Clean Energy Investment Trends 2020 - Full Report

Clean Energy Investment Trends 2020: Mapping Project-Level Financial Performance Expectations in India
Centre for
Energy Finance
Clean Energy Investment

Trends 2020
Mapping Project-Level Financial
Performance Expectations in India
Edition authors: Arjun Dutt, Lucila Arboleya, and

Pablo Gonzalez
Series editors: Kanika Chawla and Michael Waldron
Report November 2020

Market concentration for solar PV and wind

capacity sanctioned in 2019 stood at around
75 per cent.
Image: iStock
Centre for
Energy Finance
Clean Energy Investment

Trends 2020
Mapping Project-Level Financial
Performance Expectations in India
Edition authors: Arjun Dutt, Lucila Arboleya, and Pablo Gonzalez

CEEW Report
November 2020
ceew.in
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The authors
Edition authors: Arjun Dutt, Lucila Arboleya, and Pablo Gonzalez

KANIKA CHAWLA I kanika.chawla@ceew.in

Kanika Chawla is a policy specialist working at the intersection of renewable energy
and financial markets. She is the Director of the CEEW Centre for Energy Finance and
also manages CEEW’s research and outreach in renewable energy policy, regulation,
markets, and socio-economic value.
MICHAEL WALDRON I Michael.WALDRON@iea.org

Michael Waldron is a Senior Energy Investment Analyst who leads the investment
team and the World Energy Investment report at the International Energy Agency.
His work focuses on assessing the implications of energy investment and financing
trends for meeting energy security and sustainability goals.
ARJUN DUTT I arjun.dutt@ceew.in

Arjun Dutt is an Associate at the CEEW Centre for Energy Finance. His work is geared
towards enhancing the flow of affordable finance towards clean energy in emerging
economies. This includes analysing the risks constraining the flow of capital towards
clean energy and developing suitable interventions to de-risk investments.
LUCILA ARBOLEYA I Lucila.ARBOLEYASARAZOLA@iea.org

Lucila Arboleya is an Energy Economics and Financial Analyst at the International
Energy Agency, focusing on clean power investments, financing costs of renewables
and policies to attract capital for the clean energy transition in emerging market and
developing countries.
PABLO GONZALEZ I Pablo.GONZALEZ@iea.org

Pablo Gonzalez is an Invesment Analyst at the International Energy Agency. His
work focuses on investment, financing and modelling in the electricity sector, with a
special focus on renewables, grids and storage.
Contents
CEEW-CEF and IEA Clean Energy Investment Trends 1
1. Investment trends 3

2. Project-level terms of debt 5
3. Project-level equity returns 7
3.1 Aggregate EIRR expectations for utility-scale solar PV 8

3.2 State versus central off-takers 10
3.3 Solar park sites versus non-solar parks 11
3.4 Aggregate EIRR expectations for utility-scale wind 13
4. Sensitivity of equity investor returns to changing risks 13
5. Land-related constraints could slow the pace of India’s energy transition 15
5.1 Diminishing share of solar parks in sanctioned capacity 15

5.2 Unavailability of suitable sites hampering wind deployment 16
6. Industry landscape 17
Annexures 21
References 28
Image: iStock
Tables
Table 1 State off-takers by integrated ratings of discoms 7

Table 2 Average interest rates by off-taker and type of project site 7
Table 3 EIRR expectations fell with increasing creditworthiness of off-taker 11

Table 4 EIRR expectations are lower for solar park projects compared to non-solar park projects 12
Table 5 Wide variations in solar park charges 13
Table 6 Top 10 developers by capacity awarded (2019) 18
Table 7 Top 10 developers by capacity awarded (H1 2020) 18
Table 8 Leading developers (cumulative installed capacity, up to June 2020) 19
Figures
Figure 1 Share of sanctioned solar projects with central government off-takers has risen 4
Figure 2 Central government off-takers dominate sanctioned wind projects 5
Figure 3 Debt ratios close to 75 per cent are the norm for both solar and wind projects 5
Figure 4 Median loan tenures for solar and wind projects are in the 16-18 year range 6
Figure 5 EIRR expectations have increased since early 2019 8
Figure 6 Higher tender competition was associated with lower EIRR expectations 9
Figure 7 Central off-takers were associated with lower EIRR expectations than state off-takers 11
Figure 8 Projects in solar parks were associated with lower EIRR expectations 12
Figure 9 EIRR expectations associated with wind projects 13
Figure 10 Impact of variations in payment delays on realised EIRRs 14
Figure 11 Impact of variations in off-take volumes on realised EIRRs 15
Figure 12 Impact of variations in realised CAPEX on realised EIRRs 15
Figure 13 Diminishing share of solar parks in overall capacity sanctioned 16

Figure 14 Solar PV markets remained heavily concentrated 17
Figure 15 Wind energy markets remained heavily concentrated 17

Figure 16 Churn rate for the top wind and solar developers 19
Boxes
Box 1 Innovation in tender design 10
Box 2 How does financing distributed energy resources differ? 20

Equity IRR expectations for solar park projects

are around 20-260 basis points lower than those
for non-solar park projects.
Image: iStock
Clean Energy Investment Trends 2020: Mapping Project-Level Financial Performance Expectations in India 1
CEEW-CEF and IEA Clean Energy Investment Trends

To achieve its clean energy ambitions, India’s related to policy uncertainty, the financial health of
policymakers, industry actors, and financiers must act state distribution companies (discoms), volume risk,
in concert. For investments in clean energy to scale, and land-related constraints. In addition, the report
policy measures must address the investment risks also offers an update on key renewable energy debt
perceived by financiers and developers. financing and market trends.
The Clean Energy Investment Trends is a joint project Key findings

of the Council on Energy, Environment and Water
The ongoing COVID-19 pandemic has caused social
Centre for Energy Finance (CEEW-CEF) and the
and financial turmoil that have upended markets and
International Energy Agency (IEA). By monitoring
created new risks for energy investments in India.
market activity and identifying market and financing
In the years preceding the pandemic, the country
trends, the project seeks to provide a practical guide
saw large investment flows into renewable power,
to stakeholders for understanding how the interaction
with capital spending up by almost 60 per cent in
between risks and regulations is shaping investment
the five years through 2019 (IEA, 2020c). In 2020,
flows. The insights generated from the analyses of
the pandemic has disrupted clean energy supply
financing and market trends could be used to inform
chains, further weakened the financial position of
future policy action geared towards enhancing
discoms, and taken a toll on investment flows. These
investment flows.
dynamics have added new layers of risk to ongoing
challenges related to land acquisition, contract
Themes examined in the Clean renegotiation, and equipment pricing uncertainties
Energy Investment Trends 2020 in light of potential new trade measures in the case
report of solar PV and limited supplier options in the case
Interest to invest in the Indian renewable energy of wind. Thus, financing uncertainties have grown
sector remains strong, even amid the ongoing for both utility-scale solar and wind. At the same
Covid-19 pandemic. Over 12 GW of utility-scale time, structural barriers to investment persist for less
renewables projects were sanctioned at the peak of a bankable segments such as distributed solar PV.
nationwide lockdown in the second quarter of 20201.
Financial performance expectations are crucial – even Nevertheless, interest to invest has continued despite
as the economic downturn has curbed investment the global economic slowdown, with the sanctioning2
around the world, the relatively resilient return of over 15 GW of new utility-scale solar PV and wind
picture around renewable power assets and equity capacity via competitive tenders through the first half
securities, is creating new opportunities for investors of the year, almost equivalent to the total amount
to allocate capital towards the sector. Still, a number sanctioned competitively in 2019. Capacity sanctioned
of risks and barriers remain towards realising the in the first half of 2020 was boosted by 8 GW awarded
much higher levels of investment needed to align with as a result of an option exercised by Adani Green
a sustainable pathway. Energy and Azure Power in June 2020 to expand
To shed light on these issues, the Clean Energy

