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INDIAN SOLAR ENERGY SECTOR

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    Submitted by,Bibhu Prasad Biswal(40) | Chandu Bommareddi(41) |

    Tima Chaudhary(42) | Batch 18 (A)

    23RDFEBRUARY, 2014 ENVIRONMENTAL ISSUES XIME, BANGALORE

    INDIAN SOLAR

    ENERGY SECTORAN ANALYSIS OF THE VARIOUS PROJECT AND POLICIES.

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    ENVIRONMENTAL ISSUES ASSIGNMENT 1

    INTRODUCTION

    Energy is critical, directly or indirectly, in the entire process of evolution, growth and survival of all

    living beings and it plays a vital role in the socio-economic development and human welfare of a

    country. Energy has come to be known as a strategic commodityand any uncertainty about its

    supply can threaten the functioning of the economy, particularly in developing economies.

    Achieving energy security in this strategic sense is of fundamental importance not only to Indias

    economic growth but also for the human development objectives that aim at alleviation of poverty,

    unemployment and meeting the Millennium Development Goals (MDGs). Due to rapid growth in

    industrialization and population, demand of power is also increasing at an alarming rate. In order

    to meet the power requirement man always depends upon various sources of energy. Due to over

    dependence on non-renewable energy resources, the current consumption level has not only made

    the non-renewable energy resource stock scarce but has made the environment polluted by all

    possible means, hence leading to all possible ecological imbalances. As a result, now the world is

    searching for various energy sources which are renewable in nature and provide a cleaner

    environment after its use, the "Green Energy".

    Various renewable energy sources are Solar, Wind, Hydro, Tidal, Geothermal etc. Solar energy is

    genesis for all forms of energy. This energy can be used in two ways the Thermal route(i.e. using

    heat for drying, heating, cooking or generation of electricity) or through the Photovoltaic (PV)

    routewhich converts solar energy in to electricity that can be used for a myriad purposes such as

    lighting, pumping and generation of electricity. With its pollution free nature, virtually

    inexhaustible supply and global distribution - solar energy is very attractive energy resource. In this

    report we are trying to understand the solar energy market i.e. the demand and supply facilitated

    through various projects in Indian market.

    INDIAN SOLAR ENERGY MARKET OVERVIEW

    India is densely populated and has high solar insolation, an ideal combination for using solar power

    in India. In the solar energy sector, some large projects have been proposed, and a

    35,000 km2(8,600,000 acres) area of the Thar Desert has been set aside for solar power projects,

    sufficient to generate 700 GW to 2,100 GW. Also India's Ministry of New and Renewable Energy

    (MNRE) has released the Jawaharlal Nehru National Solar Mission (JNNSM) Draft Policy, by which

    the Government aims to install 10 GW of Solar Power and of this 10 GW target, 4 GW would fall

    under the central scheme and the remaining 6 GW under various State specific schemes.

    In July 2009, India unveiled a US$19 billion plan to produce 20 GW of solar power by 2020. Underthe plan, the use of solar-powered equipment and applications would be made compulsory in all

    government buildings, as well as hospitals and hotels. On 18 November 2009, it was reported that

    India was ready to launch its National Solar Mission (also known as JNNSM) under the National

    Action Plan on Climate Change, with plans to generate 1,000 MW of power by 2013. From August

    2011 to July 2012, India went from 2.5 MW of grid connected photovoltaic to over 1,000 MW. On 16

    May 2011, Indias first 5 MW of installed capacity solar power project was registered under the

    Clean Development Mechanism. The project is in Sivaganga district, Tamil Nadu. India is planning to

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    install the World's largest Solar Power Plant with 4,000 MW Capacity near Sambhar

    Lake in Rajasthan.

    According to a 2011 report by Bridge to India and GTM Research, India is facing a perfect storm of

    factors that will drive solar photovoltaic (PV) adoption at a "furious pace over the next five years

    and beyond". The falling prices of PV panels, mostly from China but also from the U.S., has coincidedwith the growing cost of grid power in India. Government support and ample solar resources have

    also helped to increase solar adoption, but perhaps the biggest factor has been need. India, "as a

    growing economy with a surging middle class, is now facing a severe electricity deficit that often

    runs between 10% and 13% of daily need. Reaching grid-parity for solar has great significance for

    India for several reasons, those are as follows.

