INDIA

SOLAR
HANDBOOK
2016
Including our first
INDIA SOLAR
CEO SURVEY

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BRIDGE TO INDIA, 2016

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About BRIDGE TO INDIA
BRIDGE TO INDIA is the leading consulting and knowledge services provider
in the Indian cleantech market. Our multi-functional experience expertise
combined with comprehensive in-house research capability enables us to
develop insightful and highly sought-after industry analyses. Our overarching
goal is to provide customised cleantech solutions and enable innovative
business models in India.

We work actively with all leading stakeholders including project developers and
investors, energy customers, equipment suppliers, regulators, policy makers
and development institutions. We have also helped a number of international
top-tier cleantech companies in growing their business footprint in India by
providing them with strategic advice, business planning, risk assessment and
JV partner selection services.

Our services

BRIDGE TO INDIA, 2016 6

 Introduction
Indian solar market in full bloom but financing poses a
key challenge

India is all set to become the fourth largest solar market globally in 2016
behind only China, USA and Japan with 5.4 GW of expected capacity addition in
the year. The tailwinds are exceptionally strong with rapidly falling costs and
greater environmental agenda in the post COP21 world.

35 new tenders The Indian solar market appears in full bloom right now with key policy
with a cumulative changes being introduced and 25 GW of projects under different stages of
development. 35 new tenders with a cumulative capacity of 15.5 GW have been
capacity of 15.5 GW
announced in the last year. An additional 5 GW of new tenders are awaiting
have been announced release in the coming months. There is burgeoning investment interest both
in the last year from Indian and international developers in the sector. This frenetic pace
of activity is a big step-up in contrast to historic solar capacity addition of
approximately 1 GW per annum for three straight years until 2014. But does the
sector have sufficient financial capacity to deliver all these projects?

The most buzzing topic for the sector right now is the intense competition with
tariffs coming down sharply to M4.34-5.00/ unit ($0.07-0.08) levels. But with
many developers struggling to raise capital and banks seemingly reluctant to
lend to projects at such tariffs, progress in 2017 and 2018 is not likely to be as
fast as expected. In contrast to Ministry of New and Renewable Energy (MNRE)
target of 12 GW of utility scale solar projects for FY 2016-17, BRIDGE TO INDIA
estimates that actual capacity addition will be only about 5-6 GW in FY 2016-17.

Other key theme in our view is the likely growth trajectory for the sector over
the 3-5 year horizon. The central government has taken early lead through
National Thermal Power Corporation (NTPC) and Solar Energy Corporation of
India (SECI) in releasing project tenders of more than 9 GW as of April, 2016.
The southern states have also shown huge interest in solar power to overcome
their growing power deficit. But with power demand showing slow growth and
grid stability issues growing more important over time particularly in areas of
high renewable penetration, we expect a slowdown in the sector after 2017 and
2018.

Ensuring On the policy front, the Solar Parks Policy and UDAY scheme have been
grid robustness and hailed largely as a successes but the broader sector policy reform through
amendments in the Electricity Act 2003 is still awaiting parliamentary approval.
investment/lending
Going forward, ensuring grid robustness and investment/lending appetite at
appetite at aggressive aggressive tariff levels will be the two main challenges. Policy interventions to
tariff levels will be the address these challenges together with demand growth measures will be key
two main challenges to sustainable growth of the sector.

One major disappointment continues to be the rooftop solar market where the
40 GW target for 2022 seems like a very remote prospect. This market needs
more focused policy support to ensure effective net-metering implementation
and attraction of financial investors. Overall, the growth prospects for the India
solar market are very bright providing an immense opportunity for investors,
developers and equipment suppliers. But a dose of caution is needed as the
market will remain very price sensitive and with its share of challenges.

BRIDGE TO INDIA, 2016 7

International perspective
Global overview: Asian countries emerge as solar leaders

Globally, new solar capacity addition grew to 50 GW in 2015, y-o-y growth

of 25%. Asian countries led by China and Japan dominated the global solar
landscape, representing about 59% of the global PV market in 2015. India
added more than 2 GW capacity in 2015 to reach a cumulative capacity of 5.6
GW by the end of the year. This allowed India to rise to the eighth position for
total installed capacity repetition as of December 31, 2015.

Solar market in the Americas also continued to grow with the USA, Canada
and Chile leading the pace but Europe, which had previously led the way for the
solar industry globally, has seen growth stall in recent times because of the
pull back of the FiTs.

