POWER May 2014 - 57

RENEWABLES
Biggest Renewables
Developers
With an investment of around $1 billion,
CLP India is the largest investor
in India's wind sector, having built up
a portfolio of 12 wind farms of a cumulative
capacity of 1,051 MW. It will
be investing an additional $1 billion to
$1.2 billion to raise the total capacity
to 2,000 MW by the end of 2016.
Tata Power Solar is a fully owned subsidiary
of Tata Power Ltd., India's largest
private sector power utility, with
a gross generation capacity of 8,521
MW. Of this, hydro, wind, and solar account
for 1,112 MW, a 13.1% share that
is proposed to be extended to 20% to
25% from a mix of clean power sources
like hydro, solar, wind, geothermal, and
waste gas generation.
believes that India is entering the next phase of
renewable power development, where installations
will pick up mainly on economic considerations
and not on incentives. " Strict RPO
compliance will further help the industry, " he
says. " However, wind power prices need to be
discovered through competitive bidding, like
it is done in solar, to discover true prices and
help increase targets. " For wind, there is no
competitive bidding involved, and developers
are free to install projects with the feed-in
tariff (FIT) or RE certification (REC) route
as long as the utilities are willing to buy that
power to meet their RPOs. For solar, most
states and the central process select projects
on the basis of competitive bidding for a predecided
capacity.
Fund-raising too has become easier for
both wind and solar. Financing had been a
problem during the first phase of bidding
under JNNSM in 2012, but with the country
having since seen fair capacity additions, financial
institutions have been more open to
funding if the project developers have sound
basics (see sidebar).
Kumar maintains, however, that though
the GBI has been reinstated, investments
are still not very forthcoming, as there is no
clarity on issues such as value, subsidy cap
per MW, depreciation rate and term period,
and maximum capacity for which the benefit
is available. RPO enforcement too remains
weak, he says. Lenders may now stop funding
projects taking the REC route, unless the
situation is rectified.
Makhija says that apart from the GBI and
AD imbroglio, it has also been over five years
since a National Action Plan on Climate
May 2014 | POWER
Change document was released. Other setbacks,
according to him, have been the mandatory
forecasting for projects, with severe
penalty for deviation from scheduled generation,
increased credit risk due to delayed
payments by state distribution companies,
lower-than-expected increase in FITs in some
states, severely capacity-limited transmission
lines, and the steep rupee depreciation that
has affected foreign currency borrowings and
cost of turbines using imported components
and raw material.
Moving with FITs and Starts
An RPO is a measure to mandate renewable
procurement by state electricity boards
(SEBs), open access consumers, and captive
plants, coupled with FITs. CSE mentions
that, while most states introduced their own
RPO targets in 2010, none of them abided
by them. States with insufficient renewable
resources face difficulty in meeting their
RPO targets. For instance, Rajasthan reduced
its target from 8.5% to 6%. But Tamil Nadu
reduced its target from 14% to 9%, despite
drawing 9.5% of its electricity from renewables.
CSE urges guidelines for states to fix
their RPOs, as currently, different states have
different rules of thumb on this issue.
Long-term FIT orders have been issued
by SERCs to ensure financial obligations of
RE developers, as a FIT is the world's most
successful policy mechanism for stimulating
the rapid development of renewables. India's
FIT was introduced in 1995 when the Ministry
of Non-conventional Energy Sources,
the precursor of MNRE, specified uniform
FIT of Rs2.25 (3.63 cents)/kWh, with an escalation
of 5% per year for all types of RE
sources. The National Tariff Policy empowers
SERCs to determine preferential tariff for
RE sources after taking into account their potential
and impact on retail tariffs.
The regulation of RECs is notified by the
Central Electricity Regulatory Commission
(CERC), the certificate being a market-based
instrument to promote RE and facilitate the
RPO portfolio by interstate exchange of
RECs. The REC mechanism seeks to address
the mismatch between RE availability
and utilities' requirements to meet their RPO
through a national-level market. One REC is
treated as equivalent to 1 MWh.
Ajay Goel, CEO of Bangalore-based Tata
Power Solar, says that solar projects, starting
from JNNSM Phase I, have been auctioned
via a reverse bidding mechanism (companies
selected on the basis of quoting the lowest
FIT), rather than a predictable FIT that is
used all over the world and in India for wind
energy projects. " Reverse bidding mechanisms
have gained popularity even at the state
level, with some notable exceptions, " he indiwww.powermag.com
Table
3. Installed solar PV capacities
(GW). Values are approximate. Source:
Sterling & Wilson
Country
Germany
China
U.S.
Spain
India
PV capacity
36
20
11-12
6-7
2
cates. " For instance, Gujarat's solar program
was funded through a FIT mechanism and is
considered by many as the most successful to
date, and incentive systems should hence be
made predictable for solar projects through
FIT at both the central and state levels. "
Renewable Industry Growth
Scenario
Venkataraman Rajaraman, director of infrastructure
and project finance at Chennaibased
India Ratings & Research (a Fitch
Group company), says India has pushed
ahead relatively successfully on RE. Most
global original equipment manufacturers
have set up manufacturing units in India, and
land has not been a major constraint, as the
different states help in its acquisition. But he
says the sector is constrained by high costs of
importing capital equipment, which is heavily
debt funded. " Many developers have not
hedged these exposures, thus exposing them
to the vulnerability of exchange and interest
rates, " he says. " Universally, solar power is
expensive and unviable but for policy support
from the governments, and availability
of debt too is generally more difficult than for
other renewables. "
Ramesh Kymal, chairman and managing
director of Gamesa India, the subsidiary of
Spain's Gamesa Corporación Tecnológica
SA, believes that boosting wind power can
have a huge macroeconomic impact as it can
reduce India's foreign exchange burden by
offsetting the high cost fuel imports. " Wind
power is already competitive with new conventional
power in some states and may become
further competitive on issues like fuel
availability and the incremental cost of imported
fuel, " he explains. " In recent years,
wind PLF has risen to 25% to 30%, primarily
due to the new-generation large-capacity
turbines and efficient wind park management
strategies. "
He says that though constraints like land
availability and grid infrastructure are more
or less universal for wind, a comprehensive
long-term policy framework in Europe ensures
a common grid on the continent to be
shared by power deficit and surplus countries.
" The availability of attractive finance
57
http://www.powermag.com
POWER May 2014

Table of Contents for the Digital Edition of POWER May 2014