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    JNNSM OBJECTIVE

    The objective of the Jawaharlal Nehru National Solar Mission is to establish India as a global leader

    in solar energy, by creating the policy conditions for its large scale diffusion across the country asquickly as possible. The Mission adopted a 3-phase approach, spanning the period of the 11th Plan

    and first year of the 12th Plan (up to 2012-13) as Phase 1, the remaining 4 years of the 12th Plan

    (2013-17) as Phase 2 and the 13th Plan (2017-22) as Phase 3. At the end of each plan, and mid-

    term during the 12th and 13th Plans, there will be an evaluation of progress, review of capacity and

    targets for subsequent phases, based on emerging cost and technology trends, both domestic and

    global. The immediate aim of the Mission was to focus on setting up an enabling environment for

    solar technology penetration in the country both at a centralized and decentralized level. The first

    phase (up to 2013) focused on capturing of the low hanging options in solar; on promoting off-grid

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    systems to serve populations without access to commercial energy and modest capacity addition in

    grid-based systems. In the second phase, after taking into account the experience of the initial years,

    capacity will be aggressively ramped up to create conditions for up scaled and competitive solar

    energy penetration in the country.

    The Mission has set the ambitious target of deploying 20,000 MW of grid connected solar power by2022 is aimed at reducing the cost of solar power generation in the country through (i) long term

    policy; (ii) large scale deployment goals; (iii) aggressive R&D; and (iv) domestic production of

    critical raw materials, components and products, as a result to achieve grid tariff parity by 2022.

    JNNSM is aimed at creating an enabling policy framework to achieve these objectives and make

    India a global leader in solar energy.

    STATUS AND ACHIEVEMENTS OF PHASE I

    Despite vast solar potential, Indias solar power capacity was almost non-existent until recently.

    Serious development in Indian solar industry came with the announcement of JNNSM in 2010.

    Before announcement of JNNSM, Indias solar power capacity was mare 17.8MW in early 2010. The

    aim of National Solar Mission is to achieve a wide range of ambitious objectives, with the overall

    stated goal of establishing India as a global leader in solar energy, by creating the policy conditions

    for its diffusion across the country as quickly as possible.

    Phase 1 of the Mission was largely focused on grid-connected projects. To achieve 500 MW of PV

    and 500 MW of solar thermal, the central government conducted two batches of reverse auctions.

    These bidding processes offer feed-in tariffs and long-term power purchase agreements (PPAs) to

    the selected least-cost developers. The feed-in tariffs to developers are complemented by support

    to power utilities through the bundling of solar power with conventionally produced electricity,

    reducing the average per-unit cost of solar power.

    BUILDING OF SOLAR POWER

    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. It was decided to select projects of 500 MW capacity each based on solar

    thermal and solar photovoltaic (PV) technologies. Considering the relatively longer gestation period

    of Solar Thermal Projects i.e. over two years, the selection of projects for 500 MW was completed in

    FY 2010-11. The size of solar thermal projects was in the range of 20 MW to 100 MW per project

    developer.

    PROJECTS UNDER BATCH 1, PHASE 1

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    The selection of Solar PV projects of 500 MW capacity was decided to be undertaken in two batches

    over two financial years of Phase 1 i.e., 2010-2011 and 2011-2012. The size of PV projects in the

    first stage in 2010-11 was fixed at 5 MW per project. Under Migration scheme NVVN started the

    process of short listing the on-going projects to migrate to the JNNSM. A total of 16 projects of 84

    MW capacity were selected. These project developers signed PPA with NNVN in October, 2010 and

    reported financial closure. The last date for commissioning of 54 MW capacity PV projects was byend of October, 2011. The 30 MW capacity solar thermal projects are to be commissioned by March,

    2013.

    Later in August 2010, NVVN started the process of selection of new grid solar power projects

    comprising of 150 MW of Solar PV and 470 MW of solar thermal capacities. This yielded a

    tremendous response and applications were received for over 5,000 MW capacity. The projects

    were selected based on tariff discounting. Total 30 SPV projects were selected after bidding process

    and subsequently 28 project developers signed PPAs for 140 MW capacity with NVVN. Similarly

    seven solar thermal projects were selected after bidding process and signed PPA with NVVN. In

    batch-I, a total of 704 MW capacity grid connected solar power projects have been selected, which

    comprise of 500 MW capacity of solar thermal power projects and 204 MW of PV power projects.

