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INDIA RENEWABLE ENERGY

STATUS REPORT 2014

May 14

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Table of Contents

1. Executive Summary ...5

2. India’s Energy Position ...7

2.1 Future Energy Requirements and Supply Options ... 8

2.2 India’s Electricity Demand Till 2032 ... 9

2.3 Analysis of state-wise Renewable Purchase Obligation (RPO) Regulation across India ... 10

2.4 State-wise Non-Solar and Solar RPOs (2011-12 to 2019-20)... 17

3. Need for Renewable Energy in India ... 20

3.1 Energy Security ... 20

3.2 Economic Viability ... 22

3.3 Rural Electrification ... 23

4. Wind Energy Market in India ... 25

4.1 State-wise Wind Farmable Sites in India ... 25

4.2 State-wise Wind Energy Potential in India (in MW) ... 26

4.3 State-wise Wind Energy Installed Capacity in India (in MW) ... 27

4.4 State-wise Wind Energy Capacity Utilization in India (in %) ... 28

4.5 State-wise Contribution of Wind Energy Installed Capacity in India (in %) ... 28

4.6 State-wise Regulation and Policy Comparison for Wind Energy in India ... 29

4.7 EXIM Scenario in Indian Wind Energy Sector ... 31

Export Scenario ... 31

Import Scenario ... 32

4.8 Key Growth Drivers and Inhibitors for Wind Energy Market in India ... 33

4.9 Risks Associated With Wind Energy in India ... 33

Credit Risk ... 33

Policy Risk ... 34

Technical Risk ... 34

4.10 Challenges for New Players in Indian Wind Energy Sector ... 35

4.11 Recommendations for Policy Makers ... 35

5. Solar Energy Market in India ... 37

5.1 State-wise Solar Energy Installed Capacity in India (in MW) ... 37

5.2 State-wise Grid Connected Solar Power Projects under JNNSM ... 38

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5.4 Solar Power Capacity Requirements (FY12 – FY22) ... 39

5.5 State-wise Regulation and Policy Comparison for Solar Energy in India ... 40

5.6 EXIM Scenario in Indian Solar Energy Sector... 42

Export Scenario ... 42

Import Scenario ... 43

5.7 Growth Drivers and Inhibitors for Solar Energy Market in India... 45

5.8 Risks Associated with Solar Energy in India... 45

Credit Risk ... 45

Policy Risk ... 46

Technical Risk ... 46

5.9 Application-wise Solar Energy Usage and Trends ... 47

Rooftop Solar PV Programme ... 47

Off-Grid Lighting Systems ... 48

Solar City Scheme ... 48

Solar Water Pumping ... 48

Telecom Towers... 49

Solar Water Heating Systems ... 49

Solar Cookers and Steam Generating Systems ... 49

Industrial Process Heat Applications ... 50

Solar Air Conditioning / Refrigeration ... 50

Solar Water Purification / Desalination ... 50

Concentrated Solar Power (CSP) Plants ... 50

5.10 Challenges for New Players in Indian Wind Energy Sector ... 51

5. 11 Recommendations for Policy Makers ... 51

6. Small Hydro Power Market in India ... 53

6.1 State-wise Small Hydro Power Potential in India (in MW) ... 53

6.2 State-wise Small Hydro Power Installed Capacity in India (in MW) ... 54

6.3 State-wise Small Hydro Power Upcoming Capacity in India (in MW)... 55

6.4 State-wise Regulation and Policy Comparison for Small Hydro Power in India ... 56

6.5 EXIM Scenario in Indian Small Hydro Power Sector ... 58

Export Scenario ... 58

Import Scenario ... 59

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6.7 Risks Associated with Small Hydro Power in India ... 60

Credit Risk ... 60

Policy Risk ... 60

Technical Risk ... 61

6.8 Challenges for New Players in Indian Small Hydro Power Sector ... 61

6.9 Recommendations for Policy Makers ... 61

7. Biomass/ Bagasse Cogeneration Power

Market in India ... 63

7.1 State-wise Biomass Power Potential in India (in MW) ... 63

7.2 State-wise Bagasse Cogeneration Power Potential in India (in MW) ... 64

7.3 State-wise Regulation and Policy Comparison for Biomass Power in India ... 65

7.4 State-wise Regulation and Policy Comparison for Bagasse Cogeneration Power in India ... 68

7.5 Central Financial Assistance (CFA) for Biomass/ Bagasse Cogeneration Power Projects ... 70

7.6 Fiscal Incentives for Biomass/ Bagasse Cogeneration Power Projects ... 71

7.7 Growth Drivers and Inhibitors for Biomass/ Bagasse Cogeneration Power Market in India ... 72

7.8 Challenges for New Players in Indian Biomass / Bagasse Cogeneration Power Sector ... 72

7.9 Recommendations for Policy Makers ... 73

8. Waste to Energy (WtE) Power Market in India 75

8.1 State-wise Waste to Energy (WtE) Power Potential in India (in MW) for MSW ... 75

8.2 State-wise Regulation and Policy Comparison for Waste to Energy (WtE) Power in India for MSW ... 76

8.3 Central Financial Assistance (CFA) for Waste to Energy (WtE) Power Projects ... 77

Capital Subsidy to Developers ... 77

Incentives to State Nodal Agencies ... 78

Financial assistance for promotional activities ... 78

8.4 Growth Drivers and Inhibitors for Waste to Energy (WtE) Power Market in India ... 78

... 78

8.5 Challenges for New Players in Indian Biomass / Bagasse Cogeneration Power Sector ... 79

8.6 Recommendations for Policy Makers ... 79

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1. Executive Summary

India has the world’s fifth-largest electricity generation capacity which currently stands at 243 GW. The power sector in India is highly diverse with varied commercial sources for power generation like coal, natural gas, hydro, oil and nuclear as well as unconventional sources of energy like solar, wind, bio-gas and agriculture. The demand for power has been growing at a rapid rate and overtaken the supply, leading to power shortages in spite of manifold growth in power generation over the years.

Focused efforts are going on to bridge this demand-supply gap by way of policy reforms, participation from private sector and development of the Ultra Mega Power Projects (UMPP). The power sector offers tremendous opportunities for investing companies due to the huge size of the market, growth potential and returns available on capital.

Industrialization, urbanization, population growth, economic growth, improvement in per capita consumption of electricity, depletion of coal reserve, increasing import of coal, crude oil and other energy sources and the rising concern over climate change have put India in a critical position. It has to take a tough stance to balance between economic development and environmental sustainability. One of the primary challenges for India would be to alter its existing energy mix which is dominated by coal to greater share of cleaner and sustainable sources of energy.

Renewable energy including large hydro constitutes for only 28.8% of overall installed capacity in India. The total renewable energy potential from various sources in India is 2,49,188 MW. India till 31st March 2014 has been able to achieve only 12.95% of its renewable energy potential. The

untapped market potential for overall renewable energy in India is 216918.39 MW which shows huge growth potential for renewable energy in India.

Sector Potential (in MW) Installed Capacity (in MW) % Achieved

Wind Energy 102772 21136.2 20.57

Solar Energy 100000 2647 2.65

Small Hydro Power (SHP) 20000 3816.91 19.08

Biomass 17536 1914.5 10.92

Bagasse Cogeneration 5000 2648.4 52.97

Waste to Energy (WtE) 3880 106.6 2.75

Total 249188 32269.6 12.95

The Ministry of New & Renewable Energy (MNRE), Government of India has set a target of achieving overall renewable energy installed capacity of 41,400 MW by 2017. As per NOVONOUS estimates, this creates an opportunity worth US$ 10.51 billion for the renewable market in India till 2017.

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2. India’s Energy Position

As a developing country, India’s energy market is still in a nascent/maturing stage. The per-capita consumption of electricity is growing at a steady pace due to greater penetration of power grids, availability of more consumer electronic products and higher disposable incomes. However, it is still not at the stage of Russia, China or even Brazil, suggesting unmet demand for power.