Figure 1: Cumulative installed solar capacity as of

December 31, 2015 (GW)1

In 2016, about 65 GW of solar capacity is expected to be added globally. Asian

countries including China, Japan and India are expected to be in the top five
countries. China is expected to continue leading the global PV market while
USA is set to overtake Japan as the second largest solar market, exceeding the
much-anticipated 10-GW mark.

India is expected to be at the fourth position leaving behind the major European
solar markets (UK, Germany and France) with expected new capacity addition
of 5.6 GW in 2016.

----------
1 Source: IEA PVPS, Snapshot 2015 of Global PV markets; India nos. estimated by BRIDGE TO INDIA

BRIDGE TO INDIA, 2016 8

 Figure 2: India to add >5 GW of solar capacity in 20162

----------
2 Source: GTM Research, BRIDGE TO INDIA

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Add-RPI-M80A
 Utility scale solar
Installed capacity
Figure 3: India has installed 6.6 GW of utility scale solar 2,687

as of March 31, 2016

2,263

Discom Rating
Calculated based on profit/ loss
of DISCOM as % of state GDP 200
1,291
Source: BRIDGE TO INDIA research

636 24
Haryana
OP WIP

2,254

5 200
Delhi
367 OP 1,200
1,105 595

Uttarakhand 5
700 OP WIP

Punjab 125
OP WIP

Bihar 5
122
OP WIP
767 780
Uttar Pradesh
OP WIP

10
Assam
WIP
Rajasthan 5 1,191
OP WIP Tripura
OP

48 West Bengal 7
Gujarat OP 433
OP WIP 18
Jharkhand
OP WIP
571
78
Madhya Pradesh
OP WIP Odisha
403 OP
340
5 Daman & Diu Telangana 530
OP WIP
OP

Andhra Pradesh
Maharashtra OP WIP
OP WIP
103
105
13
Andaman &
5
Kerala Chhattisgarh Nicobar Tamil Nadu
Karnataka OP OP OP
OP WIP OP WIP

BRIDGE TO INDIA, 2014 10

 Solar parks
MNRE has approved 33 solar parks in 21 states with 19.9 GW capacity.

Figure 4: Solar parks plan

50 MW, Kashipur
100 MW, Samba
Jammu & Kashmir Uttarakhand 100 MW, Lohit
Arunachal Pradesh
1,000 MW, Spiti Valley
600 MW, Jalaun, Allahabad,
Himachal Pradesh Mirzapur & Kanpur
Uttar Pradesh 60 MW
500 MW, Hisar, Bhiwani, Nagaland
Mahendergarh
Haryana 69 MW, Amguri, Sibsagar
Assam
Rajasthan
3,251 MW, Bhadla,
Jaisalmer, Jodhpur

Madhya Pradesh
2,750 MW, Rewa, Shajapur,
Morena

Gujarat Meghalaya
700 MW, Banaskantha 20 MW, Jaintia

Maharashtra Odisha West Bengal

1,500 MW, Beed, Dhule 1,000 MW 500 MW, Bankura

Chhattisgarh
500 MW
Karnataka
2,000 MW, Tumkur
Telangana
500 MW, Mehboobnagar

Andhra Pradesh
Kerala 4,000 MW, Anantpuramu, Kurnool,
Kadapa, Anantpur
200 MW, Kasargode

Tamil Nadu
500 MW, Ramanathapuram

Source: SECI, BRIDGE TO INDIA research

BRIDGE TO INDIA, 2016 11

Types of policy based projects in India
Figure 5: India has multiple types of utility scale solar
projects with several off-takers and processes

*Pipeline includes projects under construction, PPAs signed and open tenders
Source: BRIDGE TO INDIA analysis

BRIDGE TO INDIA, 2016 12

Project development landscape
As the Indian solar market grows and project sizes increase, international
utilities and IPPs with strong balance sheets and lower cost of capital are likely
to play a greater role. We have already witnessed this trend growing over the
last one year.