Investment Trends 2020 report examines the appeal
Aggregate equity IRR expectations
of utility-scale solar photovoltaics (PV) and onshore for solar on average rose from
wind in India by analysing project-level equity returns around 14% in the first half of 2019
expectations over 2019 and the first half of 2020. to around 16% over the course of
Further, it examines key sensitivities of returns and the second half of 2019 through to
challenges in attracting capital stemming from issues mid-2020.
1. Includes 8 GW related to an option exercised by two developers in June 2020 corresponding to a tender awarded in Dec 2019. All references
to years in this report refer to calendar years.
2. Project sanctioning refers to a firm commitment to invest in capacity either awarded through competitive auctions or in the form of captive
generation (these are not awarded competitively). Unless specified, project sanctioning also includes captive generation projects.
2 Clean Energy Investment Trends 2020: Mapping Project-Level Financial Performance Expectations in India
allocations under SECI’s manufacturing-linked tender Equity IRR expectations are higher
(2 GW each was awarded in December 2019). by 80-200 basis points for projects
with state off-takers compared to
Our analyses of utility-scale solar PV and wind
those with central off-takers.
projects sanctioned from the beginning of 2019 to
mid-2020 and tariff awards in the same period suggest the first half of 2019, to 16–17 per cent over
that the financing terms for projects, and the risks and the second half of the year through mid-2020.
returns proposition facing developers, have begun This rise likely stems from policy and market
to shift. Estimates of equity returns expectations uncertainty over potential contract renegotiation
have edged upwards on aggregate, whereas sponsors and the imposition or extension of duties on solar
continue to expect higher returns to compensate for PV imports, further exacerbated by supply chain
greater off-taker and land acquisition risks. Project uncertainties caused by COVID-19 and delays in
debt terms have remained relatively stable, but the signing of power purchase agreements (PPA)
more accommodative monetary conditions have not in 2020.
translated into lower borrowing costs as they have in
some other parts of the world. These indicators point »» Within the estimated range of EIRR expectations,
to growing uncertainty over India’s ability to attract projects with more creditworthy off-takers were
a diversity of private finance from domestic and associated with lower returns. While EIRR
international sources to affordably meet its ambitious expectations for projects with central off-takers
renewable energy targets in the years ahead. and Gujarat discoms were at par, these were 80-
200 basis points higher for projects in which the
The Clean Energy Investment Trends 2020 analysis state off-taker utility presented a higher credit
identified the following key trends: risk in 2019. However, even higher spreads were
• The availability and pricing of project debt observed for projects between central and state
finance have remained relatively stable over off-takers in early 2020, perhaps reflecting higher
the period of analysis, with differences arising risk aversion among investors as a result of the
mainly due to off-taker risks. Utility-scale solar disruption caused by COVID-19 and uncertainty
PV and onshore wind projects continue to be highly stemming from other ongoing policy, market, and
leveraged, with average debt-to-equity ratios of regulatory developments.
around 75:25. Lenders were willing to extend loans »» Projects with better access to land and timely grid
for long tenures (16–18 years) at interest rates of connections also had lower EIRR expectations.
around 10–11 per cent for these projects. Where The EIRR for projects to be set up on solar park
risks were perceived to be higher, interest rates too sites (which provide developers with ready land
were higher, by up to 50 basis points compared and evacuation infrastructure) were 20–260
to projects with the most creditworthy off-takers, basis points lower than the EIRRs for projects on
controlling for other factors. developer-acquired land.
• Our estimate of the expected equity internal »» Limited tendering activity in wind power in
rate of return (EIRR) for solar PV projects stood 2019 precluded a comprehensive examination of
at around 15% on a weighted average basis equity returns in that sector. Projects analysed
(by awarded capacity) over the course of 2019 corresponded to those with more creditworthy
and the first half of 2020, with considerable off-takers (central agencies and Gujarat discoms)
variations depending on off-taker risk, type and estimated EIRR expectations averaged
of site, and in response to ongoing policy, around 13 per cent. These were comparable to
regulatory, and market developments. solar EIRRs for the same category of off-takers
over the same time period. Moreover, the need
»» Solar PV EIRRs increased from 14 per cent in to abide by tender-specific tariff caps in the face
of rising equipment costs in 2019 due to limited sensitivity analysis included in this report.
supplier options could also have capped EIRR
expectations. • The timely availability of suitable sites for
setting up renewable energy projects is
• An evolving level of competition within tenders emerging as an additional challenge for both
has been an important determinant of equity solar PV and wind projects. Land-related
returns expectations. Several recent tenders have constraints have slowed the development of solar
been characterised by low competition in terms parks, with the share of new solar PV capacity
of the amount of capacity bid compared to that sanctioned in solar parks down to less than 10
tendered, likely as a result of prevailing policy, per cent in 2019 from over 50 per cent in 2017.
regulatory, and market uncertainties. Investors In addition, challenges with land availability
expected higher returns at these tenders. in wind-resource-rich states have delayed wind
project development and brought new tendering to
• At the same time, the market concentration of a standstill, particularly in the wake of changes in
developers sanctioning new solar PV and wind land policies in Gujarat.
capacity has remained high, edging up for solar
PV. The shift towards fewer, top developers reflects • Tender design is evolving in response to
their greater risk-taking capacity and ability to emerging challenges. Around 60 per cent of
navigate the uncertainty associated with policy, the projects sanctioned in the first half of 2020
regulatory, and market changes. involve newer project arrangements, including the
hybridisation of wind and solar PV and project
»» While the top 10 solar PV developers (in terms development bundled together with a requirement
of sanctioning capacity) have changed from one to set up domestic solar PV manufacturing capacity.
year to another over the 2015-2018 period, in 2019 This trend reflects increasing innovation in tender
this trend reversed—seven out of the top 10 solar design to address challenges such as the grid
PV developers in 2019 were the same as those in integration of renewables and land availability
2018. For wind, the churn rate was higher in 2019, for projects, as well as a tool for the attainment of
perhaps indicative of waning interest to invest other policy objectives such as to support domestic
in wind capacity amid the heightened execution manufacturing.
risks.
Still, such dynamics also raise uncertainties over
• Developers prefer central government entities the future pricing and the comparability of risks and
as off-takers. Project sanctioning shifted strongly returns metrics by developers, lenders, and analysts,
towards projects tendered by central government necessitating more sophisticated tools and analysis to
off-takers over 2019 and the first half of 2020. reliably gauge financing trends in the years ahead.
This was also because of greater capacity being
tendered by central government entities compared
1. Investment trends
to those by state entities, perhaps reflecting market
preference for more creditworthy counterparties.
• Payment delays and volume risks represent key India’s renewable power market witnessed steady
downside risks that, if realised, can significantly investment flows throughout 2019 and considerable
undermine returns. Given the competitive nature interest from developers in the first half of 2020.
of India’s renewable energy auctions, developers Investments in India’s renewable power sector have
generally do not factor in these risks in their steadily risen in recent years, reaching almost USD
bids and underlying financial models. Yet, small 18 billion in 2019 and surpassing capital expenditure
negative variations in both factors can create in the thermal power sector for the fourth year in a
considerable deviations between realised and row.3 By August 2020, utility-scale solar PV installed
expected returns, as illustrated by an indicative capacity reached nearly 33 GW while wind stood at 38
3. Investments are measured as the ongoing capital spending in power capacity and include investments in large hydropower plants.
Investment spending is spread out evenly from the year in which a new plant or upgrade of an existing one takes a final investment decision
(i.e. when a project reaches financial close or begins construction) to the year in which it becomes operational. Source: IEA (2020b).
GW (MNRE 2020), despite a considerable slowdown in land availability for projects in wind-resource-rich
in construction and shipping due to lockdowns and states, and the weak financial positions of original
mobility restrictions enforced to curb the spread of equipment manufacturers (OEMs) exacerbated by
COVID-19. the cascading effect of the ensuing delays, have
restricted activity in wind tenders (see Section 5).
The Clean Energy Investment Trends series draws
insights from a database of utility-scale solar PV and Developers demonstrated a strong preference
wind projects sanctioned between 2014 and the first for creditworthy off-takers in 2019 and mid-2020
half of 2020. The database indicates that 15.7 GW (Figures 1 and 2). Such counterparties are mainly
of solar PV capacity (including 1.4 GW solar–wind central government entities such as the Solar Energy
hybrid capacity) was sanctioned in 2019 – 28 per cent Corporation of India Limited (SECI) and NTPC
more than the 12.3 GW sanctioned in 2018 (including Limited (NTPC; formerly known as National Thermal
840 MW solar–wind hybrid capacity). In the first Power Corporation), as well as state distribution
half of 2020, 15.3 GW of solar PV capacity (including companies (discoms) with high credit ratings, such
1.6 GW solar-wind hybrid) was sanctioned. The as those in Gujarat.
sharp increase in the first half of 2020 was driven
in part by 8 GW sanctioned in June 2020 as a result In this report, we analyse in detail how both debt
of two firms exercising an option to expand their and equity financing terms have varied at the project
allocations under a manufacturing-linked tender level, in terms of aggregates as well as by the type
awarded in December 2019.4 Even excluding the of off-taker and site. We examine key sensitivities of
capacity allocation under the manufacturing-linked equity investor returns to payment delays, volume
tender in 2020, the capacity awarded in the first half risks (e.g. curtailment, low electricity demand,
of 2020 was around 4 per cent higher year-over-year underperformance of technology, etc.) and variations
compared to the first half of 2019, and around 77 per in capital costs. We then shift our attention to sector-
cent higher than the first half of 2018, demonstrating wide issues, highlighting how land is emerging as a
the resilience of investor interest in the sector. In key constraint for India’s energy transition and how
contrast, sanctioned wind capacity declined from 6.9 project-level activity has affected the industry-wide
GW in 2018 to 2.9 GW in 2019 and no wind projects competitive landscape.
were sanctioned in the first half of 2020. Challenges
Figure 1 Share of sanctioned solar projects with central government off-takers has risen
3% 0% 2% 2% 0% 2% 4%
100%
90%
24%
80% 36%
43%
Share of solar projects
70% 52%
63% 65%
60%
50%
74% 96%
40% 14%
62%
30% 57%
20%
34% 35% 32%
10%
0%
2014 2015 2016 2017 2018 2019 H1 2020
Central Central & state State Third party
Notes: Central = SECI or NTPC, State = state discoms, Central and state = both central and state agencies as off-takers, Third party =
private discoms or captive generation; excludes solar–wind hybrids.
Source: CEEW-CEF and IEA analysis.
4. The tender was managed by SECI and the two companies that exercised the option were Adani and Azure Power.
Figure 2 Central government off-takers dominate sanctioned wind projects
1%
100%
7% 9%
14%
90%
31% 24%
80%
43%
Share of wind projects
70%
60%
100% 99% 93%
50% 91%
86%
74%
40% 14%
69%
30% 57%
20%
32%
10%
0%
2014 2015 2016 2017 2018 2019
Central State Third party
Notes: 1 Central = SECI or NTPC, State = state discoms, Central and state = both central and state agencies as off-takers, Third party =
private discoms or captive generation; excludes solar–wind hybrids.
2 Excludes 728.8 MW of wind capacity awarded under GUVNL 1000 MW Grid Connected Wind Power Projects (Phase II-R) in 2019 – for
which PPAs were not signed.
2. Project-level terms of debt