Exhibit 2.1 Per Capita Electricity Consumption in India Source: CEA, NOVONOUS Insights

India’s power market is estimated to grow at a CAGR of 7.5-8% till 2017-18. Power consumption is estimated to grow from ~1127 TWh in FY2013 to ~3793 TWh in FY2032 at a CAGR of 6%, while power generation has grown from FY2007 to FY2013 at CAGR of 5.5%. From April 2013 to March 2014, electricity generation grew at 5.96%.

Exhibit 2.2 Year on Year Electricity Production Growth in India Source: NOVONOUS Insights

73.9 126.2 171.6 228.7 329.2 464.4 671.9 559.2 813.3 917 0 200 400 600 800 1000 1966 1974 1979 1985 1990 1997 2002 2007 2011 2013

India - Per Capita Electricity Consumption

kWh per person 663 705 724 772 811 876 912 1006 0 200 400 600 800 1000 1200 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 E le ct ri ci ty P ro du ct io n in T W h

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2.1 Future Energy Requirements and Supply Options

To meet the rate of consumption of electricity, 88.5 GW of electricity production capacity has been planned under the 12th Five Year Plan, and an estimated 100 GW will be scheduled in the 13th Plan.

Of the plants scheduled to be commissioned till 2017-18, more than 80% are coal-powered plants. However, there is a coal supply deficit in India that is scheduled to grow over the years. While this can be met by importing coal, it will put pressure on the prices of electricity generated by thermal power plants.

To meet the energy requirement, increase in renewable and non-conventional energy sources have been planned. The Wind Energy sector is scheduled to grow at 10-15% to meet the demand for power. Solar Energy is also estimated to reach 20 GW of energy capacity till 2022 due to heavy incentives offered by the government. The private sector is expected to play a major part, as by 2017-18, the private sector is expected to account for more than 35% of the country’s power generation.

However, despite the persistent focus on renewable energy over the past few years, demand supply deficits have steadily worsened from ~5% in 2003 to ~11% in 2009. Despite the work being done to minimize transmission and distribution (T&D) losses (T&D loss has reduced from 32.5% in 2002-03 to 25.47% in 2008-09), the country still faced an average energy deficit of 6.7% in 2013-14.

Exhibit 2.3 Region-wise Energy Deficit in India Source: CEA, NOVONOUS Insights

As of 31st March 2014, India had total installed capacity of 243028.95 MW. Thermal power plants

(coal, gas and oil) had largest share at 168254.99 MW (69.23%) followed by hydro, nuclear and renewable energy sources. Renewable energy sources included are Small Hydro Project (SHP), Biomass Gasifier (BG), Biomass Power (BP), Urban & Industrial Waste Power (U&I) and Wind Energy.

ENERGY

State/Region Requirement /

Demand

Availability / Supply Surplus/ Deficit

MU MU MU % Northern 319885 301418 -18467 -5.77 Western 286752 283396 -3356 -1.17 Southern 309840 250583 -59257 -19.13 Eastern 119632 131880 12248 10.24 North Eastern 12424 11024 -1400 -11.27 All India 1048533 978301 -70232 -6.70

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Exhibit 2.4 Source-wise Installed Capacity in India (in MW) Source: CEA, NOVONOUS Insights

2.2 India’s Electricity Demand Till 2032

The electricity demand in India is estimated to grow from ~1127 TWh in FY2013 to ~3793 TWh in FY2032 at a CAGR of 6%. NOVONOUS estimates that the electricity generation capacity will grow from about 243 GW today to 710GW by 2032 to meet the rising demand. This will require India to spend around US$ 550 billion in increasing power generation capacity and another US$ 400 to US$ 500 billion in upgrading the transmission and distribution (T&D) infrastructure which accounted for loss of 25.47% in 2008-09.

Exhibit 2.5 Electricity Consumption in India by 2032 Source: NOVONOUS Insights

Coal 145273.39 59.78% Gas 21781.85 8.96% Oil 1199.75 0.49% Hydro 40531.41 16.68% Nuclear 4780.00 1.97% RE Sources* 29462.55 12.12%

India -Source-wise Installed Capacity in MW

Coal Gas Oil Hydro Nuclear RE Sources* 1127.91 3793.2 0 500 1000 1500 2000 2500 3000 3500 4000 2013 2032 (est.) E le ct ri ci ty C on su m pt io n in T W h

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2.3 Analysis of state-wise Renewable Purchase Obligation (RPO)

Regulation across India

State Favorable Policies Neutral/Negative Policies

Andhra

Pradesh ·

Renewable energy sources' means renewable sources such as Co-generation (from renewable

sources of energy like bagasse).

· The consumption of a Rural Electricity Supply

Co-operative Society (RESCO) shall be taken into account for calculating the consumption of a distribution licensee for the purpose of these Regulations. There shall be no separate Renewable Power Purchase Obligation on the RESCOs.

· The State Agency shall submit quarterly status to the

Commission in respect of compliance of Renewable Power Purchase Obligation (RPPO) by the obligated entity(s)

· Pooled Cost of Power

Purchase does not include purchases based on liquid fuel, from traders, and short-term purchases

· The state has set a RPO

target of 0.25% till 2012-13 in line with Tariff policy but it has set a flat target of 0.25% till 2016-17

Assam · The State Agency shall submit quarterly status to the

Commission in respect of compliance of renewable purchase obligation by the obligated entities in the format as stipulated by the Commission.

· "Average Pooled Power Cost" definition is in line with

the CERC REC Regulation, 2010

· The state has set a RPO

target of 0.15% till 2012-13 which is lower than Tariff policy targets. Also, the trajectory of RPO target is till 2014-15 which is 0.25%

· The regulation does not

specify the min capacity for Captive consumers for applicability of RPO

Bihar · The Certificates purchased by the obligated entities

from the power exchange in terms of the regulation of the Central Commission shall be deposited by the obligated entities to the Commission within a month

of the purchase of the certificate.

· The regulator has also defined a longer trajectory till

2021-22 for the solar RPO target with a base of 0.25% in 2012-13 and an increase of 0.25% every year till 2019-20 and 0.5% in 2020-21 and 2021-22.

· If the distribution licensee is unable to fulfill the

obligation, the shortfall of the specified quantum of that year would be added to the specified quantum for the next year. However, credit for excess purchase from renewable energy sources would not be adjusted in the ensuing year.

· The State Agency shall submit quarterly status to the

Commission in respect of compliance of renewable purchase obligation by the obligated entities in the format as stipulated by the Commission and may suggest appropriate action to the Commission if required for compliance of the renewable purchase obligation.

· "Average Pooled Power Cost" definition is in line with

the CERC REC Regulation, 2010

· If solar certificates are not

available in a particular year, then in such cases,

additional non-solar certificate shall be purchased for fulfillment of the Renewable Purchase Obligation (RPO).

Chhattisgarh · The state has set a target of 0.5% for Solar RPO (by

2012-13) which is higher than that stipulated in the Tariff Policy.

· "Average Pooled Power Cost" definition is in line with

the CERC REC Regulation, 2010

· The State Agency shall develop suitable protocol for

collection of information from various sources such as renewable energy generating companies, obligated entities, SLDC, chief electrical inspector etc., on regular basis and compile such information to compute the compliance of RPO target by such Obligated Entities.

· In the event of non compliance of the RPO by

distribution licensees by any of the modalities, from

· The state has set a very short

trajectory for RPO targets i.e. till 2012-13.

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non-solar renewable energy plants or solar power plants in the State, the distribution licensee whose purchase of renewable energy is maximum during the year shall be compensated by other distribution licensees so that percentage of renewable energy consumption by all the distribution licensees functioning in the State become equal.

