04 jnnsm sandeep melana

Climate Connect | London New Delhi

Jawaharlal Nehru National Solar Mission

CXO CONCLAVE OF POWER MARKETSJuly 5, 2013

Mittals GroupTrusted partners creating lasting value

Sandeep Melana


PRESENTATION STRUCTURE

Introduction Background of JNNSM Approaches by JNNSM Phase I Phase II


INTRODUCTION

Global Warming, Climate Change, Sustainable Growth

The schemes and initiatives in India are being formulated as part of National Action Plan on Climate Change (NAPCC) released on June 30, 2008

8 key areas chosen for national mission as per NAPCC National Solar Mission National Mission for Enhanced Energy Efficiency National Mission on Sustainable Habitat National Water Mission National Mission for Sustaining the Himalayan

Ecosystem National Mission for a “Green India” National Mission for Sustainable Agriculture National Mission on Strategic Knowledge for Climate

Change Other Programs - Power Generation and Renewable

Energy


BACKGROUND OF JNNSM Major initiative of the

Government of India to promote Solar Energy and to fight energy security energy challenge.

This is one of the mission of National Action Plan on Climate Change (NAPCC) launched by the Prime Minister of India on June 30, 2008.

JNNSM – June 2010

Mission Objectives To establish India as a global solar leader in solar energy, by creating the policy conditions for its large scale diffusion across the country as quickly as possible.

Target 20 GW of Grid connected 2 GW of Off-grid capacity by 2022


APPROACH BY JNNSM

The mission adopted a 3-phase approach

Phases

Time Utility Grid Power including rooftop (Cumulative)

Off Grid Solar Application (Cumulative)

Solar Collectors (Cumulative)

Phase 1

Upto 2012-13

1100 MW 200 MW 7 million sq mt

Phase 2

2013-17 10,000 MW 1000 MW 15 million sq mt

Phase 3

2017-22 20,000 MW 2000 MW 20 million sq mt


STATUS & ACHIEVEMENT OF PHASE-I

Before JNNSM, in early 2010, India’s Solar power capacity was mare 17.8 MW.

Phase 1 of the mission was largely focused on grid-connected projects.

500 MW of PV and 500 MW of solat thermal The Central Government conducted two batches of reverse

auction. These bidding processes offer feed-in tariffs and long-term PPAs

to the selected least-cost developers.


PROGRESS & LEARNING FROM PHASE I

Phase I – was divided into two Batches; batch I & batch II Batch I – 150 MW SPV & 350 MW Thermal Batch II – 350 MW SPV Migrated to JNNSM - 54 MW SPV and 30 MW solar thermal Bundling Concept - In order to facilitate grid connected solar

power generation under the first phase, without any direct funding by the Government, Government approved NTPC Vidyut Vyapar Nigam (NVVN) as the nodal agency to purchase 1000 MW of solar power from the project developers, bundle it with the unallocated power available from the NTPC coal-based stations and sell this “bundled” power to the Distribution Utilities. Bundling concept was introduced to keep the cost of bundled power approximately Rs 5/kWh.


PROJECTS UNDER BATCH-I, PHASE-I 150 MW SPV Projects | 470 Solar Thermal Migration Scheme | 54 MW SPV | 30 MW Solar Thermal Tremendous response – received bids for over 5000 MW


JNNSM BATCH I BIDDING SUMMARY

Solar PV Solar Thermal

CERC Approved tariff for Solar PV

CERC approved tariff for Solar Thermal

17.91 Rs. / Kwh 15.31 Rs. / Kwh

Max. discount offered

Min. discount offered

Max. discount offered

Min. discount offered

6.96 5.15 4.82 3.07

Final Tariff Final Tariff

10.95 12.76 10.49 12.24

30 SPV Projects | 28 Project Developers 140 MW Capacity | Average Tariff: 12.16 Rs./Kwh Solar Thermal Average Tariff was Rs. 11.41 Rs./Kwh Total of 704 MW capacity project selected | 500 MW Thermal | 204 MW SPV