    PROJECTS UNDER BATCH 2, PHASE 1

    Under Batch II of Phase I, the total aggregate capacity of grid connected Solar Projects was 350 MW

    for the deployment of Solar PV Power Projects. NVVN had been designated as the nodal agency for

    procurement of solar power and for carrying out the bidding process. On August 24, 2011, NVVN

    invited Request for Selection (RfS) from interested developers to develop 350 MW solar PV projects

    with a capacity in multiple of 5 MW, Minimum capacity 5 MW & Maximum Capacity 20 MW for each

    project. Total Capacity for each bidder was limited to 50 MW.

    RPSSGP SCHEME

    MNRE announced the Guidelines for Rooftop and other Small Solar Power Plants connected to

    distribution network (Below 33 kV) in June 2010. This component of the Mission was designed

    essentially as a State driven scheme to encourage the States for grid connected projects focusing on

    distribution network and to strengthen the tail end of the grid. Under this scheme, the state utilities

    purchase power from any of the generation companies based on the tariff fixed/approved by the

    respective State Electricity Regulatory Commissions (SERCs). Another purpose of the scheme was

    to encourage as many States as possible to set up small solar grid connected projects. This would

    also help to create a database of performance of solar plants under different climatic and gridconditions. This was considered necessary for large-scale replication in future, particularly for

    meeting rural needs in the next phase of the Solar Mission.

    Under these guidelines, a cap of a maximum 20 MW capacity projects per State was put. The project

    size was limited to a maximum of 2 MW capacity to be connected to distribution grid. The role of

    the Ministry was limited to providing a fixed generation based incentive (GBI) to the State utilities

    at a rate equal to the difference of the CERC tariff for 2010-11 (Rs. 17.91 per kWh) and a reference

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    rate of Rs. 5.5 per kWh. The projects were registered with nodal agency IREDA through a web-

    based process, and 78 projects were selected to set up 98 MW capacity projects from 12 States.

    CURRECNT STATUS OF PHASE I PROJECTS

    Phase I of JNNSM has been a success story with encouraging response from solar project developers.

    During Phase-I, grid connected solar power projects were selected on the basis of discounts offered

    by the project developers on CERC approved applicable tariff. This mechanism was found to be very

    useful in selecting projects in a transparent manner and also leading to a substantial reduction in

    solar tariffs because of competition.

    Scheme Allotted Capacity (MW) Commissioned as on Sept 05, 2012

    (MW)

    Batch I, SPV 140 130Migration, SPV 54 48Migration, Solar Thermal 30 2.5RPSSGP 98 87.8Batch I, Solar Thermal 470 Scheduled to be commissioned by March

    2013Batch II, SPV 350 Scheduled to be commissioned by March

    2013Total (MW) 1142 268.3

    STATE LEVEL INITIATIVES

    In addition to initiatives at national level, there are several policy initiatives and solar power

    development programs were announced by State Governments in order to fulfill the Solar RPO(Renewable Purchase Obligations) targets specified by SERCs and to garner capacity in view of

    strong interest within the solar industry during Phase-I. The status of various State level programs

    and Solar Installed capacity in States is shown in table below:

    Sl. No. State Solar Specific Program

    1. Gujarat Announced: 968.5 MWCommissioned: 690 MW

    2. Maharashtra Announced: 205 MWCommissioned: 40 MW

    3. Karnataka Commissioned: 8MW, Plans for 600MW

    Bids Invited: 80 MW4. Rajasthan Announced: 200 MW5. Odisha Awarded: 25 MW

    Announced: 50 MW6. Madhya Pradesh Awarded: 200 MW7. Tamil Nadu Announced: 3000 MW8. Total Announced: 5000 MW (approx.)

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    MAJOR SOLAR INITIATIVES IN INDIA

    5 MWP SOLAR PV POWER PROJECT AT SIVAGANGA DISTRICT, TAMIL NADU

    On 16th May 2011, Indias first 5 MWp of installed capacity solar power project registered under

    the Clean Development Mechanism that uses solar PV technology for power generation. This

    project is now eligible to earn carbon revenue from year 2011 onwards. Please find following

    details relevant to the project activity;

    Project Developer:Sapphire Industrial Infrastructures Private Limited (SIIPL is a subsidiary ofMoser Baer Clean Energy Limited)

    Capacity:5 MWp Type:Grid connected solar PV Location:Rettaipillai Ayyanarkulam Village, Sivagangai, District - Sivaganga, Tamil Nadu Land Area:66 acres Expected power generation:8322MWh of net electricity per annum Electricity buyer/PPA with:Tamil Nadu Electricity Board (TNEB) (southern grid) Total project cost:Rs. 96,78,84,274 Power tariff:4.50 Rs/KWh (+10.50 Rs/KWh MNRE incentives)GUJARAT SOLAR PARK AT CHARANKA, PATAN DISTRICT

    Gujarat Solar Park is the name used for a group of solar parks being constructed in Gujarat, India.

