s perspective. Also, the projects which are participating under the REC regime can sign PPA with the host utilities at Average Pooled Power Purchase Cost(APPC) and trade the REC generated ta the power trading platform. The benchmarked procedure for undertaking the PPA with the host licensee for scheme of projects particularly the ones selling power to the host licensee and the setting projects under the REC regime is provided below: For projects developed under open access/captive mode, it would be important to mention that developers sign the transmission and distribution open access agreement with the respective state transmission and distribution utilities to evacuate power at identified sites. PwC 23
These agreements are state specific and are contingent to the dynamic regulatory realms prevailing in the state. 2.6. Infrastructure Planning The key focus of the solar park is to develop common infrastructure for multiple solar PV power projects in various states of India. The basic approach of the solar park design aims to achieve sustainable and renewable power generation interface which will not only ensure infrastructure availability but will also have the provision for the worker population in terms of living space and other off site facilities in the vicinity etc. In order to attain the above tasks following approach should be adopted Adequacy of connectivity and accessibility Optimization of land use Environmental sustainability through adequate buffers Adequacy of the basic infrastructure o Water supply o Sewerage and drainage system o 24 x 7 power supply o Provision for telecommunication Provisions for amenities for the worker population viz. Residential areas with adequate commercial and institutional segments Cost minimization/optimization Identification and augmentation approach for existing infrastructure viz. Roads, water supply, power supply etc. 2.7.1 Road Linkages within the Solar Park Power generation through various solar technologies does not generate any sort (or negligible) of vehicle traffic subsequent to its implementation. Traffic, within the premises of the solar park area, is mainly experienced during the construction phase when the solar PV modules, inverters, foundation and structure material, transformers etc. have to be transported to the allotted piece of land from its port of arrival. During this phase, traffic would mainly comprise of heavy duty vehicles including trucks. Electrical equipment, especially transformers of 200/400 kv switchyards are likely to be the most bulky items in the while setting up solar projects within the solar park. For free movement of trucks and other heavy vehicles, the presence of road linkages with a road width of around 8.5 meters is amiable. As the state highways, across India, are fairly well connected, focus should be made on the following Approach road from State Highway to Block Boundaries of required width, after finalizing measurements Internal road network of around 6.5 meter width PwC 24
2.7.2 Water Supply Water requirement for a solar park shall depend on the water requirement of the solar power projects to be located in the proposed solar park. Water requirement for a solar PV projects are lesser as compared to the conventional power projects viz. thermal power projects and nuclear power projects etc. The consumption of water in case of solar PV projects is mainly on account of module washing. While considering water requirement for the solar park, consideration were given for both PV technology i.e. crystalline and thin film technology. Cleaning frequency which solely depends on the climatic parameters is considered as twice in a month for the present case. Underground water can be sourced through suitability sized bore well to meet the water requirement of the solar parks. Based on the design optimization of the project, recommendations have to be drawn on the number of borewells for every plot allocation of the solar park. In case of borewells the storage for raw water and storage for treated water through individual RO plant will be developed by project developers within their premises taking in to consideration of autonomy of few days. In case of non-availability of groundwater test report, requirement of water treatment plant cannot be assessed. In case of subsequent to groundwater test report, if it is found the quality of water is suitable for module cleaning and usage by the manpower, installation of water treatment and RO plant shall be required. 2.7.3 Drainage Solar panels drain to the existing ground, and runoff should be no greater for the developed site than it was for the pre-developed site. Due to regular cleaning of the solar modules in all the projects in the solar park, the presence of a drainage system is essential to avoid waterlogging and threat to electrical equipment across the solar park. The drainage system is normally proposed in parallel with the roads, keeping a calculated distance between the proposed drainage system with the major and internal roads. However the drainage system will follow the natural drain. A detailed terrain map is required towards designing of the drainage system. 2.7.4 Transmission facility including a pooling substation The purpose of transformers in a solar power plant is to provide suitable voltage levels for transmission across the site and for export to the grid. In general, the inverters supply power at LV. But for a commercial solar power plant, grid connection is typically made at upwards of 11 kv (HV levels). It is therefore necessary to step up the voltage using a transformer between the inverter and the grid connection point. The following are the key assumptions for power evacuation in a solar park PwC 25