PROJECTS UNDER BATCH-II, PHASE-I 350 MW SPV Projects 183 bids Tremendous response – received bids for over 5000 MW


JNNSM BATCH II BIDDING SUMMARY

Batch II : Solar PV

CERC Approved tariff for Solar PV

15.39 Rs. / Kwh

Max. discount offered Min. discount offered

7.90 Rs./Kwh 5.95 Rs./Kwh

Final tariff after discount for Solar PV

7.49 Rs./Kwh 9.44 Rs. Kwh

Average Tariff : 8.77 Rs. Kwh


COMPARISON OF BATCH I & II

Bath I Batch II Comments

SPV Projects allocated (MW) 204 350 -

CERC Benchmark Tariff (Rs./Kwh)

17.91 15.39 14.07% Reduction

Average Tariff (Rs./Kwh) 12.16 8.77 27.88% Reduction

Overwhelming response Yes Yes


JNNSM PHASE I WAS A BIG

HIT

AND IS A HISTORY NOW…


JNNSM PHASE II

Time – 2013-17 Targets – Cumulative 10 GW Utility Scale | 1 GW off-grid solar

power projects Out of 10 GW; 4 GW under central schemes and 6 GW under

various state schemes Unlike Phase-I, Phase-II is not entirely dependent on bundling

scheme to bring the costs down Implementation of Phase-II will have to be reply upon

combination of various schemes like Generation Based Incentive (GBI), Viability Gap Funding (VGF) and Bundling schemes.


IMPLEMENTATION STRATEGIES FOR PHASE-II

Phase I of JNNSM had relatively smaller capacity addition targets and bundling scheme and generation based incentive mechanism proved sufficient and successful for proliferation of solar power in India during initial stage of the Mission.

However, Phase II has aimed for significantly higher scale of targets and the Ministry is contemplating all the possible options for implementation of the mission.


STRATEGIES FOR GRID CONNECTED PROJECTS

There are several strategies MNRE is proposing for implementation of solar power projects under Phase II of the mission.

a) Bundling Schemeb) Viability Gap Fundingc) Generation Based Incentive


BUNDLING SCHEME

Power generated from

NTPC coal based stations

Relatively expensive solar

power

Sell it to

Distribution Utility at Weighted

Average Price

Applicability in Phase IIImplementation of bundling scheme is dependent on availability of unallocated conventional power.

MoP has the mandate to allocate the power to power deficit states(800 MW)


VIABILITY GAP FUNDING

It is a scheme announced in 2004 to support the infrastructure projects.

Challenges in Infrastructure generally characterized by substantial upfront investments, long gestation periods, fixed returns, etc.

So it was a scheme to support infrastructure financing through CAPITAL GRANT

The Scheme provides financial support in the form of grants, one time or deferred, to infrastructure projects undertaken through public private partnerships with a view to make them commercially viable.


VGF UNDER PHASE II OF JNNSM

CAPEX for Solar Projects is still higher as compare to the thermal. Cost of generation is more than the average cost of grid power.

Bundling and GBI schemes have very limited scope in Phase II of JNNSM and Viability Gap Funding could be an attractive alternative for supporting solar projects during Phase II of the mission.

VGF ON PER MW CAPITAL COST

Under this option, bidders would bid for viability gap funding requirement in Rs/MW

and the bidder with minimum VGF requirement

would be selected.


ADVANTAGES

Procedural simplicity With upfront availability of part of capital cost, cost of financing

would be lower DISADVANTAGES/LIMITATIONS With upfront payment of VGF, long term performance of the

projects could be an issue.

No penalty on lower generation or unsatisfactory performance of selected projects .

If VGF is provided as upfront capital assistance, there is a possibility that project developers would bid aggressively ignoring the long term plant performance. This phenomenon would be detrimental for overall success of JNNSM. Therefore, disbursement of VGF would be done in multiple stages from selection of project.