Delhi · The state has considered off-grid generation also for

fulfillment of RPO.

· There will an be automatic approval on year to year

basis if tariff considering capital

subsidies/GBI/Carbon credits etc. is less than Average Power Purchase Cost (APPC) during a particular year.

· The Licensee(s) has/have to submit half yearly

progress report to the Commission, on the capacity addition, generation and purchase of electricity from renewable energy sources in their area(s) of supply, which is used by generator itself or sold to the third party under open access, and also post them on their website.

· "Average Pooled Power Cost" definition is in line with

the CERC REC Regulation, 2010

· The regulation has guided state agency to submit a

summary statement of renewable energy procurement and RPO compliance by different obligated entities. The same needs to be published by the State Agency on a cumulative basis every month by 10th day of the next month on its website.

· In case the total off grid

usage/generation capacity established under such schemes exceeds 10 percent of the total RPO obligation of Delhi

Distribution Licensees in the relevant category, the Commission may re-fix the RPO obligations of the distribution licensees taking into consideration such off grid usage/generation capacity.

· The regulator has also

defined a lower level of Solar RPO target i.e. 0.15% (by 2012-13) and 0.35%(by 2016-17) of the total power procured.

Gujarat · The state has set a high Solar RPO target of 1%

which is higher than Tariff policy targets.

· "Average Pooled Power Cost" definition is in line with

the CERC REC Regulation, 2010

· The State Agency shall submit quarterly status to the

Commission in respect of compliance of renewable purchase obligation by the obligated entities in the format as stipulated by the Commission.

· The RPO regulations are not

applicable on captive as well as open access consumers.

· As per the regulation the

APPC of previous year would be applicable while

determining the cost of power but in reality GUVNL freezes the APPC for the complete life projects.

· If the mentioned minimum

quantum of power purchase from solar is not available in a particular year, then in such cases, additional wind or other energy, over and above their RPO, shall be utilized for fulfillment of the solar RPO.

· RPO trajectory beyond

2012-13 is not provided.

Haryana · It is clearly mentioned that Non-fossil fuel based

co-generation project shall qualify for Renewable Energy source.

· The State Agency shall submit quarterly status to the

Commission in respect of compliance of renewable purchase obligation by the obligated entities in the format as stipulated by the Commission and may suggest appropriate action to the Commission

· "Average Pooled Power Cost" definition is in line with

the CERC REC Regulation, 2010

· In case of genuine difficulty

in complying with the renewable purchase obligation because limited availability of renewable energy or non-availability of certificates, the obligated entity can approach the Commission for relaxation or carry forward of compliance requirement to the next year. This provision of seeking relaxation is not desirable. Himachal

Pradesh · · The state has set RPO target in line with Tariff policy. Also the state has defined a longer trajectory for

· There is no provision requiring

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RPO targets (till 2021-22) in line with the Tariff Policy

· "Average Pooled Power Cost" definition is in line with

the CERC REC Regulation, 2010

methodology/reporting to commission regarding RPO compliance.

Jammu &

Kashmir ·

The State Agency shall devise appropriate protocol for collection of information from various sources such as renewable energy generating companies, obligated entities, SLDC, etc., on a regular basis and compile such information to compute the compliance of RPO target by such Obligated Entities.

· "Average Pooled Power Cost" definition is in line with

the CERC REC Regulation, 2010

· Generation from grid connected renewable energy

sources with installed capacity of 250 kW and above shall alone be considered as eligible renewable energy sources. However, generation from grid connected renewable energy sources with installed capacity below 250 kW shall be considered as 'eligible RE source' provided suitable metering and communication arrangement with State Load Dispatch Centre is established by such renewable energy project

· There is no clarity on RPO

targets beyond 2012-13.

· RPO on any person owning

Standby (or Emergency backup) Captive

Generating Plant facilities will not be subject to RPO.

Jharkhand · The state has defined a high Solar RPO (1% for

2012-13) compared to other states in the country.

· The State Agency shall develop the formats for

submission of quarterly progress report in respect of compliance of renewable purchase obligation by the obligated entities and get them approved by the Commission

· "Average Pooled Power Cost" definition is in line with

the CERC REC Regulation, 2010

· The state has defined a very

short trajectory for RPO targets till 2012-13.

· In case of genuine difficulty

in complying with the renewable purchase obligation because of non availability of Certificates, the Obligated entity can approach the Commission for carry forward of compliance requirement to the next year

JERC(Goa &UT)

· The commission has set a target higher (0.4% for

2012-13) than stipulated in the Tariff Policy.

· The regulation mandates the State Agency to

submit quarterly status to the Commission in respect of compliance of renewable purchase obligation by the obligated entities in the format as stipulated by the Commission and may suggest appropriate action to the Commission if required for compliance of the renewable purchase obligation.

· "Average Pooled Power Cost" definition is in line with

the CERC REC Regulation, 2010

· There is no long term

trajectory (beyond 2012-13) of RPO targets.

· The regulation does not

specify the min capacity for Captive consumers for applicability of RPO.

JERC(Manipur

& Mizoram) ·

The regulator has defined a Solar RPO target of 0.25% for 2012-13 in line with the Tariff Policy.

· The State Agency shall devise appropriate protocol

for collection of information from various sources such as renewable energy generating companies, obligated entities, SLDC, etc., on a regular basis and compile such information to compute the

compliance of RPO target by such Obligated Entities.

· "Average Pooled Power Cost" definition is in line with

the CERC REC Regulation, 2010

· There is no long term

trajectory of RPO targets.

Karnataka · The State Agency shall submit quarterly status to the

Commission in respect of compliance of renewable purchase obligation by the obligated entities in the format as stipulated by the Commission.

· "Average Pooled Power Cost" definition is in line with

the CERC REC Regulation, 2010

· Solar RPO is applicable only

on DISCOMS which is 0.25%. There is no trajectory defined.

· There is no separate solar

RPO on Captive and Open Access consumers.

· A distribution licensee may in

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solar power generated in the State of Karnataka procure from other renewable sources of energy or REC to the extent of shortfall in its RPO in any

year.

· Captive users can sell their

surplus power only to the

distribution companies (ESCOMs) at a price not

exceeding the APPC

· RECs accreditation can be

achieved only to the generators selling the power to ESCOMS at pooled cost of power purchase as

approved by the

Commission for the previous year.

Kerala · The state has set a longer trajectory for RPO (till

2021-22) targets which brings clarity to the investor.

· The State Agency shall submit quarterly status to the

Commission in respect of compliance of renewable purchase obligation by the obligated entities in the format as stipulated by the Commission and may suggest appropriate action to the Commission if required for compliance of the renewable purchase obligation.

· "Average Pooled Power Cost" definition is in line with

the CERC REC Regulation, 2010

· The Solar RPO of the state is

0.25% constant till the end of the trajectory period.

· The regulation does not

specify the min capacity for Captive consumers for applicability of RPO.

Maharashtra · It is clearly mentioned that eligible renewable

energy sources shall include Non-fossil fuel (including bagasse) based co-generation projects (both, qualifying and non-qualifying co-generation projects)

· The summary statement of RE procurement and

RPO compliance by different Obligated Entities shall be published by the State Agency on cumulative basis every month on its website.

· The State Agency shall submit quarterly status to the

State Commission in respect of compliance of renewable purchase obligation by the Obligated Entities

· Each Distribution Licensee shall indicate, along with

sufficient proof thereof, the estimated quantum of purchase from renewable energy sources for each year of the Operating Period under the Business Plan as well as under MYT Petition

· "Average Pooled Power Cost" definition is in line with

the CERC REC Regulation, 2010

· Procurement of RE power

generated within the State by Distribution Licensee at rate other than rate approved by the State Commission directly from generator or from trader shall not be considered as eligible quantum for fulfillment of renewable purchase obligation of such distribution licensee

· Captive user(s) consuming

power from grid connected fossil fuel based

co-generation plants, are exempted from applicability of RPO target and other related conditions as specified in these Regulations.

