B.V. Rao GM,IREDA 21 st September 2010, Hotel Lalit, New Delhi Conference on Solar Energy Institutional Finance for Solar Projects

JNNSM- Mission Objectives To establish India as a global leader in solar energy, by creating the policy conditions for its diffusion across the country. Mission anticipates achieving grid parity by 2022 and parity will coal based thermal power by To adopt a 3-phase approach from 2010 to Aim of the mission is to focus on setting up an enabling environment for solar technology both at centralized and decentralized level. Jawaharlal Nehru National Solar Mission has been launched under the National action Plan on Climate Change with an objective:

Mission Targets Application SegmentPhase - IPhase-IIPhase- III Utility grid power1,000-2,000 MW ,000 MW20,000 MW Off- grid Applications200 MW1,000 MW2,000 MW Solar Thermal Collectors Area 7 million Sqm15 million Sqm20 million Sqm Manufacturing Base-- 4,000-5,000 MW Solar Lighting Systems million Solar RPO0.25%--3% A 3- phase approach has been formulated

Mission Strategy To create necessary environment to attract industry and project developers for investment in power generation, manufacturing. To work closely with State governments, regulators, power utilities and local self government bodies. To attract banks and financial institutions to provide necessary finance for setting up solar power projects for grid/ off-grid. To promote off-grid solar applications to meet light and power requirements of energy –poor by provision of low cost credit through re-finance facility from IREDA

Policy & Regulatory framework Solar Power Purchase Obligation Solar specific RE Certificates Incentivizing through NTPC Vidyut Vyapar Nigam Ltd. (NVVN) for setting up of large solar power plants. Designated as nodal agency for entering into PPA with Solar Power Developers. MoP allocating equivalent amount of MW to NVVN. Sale of power as per CERC regulations (to provide Generation Based incentive) Rooftop solar PV and other small power plants connected to LT/11 KV grid with a remunerative feed-in tariff ( routed through IREDA)

Fiscal Incentives Custom duties and excise duties concession/ exemptions on Specific capital equipment Critical materials components Project imports

Solar-Manufacturing To establish low cost, high quality manufacturing facility for solar PV with the targets of 4-5 GW by To provide incentives to establish SEZ for solar manufacturing parks. To provide soft loans for technology up gradation and working capital through re-finance facility from IREDA.

Financing the Mission Activities Fund Sources To provide budgetary support for the activities To access International Funds under the UNFCCC framework Fund requirement for Phase II Review of progress achieved at the end of 11 th Plan Analysis of the efficacy of the model adopted

Research and Development To set up a solar research council to guide the overall technology development strategy To establish a national centre of excellence to implement the plans formulated by the council. Main tasks will be testing and certification, developing standards and specifications, networking among different research institutions.

Fund Requirements First stageSecond Stage AGrid Connected Power Plants 1,100 MW20,000 MW Approximately Rs crores Approximately Rs. 3,00,000 crores BOff-Grid Applications 200 MW2,000 MW Rs. 5,000 croresRs crores CSolar Thermal collectors 7 million meter square20 million meter square Rs croresRs. 20,000 crores

Status of Grid Solar Power-I Small Power Plants up to 2 MW Projects for 120 MW shortlisted. Projects up to 100 MW capacity where PPA signed and registered with IREDA, are finalized. Compliance to technical standards mandatory. GBI will be given to DISCOMs on reimbursement basis.

Status of Grid Solar Power-II Power Plants above 5 MW capacity 1,000 MW Capacity allocation between SPV and ST to be 50:50 by NVVN. 84 MW capacity projects (54 PV & 30 Thermal) allocated under Migration Selection of PV projects to be done in two batches. First Batch in 2010 and limited to 150 MWp. Second batch next year of approximately 300 MWp Solar Thermal : selection for 470 MW to be done in 2010.

Funding of Off-grid Solar Applications (SPV and ST) 200 MW capacity in the first phase Demand driven expansion SPV 30% subsidy & 5% for individuals & non commercial 30% subsidy OR 5% for commercial SPV 30% subsidy & 5% for individuals, non commercial & commercial 90% subsidy for Government projects in special category States and in other remote and difficult areas

Channelization of Funds for Off-grid Solar Applications Funding under scheme – Project mode. Directly by MNRE (approved by PAC) Scheduled commercial banks, NBFCs, FIs such as NABARD, NHB, SIDBI, IREDA etc. Additional channels for supply and maintenance (RESCOs, Financial Integrators, System Integrators, MFIs, Government agencies etc.)