Figure 6: Role of international developers and utilities

has been increasing in the Indian solar market

Commissioned projects (>10 MW) as of March 31, 2016

Projects under development (>10 MW) as of March 31, 2016

Source: BRIDGE TO INDIA analysis

BRIDGE TO INDIA, 2016 13

Figure 7: Pipeline of top 10 private project developers in
India, MW

Source: BRIDGE TO INDIA analysis

BRIDGE TO INDIA, 2016 14

Recent auctions
Figure 8: Solar tariffs have fallen by almost 33% in India
in last two years

BRIDGE TO INDIA, 2014 15

Market projections
Figure 9: BRIDGE TO INDIA expects 37 GW of cumulative
utility scale capacity addition in India until 2020

Figure 10: Capacity breakup by project category,

by 2020 (%)

Source: BRIDGE TO INDIA projections

BRIDGE TO INDIA, 2016 16

 Rooftop solar
Installed capacity
Figure 11: India has installed 740 MW of rooftop solar
capacity as of March 31, 2016

55

9.1
13 Jammu & 43.4
Kashmir
Chandigarh 12

Uttarakhand
Punjab 32
35 Uttar Pradesh
62.6 44.4

16
10.5
Delhi
Haryana Bihar Jharkhand
12
62.3 Rajasthan
West Bengal
Gujarat 30
12
16

Madhya Odisha
Pradesh Chhattisgarh
37
Maharashtra
47

Telangana

36 85.4

Karnataka 20.3

19 North east
Andhra states
Pradesh
Kerala
30

Others
Tamil Nadu

BRIDGE TO INDIA, 2016 17

 Policy landscape
The Indian government is offering several tax and financial incentives to
support the rooftop solar market
Capital subsidy: 30% subsidy for residential and institutional consumers
(M50 billion)
Accelerated depreciation: 80% depreciation
Tax holiday: 10 year tax holiday (MAT payable)
Low cost funding: $1.5 billion funding from World Bank, ADB and KFW

Table 1: Overview of state net metering guidelines

State Policy scope Individual system Grid Excess Eligibility

size limit penetration electricity sale
% of price
distribution
transformer
capacity

Andhra Pradesh Upto 1 MWp 100% of annual Not APPC All consumers
consumption mentioned

Assam 1kWp to 40% of contracted Not APPC All consumers

1MWp load mentioned

Bihar (Draft) Upto 1 MWp 90% of annual 15% Not mentioned Not mentioned
consumption

Chhattisgarh 50 kWp to 49% of annual Not 50% of regulated Not mentioned

1 MWp net generation mentioned solar tariff

Delhi >1 kWP 100% of contracted 20% APPC All consumers

load

Goa and UTs 1 kWp to Not mentioned 30% As per regulated All consumers
500 kWp solar tariff

Gujarat Not Mentioned 50% of contracted Not APPC/ 85% of All consumers
load mentioned APPC for REC
projects

Haryana 1kWp to 90% of annual 15% All consumers

1 MWp consumption

Himachal 1 kW to 80% of contracted 30% M5.00/ unit All consumers

Pradesh 5 MW load

Karnataka Upto 1 MWp Not mentioned 80% M9.56/ kWh All consumers
(without subsidy),
M7.20/ kWh
(with 30%
subsidy)*

BRIDGE TO INDIA, 2016 18

 State Policy scope Individual system Grid Excess Eligibility
size limit penetration electricity sale
% of price
distribution
transformer
capacity

Kerala 1kWp to 1MWp Not mentioned 50% APPC All consumer

categories, up to
11kV

Madhya Pradesh Up to Not mentioned 15% APPC All consumers

permissible
individual rated
capacity of 112
kW at LT

Maharasthra Upto 1 MWp 100% of contracted 40% APPC All consumers

load

Meghalaya Upto 1 MWp <90% of annual 15% No payment All consumers

consumption

Odisha Not Mentioned <90% of annual 30% No payment All consumers

consumption

Punjab 1kWp to 1MWp <80% of contracted 30% As per retail All consumers
load supply tariff of
the consumer
category

Rajasthan 1 kWp upto <80% of contracted 30% As per regulated All consumers
1MWp load solar tariff

Tamil Nadu Not mentioned <90% of annual 30% No payment All consumers
consumption

Uttar Pradesh >1 kWp 100% of contracted 15% M0.50/ kWh All consumers
load

Uttarakhand Upto 500kWp Not mentioned Not M9.20/kWh (with All consumers
mentioned subsidy)

West Bengal >5 kWp <90% of annual Not APPC Only for
consumption mentioned institutional
consumers

Telangana Not Mentioned Not mentioned Not APPC All consumers

mentioned

Note
APPC - Average pooled purchase cost
* No new PPAs signed under this rate now Source: BRIDGE TO INDIA research

BRIDGE TO INDIA, 2016 19

Market projections
Economic fundamentals for adoption of rooftop solar in India are improving
rapidly. In 2016, the market is expected to add a capacity similar to the
entire capacity added in India till date. The market is expected to grow at
compounded annual growth rate of 58% per annum.