· The state has set a RPO

target of 0.25% in line with Tariff policy but it has set a flat target of 0.5% till 2015-16.

Meghalaya · The state has defined a high Solar RPO compared

to other states in the country.

· "Average Pooled Power Cost" definition is in line with

the CERC REC Regulation, 2010

· The State Agency shall develop the formats for

submission of quarterly progress report in respect of compliance of renewable purchase obligation by the obligated entities and get them approved by the Commission

· The state has defined a very

short trajectory for RPO targets till 2012-13

· If the distribution licensee is

unable to fulfill the

obligation, the shortfall in the specified quantum for the year shall be added to the specified quantum for the following year, and credit for

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excess purchase shall not be adjusted in the ensuing year.

· The discoms are allowed for

carrying forward the unfulfilled RPO but the captive and open access consumers are not allowed the same.

· The regulation does not

specify the min capacity for Captive consumers for applicability of RPO.

Odisha · The state declared a separate RPO for procurement

from renewable energy as well as from cogeneration based stations.

· The state has defined a longer trajectory for RPO

targets till 2015-16.

· Third Party Sale from renewable energy sources has

been be exempted from the cross-subsidy surcharge

· The State Agency shall develop the formats for

submission of quarterly progress report in respect of compliance of renewable purchase obligation by the obligated entities and get them approved by the Commission

· "Average Pooled Power Cost" definition is in line with

the CERC REC Regulation, 2010

· The state has a lower solar

RPO (0.15% in 2012-13) compared to the target as stipulated in the Tariff Policy of 0.25% by 2012-13.

Punjab · The State Agency shall develop the formats for

submission of quarterly progress report in respect of compliance of renewable purchase obligation by the obligated entities and get them approved by the Commission

· "Average Pooled Power Cost" definition is in line with

the CERC REC Regulation, 2010

· The commission has set a

very low RPO target

compared to the Tariff policy targets. The Solar RPO target for year 2012-2013 is 0.07% compared to the target as stipulated in the Tariff Policy of 0.25% by 2012-13.The RPO trajectory is till 2014-15.

· The commission has carried

forward the non-compliance of RPO for 2011-12 to 2012-13.

· There is lack of clarity on the

RPO applicable on the captive users in terms of capacity.

Rajasthan · At the end of each financial year, each obligated

entity shall submit a detailed statement regarding total electricity drawn / consumed and renewable energy /REC purchased and duly certified by the auditors to the State agency on or before ensuing 30th September.

· Solar RPO target (on DISCOMS only) of 0.75% in

2012-13 is higher than Tariff policy target.

· Each Distribution Licensee shall indicate, along with

sufficient proof thereof, the estimated quantum of purchase of renewable energy for the ensuing year in tariff/ARR petition in accordance with Regulations notified by the Commission

· The State Agency shall submit quarterly status to the

Commission in respect of compliance of renewable purchase obligation by the obligated entities in the format as stipulated by the Commission and may suggest appropriate action to the Commission if required for compliance of the renewable purchase obligation.

· The State agency shall develop methodology for

· As per, Rajasthan Electricity

Regulatory Commission (Power Purchase & Procurement Process of Distribution Licensee) (2nd Amendment) Regulations, 2011 solar RPO in Rajasthan is applicable on DISCOMS only.

· RPO targets are till 2013-14

only. A longer trajectory may be desirable

· There is separate RPO for

bio-mass and that can be fulfilled by purchase of power from biomass plant only and not by purchase of

REC.

· In case of genuine difficulty

in complying with the renewable power purchase

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collection of information from renewable energy generating company, obligated entities, SLDC etc. on regular basis, compile the information to compute the RPO fulfillment by the obligated entities indicating separately the direct purchase of renewable energy as well as purchase through REC mechanism. The information shall be placed on a cumulative basis for each quarter by the State Agency on its website.

obligation because of non-availability of renewable energy and/or certificates, the obligated entity can approach the Commission to carry forward the compliance requirement to the next year or seek its

waiver.

· The shortfall in RPO

obligation can be fulfilled by purchase of renewable energy and/or REC up to 30th June of the next financial year.

· 'Pooled Cost of Power

Purchase' means the weighted average price at which the distribution licensee has purchased the electricity including cost of self generation, if any, in the previous year from all the energy suppliers, excluding

short term power purchases and those based on renewable energy.

Tamil Nadu · The State Agency shall submit quarterly status to the

Commission in respect of compliance of renewable purchase obligation by the obligated entities in the format as stipulated by the Commission.

· The state have set a very low

solar RPO target for 2012-13 i.e. 0.1%

· The RPO targets set under TN

Solar Policy 2012 and TNERC are conflicting to each other.

· The state has clarified that

purchases made from co-generation units irrespective of the fuel type would be considered for fulfilling their RPO.

· The APPC defined as per

TNERC excludes short term as well as purchases from liquid fuels for computation of APPC.

· Also according to draft

amendment published by TNERC, the APPC should not

exceed 75% of the preferential tariff of the respective technology.

Tripura · 0.1 (%) percentage points out the renewable

purchase obligation so specified shall be procured from generation bases on solar.

· The State Agency shall develop the formats for

submission of quarterly progress report in respect of compliance of renewable purchase obligation by the obligated entities and get them approved by the Commission

· "Average Pooled Power Cost" definition is in line with

the CERC REC Regulation, 2010

· In case of genuine difficulty

in complying with the renewable purchase obligation because of non availability of Certificates, the Obligated entity can approach the Commission for carry forward of compliance requirement to the next year

· There is no long term RPO

trajectory beyond 2012-13.

Uttarakhand · The State Agency shall develop the formats for

submission of quarterly progress report in respect of compliance of renewable purchase obligation by

· The commission has set a

very low Solar RPO target of 0.05% for the year 2012-13.

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the obligated entities and get them approved by the Commission

· "Average Pooled Power Cost" definition is in line with

the CERC REC Regulation, 2010

There is no long term RPO trajectory beyond 2012-13

· Provided that in case of

genuine difficulty in complying with the renewable purchase obligation because of non-availability of certificates, the Obligated Entity can approach the Commission for carry forward of compliance requirement to the next year.

· The regulation does not

specify the min capacity for Captive consumers for applicability of RPO.

Uttar Pradesh · Solar RPO target of 1% in 2012-13 is higher than Tariff

policy target.

· The renewable purchase obligation specified for the

year 2012¬13 shall continue beyond 2012-13 until any revision is effected by the Commission in this regard.

· All captive consumers irrespective of capacity will

be RPO complaint.

· Every distribution licensee shall, on a yearly basis on

or before 15th March, submit to the State Agency under intimation to the Commission, the details of the estimated quantum of purchase from renewable energy sources for the ensuing year.

· The distribution licensee shall submit quarterly status

to the State Agency in respect of compliance of renewable purchase obligation.

· If the obligated entity has

established the fact that the minimum quantum of purchase from solar energy is not available in the market either in the form of solar power or solar certificate in a particular year and the Commission is satisfied with this fact, then additional

non-solar energy over and above current non solar RPO target shall be purchased for

fulfillment of total renewable purchase obligation.

· The Commission may, either

on its own motion or on recommendation of the State Agency or on receipt of an application from the obligated entity, revise for any year the percentage RPO targets as deemed appropriate.

West Bengal · The regulator has clearly defined RPO target

fulfillment by purchase of power both being originated from co-generation and/or renewable sources.

· RPO trajectory till 2017-18 is defined.

· To meet the RPO the licensee shall make

advertisement in at least two widely published national English daily newspapers and at least one widely published Bengali daily newspaper every year.

· "Average Pooled Power Cost" definition is in line with

the CERC REC Regulation, 2010

· The commission in its

regulation have defined RPO target from 2013-14 onwards.

