Conference on Solar Energy

Institutional Finance for Solar Projects

B.V. Rao GM,IREDA b.v.rao@ireda.in
21st September 2010, Hotel Lalit, New Delhi

JNNSM- Mission Objectives

Jawaharlal Nehru National Solar Mission has been launched under the National action Plan on Climate Change with an objective: To establish India as a global leader in solar energy, by creating the policy conditions for its diffusion across the country.

Mission anticipates achieving grid parity by 2022 and parity will coal based thermal power by 2030. To adopt a 3-phase approach from 2010 to 2022.
Aim of the mission is to focus on setting up an enabling environment for solar technology both at centralized and decentralized level.

Mission Targets
A 3- phase approach has been formulated

Application Segment

Phase - I 2010-13

Phase-II 2013-17 4000-10,000 MW

Phase- III 2017-22 20,000 MW

Utility grid power

1,000-2,000 MW

Off- grid Applications Solar Thermal Collectors Area Manufacturing Base Solar Lighting Systems
Solar RPO

200 MW 7 million Sqm --0.25%

1,000 MW 15 million Sqm ----

2,000 MW 20 million Sqm 4,000-5,000 MW

20 million 3%

Mission Strategy
To create necessary environment to attract industry and project developers for investment in power generation, manufacturing. To work closely with State governments, regulators, power utilities and local self government bodies. To attract banks and financial institutions to provide necessary finance for setting up solar power projects for grid/ off-grid. To promote off-grid solar applications to meet light and power requirements of energy poor by provision of low cost credit through re-finance facility from IREDA

Policy & Regulatory framework

Solar Power Purchase Obligation Solar specific RE Certificates Incentivizing through NTPC Vidyut Vyapar Nigam Ltd. (NVVN) for setting up of large solar power plants. Designated as nodal agency for entering into PPA with Solar Power Developers. MoP allocating equivalent amount of MW to NVVN. Sale of power as per CERC regulations (to provide Generation Based incentive) Rooftop solar PV and other small power plants connected to LT/11 KV grid with a remunerative feed-in tariff ( routed through IREDA)

Fiscal Incentives
Custom duties and excise duties concession/ exemptions on

Specific capital equipment Critical materials components Project imports

Solar-Manufacturing
To establish low cost, high quality manufacturing facility for solar PV with the targets of 4-5 GW by 2020. To provide incentives to establish SEZ for solar manufacturing parks.

To provide soft loans for technology up gradation and working capital through re-finance facility from IREDA.

Financing the Mission Activities

Fund Sources
To provide budgetary support for the activities To access International Funds under the UNFCCC framework

Fund requirement for Phase II

Review of progress achieved at the end of 11th Plan Analysis of the efficacy of the model adopted

Research and Development

To set up a solar research council to guide the overall technology development strategy

To establish a national centre of excellence to implement the plans formulated by the council.

Main tasks will be testing and certification, developing standards and specifications, networking among different research institutions.

Fund Requirements
First stage Second Stage

Grid Connected Power Plants

1,100 MW
Approximately Rs. 16500 crores

20,000 MW
Approximately Rs. 3,00,000 crores 2,000 MW Rs. 50000 crores 20 million meter square Rs. 20,000 crores

Off-Grid Applications

200 MW Rs. 5,000 crores

Solar Thermal collectors

7 million meter square Rs. 7000 crores

Status of Grid Solar Power-I

Small Power Plants up to 2 MW
Projects for 120 MW shortlisted.
Projects up to 100 MW capacity where PPA signed and registered with IREDA, are finalized. Compliance to technical standards mandatory. GBI will be given to DISCOMs on reimbursement basis.

Status of Grid Solar Power-II

Power Plants above 5 MW capacity
1,000 MW Capacity allocation between SPV and ST to be 50:50 by NVVN. 84 MW capacity projects (54 PV & 30 Thermal) allocated under Migration Selection of PV projects to be done in two batches. First Batch in 2010 and limited to 150 MWp. Second batch next year of approximately 300 MWp Solar Thermal : selection for 470 MW to be done in 2010.

Funding of Off-grid Solar Applications (SPV and ST)

200 MW capacity in the first phase

Demand driven expansion

SPV 30% subsidy & loan @ 5% for individuals & non commercial 30% subsidy OR loan @ 5% for commercial SPV 30% subsidy & loan @ 5% for individuals, non commercial & commercial 90% subsidy for Government projects in special category States and in other remote and difficult areas

Channelization of Funds for Off-grid Solar Applications

Funding under scheme Project mode. Directly by MNRE (approved by PAC) Scheduled commercial banks, NBFCs, FIs such as NABARD, NHB, SIDBI, IREDA etc. Additional channels for supply and maintenance (RESCOs, Financial Integrators, System Integrators, MFIs, Government agencies etc.)