    This makes Gujarat as Asia's largest solar park hub .Certificates of completion were issued on April

    19, 2012. "Solar Park also accounts for 3,42,400 tons Carbon Emission Reductions (CERs) which is

    one of the largest CERs contributing Project in the Renewable Energy Sector.

    Project Developer:multi developer (around 17), multi facility and multi beneficiaries. Project Commissioned by:Gujarat Power Corporation Ltd. (GPCL) Capacity:590 MWp Type:thin film solar PV power systems Location: Charanka village, District Patan in Gujarat Land Area:5384 acres Expected saving of CO2:8 million tonnes Expected saving of natural gas:900,000 tonnes Total project cost:Rs. 4500 crores5 MWP SPV PLANT AT RAWARA, RAJASTHAN

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    5 MWp Solar Photovoltaic Power Plant has been installed at village Rawara, Taluka Phalodi in the

    state of Rajasthan under Jawaharlal Nehru National Solar Mission. The location is ideally suited for

    taking all the advantages of Photovoltaic systems as in Western Rajasthan the solar insulation is

    very good and number of sunny days is also very high. This Power plant is designed to feed power

    to 33/132 kV Grid Sub Station at village Bap which is situated at 18 km from plant site Rawara.

    Project Commissioned by: Rajasthan Electronics & Instruments Ltd. (REIL) Total capacity: 5 MWp Expected Energy Generation: 67 Lac KWh / year Cost of the project: Rs. 67.00 Crore (approx.) Project Owner: Indian Oil Corporation Ltd. Date of commissioning: 31st January 2012

    NATIONAL SOLAR THERMAL POWER TESTING, SIMULATION AND RESEARCH FACILITY

    The facility envisages a grid connected Solar Thermal Power Plant of 1 MW capacity. This will also

    include a test set up that enables companies and research institutions to test the performance of

    different solar concentrators, coatings and materials, components and system for a Solar Thermal

    Power Plant. The project is being implemented by IIT Mumbai and a consortium partners

    consisting of Tata Power, Tata Consulting Engineers, Larsen & Toubro, Clique, KIE Solatherm.

    INSTITUTIONAL ARRANGEMENTS

    Solar Energy Corporation of India(SECI) was set up on 20th September 2011, as a not-for-profit company under Section-25 of the Companies Act 1956 as an implementation and

    facilitation institution dedicated to Solar Energy sector. SECI is established under the

    administrative control of the Ministry of New and Renewable Energy, Government of India.Mandate of SECI allows wide ranging activities to be undertaken with an overall view to

    facilitate implementation of JNNSM and achieving the targets set therein. The Corporation has

    the objective of developing Solar Technologies and ensuring inclusive solar power development

    throughout India.

    Solar Energy Industry Research Advisory Council - Ministry of New and Renewable Energy(MNRE) has constituted 'Solar Energy Industry Advisory council' (SEIAC) to advice the ministry

    on various technology related matters, attract investment across the value chain, suggest steps

    required to encourage R&D and drive down costs and make the Indian solar industry globally

    competitive.

    Solar Energy Centre established in 1982, is a dedicated unit of the Ministry of New andRenewable Energy, Government of India for development of solar energy technologies and its

    related science and engineering. To achieve its objective, the Centre has been working on

    various aspects of solar resource utilization and technology development in collaboration with

    other research institutions, implementing agencies and industry. Over the years, the Centre has

    developed a variety of technical facilities for technology evaluation and validation, testing and

    standardization, performance reliability, monitoring and data analysis apart from training.

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    CHALLENGES OF SOLAR ENERGY PROJECTS IN INDIA

    Key challenges facing the growth and development of solar energy sector in India include:

    Cost and Transmission & Distribution (T&D) Losses:Solar PV is some years away fromtrue cost competitiveness and from being able to compete on the same scale as other energy

    generation technologies. Adding to the cost are T&D losses that at approximately 40 percent

    make generation through solar energy sources highly unfeasible. However, the government

    is supporting R&D activities by establishing research centers and funding such initiatives.