· RPO targets till 2017-18 (0.6%)

are not sufficient to meet Tariff policy targets

· There is no provision requiring

State Agency developing methodology/reporting to commission regarding RPO compliance.

· The regulation does not

specify the min capacity for Captive consumers for applicability of RPO.

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2.4 State-wise Non-Solar and Solar RPOs (2011-12 to 2019-20)

State RE Technology 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 Andhra Pradesh Non-Solar 4.75% 4.75% 4.75% 4.75% 4.75% 4.75% Solar 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% Total 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% Arunachal Pradesh Non-Solar 4.10% 5.45% 6.80% Solar 0.10% 0.15% 0.20% Total 4.20% 5.60% 7.00% Assam Non-Solar 2.70% 4.05% 5.40% 6.75% Solar 0.10% 0.15% 0.20% 0.25% Total 2.80% 4.20% 5.60% 7.00% Bihar Non-Solar 2.25% 3.75% 4.00% 4.25% Solar 0.25% 0.25% 0.50% 0.75% 1.00% 1.25% 1.50% 1.75% 2.00% Total 2.50% 4.00% 4.50% 5.00% Chhattisgarh Non-Solar 5.00% 5.25% Solar 0.25% 0.50% Total 5.25% 5.75% Delhi Non-Solar 1.90% 3.25% 4.60% 5.95% 7.30% 8.65% Solar 0.10% 0.15% 0.20% 0.25% 0.30% 0.35% Total 2.00% 3.40% 4.80% 6.20% 7.60% 9.00%

JERC (Goa &

UT) Non-Solar Solar 1.70% 0.30% 2.60% 0.40%

Total 2.00% 3.00% Gujarat Non-Solar 5.50% 6.00% Solar 0.50% 1.00% Total 6.00% 7.00% Haryana Non-Solar 1.50% 2.00% 3.00% Solar 0.00% 0.05% 0.10% Total 1.50% 2.05% 3.10% Himachal

Pradesh Non-Solar Solar 10.00% 0.01% 10.00% 0.25% 10.00% 0.25% 10.00% 0.25% 11.00% 0.25% 12.00% 0.25% 13.00% 0.50% 14.00% 0.75% 15.00% 1.00% Total 10.01% 10.25% 10.25% 10.25% 11.25% 12.25% 13.50% 14.75% 16% Jammu and Kashmir Non-Solar 2.90% 4.75% Solar 0.10% 0.25% Total 3.00% 5.00% Jharkhand Non-Solar 2.50% 3.00% Solar 0.50% 1.00% Total 3.00% 4.00%

Karnataka Non-Solar 10% and

7% Solar 0.25% Total (Discoms only) 10.25% & 7.25% Kerala Non-Solar 3.35% 3.65% 3.95% 4.25% 4.55% 4.85% 5.15% 5.45% 5.75% Solar 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% Total 3.60% 3.90% 4.20% 4.50% 4.80% 5.10% 5.40% 5.70% 6.00% Madhya Pradesh Non-Solar 2.10% 3.40% 4.70% 6.00% Solar 0.40% 0.60% 0.80% 1.00% Total 2.50% 4.00% 5.50% 7.00% Maharashtra Non-Solar 6.75% 7.75% 8.50% 8.50% 8.50%

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Solar 0.25% 0.25% 0.50% 0.50% 0.50% Total 7.00% 8.00% 9.00% 9.00% 9.00% Manipur Non-Solar 2.75% 4.75% Solar 0.25% 0.25% Total 3.00% 5.00% &Mizoram Non-Solar 5.75% 6.75% Solar 0.25% 0.25% Total 6.00% 7.00% Meghalaya Non-Solar 0.45% 0.60% Solar 0.30% 0.40% Total 0.75% 1.00% Nagaland Non-Solar 6.75% 7.75% Solar 0.25% 0.25% Total 7.00% 8.00% Orissa Non-Solar 4.90% 5.35% 5.80% 6.25% 6.70% Solar 0.10% 0.15% 0.20% 0.25% 0.30% Total 5.00% 5.50% 6.00% 6.50% 7.00% Punjab Non-Solar 2.37% 2.83% 3.37% 3.81% Solar 0.03% 0.07% 0.13% 0.19% Total 2.40% 2.90% 3.50% 4.00% Rajasthan Non-Solar 5.50% 6.35% 7.00% Solar 0.50% 0.75% 1.00% Total 6.00% 7.10% 8.20%

Tamil Nadu Non-Solar 8.95%

Solar 0.05% Total 9.00% Tripura Non-Solar 0.90% 1.90% Solar 0.10% 0.10% Total 1.00% 2.00% Uttarakhand Non-Solar 4.50% 5.00% Solar 0.03% 0.05% Total 4.53% 5.05% Uttar

Pradesh Non-Solar Solar 4.50% 0.50% 5.00% 1.00%

Total 5.00% 6.00%

West Bengal Non-Solar 3.75% 4.70% 5.60% 6.50% 7.40%

Solar 0.25% 0.30% 0.40% 0.50% 0.60%

Total 3.00% 4.00% 4.00% 5.00% 6.00% 7.00% 8.00%

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3. Need for Renewable Energy in India

Industrialization, urbanization, population growth, economic growth, improvement in per capita consumption of electricity, depletion of coal reserve, increasing import of coal, crude oil and other energy sources and the rising concern over climate change have put India in a critical position. It has to take a tough stance to balance between economic development and environmental sustainability. One of the primary challenges for India would be to alter its existing energy mix which is dominated by coal to greater share of cleaner and sustainable sources of energy.

The total renewable energy potential from various sources in India is 2,49,188 MW.

Exhibit 3.1 Total Renewable Energy Potential in India (in MW) Source: MNRE, NOVONOUS Insights

As of 31st March 2014, the total installed capacity from renewable energy, both grid-interactive

and off-grid/captive power, was 32,730 MW. Thus the untapped market potential for overall renewable energy in India is 2,15,922 MW.

3.1 Energy Security

Energy security is interplay of demand and supply scenarios which are influenced by a number of factors that requires careful consideration and evaluation. Energy security is one of the key challenges confronting India. Energy is critical for the socio-economic development of a country. Hence, energy is considered as a ‘strategic commodity’ and any uncertainty regarding its supply can affect the functioning of a country’s economy. In this strategic sense, achieving

Solar Power 100000 Wind Power

102772 Small Hydro Power

(up to 25 MW) 20000 Bio-Power: Agro-Residues 17536 Bio-Power: Cogeneration - Bagasse 5000

WtE: Municipal Solid Waste

2600

WtE: Industrial Waste 1280

India - Total Renewable Energy Potential (in MW)

Solar Power Wind Power

Small Hydro Power (up to 25 MW) Bio-Power: Agro-Residues

Bio-Power: Cogeneration - Bagasse WtE: Municipal Solid Waste WtE: Industrial Waste

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energy security is considered to be of fundamental importance for India’s economic growth and meeting the Millennium Development Goals (MDG) such as decreasing unemployment, alleviation of poverty, improving healthcare and increase the literacy rate. India wants to be self-reliable in energy production, because large import of coal, crude oil, natural gas or other energy sources is paid in foreign currencies which results in devaluating Indian currency and increase the inflation which would affect the economy.

Even though India is the fifth largest producer of energy at 548 Million Tons of Oil Equivalent (MTOE) in the world as of 2012, the gap between production and consumption is huge and growing. As of 2012, the gap between production and consumption is 226 MTOE. The energy deficit of the country is around 30% as of 2012. Most of the deficit in the energy front is due to the fact that India is a net importer of oil.

As per 12th Five Year Plan, the total domestic energy production by 2016-17 will be 669.6 MTOE

and by 2021-22 it is expected to reach 844 MTOE. This will meet around 71 per cent and 69 per cent of expected energy consumption, with the balance to be met from imports, projected to be about 267.8 MTOE by 2016-17 and 375.6 MTOE by 2021-22.

