Partnership to Advance Clean Energy - Deployment (PACE-D) TA Program The Solar Rooftop Evaluation Tool 09 th September, 2015 Presented at the Workshop for the Launch of the Solar Rooftop Evaluation Tool Mumbai, India Presented by The USAID PACE-D TA Program
Contents • Solar Rooftop Business Models • Key Challenges in Financing Solar Rooftop Projects • Techno-commercial challenges • Risks • The Solar Rooftop Evaluation Tool for Banks • Key Features of the Tool • The Working of the SRET • Feedback
Solar Rooftop Business Models
Solar PV implementation across the globe has followed two routes – large scale centralized generation or smaller scale distributed generation Solar Rooftop
Solar rooftop space has seen a number of models emerge – basically based on ownership, metering and types of rooftops
Challenges in Financing Solar Rooftop Projects
However the emergence of these business models and the vibrancy in the solar rooftop market across the globe has been due to a facilitative policy and regulatory framework and access to financing • Germany – global leader – solar and rooftop solar Germany launched the 100,000 rooftop program in 1999 to bring about market transformation The program provided provision of ten-year loans under the program along with attractive feed-in-tariffs Created appropriate market pull desired by policy makers • United States – the most vibrant solar market across the globe has been one of the most innovative in financing Sale/ lease/ buyback structures Flip structures Solar securitization
However financing still remains one of the most significant challenges for the solar rooftop sector to scale – due to limited awareness, emerging business models, lack of trained manpower & higher perceived risks associated with the sector Key challenges confronting financing of solar rooftop projects in India • Role of utility/ electrical • Interconnection inspector – timelines process Role of varied stakeholders • Standards & Understanding of the starting from rooftop • Open access emerging policy and Certifications owners to developers and charges regulatory scenario • Empanelment of the utility • Infrastructure up inverter/ meter gradation? manufacturers Low ticket sizes, high transaction costs, limited market size & capacity amongst FIs & banks • Site related risks • Grid availability • Lack of clarity on Varied risks - development risks business models Clear understanding of and operational stage/ new and emerging • Contract • Rooftop leasing understanding of risk business models • Utility based sanctity & host mitigation strategies business models credit-quality
Introducing The SOLAR ROOFTOP EVALUATION TOOL (SRET) 9
The Solar Rooftop Evaluation Tool aims to address challenges faced by banks/ FIs in evaluating solar rooftop projects using a framework for mapping technical, commercial parameters as well as risks for informed decision making on financing • Provides a techno-commercial framework to evaluate viability of solar rooftop projects • Maps key risks and establishes whether appropriate risk mitigation Objectives methodologies have been followed • Assists FIs and banks to arrive at an informed decision on financing commercial and industrial rooftop projects • Focus on commercial and industrial solar rooftop projects especially design and structure of these projects • Can be customized for evaluation of any solar rooftop project (residential/ What can clusters/ portfolio - third party or self owned self consumption projects the tool do • Outlines a risk sharing matrix with focus on specific mitigation strategies & how can • Incorporates existing and applicable policies, regulations and business models. it be used • Flexible which allows for changes in regulations, policies, business models and financial guidelines. • Designed for FIs & banks, but will benefit developers & rooftop owners in developing viable rooftop projects