VGF FINANCING PLAN

Government would provide funding for setting up grid connected solar PV power projects

Tariff will be pre-fixed. The projects will be selected based on international competitive

bidding; less the requirement from government, higher the chances of getting the project

The VGF would be provided on deferred payment basis to ensure completion of project as per guidelines of the scheme.

National Clean energy Fund (NCEF) is proposed to be used for used as a viability gap funding measure of the last resort


IT IS PROPOSED THAT THE VGF WOULD BE PROVIDED IN THREE TRANCHES AS FOLLOWS:

25% at the time of delivery of at least 50% of the major equipment at the site. This would be based on the cost of total procurement.

50% on successful commissioning of the full capacity of the plant

Balance 25% after one year of operation meeting requirements of generation as per guidelines.


MAJOR ACTIVITIES

MNRE shall determine a base tariff at which solar power would be supplied to utilities. CERC, through draft orders on determination of levellised solar tariff for 2013- 14,hasspecified the benchmark rate (paisa/unit) and benchmark capital cost (per MW) for FY 2013-14 on which calculations for VGF requirement would be done by the bidders.

Bidders can bid for a maximum VGF of 40% of benchmark rate or benchmark capital cost.

Selection of bidders who require minimum VGF support.

Development of VGF disbursement procedure by SECI


TARGETED CAPACITY AT UTILITY SCALE

2013-14 2014-15 Total

Bundling (fit)

PV 800 MW 0 MW 800 MW

VGF PV 750 MW 770 MW 1520 MW

CSP 0 MW 1080 MW 1080 MW


CURRENT HAPPENINGS…

Draft guidelines were issued on December 3, 2012 | 800 MW through Bundling | 750 MW through VGF

Till now, the MNRE had been trying to arrange for unallocated power from the Ministry of Power (MoP) to carry out the tariff based bidding component of allocations based on bundling of power.

However, as there is only a limited amount of unallocated power available and all states demand access to this power, the MoP has been unwilling to provide it.

As a result, the MNRE has now decided to go ahead only with the allocations for just 750 MW based on VGF.


CURRENT HAPPENINGS

The draft methodology for the VGF based bidding process was released in May 2013

The allocation process, signing of PPAs and handing out of VGF will all be handled by the Solar Energy Corporation of India (SECI).

Tariff under VGF = Rs. 5.45 / Kwh (No A.D. Benefits) Tariff under VGF = Rs. 4.95 / Kwh (A.D. Benefits) Over and above this, VGF will be provided with an upper limit of

30% of the project cost or Rs. 2.5 Crores /MW.


OUR ANALYSIS…

In the past, the solar power from NSM projects has been sold to the states in which projects are located.

More than 80% of all NSM projects under phase one (batch one and two) will be located in Rajasthan. As Rajasthan is already meeting its solar Renewable Purchase Obligation (RPO), it is unlikely that the state will continue to buy power from the new projects.

Rajasthan has land and high irradiation and is therefore attractive for projects under phase two as well. SECI, however, will need to devise a way to sell power outside of the state.


OUR ANALYSIS…

In the past, the solar power from NSM projects has been sold to the states in which projects are located.

More than 80% of all NSM projects under phase one (batch one and two) will be located in Rajasthan. As Rajasthan is already meeting its solar Renewable Purchase Obligation (RPO), it is unlikely that the state will continue to buy power from the new projects.

Rajasthan has land and high irradiation and is therefore attractive for projects under phase two as well. SECI, however, will need to devise a way to sell power outside of the state.


OUR ANALYSIS

Unlike its predecessor in phase one, the National Thermal Power Corporation Vidyut Vyapar Nigam (NTPC NVVN), SECI is not an AAA rated company and will be considered as a less bankable option.

To counteract that SECI plans to set up a payment guarantee fund to cover three months of payments. For this, it will primarily depend on the National Clean Energy Fund (NCEF).

A key concern with regards to the implementation of the VGF is its impact on the long term performance


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THANKYOU

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04 jnnsm sandeep melana