Solar PV and wind projects are capital-intensive first half of 2020; the figure was 73 per cent in the case
infrastructure projects, financed largely through debt. of wind in 2019 (Figure 3). These indicate that debt
On a capacity-weighted average basis, 74 per cent of ratios remained close to 75 per cent for both solar and
solar PV capital costs were financed using debt in the wind.
Figure 3 Debt ratios close to 75 per cent are the norm for both solar and wind projects
80.0%
79.0%
Weighted average debt ratio
78.0%
77.0%
76.0%
75.0% 75.0% 74.0% 74.0%
75.0%
73.8% 73.9%
74.0% 74.3%
75.0% 75.0% 73.2%
73.0% 73.3% 73.5%
72.9%
72.0%
71.0%
70.0%
2014 2015 2016 2017 2018 2019 H1 2020
Solar Wind

Debt financing for India’s renewable energy projects tempered by additional guarantees or collateral from
largely comes from domestic financial institutions, the sponsor. The terms of debt vary considerably,
banks, and non-banking financial companies depending on the project arrangement and risk
(NBFCs).5 The overall cost of debt for renewable management approach. However, the following
projects depends upon both, financial institutions’ characteristics are commonly associated with most
internal benchmark rates (MCLR for banks, PLRs for renewables loans:
NBFCs), as well as spreads over the benchmark rates • Long-tenure debt for greenfield renewable energy
offered for renewable loans.6 Lending competition projects is available for most projects (Figure 4).
among financial institutions may also temper overall
interest rates. • Loan tenures typically include moratorium periods
of up to one year after the scheduled commissioning
Expansive monetary policy and liquidity support date of the project. While interest accrues over this
for NBFCs amid the COVID-19 pandemic has had period, loan repayment commences only after the
a moderating effect upon benchmark rates, which expiry of this grace period.
could persist at these levels in the near term (PIB
2020) (RBI 2020).7 Further, as discussed in Clean • They typically require sponsors to establish debt
Energy Investment Trends 2019 (Dutt, Arboleya, and service reserve account provisions for up to six
Mahadevan 2019), supportive policies and a maturing months of debt repayment.
industry helped reduce risk perceptions and improve • They expect a minimum debt service coverage ratio
debt financing terms for solar PV and wind in India, (DSCR) of 1.1 generally. The DSCR represents the
enabling renewable investments at lower costs. This minimum share of net operating income that needs
availability of long-term debt has been critical in to be available to service the debt (for both principal
supporting higher levels of investment in renewables and interest). Average DSCR requirements can
given the highly leveraged nature of solar PV and vary. Some financiers indicated that average DSCR
wind projects. requirements for wind loans could be 5–7 basis
points higher than those for solar loans, though
Debt financiers assess the risks associated with there is limited empirical evidence of this due to
project-level cash flows to determine the terms to be low wind project sanctioning in recent years.
offered to a renewable project. These risks may be
Figure 4 Median loan tenures for solar and wind projects are in the 16-18 year range
20
18.3 18.0 18.5 18.3
18
16.2
17.9
Median loan tenure (years)
16 17.0
14.6 16.2
15.8
14 14.8 14.3
12
10
8
6
4
2
0
2014 2015 2016 2017 2018 2019 H1 2020
Solar Wind
5. Companies that exercised the option were Adani and Azure Power. Are lenders to Indian renewable projects over the course of 2019 and the
first half of 2020.
6. MCLR = marginal cost of fund based lending rate; PLR = benchmark prime lending rate.
7. The MCLR of the State Bank of India, India’s largest lender by assets, decline by 90 basis points between January and September 2020 (SBI
2020).
Interest rates Table 2 Average interest rates by off-taker and type

of project site
One of the most important determinants of the
perceived risks associated with project cash Entity Solar park Non-solar park Wind
flows is the creditworthiness of the off-taker, the
SECI/NTPC/ 10.50% 10.65% 10.65%
counterparty in the PPA. Central government off- Gujarat
takers (SECI, NTPC), due to their quasi-sovereign
Maharashtra - 10.75% -
status, and Gujarat discoms are regarded as off-takers
with superior creditworthiness by renewable debt Uttar Pradesh - 11.15% -
financiers (Table 1).8
Note: These figures refer to lending rates charged by leading
Table 1 State off-takers by integrated ratings of NBFCs for renewable energy loans between Jan 2019 and June
discoms 2020. Market interactions indicate that NBFCs were the largest
lenders to the Indian renewable energy sector over this period.
State Discom name (ratings) Source: CEEW-CEF and IEA market intelligence.
Gujarat DGVCL (A+), UGVCL (A+), MGVCL (A+), solar parks vis-à-vis those located on developer
PGVCL (A+)
acquired or leased land, primarily due to lower land
Maharashtra MSEDCL (A) and evacuation infrastructure risks associated with
Uttar Pradesh KESCO (B+), PVVNL (B), MVVNL (C+),
solar park projects.
PUVVNL (C+), DVVNL (C+)
Notes: Integrated ratings, awarded by the Ministry of Power,

evaluate discoms on operational, financial, regulatory, and reform- 3. Project-level equity
returns
related parameters. The states mentioned in Table 1 are those that
constituted off-takers for renewable projects over 2019 and mid-
2020. The table includes the ratings of all the discoms in each state.
Source: Ministry of Power 2019. Equity, the other principal financing instrument,
accounts for around a quarter of the project costs of
Debt financiers have extended loans to projects utility-scale solar PV and wind projects in India today.
located in states characterised by a range of financial While these projects are financed predominantly
and operational discom performance, reflecting a through debt, where repayment and recourse terms
continued interest in financing the renewable power are agreed upfront, the higher risk profile associated
sector. However, they expected higher interest rates with equity – given its junior position in the cash
for loans to projects involving less creditworthy waterfall relative to debt – combined with prevailing
off-takers, when controlling for other factors (Table conditions in the Indian market, create relatively high
2). Interest rates for solar projects involving more returns expectations among shareholders. On the one
creditworthy off-takers (central entities and Gujarat hand, healthy equity returns are a strong signal for
discoms) were up to 50 basis points lower, controlling developers and investors to commit capital. However,
for other factors. perceived risks and barriers can heighten returns
expectations and translate into higher financing costs,
In terms of lending to the solar PV sector, interest rates which can limit the pace of investment as well as the
were slightly more competitive for projects located in diversity of investors that participate in financing the
sector.
Lending rates are higher by up to
50 basis points for projects with This section examines EIRR expectations associated
state off-takers compared to those with renewable projects in India, first in aggregate
with central off-takers, controlling terms and then those associated with specific project
for other factors.
8. Based on stakeholder consultations.

categories. We reverse engineer the expected EIRR Equity IRR expectations over the
of awarded projects through a discounted cash flow course of 2019 and the first half of
analysis given the awarded tariffs, estimated project
2020 averaged around 15 per cent.
costs, production parameters, and indicative terms of
debt. Annexures 3 and 4 present the methodology and amounting to 2.6 times the capacity tendered (see
the input data assumed in the project-level cash flow Table A14 in Annexure 3). The winning developers
model. may have had access to cheaper sources of debt than
that assumed in this report, which could have enabled
3.1 Aggregate EIRR expectations them to factor in higher returns than those estimated.
for utility-scale solar PV
Competition within tenders was an important
Our analysis of utility-scale solar PV projects awarded determinant of returns expectations (all else being
in 2019 and the first half of 2020 suggests that the equal). Tenders characterised by lesser competition
implicit EIRRs of these projects were 15.2 per cent were associated with higher EIRRs, while those
in 2019 and 15.3 per cent in 2020 (estimated on a marked by greater competition were on average
capacity-weighted average basis, based on sanctioned associated with lower EIRRs (Figure 6; see also Table
capacities), around 1.4 times the cost of debt financing A11 in annexure for more details). Tenders over
of 10.5–11.2 per cent during the period. the period of analysis were subject to tariff caps,
which were designed to limit the maximum tariffs
Expected EIRRs for solar PV projects rose over the realised. These tariff caps were included by both
period, from 14.5 per cent in the first half of 2019 to central and state tendering agencies, with the MNRE
around 17.8 per cent in the second half of 2019 and 15.3 finally scrapping the requirement in March 2020
per cent in the first half of 2020 (Figure 5). Expected (Chatterjee 2020). Some of these tenders saw limited
EIRRs continued to be high during months marked by participation, with the ceiling price likely providing
high market uncertainty resulting from the COVID-19 an insufficient level of remuneration in the face of
pandemic. International developers pushed tariffs heightened risk perceptions.
to a record low of INR 2.36/kWh in June 2020. This
tender was extremely competitive with bids received
Figure 5 EIRR expectations have increased since early 2019
22%
20%
18%
EIRR
16%
14%
12%
10%
Jan-19
Feb-19
Mar-19
Apr-19
May-19
Jun-19
Jul-19
Aug-19
Sep-19
Oct-19
Nov-19
Dec-19
Jan-20
Feb-20
Mar-20
Apr-20
May-20
Jun-20
Jul-20
Solar parks Central Gujarat Maharashtra Uttar Pradesh

Figure 6 Higher tender competition was associated • The Directorate General of Trade Remedies
with lower EIRR expectations undertook a review investigation pertaining to the
potential extension of safeguard duties in March
18% 2020 and subsequently issued a notice extending
17.1%
them for another year from July 2020 (Ministry of
16% 15.7% Commerce and Industry 2020).11 This further added
to the uncertainty around costs and the duties
applicable on module imports going forward as well
EIRR
14% 13.6% as raised concerns regarding the payment of timely

compensation for developers awarded capacity
12% before July 2020 under the change in law clause.
• For projects awarded through SECI tenders,