The total capacity of the solar park and the various solar technologies (solar PV and solar thermal) being used to implement solar power generation projects The minimum generation capacity for each individual project The total land required based on solar technologies being used, total solar park capacity for power generation and hence, number of individual projects Based on the above, identifying or building suitable grid substations (GSS) by PGCIL (in most cases) The solar park, based on its total capacity, will be split in to blocks of a certain capacity. Each block will have an individual pooling substation, of a certain rating, which will also consist of transformers (of a specific rating). The power from each block will be connected to the pooling substation through underground cables via a transformer to step up the voltage. The voltage will further be stepped up when the power is evacuated from the pooling substation to the nearest main substation, having grid availability for the total capacity of the solar park, which will be the common point for the power being evacuated from all the pooling substations across the solar park. The figure below shows the flow of power from an individual project, termed as unit, to the main evacuating grid substation According to the Indian grid code, there should be an appropriate metering system installed as per the framework laid down. Therefore, it is required to install electronic energy meters at the pooling substations, main evacuating grid substation and at the individual projects to keep track of amount of energy being exported and calculate transmission losses, if any. 2.7.5 Social Infrastructure Apart from the solar projects being accommodated in the solar park, the SPIA should make necessary arrangements in the construction of the following PwC 26
Parking Area To allow heavy duty vehicles carrying construction equipment, equipment to be replaced, water tankers for cleaning (if required) to park their vehicles in designated areas without causing any blockages for any other activity Warehouses should be built block wise based on the total capacity of the solar park which is determined in the earlier stages. These warehouses will be used to store spare parts, equipment and other material which are required at individual solar projects. Administrative Blocks to accommodate personnel on behalf of the SPIA and relevant agencies to monitor and inspect individual projects at regular intervals. These buildings should be built based on the size of each block of the solar park as mentioned in section 2.7.4. Street Lighting System- To allow the movement of the equipment, people and ensure proper lighting inside the solar park, creation of the street lighting system is imperative. Therefore solar park should be provided with adequate street lighting facilities. Residential Buildings will be used to house personnel deployed at various individual projects for the maintenance during the operation phase and for the supervisors during the construction phase of the projects. 2.7. Operations and Maintenance The SPIA will also be responsible for Operation and Maintenance of the Solar Park for a period of 25 years. The SPIA will ensure the following facilities provided in the solar park are maintained for 25 years: Land approved for installation of solar power plants Fencing and road connectivity within the park Water availability for running of power plants and demineralization plant Internal drainage for proper discharge of flood water Proper housing facilities for basic manpower Telecommunication Facilities Street-lighting systems Proper parking and warehousing Power connectors at the site connecting all the individual power plants Smooth functioning of the pooling sub-station in the park. PwC 27
Business Model for Implementing a Solar Park 3. Business Model for Implementing a Solar Park 3.1. Implementation Functions Once the mode of solar park development is finalized (Section 1.3) between the relevant authorities of the state and central government, the joint implementing agency forms a solar special purpose vehicle (SPV) for the development of the entire solar park. The key function of the newly formed SPV would include Land Purchase: The SPV will acquire the land for setting up the proposed solar park either by utilizing government land, leasing land from farmers or acquiring private land and providing corresponding compensation. Land Development and Civil Works: The SPV will undertake land development and civil work in the proposed site for setting up the solar park. This will include leveling and grading the land parcel, building an external boundary wall, building access roads in to the solar park and roads within the solar park, common utility buildings and warehouse all as mentioned in the earlier section. Evacuation Arrangement: will be planned in adherence with the state STU norms, set-up the evacuation infrastructure for the solar park. Water Supply Arrangement: Set-up water supply network infrastructure to meet the water requirement for the solar projects and internal consumption in the solar park. Entering in to appropriate contracts/agreements: A provisional list of contracts which the solar park SPV entity is likely to enter is: o Solar park construction contracts Grid Connection Agreement between the solar park and STU Construction of the internal access road and civil works o Solar park post construction agreements License Agreement with each solar project on allotment of plots Services Agreement with each solar project for providing various services (water, power evacuation) Bring on board private operators to invest, develop and operate solar projects in the park 3.2. Framework for Project Development The association between the state government and central government shall undertake the infrastructure development for setting up the solar park and allot the plots to various project PwC 28