India continues to depend heavily on coal to meet most of the demand and it will continue to remain as the most important source of energy in the near future.

Coal Supply Constraints and Pricing Risk: India has the fifth-largest global reserves of coal. However, coal imports are increasing. Coal imports now meet 18% of the country’s demand and have been up from 9% five years back. Coal imports are likely to grow at a CAGR of 13% over FY12 to FY17 and meet 21% of demand in FY17. With international coal prices much higher than the domestic coal price, the performance of generators relying on imported coal has been adversely affected.

Gas Shortage and High Price: India has less than 1% of the world’s gas reserves. Over the past five years, domestic supply has increased 54%, but way below the government and industry expectations. Import gas prices remain to be high and making such projects economically unviable.

Nuclear Facing Twin Challenges: Public opposition and the Nuclear Liability Bill are the two key challenges faced by the nuclear sector in India. Post Fukushima, lot of allegations regarding the safety and viability of this source of energy cropped up .The Kudankulum nuclear plant site in Tamil Nadu, where the construction was around 90% complete when the Fukushima disaster struck Japan in March 2011 faced lot of resistance to start operations.

Water Stress Aggravating: India is a water stressed nation. According to available estimates by the Centre for Science and Environment, 88% of the country’s industrial water demand is taken up by thermal power plants. The per capita availability of water in the country is 1545 cubic meters as per the 2011 census according to ministry of water resources.

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Power Supply Deficit: As per Central Electricity Authority (CEA), India currently has a peak deficit of 12GW, which is 6.7% of its demand. With electricity demand expected to grow and conventional power capacity facing its own challenges, we expect developers and investors to favor renewable capacity addition. With India’s growing population coupled with increased industrialization the Demand supply gap will only keep on growing .At this rate it becomes imperative to look beyond conventional sources of energy and evaluate their economic viability.

3.2 Economic Viability

The cost of electricity generation from major renewable sources like wind and solar is comparable to or cheaper than diesel or re-gasified liquid natural gas (RLNG). Only coal, hydro powered plants have cheaper cost per unit of electricity production.

Exhibit 3.2 Source-wise Cost Per Unit of Electricity Production in India (in INR) Source: CEA, NOVONOUS Insights

The initial capital cost of installation is higher in most of the renewable sources except hydro. But the cost of operation and maintenance is comparatively cheaper than thermal or nuclear power plants.

Also since the cost of fuel is none for renewable energy sources. With increase in prices of coal, gas and other fossil fuels renewable sources will become comparable or cheaper than conventional power sources and will thus become economically viable.

3.5 14 8 6 8.58 4.5 2.12 0 2 4 6 8 10 12 14 16

Imported Coal Diesel Re-gasified Liquid Natural

Gas (RLNG)

Nuclear Solar Wind Hydro

India - Source-wise Cost Per Unit of Electricity

Production in INR

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3.3 Rural Electrification

As per 2011 census, around 742 million or 72.2% people in India live in villages. Also 43% of rural households still use kerosene to light their houses compared to 6-7% people in urban areas. As of 31st March 2014 out of a total 5,93,732 inhabited villages, only 5,72,414 (96.4%) villages have got

access to electricity. There are still 21,318 villages which have got no access to electricity.

Exhibit 3.3 Electrified vs. Unelectrified Village in India Source: CEA, NOVONOUS Insights

These communities are still waiting to see a bulb glowing in their homes. People are deprived of carrying on many activities after sunset which hampers their productivity as no economic activity can be carried in dark. It also affects the children as they cannot study during night. Over 85% of rural India is still using firewood, crop residue or cow dung as its primary source of fuel for cooking. These inefficient cooking stoves not only use more energy but also give rise to health problems as well as energy poverty.

One of the major reasons for this situation lies in the location of the villages itself which are often time in remote areas. Also it takes a lot of investment is required in setting up transmission and distribution (T&D) mechanisms in the rural areas.

Renewable energy become a very suitable candidate in these case as it is much more cost effective and less time consuming to set up in rural areas.

Electrified Villages 572414 96.41% Unelectrified villages 21318 3.59%

India - Electrified vs. Unelectrified Villages

Electrified Villages Unelectrified villages

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4. Wind Energy Market in India

India has an estimated wind power potential of 1,02,772 MW out of which the total installed capacity as of 31st March 2014 was 21,136.30 MW.

4.1 State-wise Wind Farmable Sites in India

Centre for Wind Energy Technology (C-WET), Chennai is responsible for identifying various wind farmable sites in India and also for validating and certifying various wind turbines in India. C-WET has identified 233 sites in India across 14 states and union territories after detailed surveys which are suitable for wind farms as they have wind power density (WPD) > 200 W/m2 at 50 m height.

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4.2 State-wise Wind Energy Potential in India (in MW)

India has an estimated on-shore wind energy potential of 1,02,772 MW. India has a coastline of 7517 Km. thus offering a huge potential for off-shore wind energy as well. C-WET currently is working on mapping the off-shore wind energy potential in India.

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4.3 State-wise Wind Energy Installed Capacity in India (in MW)

As of January 2014, India’s wind energy installed capacity was majorly spread across 8 states Rajasthan, Gujarat, Madhya Pradesh, Maharashtra, Andhra Pradesh, Karnataka, Tamil Nadu and Kerala.

Exhibit 4.3 State-wise Wind Energy Installed Capacity in India (in MW) Source: MNRE, NOVONOUS Insights

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4.4 State-wise Wind Energy Capacity Utilization in India (in %)

As of January 2014, states like Maharashtra, Rajasthan and Tamil Nadu had utilized their overall wind energy potential by more than 50%. Karnataka on the other hand has estimated wind energy potential of 13,593 MW spread across 26 wind farmable sites out of which it has been able to utilize only 17.01% of capacity. This is a huge opportunity for wind energy manufactures, plant developers and Government to expand this sector.

Exhibit 4.4 State-wise Wind Energy Capacity Utilization in India (in %) Source: MNRE, NOVONOUS Insights

4.5 State-wise Contribution of Wind Energy Installed Capacity in India

(in %)

Exhibit 4.5 State-wise Wind Energy Installed Capacity in India (in %) Source: MNRE, NOVONOUS Insights 4.47 9.65 17.01 4.18 13.17 58.25 54.14 51.24 0.04 0.00 10.00 20.00 30.00 40.00 50.00 60.00 70.00

India - State-wise Wind Energy Capacity Utilization

(in %)

Andhra Pradesh 3.20% Gujarat 16.73% Karnataka 11.43% Kerala 0.17% Madhya Pradesh 1.91% Maharashtra 17.17% Rajasthan 13.52% Tamil Nadu 35.85% Others 0.02% Andhra Pradesh Gujarat Karnataka Kerala Madhya Pradesh Maharashtra Rajasthan Tamil Nadu Others

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4.6 State-wise Regulation and Policy Comparison for Wind Energy in India

STATE / CENTRE Tariff Regulati ons / or Order or Draft Control period Tariff (Rs/kWh) Capit al Cost (Rs. Lakh/ MW) Capacity Utilisation Factor (%) Usef ul life (yrs) Subsidy and incentive by Central /State Govt Taxes and Duties Late Payme nt surchar ge CERC (FY13-14) Draft CERC Generic RE Tariff Order for FY 2013-14; CERC Regulati ons, 2012 FY 2012-16 (3 yrs) Wind power density = Tariff(Rs /kWh) <200 = 6.27, 5.78(with A.D) 200-250 = 5.70, 5.25(with A.D) 250-300 = 5.02, 4.63(with A.D) 300-400 = 4.18, 3.85(with A.D) >400 = 3.92 , 3.61(with A.D) 595.99 (FY 2013-14) Wind power density CUF <200 = 20% 200-250 = 22% 250-300 = 25% 300-400 = 30% >400 = 32% 25 Shall be factored in the tariff on per unit benefit derived on levellised basis Tariff exclusiv e of taxes and duties, pass through allowed on actual basis 1.25% per month if payme nt delaye d beyon d 60 days Andhra