10% the central tendering agency signs PPAs with
Low Medium High
developers only if it can sign back-to-back power
Level of competition sales agreements (PSAs) with state discoms.
Before 2020, SECI would sign PSAs for each tender
Note: The level of competition is measured as the ratio of capacity bid
separately and then sign PPAs with developers. In
to capacity tendered. Low level of competition corresponds to a ratio
< 1.0; medium-level corresponds to a ratio between 1.0 and 2.0, and the case of solar projects awarded between January
high competition corresponds to a ratio higher than 2.0. and June 2020, SECI is looking to sign PSAs for the
Source: CEEW-CEF and IEA analysis. entire 15.3 GW awarded at a pooled tariff with state
discoms. This capacity includes the 8 GW awarded
Several developments may have contributed to under the manufacturing-linked tender in June
growing risk perceptions: 2020, which was signed at a relatively high tariff
• The Andhra Pradesh government announced its of INR 2.92/kWh. However, the inability to sign
plans to renegotiate renewable tariffs for already PSAs for this entire awarded capacity has delayed
contracted renewable capacity in mid-2019 (Kumar the signing of PPAs for tenders awarded in 2020.
2019). Though this announcement was made by This delay has created uncertainty among market
only one state government, it adversely affected participants.
off-taker risk perceptions with respect to India’s • The COVID-19 pandemic has disrupted clean energy
renewable sector as a whole. supply chains and exacerbated uncertainties about
• The Indian government announced its intention to the timely sourcing of solar modules and other
levy basic customs duty (BCD) on solar PV imports equipment (Ministry of New and Renewable Energy
in February 2020 (Ministry of Finance 2020). 2020). Furthermore, demand risk and concerns
While the BCD would be a pass-through cost for over the worsening of the financial health of
projects awarded before its imposition (under the discoms due to the crisis have likely boosted risk
change in law clause), the timelines and amount perceptions.
of compensation to be awarded by regulators are
uncertain.9 Concerns around lengthy approval times
and the inadequacy of compensation have raised
concerns among developers facing the potential
imposition of the BCD.10
9. The change in law clause is a contractual provision in PPAs, which entitles developers to financial relief from higher costs stemming from
changes in regulation, usually those pertaining to indirect taxes or duties, that impact project costs. Developers are provided relief under
the change in law clause after approval from the relevant electricity regulator.
11. The applicable safeguard duty is 14.9 per cent from July 30, 2020 to January 29, 2021 and 14.5 per cent from January 30, 2021 to July 29, 2021.
BOX 1 Innovation in tender design
One of the key emerging trends over 2019 and 2020 is innovation in tender design. This innovation is primarily
directed towards addressing the challenges of renewable energy integration and supporting domestic PV
manufacturing.
SECI has introduced several innovative tenders to support renewable energy integration:
• Solar–wind hybrid tenders reduce overall intermittency and improve utilisation of transmission infrastructure.
• Assured peak power supply tenders combine storage with solar–wind hybrid systems to ensure reliable power
supply to meet peak power requirements.
• Round-the-clock energy tenders combine storage with solar–wind hybrid systems and specify high minimum
capacity utilisation factor requirements (80 per cent annual, 70 per cent monthly). Projects may be located
anywhere in India with multiple injection points into the grid. These improve transmission system utilisation and
reduce intermittency.
• Round-the-clock storage-wind-solar-coal tenders require renewable energy, storage, and spare or under
construction capacity to be located in the same regional load dispatch centre area and permits multiple delivery
points into the grid. This improves the dispatchability of the delivered power and improves utilisation of
transmission infrastructure.
The following tenders were introduced to support domestic PV manufacturing:
• Central Public Sector Undertaking (CPSU) scheme tenders: These tenders are for projects developed by state-
owned entities that require the utilisation of domestically produced modules.
• Manufacturing-linked tenders: These tenders require the winner to undertake both project development and
the setting up of new PV manufacturing facilities.
• In addition, floating solar tenders have also been introduced that respond to the challenges in land availability
for ground-mounted utility-scale projects.
Going forward, renewable energy integration and land acquisition will remain challenging, given the sheer scale
of India’s renewable energy ambitions: 450 GW of renewable energy by 2030.
Innovative tenders geared towards renewable energy integration and those
addressing land-related challenges such as floating solar tenders could become
even more common. In addition, given India’s emphasis on creating a conducive
ecosystem for PV manufacturing, we may see more tenders supporting
domestic PV manufacturing.
3.2 State versus central off-takers Projects with the most creditworthy off-takers (central
off-takers) had the lowest EIRRs, with creditworthy
To understand the underlying differences in returns state discoms, such as those in Gujarat, having similar
expectations for projects involving central versus returns expectations (Figure 7). By contrast, less
state off-takers, we compare projects awarded closely creditworthy states showed higher EIRR expectations
spaced in time (awarded in the same month). Though (Table 3). The uncertainty induced by COVID-19,
this limits the number of data points for comparison, along with other policy and regulatory developments
it allows us to examine returns expectations under discussed in Section 3.1, may have heightened risk
the same policy, regulatory, and market conditions, aversion among investors, translating into a much
ensuring that these factors do not colour the higher spread for state off-takers in 2020 (Table 3).
comparisons.
Figure 7 Central off-takers were associated with lower EIRR expectations than state off-takers
22%
20%
18%
EIRR
16%
14%
12%
10%
Mar-20
Jan-19
Feb-19
Mar-19
Apr-19
May-19
Jun-19
Jul-19
Aug-19
Sep-19
Oct-19
Nov-19
Dec-19
Jan-20
Feb-20
Central Gujarat Maharashtra Uttar Pradesh
Table 3 EIRR expectations fell with increasing creditworthiness of off-taker
State off-taker projects Central off-taker projects
State Month of award EIRR Month of award EIRR Spread state–central
Gujarat* Feb 2019 11.9% Feb 2019 12.1% -0.2%
Maharashtra Feb 2019 12.9% Feb 2019 12.1% 0.8%
Uttar Pradesh Jun 2019 18.1% Jun 2019 16.1%

0.8–2.0%
Jun 2019 17.3%
Uttar Pradesh Feb 2020 21.4% Feb 2020 15.8% 5.6%
Note: GUVNL solar park projects had EIRR spreads of 230-240 basis points from central solar park projects in May 2019. However, this
spread may have been inflated due to lack of investor interest in setting up projects at GUVNL solar parks - Raghanesda and Dholera. (Refer
to Section 3.3 for details).
3.3 Solar park sites versus non- same month or closely spaced (one or two months) in
terms of timing of award. This enables an examination
solar parks
of returns under the same policy, regulatory, and
This section examines variations in EIRR expectations market conditions, ensuring that these factors do not
based on the type of site: solar park versus non-solar colour comparisons. Overall, projects to be installed in
park sites. To isolate other factors, we compare solar solar parks had lower EIRR expectations (Figure 8 and
park and non-solar park projects awarded either in the Table 4).
Figure 8 Projects in solar parks were associated per cent at the Raghanesda and Dholera solar parks,
with lower EIRR expectations respectively.
20%
The divergence in EIRR may be attributed to
18% differences in risk perceptions associated with various
sites, given differences in the nature of the supporting
16%
infrastructure provided to developers at these sites.
EIRR
14% This is reflected in the solar park charges associated

with each site (Table 5).
12%
10% While Dondaicha has more comprehensive supporting

Feb-19
Mar-19
Apr-19
May-19
Jun-19
Jul-19
Aug-19
infrastructure facilities, challenging site conditions
at the Raghanesda and Dholera solar parks require
the developer to undertake additional expenditure,
Solar parks Non-solar parks
especially in the case of Dholera (Sukumar 2020). The
Source: CEEW-CEF and IEA analysis. Dholera solar park is located close to the sea, and
a portion of it floods during the monsoon and due
Return expectations for solar park projects were to tidal variations (The Indian Express 2020). This
20–260 basis points lower than those for comparable entails considerable expenditure on civil works, which
non-solar park projects (Table 4). Solar parks, which pushes up the cost of solar power generation relative
offer assured land and evacuation infrastructure to to other sites. However, overall CAPEX (excluding
developers in exchange for a fee, help to manage land modules) for all three solar parks is similar (summing
acquisition and transmission risks. The lower EIRR up the corresponding entries in Table 5 in this section
expectations associated with solar parks indicate and Table A8 in Annex 3). Nonetheless, the higher
how such mechanisms can help lower project cost of risks associated with project development at the
capital. Raghanesda and Dholera solar parks translate to
higher return expectations compared to at Dondaicha,
Variations in EIRR expectations resulting in lower investor participation in these
among solar park projects tenders (table A14).
We also observed a wide variation in the expected

returns at solar park sites – ranging from 13.0 per cent
at the Dondaicha solar park to 15.3 per cent and 15.4
Table 4 EIRR expectations are lower for solar park projects compared to non-solar park projects
Solar park Month of award EIRR of the solar Month of award of the EIRR of the Spread
park project comparable non-solar non-solar park
park project project
Dondaicha* May 2019 13.0% Mar 2019 15.6% -2.6%
Raghanesda May 2019 15.3% Mar 2019 15.6% -0.3%
Dholera May 2019 15.4% Mar 2019 15.6% -0.2%
Raghanesda Aug 2019 15.3% Aug 2019 17.0% -1.7%
Dholera Aug 2019 15.4% Aug 2019 17.0% -1.6%
Note: The spreads for Gujarat solar park projects are computed relative to central non-solar park projects, given the lack of comparable non-
solar park projects in Gujarat. This comparison was made considering the similar creditworthiness of Gujarat discoms and central tendering
agencies. We compared solar park projects in May 2019 with non-solar parks projects from March 2019, to preclude the possible impact of
Andhra Pradesh’s PPA renegotiations on expected returns.
Table 5 Wide variations in solar park charges equipment were experiencing financial difficulties as
a result of limited project deployment with the shift to
Solar park One-time solar park charges competitive auctions in 2017. Further, delays in project
(INR million/MW) execution for projects awarded in 2018 onwards have
had a cascading effect on the entire sector, limiting
Dondaicha Phase – I 4.75
the number of OEMs supplying turbines and other
Raghanesda Phase – III 4.03
equipment (refer to Section 5.2).
Dholera Phase – V 2.01