Channelization of Funds for Off-grid Solar Applications

Accreditation
Performance Monitoring Refinancing

MoU signed by IREDA with NABARD, NHB and Central Bank of India.

About IREDA
Objective Extend financial support to Renewable Energy, Energy Efficiency & Conservation projects. Sectors being financed:
Wind Small & Medium Hydro Biomass Power & Cogeneration Solar Waste to Energy EE & Conservation Bio Fuels/ Alternate Fuels

Other Activities

Intermediary for providing financing facilities for various MNRE Schemes. Implementing Agency for GBI Scheme Wind & Solar

Financing Schemes

Quantum of Assistance - Upto 70% of Project Cost Rate of Interest - 9.75% to 12.25% Repayment Period - Upto 13 Years

Financing terms for different sectors

Sector
Small Hydro (up to 25 MW) Hydro above 25 MW Wind Energy Biomass Co-generation Biomass Power Generation

Interest Rate range (%) p.a.

11.50% to 12.15% 11.50% to 12.15% 10.50% to 11.40% 10.50% to 11.40% 10.50% to 11.40%

Maximum Repayment period (years)

10 15 10 10 10

Solar PV/ Solar Thermal Grid connected Power Projects

Energy Conservation Energy Efficiency Projects Waste to Energy

10.75% to 11.75%
10.25% to 12.25% 10.25% to 12.25% 12.25%

10
10 8 10

Cumulative Performance
No of Projects Sanctioned Total Loan Sanctions Loan Disbursements Sanctioned Power Capacity Commissioned Capacity Conventional Fuel Replacement : 1921 Projects : Rs. 121794 Mn : Rs. 66440 Mn : 4378 MW : 2173 MW :1.3 M MTCR/Yr

As on 31.3.2010

Role of IREDA under JNNSM

Type of system
Grid connected power projects

Role of IREDA
Financing of Projects

Small solar power projects and roof top systems

Off- grid applications Solar thermal sector- SWHS

Financing of Projects Generation Based Incentive Monitoring

Soft loans through banks by re-financing Monitoring of the systems Administration of Interest subsidy scheme through banks / financial institutions Funding of projects Funding through intermediaries Soft loans Working capital Re-financing facility as per MNRE

Solar Manufacturing

Risk Factors perceived by FIs

For Financing Solar Power Projects
Regulatory Risk Technology Risk Implementation Risk Infrastructure Risk Repayment Risk Political Risk Policy Risk Fixing of the tariff and assurance on the power sale agreement Technology yet to be proven on the ground Uncertainties in the implementation of the project as per schedule Inadequate evacuation facility and clearances on land and other statutory clearances. Non assurance of repayment from the utilities may result in repayment risk to the developers/ FIs. Changes in fixing of unallocated power with respect to change in political system. Assurance of long term policy with greater accuracy and uncertainties in development of the solar sector.

Risk Factors perceived by FIs

For Financing Solar Power Projects
Financial Risk In time financial closure by the project developer. High project cost - funding from single source . Raising of equity

Guarantee and Warranty Availability of long term guarantee and warranty from Risk the technology providers for the new technology.

Suggested Measures for Risk Mitigation

Advocation for long term / stable/ consistent policies at central / state level- to honor PPAs and MoUs.
Proper Resource assessment studies.

Provision of Risk Guarantee Fund.

Importance of timely clearances / approvals for solar projects. To create special single window clearance cell at state level.

Suggested Measures for Risk Mitigation

To take advance actions to avoid delay of deliveries. To increase manufacturing capacity for indegenious cells/ modules . To establish a mechanism to have information exchange between various FIs and banks for co-financing or consortium financing. Detailed site survey reports to be undertaken through professional bodies to maximize performance efficiencies.

To establish more training institutions for producing skilled manpower.

Suggested Measures for Risk Mitigation

Concurrent monitoring of projects by FIs - appointment of lenders engineers. Periodic inspection / monitoring of projects even after implementation. (TRA and Generation data) Innovative financing models by accessing low cost funds from international institutions.

Thank you
Indian Renewable Energy Development Agency Limited