Pradesh Wind Tariff Order in respect of "New Wind Based Power Projects ( O.P No. 6/7 of 2009) For WPP having entered into PPA btw May 1, 2009 to March 31, 2014 For first 10 years-3.5 For next 10 years-determined thereafter

470 24.50% 20 N.A N.A N.A

Gujarat Wind Tariff Order (Order No.2 of 2012, Aug 8, 2012) August 11, 2012 to March 31, 2016 Gross Tariff - Rs 4.23/kWh Depreciation- Rs 0.38/kWh Net Tariff-Rs 4.23/kWh 608 24% 25 Takes into account benefit of depreciatio n. Shall take a view on GBI once MNRE announces the scheme N.A N.A Karnataka Order for determi nation of tariff for RE sources (Dec, 11,2009)

10 years Average tariff for first 10 years from signing of PPA= Rs 3.70/kWh 470 26.50% 25 Shall not take into considerati on incentives allowed by Govt for tariff determinati on Pass through on actual incurre d basis N.A

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Maharashtra Generic Tariff Order ( March 30, 2012) FY 2012-13 Wind power density = Tariff(Rs /kWh) 200-250 = 5.67 (including AD of 0.81/kWh) 250-300 = 4.93 (including AD of 0.70/kWh) 300-400 = 4.20 (including AD of 0.60/kWh) >400 = 3.78 (including AD of 0.54/kWh) 516.94 for FY 13 subje ct to index ation Wind power density CUF 200-250 =20% 250-300 =23% 300-400 =27% >400 =30% 25 Takes into account benefit of depreciatio n. However shall not take into account GBI benefit into tariff determinatt ion Pass through on actual incurre d basis 1.25% per month if payme nt delaye d beyon d 60 days Rajasthan RERC (Terms and Conditi ons of Tariff) Regulati ons, 2009, Draft Tariff Order on Wind Projects for FY 2012-13 April 1, 2009 to March 31, 2014 5.18 (without AD) 4.90 (with AD)-for projects in Jaisalmer, Jodhpur and Barmer districts 5.44 (without AD) 5.14 (with AD)-for other districts 530 for FY 13 21%- Jaisalmer, Jodhpur and Barmer districts 20%- Other districts 25 Any Policy support by way of capital subsidy /Capital Finance Assistance (CFA), higher depreciatio n benefit or GBI, which becomes available to the developer/ generator, needs to be passed on to the utilities. Tax is not a pass through ; ROE comput ed on pre-tax basis 1.25% per month on daily basis for delay beyon d a period of 1.5 month from the date of billing

Tamil Nadu Compre hensive Tariff Order on Wind Energy (Order No. 6 of 2012) dated July 31, 2012 August 31, 2012 to March 31, 2014 3.51 Rs/kWh 575 27.15% 20 Penalty of 1% per month shall be levied for delaye d payme nt by the license e Exhibit 4.6 State-wise Wind Energy Regulation and Policy in India Source: Various SERC Orders

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4.7 EXIM Scenario in Indian Wind Energy Sector

Export Scenario

India’s export of wind generators was at US$ 0.78 million in 2003-04 which rose to US$ 49.93 million in 2013-14 (Apr-Dec). India exported US$ 1824.90 million worth of wind generators and the overall exported quantity was 46,730 units between 2003-04 and 2013-14 (Apr-Dec).

Exhibit 4.7 Export Value of Wind Generators in India (in US$ million) from FY 03-04 to FY 13-14 Source: Dept. of Commerce, NOVONOUS Insights

Exhibit 4.8 Export Quantity of Wind Generators in India (in thousands) from FY 03-04 to FY 13-14 Source: Dept. of Commerce, NOVONOUS Insights

0.78 1.18 23.76 296.51 364.97 694.23 287.41 4.62 44.59 56.92 49.93 0 100 200 300 400 500 600 700 800 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 (Apr -Dec)

India - Export Value of Wind Generators(in US$ million)

1.63 1.81 3.71 3.62 27.36 4.23 3.11 0.1 0.13 0.57 0.46 0 5 10 15 20 25 30 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 (Apr -Dec)

India - Export Quantity of Wind Generators

(in thousands)

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Import Scenario

India’s import of wind generators was at US$ 1.18 million in 2003-04 which rose to US$ 3.14 million in 2013-14 (Apr-Dec). India imported US$ 40.81 million worth of wind generators and the overall imported quantity was 3,320 units between 2003-04 and 2013-14 (Apr-Dec).

Exhibit 4.9 Import Value of Wind Generators in India (in US$ million) from FY 03-04 to FY 13-14 Source: Dept. of Commerce, NOVONOUS Insights

Exhibit 4.10 Import Quantity of Wind Generators in India (in thousands) from FY 03-04 to FY 13-14 Source: Dept. of Commerce, NOVONOUS Insights

1.18 2.22 7.61 2.4 1.06 2.29 1.63 5.75 6.57 6.96 3.14 0 1 2 3 4 5 6 7 8 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 (Apr -Dec)

India - Import Value of Wind Generators

(in US$ million)

0.01 0.29 0.23 0.1 0.1 0.76 0.21 0.48 0.12 0.94 0.08 0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.91 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 (Apr -Dec)

India - Import Quantity of Wind Generators

(in thousands)

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4.8 Key Growth Drivers and Inhibitors for Wind Energy Market in India

Exhibit 4.11 Key Growth Drivers and Inhibitors for Wind Energy Market in India Source: NOVONOUS Insights

4.9 Risks Associated With Wind Energy in India

Credit Risk

Ernst & Young LLP ranked India as Asia’s third-most attractive country for renewable investments as it plans to double its clean-energy capacity to 55 GW by 2017. Lack of affordable financing is a major hindrance in reaching this goal as the central bank is raising interest rates to combat inflation and commercial banks are wary about lending to new technologies.

According to Bloomberg, the state-run Indian Renewable Energy Development Agency Ltd. (IREDA) raised about 7.2 billion rupees ($117.8 million) in the month of March 2014 by selling 10, 15 and 20 year tax-free bonds to help finance clean-energy projects.

Growth Inhibitors

- High Initial Investment - Large Land Requirements - Variable Energy Outputs

- Lack of Transmission Infrastructure - Delay in Payments

- Lack of Strict Enforcement of RPOs

Growth Drivers

- Government Incentives - Cost Competitiveness of RE - Shift to Clean Energy

- Distributed Electricity Demand - Favorable Foreign Investment Policy - Huge Untapped Potential

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Currently Indian commercial banks offer 10 year loans with interest rates of varying from 12-13 percent to renewable plants. As per Climate Policy and Indian School of Business study such unfavorable terms add as much as 32 percent to the cost of renewable energy in India compared to similar projects in other countries This study also found that India could cut the cost of subsidizing wind energy by as much as two-thirds by introducing new policies to allow projects to raise cheaper, longer-term loans.

By helping wind farms and solar-power plants to reduce borrowing costs and obtain loans with terms as long as 20 years would be a cheaper way of supporting clean energy than existing policies.

A cost-effective way for the government to support renewable energy would be through debt-related policies, such as paying part of the interest-rate obligations of projects or lending funds below commercial rates or for longer tenors.

According to Bloomberg, India witnessed increased investment in renewable power and energy smart technologies at $7.8bn in 2013, up from $7.6bn in 2012. It shows investors are still willing to invest in this sector which can further be improved with favorable policies.

Policy Risk

Almost all renewable energy projects are prone to policy risk, for example heavy losses could be incurred due to changes in the energy markets which can be because of changes in the price of other sources of energy including fossil fuels.