    The government has tied up with world-renowned universities to bring down the

    installation cost of solar power sources and is focusing on up gradation of substations and

    T&D lines to reduce T&D losses.

    Land Scarcity:Per capita land availability is very low in India, and land is a scarce resource.Dedication of land area near substations for exclusive installation of solar cells might have

    to compete with other necessities that require land.

    Fundingof initiatives like National Solar Mission is a constraint given India's inadequatefinancing capabilities. The finance ministry has explicitly raised concerns about funding an

    ambitious scheme like JNNSM.

    Manufacturers are mostly focused on export markets that buy Solar PV cells and modules athigher prices thereby increasing their profits. Many new suppliers have tie-ups with foreign

    players in Europe and United States thereby prioritizing export demand. This could result in

    reduced supplies for the fast-growing local market.

    The need for focused, collaborative and goals driven R&D to help India attain technologyleadership in PV.

    The need for a better financing infrastructure, models and arrangements to spur the PVindustry and consumption of PV products.

    Training and development of human resources to drive industry growth and PV adoption The need for intra-industry cooperationin expanding the PV supply chain, in technical

    information sharing through conferences and workshops, in collaborating with BOS

    (balance of systems) manufacturers and in gathering and publishing accurate market data,

    trends and projections.

    The need to build consumer awareness about the technology, its economics and rightusage

    Complexity of subsidy structure & involvement of too many agencies like MNRE,IREDA, SNA, electricity board and electricity regulatory commission makes the

    development of solar PV projects difficult.

    CONCLUSION ONE STEP FORWARD, TWO STEPS BACKWARD

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    The Indian solar market is in transition, with a gradual move from an incentive driven market to a

    parity driven market. This transition is causing headaches for policy makers who are wondering

    about the most effective way of stimulating the market and is responsible for many policy delays

    and uncertainties. As a result, in the fourth quarter of 2013, the Indian solar market grew by only a

    disappointing 162 MW.

    One of the implications of this transition to parity driven market is that India will move from a

    primarily utility scale market to a more distributed generation market. It is expected that 2014 will

    lay the groundwork for the rooftop solar market. The direction and soundness of related policy and

    regulations such as net-metering will be a key determinant of the future of solar in India.

    To elaborate on how this transition is impacting the existing policy space: planned state level

    allocations in Tamil Nadu, Andhra Pradesh, Karnataka, Punjab and Uttar Pradesh continue to face

    delays. Most projections on market growth have turned out to be too optimistic. Among all these

    states, Power Purchase Agreements (PPAs) have only been signed in Andhra Pradesh for 138 MW.

    In Tamil Nadu, nothing is expected to move until the Tamil Nadu Electricity Regulatory Commission

    (TNERC) approves tariffs for solar projects in the state. In Karnataka, the process has gone intolitigation and no PPAs have been signed and Karnataka Renewable Energy Development Limited is

    unwilling to offer any clarifications on the subject. In Punjab and Uttar Pradesh, no PPAs were

    signed as of 20th December, 2013. Bihar wanted to allocate a capacity of 100 MW but the process

    has been cancelled without any official statement. Even the National Solar Mission (NSM) appears

    to be getting delayed as states purportedly showing reluctance to pay any premium for solar power.

    On the other hand, it is encouraging to see that several state and central policies have announced

    measures to promote rooftop solar sector. Subsidies, feed-in-tariffs (FiTs) and net/gross metering

    concepts are being introduced across different policies. Uttarakhand released its FiT based rooftop

    solar policy in September for 5 MW. Tamil Nadu, Andhra Pradesh and Karnataka want to follow a

    rooftop policy with capital subsidies similar to Kerala. Gujarat also wants to provide capital

    subsidies for a rooftop capacity of 60 MW.

    However, the state rooftop policies rely largely on funding support from Ministry of New and

    Renewable Energy (MNRE). With the ongoing funding crunch at MNRE and the general election

    paralysis in India (before the national elections in 2014), there is no certainty of these schemes

    going through. The release of payments for Keralas rooftop scheme is already known to have

    suffered significant delays. Any new fund allocations can only be expected in the budget passed by

    the new government around August 2014.

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