Figure 12: 6.8 GW of new rooftop solar capacity addition is

expected in India between 2016 and 2020

Source: BRIDGE TO INDIA projections

BRIDGE TO INDIA, 2016 20

Survey sponsor

India Solar CEO Survey

 Our first pulse check of the state of
the Indian solar market
It is a great pleasure to announce the results of our first Solar CEO survey.

The purpose of this survey, coming at a critical time in the evolution of India's
solar sector, was to seek honest, critical opinion of senior corporate leaders
and get their perception of the opportunities and challenges facing the
industry. Are we on the right track? Where might we be falling short and what
does the government need to do differently? How do different parts of the
sector government policy projects, rooftop and open access compare?

The survey has got excellent response from both Indian and multinational
companies across the sector value chain:
Project developers EPC contractors Equipment
manufacturers
Aditya Birla Enerparc Energy Delta Power
First Solar Jakson Engineers DuPont
Fortum India Juwi India Renewable EMMVEE Photovoltaic
Hero Future Energies L&T First Solar
Jakson Engineers Mahindra Susten Ganges Internationale
Mahindra Susten Moser Baer Solar Hitachi Hi-Rel Power
Mytrah Energy Sterling and Wilson Jakson Engineers
Rattan India Solar SunSource Energy SMA
Sky Power Ujaas Energy SNS Corporation
SunEdison Vikram Solar Vikram Solar
Rays Experts Moser Baer Solar
Refex Energy

While some findings seem obvious, there are many insightful results and some
clear warning signs for the government. Key findings are summarized below:
1. The industry is very buoyant about sector growth prospects but the 100 GW
target still seems too ambitious with key challenges expected to be grid
stability and financing.
2. There is genuine concern about bankability of SECI as an offtaker. Unless
SECI gets capitalized adequately, it is seen merely as an intermediate layer
between the developer and ultimate offtaker ie DISCOM.
3. The rooftop sector needs much stronger push as the consensus
estimate for total rooftop capacity addition by 2022 is only 10-11 GW,
significantly below the governments 40 GW target. Key challenges here
are ineffective net metering policy framework and lack of more attractive
debt financing solutions.
4. The industry is generally positive about the prospects of domestic
Notes:
1. Some company names are shown
manufacturing and India is expected to have an annual cell-module
more than once in this table manufacturing capacity of 5 GW by 2022.
depending on their business activity.
2. For multinational companies, the
survey has been completed by the We propose to conduct further relevant surveys in the near future and welcome
respective head of Indian solar all feedback.
business.

BRIDGE TO INDIA, 2016 23
 Market growth and challenges
Solar capacity addition by 2022
As per the survey participants,
India is expected to add a total
of 57 GW solar capacity by
2022, substantially below the
government target of 100 GW.

Rooftop solar capacity addition by 2022

Capacity addition in the rooftop
and open access markets is
expected to be <10 GW and < 5
GW respectively by majority of
participants, again substantially
below government targets.
This should be an alarm call
particularly for the government
and all policy makers. Most
of government focus so far
has been on large policy
driven, ground based projects
whereas the biggest benefit of
solar power lies in distributed
generation and market driven
solutions.

Open access solar capacity addition by 2022

BRIDGE TO INDIA, 2016 24

 Business growth by 2020
There is huge optimism in
the sector. The participants
believe that their individual
solar businesses will grow
by an average of 3-5x by 2022
with about 37% of participants
believing that their business will
grow by more than 10x in this
period.

Biggest challenge for 100 GW by 2022

We asked the participants to
select the biggest challenge
for India to achieve the 100 GW
target as well as to share their
view on availability of key inputs
for the sector. The three top
challenges identified are grid
integration, lack of FiTs and
poor operating environment (ie
general day-to-day difficulty in
doing business).

Inputs for achieving 100 GW target

In terms of availability of key
inputs that go into solar project
development, the industry
is most concerned about
transmission connectivity/
grid failure, debt financing and
INR depreciation risk. Land
availability concerns seem
to have relatively come down
perhaps because of proactive
government moves on solar park
development.

BRIDGE TO INDIA, 2016 25

 Central government rating
Rating of central government initiatives
74% of the survey participants
give the central government
a rating of Good/Very Good
on overall policy framework.
But the government does
not do so well on specific
initiatives including solar park
development, transmission
capacity, debt financing
and support for domestic
manufacturing.