In India’s case, renewable project revenues currently depend more on policy support rather than on the prices of fossil fuels. Even minor reduction in the financial support may impact financing arrangements and hamper investor confidence in the sector. For example, both the accelerated depreciation (AD) and the generation based incentive (GBI), which comprised 10% of wind energy incentives, expired in March 2012. Although they were brought back in 2013, it affected the sector significantly. New mechanisms, including the Renewable Energy Certificate (REC) market can assist India’s ambition to increase renewable energy installed capacity in near and long term but it’s still in a nascent stage and the demand is overpowered by huge supply of REC’s resulting in flooring of prices.

Technical Risk

Like any technology, wind energy also has its own risks. Some of the major areas related to technology are:

Building and Testing Risk: The risk of property damage or third-party liability arising from accidents during building or testing of new wind power plants/equipments can prove to be dangerous.

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Operational Risk: The risk of unplanned plant closure, for example owing to unavailability of resources, plant damage or component failure. The wind power industry is still focusing on replacing smaller wind turbines with larger once. The major reason for this behavior is that all the best sites are already occupied, and increasing the wind turbine size is one of the few ways left to increase the output. This is already happening in leading states in terms of wind power like Tamil Nadu. So far, there are no offshore wind farms in India. C-WET and MNRE are working towards changing this scenario. In case of off-shore wind farms, the level of risk increases with size and location.

Weather-Related Risk: The risk of a fall in volume of electricity produced due to lack of wind or high speed of wind. The complete dependence on climatic conditions leads to variability in power generation which acts as a major obstacle to recover costs.

Supply Chain Risk: The shortage of component and increase in transportation costs put pressure on margins. The shortage of critical components like gearboxes, slew rings, pitch bearings, towers, control panels etc. can affect maximum power generation from wind turbines.

4.10 Challenges for New Players in Indian Wind Energy Sector

Wind Turbine Manufacturers Component Manufacturer Wind Farm Operator

Competition in the industry Product acceptance in the market Land acquisition

Health of the distribution company High amount of technical support Huge investment for turn-key projects

Difficulty in finances No past track record Evacuation of energy

Acquiring skilled manpower Difficult to maintain cycle time Forest area permission

Stability in currency exchange rate Quality control Hard to get clearances

Exhibit 4.12 Challenges for New Players in Indian Wind Energy Sector Source: NOVONOUS Insights

4.11 Recommendations for Policy Makers

1. Improve short-term wind forecasting 2. Adequate Grid Connectivity

3. Increase PPPs to reduce risks to private investors 4. Solve institutional inefficiencies

5. Establish long-term markets for off-shore wind power

6. Provide flexible financing options to new players

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5. Solar Energy Market in India

India has an estimated solar power potential of around 1,00,000 MW out of which the total installed capacity as of 31st March 2014 was 2,647 MW.

5.1 State-wise Solar Energy Installed Capacity in India (in MW)

As of March 2014, India’s solar energy installed capacity was majorly spread across 8 states Rajasthan, Gujarat, Madhya Pradesh, Maharashtra, Andhra Pradesh, Tamil Nadu, Karnataka and Uttar Pradesh.

Exhibit 5.1 State-wise Solar Energy Installed Capacity in India (in MW) Source: MNRE, NOVONOUS Insights

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5.2 State-wise Grid Connected Solar Power Projects under JNNSM

As of 31st March 2014, India had 2631.9038 MW of grid connected solar power projects which

were commissioned under Jawaharlal Nehru National Solar Mission (JNNSM). This included 687.8 MW projects by Ministry of New & Renewable Energy (MNRE), 1322.59 MW under various state government policies, 90 MW under renewable purchase obligation (RPO), 490.685 under renewable energy certificate (REC) scheme, 15.6288 MW by private initiative (roof-top) and 25.2 MW by central public sector undertakings (CPSUs).

This was an increment of 947.4683 MW over last year which ended with 1684.4355 MW as of 31st

March 2013.

Sr.

No. State/UT Total MNRE Projects (in MW) State Policy (in MW) RPO (in MW) REC Scheme (in MW) Private Initiative (Roof top) (in MW) CPSUs

(in MW) commissioned Total capacity till 31-3-14 (in MW) 1 Andhra Pradesh 46.75 85.09 131.84 2 Arunachal Pradesh 0.025 0.025 3 Chhattisgarh 4 3.1 7.1 4 Gujarat 0 860.4 50 6 916.4 5 Haryana 7.8 2.5 10.3 6 Jharkhand 16 16 7 Karnataka 5 17 9 31 8 Kerala 0.025 0.025 9 Madhya Pradesh 5.35 175 166.815 347.165 10 Maharashtra 47 150 49.25 3 249.25 11 Orissa 13 5 2.5 10 30.5 12 Punjab 9.325 7.52 16.845 13 Rajasthan 493.5 22.1 40 174.5 730.1 14 Tamil Nadu 16 3 78.86 0.5 98.36 15 Uttar Pradesh 12.375 8.7 21.075 16 Uttarakhand 5.05 5.05 17 West Bengal 2.05 5 7.05

18 Andaman & Nicobar 0.1 5 5.1

19 Delhi 0.885 2.14 2.1288 5.1538 20 Lakshadweep 0.75 0.75 21 Pondicherry 0.025 0.025 22 Chandigarh 2 2 23 Others 0.79 0.79 TOTAL 687.8 1322.59 90 490.685 15.6288 25.2 2631.9038

Exhibit 5.2 State-wise Grid Connected Solar Power Projects in India under JNNSM (in MW) Source: MNRE

(40)

5.3 State-wise Solar RPO Targets (2011-12 to 2021-22)

State 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 Andhra Pradesh 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% Arunachal Pradesh 0.10% 0.15% 0.20% Assam 0.10% 0.15% 0.20% 0.25% Bihar 0.25% 0.25% 0.50% 0.75% 1.00% 1.25% 1.50% 1.75% 2.00% 2.50% 3.00% Chhattisgarh 0.25% 0.50% Delhi 0.10% 0.15% 0.20% 0.25% 0.30% 0.35%

JERC (Goa & UT) 0.30% 0.40%

Gujarat 0.50% 1.00% Haryana 0.00% 0.05% 0.10% Himachal Pradesh 0.01% 0.25% 0.25% 0.25% 0.25% 0.25% 0.50% 0.75% 1.00% 2.00% 3.00% Jammu and Kashmir 0.10% 0.25% Jharkhand 0.50% 1.00% Karnataka 0.25% Kerala 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% Madhya Pradesh 0.40% 0.60% 0.80% 1.00% Maharashtra 0.25% 0.25% 0.50% 0.50% 0.50% Manipur 0.25% 0.25% Mizoram 0.25% 0.25% Meghalaya 0.30% 0.40% Nagaland 0.25% 0.25% Orissa 0.10% 0.15% 0.20% 0.25% 0.30% Punjab 0.03% 0.07% 0.13% 0.19% Rajasthan 0.50% 0.75% 1.00%

Sikkim No regulation issued for RPO by the Power Department

Tamil Nadu 0.05%

Tripura 0.10% 0.10%

Uttarakhand 0.03% 0.05%

Uttar Pradesh 0.50% 1.00%

West Bengal 0.25% 0.30% 0.40% 0.50% 0.60%

Exhibit 5.3 State-wise Solar RPO Targets (2011-12 to 2021-22) Source: MNRE

5.4 Solar Power Capacity Requirements (FY12 – FY22)

As per the National Tariff Policy, it is envisaged that the targets for Solar RPO shall be 0.25% by 2012-13 extending to 3% by 2022. The Jawaharlal Nehru National Solar Mission has been the first step towards achieving these targets.

The following table illustrates the Solar RPO requirement by FY 2022 on the basis of expected demand in India. Assumptions: Average CUF for Solar Power Technologies to be 19%.

References

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