Figure 9 EIRR expectations associated with wind
projects
Source: Request for selection documents pertaining to the 15%

relevant tenders.
14%
While Dondaicha has more comprehensive supporting 13%
EIRR
infrastructure facilities, challenging site conditions
12%
at the Raghanesda and Dholera solar parks require
the developer to undertake additional expenditure, 11%
especially in the case of Dholera (Sukumar 2020). The
10%
Dholera solar park is located close to the sea, and
Feb-19
Mar-19
Apr-19
May-19
Jun-19
Jul-19
Aug-19
Jan-19
a portion of it floods during the monsoon and due
to tidal variations (The Indian Express 2020). This
entails considerable expenditure on civil works, which Source: CEEW-CEF and IEA analysis.
pushes up the cost of solar power generation relative
to other sites. However, overall CAPEX (excluding
modules) for all three solar parks is similar (summing 4. Sensitivity of equity
up the corresponding entries in Table 5 in this section
and Table A8 in Annex 3). Nonetheless, the higher
investor returns to
risks associated with project development at the changing risks
Raghanesda and Dholera solar parks translate to
higher return expectations compared to at Dondaicha, While the previous section analysed the returns
resulting in lower investor participation in these expectations of equity sponsors for solar and wind
tenders (table A14). projects at the time of sanctioning, the realised returns
could be different. Three prominent factors that affect
3.4 Aggregate EIRR expectations realised returns include:
for utility-scale wind • Off-taker risk. Given the competitive nature of
India’s renewable energy auctions, developers
The limited wind tendering activity in 2019 precludes
generally do not account for payment delays on
a detailed examination of returns. While, EIRR
the part of discoms in their bids and underlying
expectations for wind were lower than those for solar
financial models.12 However, the precarious
(Figure 5) on average; only central entities Gujarat
financial position of several discoms, exacerbated
awarded projects. The estimated wind expected
by the economic disruption caused by COVID-19, is
EIRRs are comparable to solar EIRRs for the same
likely to place some projects at considerable risk of
category of off-takers over the same time period.
temporary revenue shortfalls or higher amounts of
Further, the estimated EIRRs are perhaps reflective of
receivables. Long payment delays would translate
the need to conform to applicable tariff caps despite
into high working capital requirements and lower
higher equipment costs for projects awarded in 2019
realised returns.13
relative to those in the past due to more limited
supplier options. OEMs supplying turbines and other

13. PPAs may include payment security mechanisms to mitigate these risks (e.g., requirements for discoms to issue a Letter of Credit).
• Volume risk. Renewable energy tenders offer a the commissioning date.14 A more rapid decline
guaranteed price for the duration of the contract, in equipment costs than assumed by developers
but the volume of off-take is not explicitly enforced between the time of bidding and procurement of
nor assured. This means that developers must equipment can provide a boost to realised EIRRs.
account for this risk in their bids. Among the
multiple sources of volume risk (curtailment, Sensitivity analysis: payment
low electricity demand, underperformance of delays, volume risk, and CAPEX
technology, faulty operation and maintenance, scenarios
meteorological variations), curtailment risk seems
to be of the greatest concern among investors. Due We conducted a sensitivity analysis to investigate
to its small share in the energy mix, renewables in the impact of payment delays, volume risks, and
India present a small to moderate risk for power CAPEX variations on EIRRs (Figure 10). For the sake of
system operation, but several states are already simplification, we illustrate the impact of these factors
facing significant system integration challenges on the median EIRR. Further, while we only present
(IEA 2020a). These are a source of volume risk the returns for solar PV projects, a similar analysis
despite the must-run status conferred upon also applies to wind.
renewables from the perspective of power dispatch.
While the central government supports greater Figure 10 illustrates the impact of payment delays on
interconnection across the country, requires the realised EIRR. The extent of the impact of payment
existing coal fleet to operate more flexibly and delays on realised EIRR depends on two factors:
promotes affordable battery storage, unlocking the average delay in payments (number of months
a full and diverse set of flexibility options would of receivables for developers) and the number of
require further market reform and investments, years for which the delay persists over the life of the
particularly in grid infrastructure. These needs contract. An average three-month delay over five years
come at a time when the long-term impact of the lowers the realised EIRR by 80 basis points compared
COVID-19 pandemic on economic growth, and to the expected EIRR. In the most extreme case, a
therefore electricity demand, remains uncertain. 12-month delay over the duration of the contract could
Lower electricity demand may lead to lower lower the EIRR by around 500 basis points.
available hours for all generators, with potential
knock-on effects for renewables. These situations Figure 10 Impact of variations in payment delays on
realised EIRRs
contribute to persistent volume risks that could
affect the viability of some projects. 16%
• Capital expenses (CAPEX) assumptions. 15%
Projects secured through tenders have an average 14%

Realised EIRR
gestation period of around 18 months from the 13%

date of award to commissioning. Equipment costs
12%
for solar and wind have declined over the past few
11%
years (IRENA 2020). Developers estimate equipment
costs at the time of procurement while bidding for 10%
capacity. In the case of solar PV projects, actual 9%

module procurement occurs only 3–5 months before 8%
0 months
3 months
6 months
9 months
12 months
Payment delays and volume

risks, if realised, can significantly
Payment delay
lower realised EIRRs compared to
expectations. Whole duration of the contract
10 years 5 years
14. Based on stakeholder consultations. Source: CEEW-CEF and IEA analysis.

Figure 11 illustrates the impact of volume risk on per cent reduction in realised CAPEX increases the
realised EIRR. We analysed volume risk using the realised EIRR by around 60 basis points in the case of
same methodology as for payment delays. The EIRR solar and 50 basis points in the case of wind.
for solar PV projects is impacted by around 70 basis
points per every 2.5 per cent of total production lost in
the first five years. If the same level of production loss 5. Land-related
persists through the lifetime of the project, the EIRR constraints could slow
would decline by around 160 basis points per every 2.5
per cent of production loss. the pace of India’s energy
Figure 11 Impact of variations in off-take volumes on
transition
realised EIRRs
The timely availability of suitable sites for setting up
16%
renewable projects is emerging as a critical challenge
for India’s energy transition with evidence for both
15%
solar and wind deployment.
14%
Realised EIRR
13% 5.1 Diminishing share of solar

12% parks in sanctioned capacity
11%
Solar parks greatly improve the ease of doing business
10%
by offering developers a plug-and-play model for
9% setting up projects. As a policy tool, these have
8% been instrumental in accelerating the uptake of
0% 2.5% 5% 7.5% 10%
solar energy in India as well as in attracting foreign
Volume loss investors (Chawla et al. 2018). However, challenges
Whole duration of the contract associated with land acquisition have held back solar
park development. This has translated to a decline in
10 years 5 years
the share of projects located in solar parks in overall
Source: CEEW-CEF and IEA analysis. capacity awarded from 2017 onwards (Figure 13).
Moreover, the capacity sanctioned for development in
Figure 12 illustrates the impact of lower realised solar parks declined by around 60 per cent in absolute
CAPEX (i.e. a larger drop in capital expenses) as terms from 2018 to 2019. No capacity was awarded in
compared to assumptions factored in at the time solar parks in the first half of 2020.
of bidding (assumptions as per our model). Every 1
Figure 12 Impact of variations in realised CAPEX on

realised EIRRs
20%
18%
Realised EIRR
16%
14%
12%
10%
Base 1% 2% 3% 4% 5%
CAPEX less less less less less
Realised CAPEX variation
Solar Wind
Source: CEEW-CEF and IEA analysis. Image: iStock

Figure 13 Diminishing share of solar parks in overall capacity sanctioned
100% 3500
Share of solar projects sanctioned
3000
80%
46%
2500
62%
60% 78% 76%
93% 2000
97%
MW
1500
40%
54% 1000
20% 38%
500
22% 24%
3% 7%
0% 0
2014 2015 2016 2017 2018 2019
Non-solar power projects Solar power projects Nameplate capacity of solar

(left-side axis) (left-side axis) power projects awarded
(right-side axis)
5.2 Unavailability of suitable sites existing practice in land acquisition. This made
hampering wind deployment land acquisition an onerous process, particularly for
foreign developers.
Unlike solar resource, which is widely distributed
throughout India, wind resource is geographically With state-owned land unavailable for projects
concentrated. The states of Gujarat and Tamil awarded under non-state government tenders,
Nadu offer the best resource potential and account developers had to either set up projects on expensive
for around 45 per cent of India’s cumulative privately-owned land, which adversely impacted their
wind installed capacity (Indian Wind Power financial viability, or delay the financial closure and
2020). Following sharp declines in tariffs after commissioning of projects. Land acquisition is also
the introduction of power procurement through a challenge in Tamil Nadu, where state-owned land
competitive auctions, setting up projects in these for wind projects is scarce and setting up projects on
wind resource-rich states became essential for project expensive privately owned land could make projects
viability. unviable. Delays in setting up wind projects have had
a cascading effect on the sector, with several OEMs
Developers have been facing challenges in acquiring facing financial difficulties.
land for capacity awarded under auctions conducted
by central agencies from the SECI Tranche-III and While investor confidence has suffered in India’s wind
Tranche-IV tenders onwards, which were awarded sector, Gujarat’s land policies have been modified
in February and April 2018 respectively.15 Changes in since then to provide designated sites for projects
land policies for renewables projects in Gujarat made tendered by central agencies (Chandrasekaran 2019).
it challenging for developers to lease state-owned After the above modifications were issued by the
land for projects tendered out by central agencies. Gujarat government, SECI awarded 970 MW in the
Further, these changes also limited applications for latest tranche (Tranche-IX) of wind bidding. It remains
land allocation to entities that were awarded letters of to be seen how much capacity out of these newly
award by central tendering agencies. This precluded awarded projects is set up in Gujarat, illustrating the
land acquisition by land aggregators or wind OEMs impact of the recently amended land policy in Gujarat.
on behalf of developers, which had been the pre-

