Astonfield Renewable Resources, Ltd. Oral Hearing : Draft Regulations for Renewable Energy J l July 2009 2009 Note: The information contained here-in is Astonfield Renewable Astonfield Renewable Resources Ltd. Resources Ltd. proprietary and confidential. Any unauthorized An Astonfield An Astonfield reproduction or distribution is forbidden. Group Company Group Company 0
Draft Norms for Renewable Energy D ft N f R bl E Proposed regulations on determination of tariff for renewable energy p g gy � provides an enabling framework to all the stakeholders � Clarity to developers on the expected returns from the projects � Line of sight on tariff related aspects to make up-front investments in the sector � Pushes manufacturers to aggressively lower costs gg y � The regulations provide a guiding path which will be hopefully followed by the SERCs while declaring state-specific tariffs for renewable energy � With solar guidelines in particular, CERC’s stated guidelines sufficient to allow for execution of initial grid connected projects in late 2009 and 2010 1
Draft Norms for Renewable Energy: Solar PV D ft N f R bl E S l PV � Concept of Feed In Tariff incentivizes the Developer to � Concept of Feed In Tariff incentivizes the Developer to Clause 2 (s-a), Solar Clause 2 (s a) Solar choose the most reliable technology PV power plant, � Gestation period for Solar PV projects is typically in the range technology as of 6-8 months approved by MNRE 1. National Solar tariff � Execution can be expedited p determination Standards determination Standards � In view of performance guarantees offered by � In view of performance guarantees offered by Clause 6, Tariff period manufacturers of solar panels, tariff period / useful life of of 25 years 25 years is warranted and appropriate � SERC adoption of 25-year tariff period and translation into PPA terms will be critical component asked for by financiers PPA terms will be critical component asked for by financiers 2
Solar PV can Achieve Peak Grid Parity as early as 2013 PHASE I PHASE II (Govt Policy (Post Govt Policy, Market very important) Forces take effect) 7% 6% 5% 4% Convergence / India – Estimated price Peak Grid Parity of peak electricity today: Rs. 6.50/KWh � India can substitute expensive sources such as diesel with solar to meet growing peak power demand * * � Astonfield estimates that base load grid parity can be achieved by 2020-23 - beyond that point, abundantly available A t fi ld ti t th t b l d id it b hi d b 2020 23 b d th t i t b d tl il bl domestic solar power will be cheaper than imported coal generated power, positioning India to be energy independent * Assumes that conventional power tariff escalates at roughly 5-7% per annum Source: Stephen O’Rourke/Deutsche Bank / Astonfield Analysis 3
Draft Norms for Renewable Energy: Solar PV D ft N f R bl E S l PV � Prescribed norm is aggressive, especially in view of the p prevailing benchmark prices as quoted by suppliers g p q y pp � Quoted capital cost numbers for tariff petitions in Rajasthan : Clause 57, Capital Party 1 : Rs 2140 L / mw cost : Normative 1. National Solar tariff Party 2 & 3 : Rs 2115 L / mw capital cost of Rs determination Standards Party 4 : Rs 2006 L / mw Party 4 : Rs 2006 L / mw 1800 L / mw for FY 1800 L / mw for FY � However, given manufacturers desire to supply to the Indian 2009 – 10 solar market, such a guideline could drive them to accept reduced margins � Multi-year guidelines could be effective in laying out cost curve expected from manufacturers t d f f t � CUF and the corresponding PLF is highly dependent on the solar insolation levels (which can vary from 5 kwh / sqm/day to 6 kwh / insolation levels (which can vary from 5 kwh / sqm/day to 6 kwh / Clause 62, Capacity Clause 62 Capacity sqm / day Utilization Factor : � Corresponding PLF shall be 16.67% to 19% (with Gross output 19% varying from 1.46 Mus to 1.75 Mus p.a.) � For regions whose insolation imply CUF less than 19%, further downward pressure will be placed on installed cost to achieve commercial viability 4
Solar RPPOs: Critical to Ensure Visibility of Solar Sector Growth to Attract Up-Front Investment S t G th t Att t U F t I t t The rationale for Solar RPPO Available Benchmarks � Demand is generated by State Global Experience DISCOMs – in the absence of solar EU : 20/20/20 (20% cut in emission norms, energy procurement targets, they will gy p g , y 20% renewable energy portfolio 20% cut in 20% renewable energy portfolio, 20% cut in tend to opt for cheaper renewable power energy consumption by 2020) sources Germany : solar accounts for 4% of renewable portfolio � In addition to targets, there must also be penalties on DISCOMs that fail to achieve these targets Indian Experience Gujarat : Solar specific RPPO ( 1.5% in 2009, � Path to Grid Parity is dependent on increasing to 2.5% by 2011) creating visibility through RPPO to build creating visibility through RPPO to build manufacturer and developer confidence in economies of scale CERC can play a critical role in guiding the SERCs to declare solar- specific RPPO targets 5
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