Business Model for Implementing a Solar Park developers eligible for participating in the schemes identified in the solar park. The figure below explains the overall framework for project development in a phase wise manner Phase 1: Solar Park Development The key steps related to the Phase 1: Solar Park developments are: Solar park development: The solar park SPV would be responsible to undertake infrastructure development for setting up the Solar Park. This shall include land acquisition, land development, power evacuation infrastructure and water supply infrastructure. Funding: The state government may provide the initial funding for meeting the funding requirement for setting up the solar park. A budget allocation from the state government can be earmarked for providing the funds for undertaking the preparatory work for development of the solar park. Also, the fund could be sourced from the grant provided by MNRE under the Scheme for Development of Solar Parks. The grant could be of up to Rs.20 lakhs/mw or 30% of the project cost including grid connectivity cost, whichever is lower Phase 2: Solar Project Development The key steps related to Phase-2 i.e. solar project development are: Registration Fees: A one-time registration fee (per project or per MW) may be collected by inviting applications from the prospective developers when the scheme is finalized. Allotment of plots to the solar project developer: The plots in the solar park can be allotted to developers after charging a one-time charge or a combination of the following: o Upfront Allotment Fee One time PwC 29
Business Model for Implementing a Solar Park o Service Charge with annual escalation Charges for other services: It can be expected that solar park SPV (between state and central governments) will continue operating as an entity and having separate service agreements with project developers for providing various services (water, power evacuation). 3.3. Revenue Streams There are three main avenues for the solar park SPV to generate revenues to overcome the initial capital expenditure incurred namely registration fee for all eligible developers, land lease payments, payments for allowing the utilization of power evacuation facilities and payments for the provision of basic amenities. These payments are to be made by various developers who would be utilizing these services being provided by the solar park SPV. The payments can be a combination of upfront fee and annual fee payments over the life of the projects. An explanation of the same is provided below Land Lease Fee: If the solar park owner has either acquired the land or leased it from a private individual(s)/farmer(s) and/or developed the entire land parcel suited for developers to use it as a plug and play method. Power Evacuation Facility: The solar park owner incurs the initial capital expenditure to set up the evacuation facilities including the pooling substations located within the solar park and grid substation to evacuate the total power from the solar park. Basic Amenities: The solar park owner takes the onus of providing the potential developers with basic amenities like water supply, storage area, domestic and administrative buildings, road linkages, central weather monitoring station, power and telecommunication facilities, parking and warehousing. Other Facilities: If the solar park owner further leases out the land to potential manufacturers, skill training and capacity building institutes etc. The solar park owner can charge developers for the above mentioned facilities in two main ways o An upfront fee: where the developer pays a one time upfront fee to the solar park owner at the time of COD, or o Upfront + Annual fee collection: where the developer will pay an upfront fee, which is not so significant in amount, as well as annual charges determined by the solar park owner for the lifetime of the solar project. PwC 30
Business Model for Implementing a Solar Park 3.4. Identifying Funding Sources for the Solar Park The development of a solar park is a capital intensive task and requires a significant amount of funding in order to complete it from its inception to execution stage. With immense potential for power generation through renewable sources specifically through solar in India, many financing opportunities have emerged for this sector. The GoI has permitted 100% foreign direct investments (FDI) in to this sector and has already attracted over USD 9.5 billion (till Feb 2015) in investments. In view of recent development in solar technology, government of India plans to hasten the growth and looking at steep fall in the solar prices there could be possible addition of 1 lakh MW solar capacity in next 5 years and also in other renewables. If it is so, investment requirement for solar itself will be nearly 100 billion USD in next 5 years. To meet the financing requirement, more and more foreign investors are being attracted owing to potent natural resources, large-scale investment opportunities, and attractive Government incentives. Wind and solar sectors are expected to garner massive overseas investments in the coming years. All efforts are being made to attract FDI from investors and autonomous power producers internationally. A variety of investors finance renewable energy projects in India, including institutions, banks, and registered companies. Institutional investors are either state-owned or bilateral and multilateral institutions. Among banks, both private sector and public sector banks are involved. In addition to registered companies, venture capital and private equity investors contribute equity investment. The funding assessment will be done via the results of the business model and PPP implementation framework that has been arrived at as a result of the previous activities carried out by the project team. The funding for the project is normally a mix of debt and equity/grant funds. Potential sources of financing include PwC 31