The Solar Rooftop Evaluation Tool (SRET) works by first evaluating broad eligibility, followed by techno-commercial viability and finally risk assessment The SRET uses three stages for establishing the viability of Solar Rooftop Projects: 1. Screens the eligibility of the rooftop project based on a qualitative checklist 2. Captures and evaluates the technical and commercial parameters of the project 3. Assess the risks and conditions proposed for lending Step 2: Techno-commercial Step 3: Risk Assessment and Step 1: Evaluating Eligibility Assessment Financial Appraisal • Objective: Establish broad • Objective: Analyze techno- • Objective: Analyzes risks & viability by assessing key commercial viability of financiability of the project/s risks project with basis for a Go/ No Go • Qualitative checklist – • Focus on demand analysis, decision analysis critical technical architecture & • Maps key risks associated shortcomings which impact risks, costing & financing with the project, evaluates viability • Utilizes technical & whether appropriate • Utilizes key technical, commercial inputs from mitigation strategies commercial & regulatory applicant & lenders adopted parameters engineer 11
The Solar Rooftop Evaluation Tool (SRET) layout shows the three stage/ sub-stages as well as the source of inputs for analysing the rooftop project Components/Forms Flow Inputs Consumption Stage 1 Relationship Net and Gross Metering Establishing Eligibility Manager Profile of Roof Solar plant design Stage 2 Solar elec. gen. and consumption Applicant & Operation and Maintenance Lender’s Techno-commercial Electricity Cost Engineer Assessment PPA Tariff Project and operation cost Term Loan Electricity Cost (Officer) Stage 3 PPA tariff (Officer) Lender’s Risk Assessment Engineer Term Loan (Officer) and and Banker Financial appraisal Risk Matrix Detail list of Contractual Risk 12
RESCO MODEL Third Party Based Business Model – Net Metering
Business Models & Their Variations covered by the SRET 14
SRET formats use specific navigation buttons and protocols Tool name and version Heading of the form Subheadings in the form Legends Navigation Links Navigation 15 buttons
Stage 1- Establishing Eligibility 16
Stage 1- Establishing Eligibility (1) • Stage 1 screens projects using a qualitative check list. • Based on screening, the financer can decide whether to go ahead with some changes/ suggest deferment or reject the project. Arrangement Name of the applicant X Lists all states - automatically takes Proposed Solar Capacity in kW (AC- total Inverter Rating) 450 applicable state‘s regulations State in which the project is located Andhra Pradesh Nature of the applicant RESCO Three parameters define arrangement / Purchaser of solar energy produced from rooftop business model: project Consumer 1. Nature of Applicant: Metering arrangements Net Metering RESCO/Consumer/Third party (Building Category of the electricity consumer Commercial Name of the distribution utility the project will be owner or Manager) connected Y 2. Buyer of Solar energy: Has the utility defined an interconnection process? Yes Consumer/Utility Stage of Project development Vendor identified 3. Metering: Net/ Gross Metering/Self consumption Category of electricity consumer - Industrial and Commercial. Establishing Eligibility 17
Stage 1- Establishing Eligibility (2) Ownership of the roof Owner of the roof Third Party Availability of the Roof for Name of owner of roof solar project during loan Tenure of lease agreement (Remaining) between consumer and rooftop owner 9 repayment tenure. Is lease further extendendable (after the end of the remaining tenure) Yes For how many years the lease agreement is extendable? (in Years) Is the No Objection Certificate available from the rooftop owner? Yes Power Purchase Agreement PPA signed by the electricity consumer? Yes PPA tenure vis a Tenure of PPA? 25 vis loan tenure Features of the roof New buildings coming up around creating shadow effect? Yes Any new buildings likely to come up in near future? Yes 9 What is the remaining age of the roof? Adequacy of the access to the rooftop for installation and operation? No Yes Roof access - limited or open for public? Risks with rooftop - Availability of synchronizing voltage Shadows/ structural Grid availability (uptime percentage) 94% integrity/ remaining age of Average downtime of grid during daytime the roof/ Access to the roof No Alternate source of synchronizing voltage (DG set or battery bank with inverter)? Findings based on which the bank will decide Go / no Go • Life of building / roof lease /PPA tenure less than loan tenure • Possible loss of generation due to outages • Grid uptime not adequate 18 Establishing Eligibility
Stage 2- Techno-Commercial Assessment Consumption Net and Gross Metering Profile of Roof Solar plant design Solar elec. gen. and consumption Operation and Maintenance Electricity Cost PPA Tariff Project and operation cost Term Loan 19
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