6. Industry landscape and 15). The award of 8 GW of capacity under SECI’s

manufacturing-linked tender to two developers
translated to heavier concentration in the first half
The Clean Energy Investment Trends series tracks of 2020. Access to debt finance on favourable terms
the competitive landscape in the renewable sector gives the top developers an advantage in structuring
through the ‘market concentration’ metric. We define competitive bids in renewable energy auctions (Tables
‘market concentration’ as the share of top developers 6 and 7). In addition, these developers also have
in the total project capacity sanctioned in a particular greater risk-taking capacity, which perhaps enabled
year. them to better navigate the uncertainty associated
with policy, regulatory, and market developments over
Market concentration in the sanctioning of new the course of 2019 and the first half of 2020.
solar PV and wind capacity continued to remain
high in 2019 and the first half of 2020 (Figures 14
Figure 14 Solar PV markets remained heavily concentrated
100%
90% 88%
84% 82%
80% 75%
71% 71%
70% 76%
60%
60%
60% 59% 57%
50% 54%
40% 48%
43%
30%
20%
10%
0%
2014 2015 2016 2017 2018 2019 H1 2020
Share of top 5 firms in sanctioned solar projects Share of top 10 firms in sanctioned solar projects
Note: Solar–wind hybrid projects are excluded from this analysis.

Figure 15 Wind energy markets remained heavily concentrated
100%
91%
90% 86%
80% 76% 75% 75%
70% 63%
60% 66%
50% 54% 52%
48% 51%
40%
39%
30%
20%
10%
0%
2014 2015 2016 2017 2018 2019
Share of top 5 firms in sanctioned wind projects Share of top 10 firms in sanctioned wind projects
Notes: 1 Solar–wind hybrid projects are excluded from this analysis.

2 Excludes 728.8 MW of wind capacity awarded under GUVNL 1000 MW Grid Connected Wind Power Projects (Phase II-R) in 2019 – for which
PPAs were not signed.
Table 6 Top 10 developers by capacity awarded (2019)
Solar PV Capacity awarded (MW) Wind Capacity awarded (MW)
Azure Power 2670 Adani 380
Adani 2150 Renew Power 350
NTPC 1992 SB Energy 324
Renew Power 1415 CLP 251
Avaada Energy 940 Engie 200
Tata Power 780 Enel Green Power 189
SB Energy 630 Continuum Wind Energy 150
Acme Solar Holdings 550 Ecoren Energy India Private Limited 125
Mahindra Renewables 450 Powerica 101
UPC Renewables 450 Solenergi Power 100
Note: Excludes wind projects that have not signed PPAs.

Table 7 Top 10 developers by capacity awarded While the top 10 developers account for a large share
(H1 2020) of the capacity sanctioned for both wind and solar,
there is a churn in the companies occupying the top
Solar PV Capacity awarded (MW) 10 positions each year. The churn rate is defined as
the extent of change in the top 10 developers with
Adani 6000 respect to the previous year – for example, a churn
rate of 40 per cent in a particular year means that 40
Azure Power 2000
per cent of the top 10 developers of the previous year
SB Energy 1200 did not feature in the top 10 of the present year. The
churn rate remained high for wind in 2019, perhaps
EDEN Renewables 600 indicative of waning interest in investing in wind
capacity amid heightened execution risks stemming
Renew Power 600
from the non-availability of suitable sites for setting
Axis Energy Group 400 up projects. In contrast, the churn rate for solar
dipped considerably in 2019 (Figure 16). Though solar
O2 Power 380
PV had its own set of associated risks, these were not
IB Vogt 350
as severe as those pertaining to land availability for
wind projects. The top developers that are best placed
Avaada Energy 320 to navigate market uncertainties and conform to tariff
caps continued to dominate capacity awards. The
CDC Group 300
entry of a few first-time bidders increased the churn in
the first half of 2020.
Figure 16 Churn rate for the top wind and solar developers
100%
90%
90%
80%
70% 70%
70%
60% 60% 60%
60%
Churn rate
50% 50%
50%
50% 50%
40%
30%
30%
20%
10%
0%
2015 2016 2017 2018 2019 H1 2020
Top 10 Solar Top 10 Wind
Despite the year-over-year churn in top developers, a few companies have emerged as leaders in terms of
cumulative installed capacity (Table 8).
Table 8 Leading developers (cumulative installed capacity, up to June 2020)
Solar PV Capacity (MW) Wind Capacity (MW)
Acme Solar Holdings 2900 Renew Power 2957
Renew Power 2352 Greenko Energy Holdings 2318
Adani 2198 Sembcorp 1730
Greenko Energy Holdings 2175 Mytrah Energy 1350*
Azure Power 1809 Tata Power 932
Tata Power 1704 CLP 925
NLC 1370 Continuum Energy 757
NTPC 870 Torrent Power 611
Hero Futures Energy 716 Hero Futures Energy 584
Avaada Power 680 Inox Renewables 550*
*Projects awarded by SECI and NTPC in the year 2018 were assumed to not have reached commissioning due to land acquisition issues.
BOX 2 How does financing distributed energy resources differ?
While recent clean energy investment growth has come more from utility-scale renewables, distributed energy
resources – such as rooftop solar PV, electric vehicle charging, and efficiency improvements – can play an
important role in India’s transition to a sustainable pathway. Financing can differ considerably from that for bulk
power assets, with greater reliance on the balance sheets of consumers, micro, small, and medium enterprises
(MSMEs), real estate, and renewable energy service companies (RESCOs), which may face tighter credit terms
and a higher reliance on equity. Financial development constraints mean that only around 15 per cent of
MSMEs have formal access to credit, relying instead on the more expensive, and less transparent, informal
market for lending (Financial Express, 2020).
In distributed solar PV, around 65 per cent of the investment over the past five years has been concentrated
in projects serving commercial and industrial buildings, many of which are subject to relatively high electricity
tariffs (WEI, 2020b). Debt financing terms depend on the degree of self-ownership compared with ownership
by third parties, as well as the remuneration model (e.g., net metering compared with energy savings from
self-consumption). For projects that are self-owned and part of new buildings, the capital structure of real
estate developers points to a wide potential range of debt shares (20–40 per cent; (Damodaran, 2020)).
While this suggests a much higher reliance on equity than in utility-scale assets, equity returns for real estate
are also lower. In the case of third-party-owned projects, financing depends primarily on the developer (e.g.,
Amplus Solar, Cleantech Solar, Sunsource Energy, and Tata Power Solar), with only some of these overlapping
with utility-scale development. Utility ownership remains nascent, but it has the potential to grow as discoms
recognise the value of integrating distributed solar into their portfolios.
In recent years, domestic lending capacity has been reinforced by development financing: preferential lines
of credit of USD 625 million have been earmarked for distributed PV development by the World Bank in
collaboration with the State Bank of India, and another USD 100 million has been designated by the Asian
Development Bank in collaboration with the Punjab National Bank (IEA, 2018). While disbursal of these rooftop
loans is currently under way, an acceleration in investment is yet to be seen.
Overall, a better understanding of the distributed solar financing landscape requires addressing data gaps,
in terms of asset-level financing, corporate actors involved in project development, as well as the credit
worthiness of smaller businesses and households. Analysing solar auction tariffs of renewable energy service
companies for government off-takers may also offer a starting point for future analysis of project-level returns.
Annexures
year; e.g., a churn rate of 40 per cent in a particular

Annexure 1 year means that 40 per cent of the top 10 developers
Terms and definitions of the previous year did not feature in the top 10 of the
present year.
Equity internal rate of return (EIRR)
The EIRR is the internal rate of return for providers Market concentration
of equity capital at the project level. It is estimated Share of top developers in the total project capacity
through a discounted cash flow analysis on project sanctioned in a particular year; e.g., market
cash flows net of payments to debt holders. In our concentration of top five developers in year x =
analysis, we have estimated the post-tax EIRR, that is, capacity sanctioned by top five developers / total
the returns net of project-level taxes. capacity sanctioned in year x.
Debt service coverage ratio (DSCR) Annexure 2

This refers to the ratio of the net operating income
available for servicing debt to the overall debt
List of EIRR by project type
repayment obligation for that year (principal and Tables A1–A3 summarise the estimated expected
interest); i.e., DSCR = net operating income/total debt EIRRs for solar and wind tenders analysed over the
service. course of 2019 and H1 2020. Table A14 further specifies
details pertaining to these tenders, while Annexe 3
Churn rate provides details on the methodology for identifying
Percentage change in the top 10 developers (in terms tenders for analysis.
of sanctioned capacity) with respect to the previous
Table A1 Expected EIRRs for solar projects with central off-takers
Feb-19 Mar-19 May-19 Jun-19 Aug-19 Oct-19 Feb-20 Apr-20 Jun-20
12.1% 15.6% 13.0% 16.1% 17.0% 17.9% 15.8% 17.3% 11.9%
17.3% 19.9%
Table A2 Expected EIRRs for solar projects with state off-takers
State Feb-19 May-19 Jun-19 Aug-19 Feb-20 Mar-20
Gujarat 11.9% 15.3%, 15.3%, 18.7%