Channelization of Funds for Off-grid Solar Applications Accreditation Performance Monitoring Refinancing MoU signed by IREDA with NABARD, NHB and Central Bank of India.

About IREDA Objective Extend financial support to Renewable Energy, Energy Efficiency & Conservation projects. Sectors being financed: Wind Small & Medium Hydro Biomass Power & Cogeneration Solar Waste to Energy EE & Conservation Bio Fuels/ Alternate Fuels Other Activities Intermediary for providing financing facilities for various MNRE Schemes. Implementing Agency for GBI Scheme – Wind & Solar

Financing Schemes Quantum of Assistance - Upto 70% of Project Cost Rate of Interest % to 12.25% Repayment Period - Upto 13 Years

Financing terms for different sectors SectorInterest Rate range (%) p.a. Maximum Repayment period (years) Small Hydro (up to 25 MW)11.50% to 12.15%10 Hydro above 25 MW11.50% to 12.15%15 Wind Energy10.50% to 11.40%10 Biomass Co-generation10.50% to 11.40%10 Biomass Power Generation10.50% to 11.40%10 Solar PV/ Solar Thermal Grid connected Power Projects 10.75% to 11.75%10 Energy Conservation10.25% to 12.25%10 Energy Efficiency Projects10.25% to 12.25%8 Waste to Energy12.25%10

Cumulative Performance No of Projects Sanctioned: 1921 Projects Total Loan Sanctions: Rs Mn Loan Disbursements: Rs Mn Sanctioned Power Capacity: 4378 MW Commissioned Capacity: 2173 MW Conventional Fuel Replacement:1.3 M MTCR/Yr As on

Role of IREDA under JNNSM Type of systemRole of IREDA Grid connected power projects Financing of Projects Small solar power projects and roof top systems Financing of Projects Generation Based Incentive Monitoring Off- grid applications Soft loans through banks by re-financing Monitoring of the systems Solar thermal sector- SWHS Administration of Interest subsidy scheme through banks / financial institutions Funding of projects Funding through intermediaries Solar Manufacturing Soft loans Working capital Re-financing facility as per MNRE

Risk Factors perceived by FIs For Financing Solar Power Projects Regulatory Risk Fixing of the tariff and assurance on the power sale agreement Technology RiskTechnology yet to be proven on the ground Implementation Risk Uncertainties in the implementation of the project as per schedule Infrastructure RiskInadequate evacuation facility and clearances on land and other statutory clearances. Repayment RiskNon assurance of repayment from the utilities may result in repayment risk to the developers/ FIs. Political RiskChanges in fixing of unallocated power with respect to change in political system. Policy RiskAssurance of long term policy with greater accuracy and uncertainties in development of the solar sector.

Risk Factors perceived by FIs For Financing Solar Power Projects Financial Risk In time financial closure by the project developer. High project cost - funding from single source. Raising of equity Guarantee and Warranty Risk Availability of long term guarantee and warranty from the technology providers for the new technology.

Suggested Measures for Risk Mitigation Advocation for long term / stable/ consistent policies at central / state level- to honor PPAs and MoUs. Proper Resource assessment studies. Provision of Risk Guarantee Fund. Importance of timely clearances / approvals for solar projects. To create special single window clearance cell at state level.

Suggested Measures for Risk Mitigation To take advance actions to avoid delay of deliveries. To increase manufacturing capacity for indegenious cells/ modules. To establish a mechanism to have information exchange between various FIs and banks for co-financing or consortium financing. Detailed site survey reports to be undertaken through professional bodies to maximize performance efficiencies. To establish more training institutions for producing skilled manpower.

Suggested Measures for Risk Mitigation Concurrent monitoring of projects by FIs - appointment of lenders engineers. Periodic inspection / monitoring of projects even after implementation. (TRA and Generation data) Innovative financing models by accessing low cost funds from international institutions.

Thank you Indian Renewable Energy Development Agency Limited