Beehives or elephants? How should India drive its solar transformation? September 2014 Tobias Engelmeier Ajay Goel

© BRIDGE TO INDIA, Challenges with the current scenario India needs to look beyond coal to ensure its energy security Issues with expanding coal based power infrastructure in India

© BRIDGE TO INDIA, Cost trends Cost of power from large scale solar is already at par with imported coal Highlights At the generation side, the cost of solar power for a utility scale project is already at par with the cost of power from imported coal. Solar power will also achieve parity with domestic coal by the year Even though storage is expensive, the cost of power with storage will likely become competitive with the cost of power from imported coal post 2017.

© BRIDGE TO INDIA, Scenario definition We have modeled four distinct scenarios for solar capacity addition in India Comparison of four scenarios of 25 GW each Distributed generation Centralized generation: Solar power is unique as it can be deployed in variety of forms ranging from distributed generation (residential & large rooftops) to centralized generation (utility scale & ultra-mega scale projects)

© BRIDGE TO INDIA, Potential for solar installation India can add up to 145 GW of solar over the next 10 years Highlights At 145 GW, solar could contribute about 13% to India’s power generation in Most grid operators today consider 20% of power from intermittent sources like solar acceptable. We believe that the “ceiling” will rise substantially in the next ten years as grids become “smarter”. Therefore, we consider 13% generation from solar plausible. The 144 GW would be distributed across different grid- connected system types (“bees” to “elephants”). Distributed generation Centralized generation Total: GW

© BRIDGE TO INDIA, LCOE vs. LCOP Economics of solar power should be evaluated at point of consumption than point of generation Levelized Cost of Energy (LCOE) Cost of evacuation of power T&D charges and losses Commercial losses / theft of power Additional cost of balancing the grid + ++ Landed Cost of Power (LCOP) Cost of land/ rooftop lease + Cost of smart meters/ energy accounting + From the consumer’s (and India’s overall) perspective, what matters more is the LCOP at the point of consumption, rather than the LCOE

© BRIDGE TO INDIA, Cost trends Detailed modeling shows interesting cost trends for each scenario over next 10 years Highlights Unsubsidized LCOE and LCOP in 2015 Unsubsidized LCOE and LCOP in 2024 Large size projects are more cost effective today; however rooftops would witness steeper cost decline over next 10 years. LCOE for rooftops would fall by ~30% whereas that for utility scale by 17%. Gap between LCOP & LCOE is as high as Rs 2.00/unit for utility scale compared to Rs 0.20/ unit for rooftops, highlighting advantage of distributed gen. The gap between LCOP & LCOE would still remain at Rs 1.50 /unit for centralized projects after 10 years.

© BRIDGE TO INDIA, Job creation 6.75 Lakh total jobs can be created if 100 GW is implemented across the four scenarios Highlights Most jobs are created in the small rooftop market, which would see a large number of small installers and a very diverse value chain. Most solar jobs require the regular addition of new capacity to sustain. Jobs in ultra-mega projects will suffer most from project related ebbs and flows. The industry structure will be characterized by fewer (and probably more professional) players, the larger the project size.

© BRIDGE TO INDIA, Speed of deployment Speed of deployment is fastest for small rooftops and slowest for ultra mega projects Highlights For smaller rooftops, smaller size & captive roof space imply quicker deployment of systems that can be built in days. Large rooftops additionally require contractual agreements and thus system can be installed in few months. Utility scale projects need longer time for land acquisition & clearances, hence they can be installed in 6-8 months. Ultra mega projects require a couple of years of time frame for deployment; increased time required for planning, land acquisition, evacuation infrastructure development, financial closure, etc.

© BRIDGE TO INDIA, Implementation challenges Implementation challenges are minimum for utility scale projects due to already developed ecosystem Highlights Financing challenges are a common thread across all 4 scenarios. Small rooftop market is fragmented & disorganized and it needs to become more organized with standardized, ready for installation solutions. Things are broadly in place for utility scale projects as there is a proven track record; large rooftops are gaining pace with net- metering gradually coming in place. For ultra mega projects, the ecosystem needs to be developed esp. for land acquisition & transmission infra development.

© BRIDGE TO INDIA, Way Forward The country should focus on providing broad based support across scenarios Highlights Similar to the diesel gen-set market, solar could become a “default” rather than a “design” market. Mindset of the regulators and policy makers needs to move away from the current school of thought where power gen. happens centrally. Existing regulations and policies need to be re-evaluated, with due importance given to generation being at the point of consumption. Incentives (GBI/ subsidy/ VGF) Setting up of “green funds” and solar/renewable focused NBFCs Financial Single window clearance New substations Setting up of green corridors Weather and demand forecasting Infrastructure Demo projects in public places or government buildings Standards for system quality; Performance monitoring Stakeholder meetings Government backing of contracts to improve bankability Ease of business Regulations for net-metering & smart grids implementation Long term clarity on regulatory & policy provisions Regulation Creating dependable solar policies to encourage investments & easy implementation process While the government should continue to encourage large scale projects to add to the power generation capacity in the country, a much larger emphasis should be given to rooftop projects which will lead to a more organic growth of the sector.

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