Bankability of SECI as an offtaker

We also sought participants
view on SECIs bankability as
an offtaker and only 50% of
them believe that SECI is an
acceptable offtake risk. This
response seems consistent with
actual experience on-the-ground
with payment delays being
experienced by developers in
previous SECI projects.

Are you optimistic that the UDAY scheme will make

DISCOMs bankable?
54% of the participants are
optimistic about the UDAY
scheme, a signature reform
policy of the current government.
But there is also a fair degree
of skepticism with 46% of
participants either indifferent or
pessimistic. Given the result of
previous moves to restructure
DISCOM finances, these results
are not surprising but show
that the scheme needs strong
monitoring and proactive
enforcement.

BRIDGE TO INDIA, 2016 26

 State government ratings
We asked the participants to rank eight key states on overall ease of doing
business and their attractiveness for developing solar projects.

Ease of doing business

Ease of doing business covers a
wide category of issues including
land acquisition and conversion,
transparency and predictability
of policy, approval process. The
results are revealing as some of
the leading states Karnataka,
Maharashtra and Tamil Nadu
come near the bottom of this
table.

Ranked list of states in order of attractiveness for open

access projects

BRIDGE TO INDIA, 2016 27

 Project development returns and quality of
implementation
Expected project IRR (post tax) @ M5/kWh tariff
With bid tariffs falling sharply,
there has been concern in the
industry on sustainability of
these tariffs. 23% of participants
believe that post-tax project IRR
at current tariffs is less than 12%
and another 42% believe the IRR
to be in the 12-14% range, which
is barely enough to cover risk
adjusted cost of capital.

Overall solar project quality and expected power output

over 25 years
There has been some on-
the-ground evidence of low
tariffs forcing developers and
contractors to compromise on
component quality and project
performance. The survey shows
mixed opinion on project quality
issues.

BRIDGE TO INDIA, 2016 28

 Rooftop solar
Ranked list of challenges for rooftop solar
The participants believe
predominant challenges for
the rooftop sector to be poor
net metering policy framework
and lack of more attractive debt
financing solutions.

Ranked list of challenges for BOOT/PPA model

On prospects for success
of BOOT/PPA model in the
rooftop sector, the participants
believe that the most important
challenges are poor legal
enforcement and bankability of
private clients.

Measures needed the most to boost open access market

in India
The open access market is
hamstrung by uncertainty of
policy and poor enforcement of
RPO. 82% of the participants
feel that these challenges are
holding this market back. Waiver
of open access charges is not
seen as a critical factor as the
fundamental competitiveness of
solar power has improved hugely
and the industry needs certainty
of policy/ charges rather than
concessions.

BRIDGE TO INDIA, 2016 29

 Domestic manufacturing
Potential for domestic manufacturing till 2022

The industry is largely positive

about the potential of domestic
manufacturing in India with
consensus expectation for cell
and module manufacturing
capacity of 5-6 GW by 2022.
However, 60% of the participants
dont expect India to have any
integrated manufacturing
line even by 2022. This is a
setback to the governments
aspiration of promoting domestic
manufacturing.

Annual domestic manufacturing capacity by 2022

Will India see an integrated module manufacturing line

(polysilicon extraction wafer cell modules) by 2022?

BRIDGE TO INDIA, 2016 30

Glossary of terms
AD Accelerated Depreciation
ADB Asian Development Bank
APPC Average Pooled Purchase Cost
BOOT Build Own Operate Transfer
CEO Chief Executive Officer
CERC Central Electricity Regulatory Commission
CPSU Central Public Sector Utility
CSS Cross Subsidy Surcharge
DCR Domestic Content Requirement
DISCOM Distribution Companies
ED Electricity Duty
EPC Engineering, Procurement and Construction
FiT Feed-in Tariff
IRR Internal Rate of Return
MAT Minimum Alternate Tax
MNRE Ministry of New and Renewable Energy
NSM National Solar Mission
NHPC National Hydro Power Corporation
OA Open Access
PPA Power Purchase Agreement
PSU Public Sector Unit
PV Photovoltaic
REC Renewable Energy Certificate
RPO Renewable Purchase Obligation
RGO Renewable Generation Obligation
SECI Solar Energy Corporation of India
UDAY Ujwal DISCOM Assurance Yojana
VGF Viability Gap Funding

BRIDGE TO INDIA, 2016 31

C 8/5, DLF Phase 1,
Gurgaon 122 001,
Haryana, INDIA

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