15.4% 15.4%
Maharashtra 12.9%
Uttar Pradesh 18.1% 21.4%

Table A3 Expected EIRRs for wind projects expected EIRR associated with a particular tender,
we analysed the lowest successful tariff bid (L1 tariff).
Feb-19 May-19 Aug-19 This follows from our assumptions pertaining to
debt financing, for which we factored in the most
13.1% 12.5% 13.3% competitive terms of debt applicable to specific
categories of projects. These typically correspond to
12.7%*
the lowest tariffs realised.
*Note: Wind projects were all tendered by central off-takers except
the GUVNL 1000 MW grid-connected wind power projects (Phase Sensitivity analysis
II-R) (EIRR of 12.7%).
The sensitivity analysis draws on the base case
expected EIRR analysis and modifies one input
variable to analyse the effect on returns.
Annexure 3
Payment delays
Methodology
It is assumed that developers make up for shortfalls
EIRR analysis in cash flows stemming from payment delays through
working capital loans. These working capital loans
Project selection
lower realised returns compared to their expected
Several factors collectively determine the EIRR values.
expectations of developers. Factors such as the
off-taker, project location, and type of site (solar Volume risk
park versus non-solar park) affect the performance,
Curtailment is modelled as a constant percentage
cost, and financing of projects and impact returns
annual loss of production during a certain set of years
expectations. In addition, the specific requirements
and thus a loss of revenue. Note that production loss
of tenders may also alter returns expectations. Some
is incremental to the annual degradation related to the
of these requirements include stringent timelines for
operation of the renewable project.
demonstration of land possession prior to project
commissioning, varying minimum capacity utilisation
CAPEX variations
factors (CUF) requirements, or multiple possible
deployment configurations (both applicable to hybrid Percentage variations are applied to the base CAPEX
tenders), and different modes of awarding capacity (expected at the time of bidding) to quantify its effect
(reverse auction, green-shoe options, MoU route, etc). on the realised EIRR.
These specific requirements alter the performance
parameters and costs associated with such renewable
energy tenders and preclude comparability with
awards of plain solar or wind capacity through a
reverse auction mechanism.
This report aims to study variations in EIRR according

to the off-taker, project location, type of site, and
policy developments. To draw meaningful insights,
it is important to ensure the general comparability of
the projects analysed by controlling for tender-specific
variations. Thus, this analysis excludes projects from
the tenders listed in Table A4.
Tariff selection
The tariffs realised in renewable energy auctions
typically occupy a narrow range. To determine the
Table A4 Tenders excluded from the analysis
Tender name Date of award Tariff (INR/kWh) Reason
MSEDCL 1350MW Mukhyamantri 07/11/2019 3.14 Small-scale projects connected to

Agricultural Feeder Scheme Solar PV agricultural feeders
Projects
Small-scale projects connected to
05/08/2019 3.05
MSEDCL 184MW solar PV projects agricultural feeders
MSEDCL 500MW ISTS Phase IV Requirement to identify 100 per cent of the
18/12/2019 2.89
Solar Projects land required before bidding
MSEDCL MSKVY Purchase of Solar 06/09/2019 3 Procurement not through competitive

Power via MoU Route tendering
MSEDCL Purchase of Solar Power via 21/11/2019 2.92 Procurement not through competitive
MoU Route tendering
MSEDCL Western Maharashtra Small-scale projects connected to

27/12/2019
(Ph-II-C) 50MW Solar Projects for 2.99 agricultural feeders
Agricultural Feeders
SECI 1.2GW ISTS Tranche-VII RE 31/01/2020 Hybrid tender, which required a specific
4.3
Peak Power Supply generation profile and had higher minimum
CUF requirements
SECI 1200 MW ISTS-connected Solar 27/05/2019 Hybrid tender, specific CUF requirements
2.7
Wind Hybrid Projects (Tranche-II)
SECI 1500MW solar PV (Tranche-II) 08/11/2019 3.5 Required using domestically produced
in CPSU Phase-II Scheme modules
SECI 2000MW Solar PV projects

26/09/2019 3.5 Required using domestically produced
under CPSU Scheme Phase-II
modules
(Tranche-I)
SECI 400MW RE Power RTC Supply Hybrid tender, specific CUF specifications
08/05/2020 2.9
to NDMC, New Delhi and Dadra and
Nagar Haveli
SECI 7GW ISTS solar PV linked Developer required to undertake PV

with 2GW (per annum) solar 13/12/2019 2.92
manufacturing, staggered commissioning
manufacturing plant under Global till 2025
Competitive Bidding
SECI 7GW ISTS solar PV linked

with 2GW(per annum) solar Developer required to undertake PV
09/06/2020 2.92
manufacturing plant under Global manufacturing, staggered commissioning
Competitive Bidding - GREENSHOE till 2025
OPTION
HPPC 300MW Grid-connected Solar 16/08/2019 2.73 Tariff renegotiated downwards

PV Power Projects
TPC-D 150MW Grid-connected solar 10/10/2019 2.83 Private discom off-taker

PV capacity

Solar
Annexure 4
While developers typically factor in assumed module
Assumptions prices applicable at the time of procurement, given the
limited visibility on developers’ pricing assumptions
Performance parameters for future time frames, we have assumed that the
Solar module price at the time of project award as the input
price. Table A6 summarises these assumptions, while
DC overloading is a common practice in the Indian
tables A7 and A8 list out other components of capital
solar energy sector. We assumed 40 per cent DC
expenditure.
overloading in our analysis. The following table
summarises the AC CUF assumptions for projects
located in various states. The AC CUF for each state
Module costs
was derived based on solar power generation potential Table A6 Module costs
GIS data for the top 50 percentile districts in each
state and was verified through inputs from market Time period PV modules USD/INR INR million/
participants. cost (USD/Wp) MWp
January 19 -
Table A5 Module performance parameters 0.22 71 15.6
December 19
State AC CUF (@40% DC overloading) January 20 -

0.21 75 15.8
June 20
Rajasthan 27.7%
Note: Safeguard duty of 15 per cent was considered for projects
Gujarat 27.6% procuring modules before July 2020. The date of module
procurement is assumed to be three months before scheduled
Madhya Pradesh 26.3% commissioning.
Source: CEEW-CEF and IEA market intelligence.
Maharashtra 26.2%
Table A7 Solar park charges

Uttar Pradesh 24.0%
Solar park One-time solar park charges

Notes: Projects under solar tenders that permit installation anywhere (INR million/MW)
in India are assumed to be set up in Rajasthan. One central tender
required projects to be set up in Madhya Pradesh; The analysis factors Dondaicha Phase – I 4.75
in an annual degradation in generation rate of 0.6 per cent.
Raghanesda Phase – III 4.03
Source: Global Solar Atlas - World Bank, CEEW-CEF and IEA market
intelligence.
Dholera Phase – V 2.01
Wind
Source: RfS documents pertaining to the relevant tenders.
The states of Gujarat or Tamil Nadu were assumed
to be the locations for the projects. Based on market
Table A8 Other CAPEX
intelligence, a CUF of 39 per cent was assumed.
Degradation in generation at the rate of 0.1 per cent Other CAPEX Value (INR million/MW)
per annum was assumed.
Solar park 8.0*
Capital costs
Non-solar park 11.0
Land leasing was assumed to be the methodology for
securing land for renewable energy projects (except Notes: Other CAPEX includes balance of system, civil works,
for solar park projects, where solar park charges mounting structures, preliminary and pre-operative expenses, and
evacuation infrastructure up to the inter-connection point for non-
would apply). Thus, capital expenditure excluded
solar park projects and up to the pooling substation in solar parks.
land acquisition costs. * Other CAPEX for the Raghanesda and Dholera solar park stands
at INR 9 million/MW and 111 million/MW respectively.
Wind Financing parameters

Table A9 Capital expenditure All projects are assumed to be financed by domestic
Indian financial institutions as on the following terms.
Parameter Value (INR million/MW)
Table A12 Interest rates
Capex 60
Entity Solar park Non-solar Wind

Note: This figure excludes land acquisition costs, as a lease model has park
been considered in the analysis.
SECI/NTPC/Gujarat 10.50% 10.65% 10.65%
Operating costs
Maharashtra - 10.75% -
Table A10 Operating expenses
Uttar Pradesh - 11.15% -
Parameter Unit Solar Wind Note: Working capital loans are assumed to be available at 100
basis points below the cost of long-term debt.
O&M expenses INR million/MW 0.5 1 Source: CEEW-CEF and IEA market intelligence.
Annual escalation % 5% 3%
Table A13 Other financing parameters
Land lease expenses INR/acre 37,500 37,500

Solar park Non-solar Wind
Annual escalation % 5% 5% park
Loan tenure 17 years 17 years 18 years

Land requirements Acre/MW 3.5 0.6 (including (including (including
one-year one-year one-year
moratorium moratorium moratorium
on principal on principal on principal
repayment) repayment) repayment)
Table A11 Recurring costs in solar parks
Debt-equity 75:25 75:25 75:25
ratio
Dondaicha Solar Raghnaseda Solar Dholera Solar Park
Park (Phase I) Park (Phase III) (Phase V) Tax rate 25.17% 25.17% 25.17%
• O&M • O&M • O&M Minimum

expenses of expenses of expenses of debt service 1.1 1.1 1.1
INR 180,000 INR 198,000 INR 30,000 coverage
with annual with annual with annual ratio
escalation of 5 escalation of 5 escalation of 5
Debt service
per cent per cent per cent
reserve 6 months 6 months 6 months
account
• Land-related • Land-related • Land-related
costs of INR costs of INR costs of INR Depreciation Straight line Straight line Straight line
8,000/acre/year 4000/acre/year. 4000/acre/year,
Escalating at 15 escalating at 15
per cent every per cent every
three years three years
• Local area • Local area

development development
charges of INR charges of INR
80,000 for five 50,000 over
years eight years
Source: RfS documents pertaining to the relevant tenders.

Annexure 5
Investor participation at solar and wind tenders
Table A14 Extent of competition in tenders analysed
Tender Date of EIRR Capacity Capacity Capacity L1 Capex

complete name award tendered bid for sanctioned tariff (INR lakh)
SECI 1.2 GW Solar Projects Auction Feb-19 12.1% 1,200 1,500 1,200 2.55 356.5
(ISTS-III)
MSEDCL 1000 MW Solar Projects Feb-19 12.9% 1,000 1,900 1,000 2.74 356.5
Auction (Phase-II)
GUVNL 500MW Grid Connected Feb-19 11.8% 500 1,045 500 2.55 356.5
Solar PV Power Projects (Phase-IV)
SECI 750 MW Rajasthan Solar Project Mar-19 15.6% 750 2,370 750 2.48 323.7
Auctions
GUVNL 700MW Raghanesda Solar May-19 15.3% 700 600 500 2.65 343.9
Park (Phase-III R)
GUVNL 1000MW Grid Connected May-19 15.4% 1,000 300 250 2.75 376.6
Solar PV Power Projects located in
Dholera Solar Park (Phase-V)
SECI 250MW Grid Connected Solar May-19 13.0% 250 400 250 2.87 374.0
PV Power Project at Dondaicha Solar
Park (Phase-I)
SECI ISTS-connected 1200MW Solar Jun-19 17.3% 1,200 2,100 1,200 2.54 323.7
PV Projects (ISTS-IV)
SECI 750MW Grid Connected Solar Jun-19 16.1% 750 850 680 2.5 323.7
PV Projects in Rajasthan (Tranche-II)
UPNEDA 500MW Grid Connected Jun-19 18.1% 500 90 72 3.02 323.7

Solar PV Projects
GUVNL 200MW Grid Connected Aug-19 15.3% 200 100 100 2.65 343.9
Solar PV Projects in Raghanesda
Solar Park (Phase-VI)
GUVNL 750MW Grid Connected Aug-19 15.4% 750 50 50 2.75 376.6

Solar PV Power located in 1000 MW
Dholera Solar Park (Phase VII)
SECI 1200 MW ISTS-connected Aug-19 17.0% 1,200 600 480 2.53 323.7
solar power projects under Global
Competitive Bidding (ISTS-V)
NTPC 1200 MW ISTS Solar PV Oct-19 19.9% 1,200 600 300 2.63 323.7
projects
SECI 1200 MW Solar Power Projects Oct-19 17.9% 1,200 1,200 960 2.7 323.7
ISTS-VI
UPNEDA 500 MW Grid connected Feb-20 21.4% 500 232 184 3.17 325.5
Solar PV Projects
Table A14 contd...
Tender Date of EIRR Capacity Capacity Capacity L1 Capex

complete name award tendered bid for sanctioned tariff (INR lakh)
SECI 1200 MW ISTS-connected solar Feb-20 15.8% 1,200 3,500 1,200 2.5 325.5
PV power projects ISTS-VIII
GUVNL 500 MW Solar Phase-VIII Mar-20 18.7% 500 430 350 2.61 325.5
NHPC 2000 MW Solar Auction Apr-20 17.3% 2,000 3,780 2,000 2.55 325.5
SECI 2 GW ISTS Tranche IX Solar Jun-20 11.9% 2,000 5,280 2,000 2.36 325.5
Tender
SECI 1200 MW (Tranche-VI) Wind Feb-19 13.1% 1,200 2,325 1,200 2.82 600.0
Power Auction
GUVNL 1000 MW Grid Connected May-19 12.7% 1,000 931.4 202.6 2.8 600.0
Wind Power Projects (Phase II-R)
SECI 1200 MW ISTS-connected wind May-19 12.5% 1,200 600 480 2.79 600.0
power projects (Tranche-VII)
SECI 1800 MW ISTS T-VIII Wind Aug-19 13.3% 1,800 550.8 439.8 2.83 600.0
Projects

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Acknowledgments
CEEW: CEEW’s contribution to this report could not have been possible without the support
and co-operation provided by multiple philanthropies to the CEEW Centre for Energy Finance
(CEEW-CEF).
IEA: The IEA’s contribution to this report was prepared within its Clean Energy Transitions
in Emerging Economies programme, which has received funding from the European Union’s
Horizon 2020 research and innovation programme under grant agreement No 952363.
The report benefited from valuable inputs, comments, and feedback from various experts:
Astha Gupta (IEA Consultant), Daniele Perugia (IEA), Gagan Sidhu (CEEW-CEF), Gireesh
Shrimali (CEEW-CEF), Inchan Hwang (IEA), Nicole Thomas (IEA), Peter Zeniewski (IEA),
Randi Kristiansen (IEA), Sree Sanyal (IEA), Szilvia Doczi (IEA), and Tim Gould (IEA).
The report was peer-reviewed by several renewable energy stakeholders including

developers, financiers, and government agencies.
The authors would like to acknowledge the contribution of Ankita Nayak (CEEW-CEF) and
Sangeeth Raja (CEEW-CEF) in collating the data underlying the analysis.
Acronyms
BCD basic customs duty
CEEW Council on Energy, Environment and Water
CEEW-CEF Centre for Energy Finance at the Council on Energy, Environment and Water
CPSU Central Public Sector Undertaking
EIRR equity internal rate of return
GW gigawatt
IEA International Energy Agency
MCLR marginal cost of funds-based lending rate
MNRE Ministry of New and Renewable Energy
MW megawatt
NBFC non-banking financial company
NPA non-performing asset
NTPC National Thermal Power Corporation
OEM original equipment manufacturer
PLR prime lending rate
PPA power purchase agreement
PSA power sales agreement
PV photovoltaic
RBI Reserve Bank of India
SECI Solar Energy Corporation of India

Lower-return expectations are associated with

renewable energy tenders characterised by
higher competition.
Image: iStock
COUNCIL ON ENERGY, ENVIRONMENT AND WATER (CEEW)
Sanskrit Bhawan, A-10, Qutab Institutional Area

Aruna Asaf Ali Marg, New Delhi - 110067, India
T: +91 (0) 11 4073 3300
info@ceew.in | ceew.in | @CEEWIndia

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Clean Energy Investment Trends 2020: Mapping Project-Level Financial Performance Expectations in India

Clean Energy Investment

Edition authors: Arjun Dutt, Lucila Arboleya, and

Report November 2020

Market concentration for solar PV and wind

Clean Energy Investment

Edition authors: Arjun Dutt, Lucila Arboleya, and Pablo Gonzalez

Cover image: iStock.

International Energy Agency, 9 rue de la Fédération, 75739 Paris Cedex 15 France

Edition authors: Arjun Dutt, Lucila Arboleya, and Pablo Gonzalez

KANIKA CHAWLA I kanika.chawla@ceew.in

MICHAEL WALDRON I Michael.WALDRON@iea.org

ARJUN DUTT I arjun.dutt@ceew.in

LUCILA ARBOLEYA I Lucila.ARBOLEYASARAZOLA@iea.org

PABLO GONZALEZ I Pablo.GONZALEZ@iea.org

3. Project-level equity returns 7

3.1 Aggregate EIRR expectations for utility-scale solar PV 8

4. Sensitivity of equity investor returns to changing risks 13

5. Land-related constraints could slow the pace of India’s energy transition 15

5.1 Diminishing share of solar parks in sanctioned capacity 15

Table 1 State off-takers by integrated ratings of discoms 7

Table 3 EIRR expectations fell with increasing creditworthiness of off-taker 11

Figure 5 EIRR expectations have increased since early 2019 8

Figure 10 Impact of variations in payment delays on realised EIRRs 14

Figure 11 Impact of variations in off-take volumes on realised EIRRs 15

Figure 12 Impact of variations in realised CAPEX on realised EIRRs 15

Figure 13 Diminishing share of solar parks in overall capacity sanctioned 16

Figure 15 Wind energy markets remained heavily concentrated 17

Box 2 How does financing distributed energy resources differ? 20

Equity IRR expectations for solar park projects

CEEW-CEF and IEA Clean Energy Investment Trends

The Clean Energy Investment Trends is a joint project Key findings

To shed light on these issues, the Clean Energy

Central Central & state State Third party

Figure 2 Central government off-takers dominate sanctioned wind projects

Central State Third party

2. Project-level terms of debt

Source: CEEW-CEF and IEA analysis.

Source: CEEW-CEF and IEA analysis.

Interest rates Table 2 Average interest rates by off-taker and type

Notes: Integrated ratings, awarded by the Ministry of Power,

8. Based on stakeholder consultations.

Figure 5 EIRR expectations have increased since early 2019

Solar parks Central Gujarat Maharashtra Uttar Pradesh

Source: CEEW-CEF and IEA analysis.

14% 13.6% as raised concerns regarding the payment of timely

• For projects awarded through SECI tenders,

BOX 1 Innovation in tender design

The following tenders were introduced to support domestic PV manufacturing:

Source: CEEW-CEF and IEA analysis.

Table 3 EIRR expectations fell with increasing creditworthiness of off-taker

State off-taker projects Central off-taker projects

State Month of award EIRR Month of award EIRR Spread state–central

Gujarat* Feb 2019 11.9% Feb 2019 12.1% -0.2%

Maharashtra Feb 2019 12.9% Feb 2019 12.1% 0.8%

Uttar Pradesh Jun 2019 18.1% Jun 2019 16.1%

Uttar Pradesh Feb 2020 21.4% Feb 2020 15.8% 5.6%

14% This is reflected in the solar park charges associated

10% While Dondaicha has more comprehensive supporting

We also observed a wide variation in the expected