Month: April 2019

Real Talk

Everyone In India Smokes Due To Pollution

“We have no non-smokers in India. Everybody living in India is a smoker. Air is needed for every breath. The only thing you can do if you want to avoid total damage is to stop breathing, which unfortunately you cannot do for more than a minute.” – Dr. Arvind Kumar, chest surgeon and founder of the Lung Care Foundation

According to Air Quality Life Index, developed by the University of Chicago, air pollution cuts life expectancy by almost two years and the consequences of pollution are more fatal than HIV/AIDS, cigarette smoking, and even terrorism.

Not breathing is not an option but including the right foods in your diet can help prevent the ill effects of air pollution. Like broccoli and broccoli sprouts, which prevent a common nasal allergy that occurs with exposure to diesel exhaust.


Tariff a Bone of Contention Between Indian Wind Stakeholders and Government Agencies

Author: Saumy Prateek

Wind is now the cheapest source of energy in India

India’s wind energy sector has come a long way since the introduction of reverse auctions. In 2016, the Solar Energy Corporation of India (SECI) carried out the first-ever wind auction in India. The sector has benefitted immensely ever since. To date, 10.6 GW of wind projects has been auctioned and awarded in India.

The reverse auction mechanism was introduced in the sector after witnessing solar bids plummet in its reverse auctions. Before reverse auctions were introduced, wind projects were mostly developed by private companies for captive consumption or for sale to the state; the process was not transparent. But all of this changed in 2016 when the reverse auction was introduced.

The first batch of the auctioned interstate transmission system (ISTS)-connected wind energy projects were commissioned in India in August 2018.

Wind is now one of the cheapest sources of energy in India. In December 2017, wind power tariffs dropped to a record-low level of ₹2.43 (~$0.038)/kWh quoted in the Gujarat Urja Vikas Nigam Ltd. (GUVNL) 500 MW auction in Gujarat. This is lower than the lowest solar tariff of ₹2.44 (~$0.037)/kWh quoted in the Bhadla Solar auction in May 2017.

Reverse auctions have caused tariffs to plummet and tariffs have remained at levels below ₹3 (~$0.043)/kWh. An increasing number of state agencies have even introduced wind tenders to meet their non-solar renewable purchase obligations (RPOs).

Government support in the form of wind resource assessment and identification of potential sites through the National Institute of Wind Energy, the waiver of interstate transmission charges, and concessional customs duty exemption on certain components of wind electric generators have all helped.

As wind tariffs fell below solar, it also enabled the government to come up with wind+solar hybrid policies and regulations. Recently, a tariff of ₹2.67 (~$0.03794)/kWh was quoted in India’s first-ever wind+solar hybrid auction conducted by SECI.

After the decline in wind tariffs, the government began exploring the possibilities of offshore wind as India has one of the longest coastlines in the world. Recently, the MNRE issued draft offshore wind energy lease rules which are aimed at spurring activity in offshore wind, which has until now remained dormant. In June 2018, the MNRE established a short-term installation target of 5 GW of offshore wind capacity by 2022 and a long-term installation target of 30 GW of offshore wind projects by 2030.

However, not everyone is thrilled with reverse auctions and the direction of tariffs especially after the introduction of tariff caps.

When contacted, a top executive at one of the leaders in the Indian wind energy sector said, “Yes, we have come a long way since 2016 and the commissioning of the first batch of auctioned wind projects marks the completion of a circle that the sector has turned. Tariffs have gone down and there are tenders galore, but all’s not well.”

“As it happened with solar, the low tariff bug has bit the implementing agencies in the wind energy sector too. Once the tariff went to ₹2.43 (~$0.038)/kWh in a GUVNL auction, implementing agencies started fixing upper tariff ceilings way below the ₹3 (~$0.043)/kWh mark in tenders. This is a huge negative as the same tariff cannot be achieved in other locations. Implementing agencies need to understand the potential of the areas they are tendering for, as the height of windmills plays a huge role in the cost of projects,” added the executive.

An executive at a wind project development firm said, “As of now, everything is fine, but the mad dash for low tariffs can ruin the progress made in the past three years. Another issue that is being faced is curtailment in windy states.”

Speaking about the tariff issue, a government official told Mercom, “Our aim is to provide cheap, green power to Indian citizens. Technologies are getting cheaper, and that’s why we are reducing upper tariff caps. We are not just doing it on a whim but after due diligence. Firms always keep profit paramount, even they must change their attitude a bit and work for the betterment of India, not just filling their coffers. Tariffs around the ₹2.60 (~$0.038)/kWh mark will still be profitable for them if we look at the low of ₹2.43 (~$0.038)/kWh.”

Low tariffs are a bone of contention between the stakeholders, and the government agencies.

“The reverse auction procurement system in solar and wind was designed to award the projects to the lowest bidder. What we have now is a reverse auction where opening bids are set and can only go in one direction – down. Government agencies need to consult with developers and investors and strike a balance between tariff, project quality and profits,” said Raj Prabhu, CEO of Mercom Capital Group.


The Gift Of Fresh Air

Babies nap outside in Nordic countries like Norway and Sweden. They fully embrace the concept of ‘friluftsliv’, which translates to ‘open air living’ and conveys the importance of spending time outside to be healthy and happy. Even when the temperature is as low as -15°C you’ll find babies napping outside in a warm sleeping bag. As the old Swedish saying goes, “There is no bad weather, only bad clothing.”


Investment in Indian Solar Sector Dips to $9.8 Billion in 2018

Author: Saumy Prateek

In 2018, investments in the Indian solar sector totaled approximately $9.8 billion compared to 2017, in which almost $11.5 billion flowed into the Indian solar sector.  2018 witnessed a decline of 15% in investments year-over-year (YoY). These findings were revealed in Mercom India’s recently released 2018 Q4 and Annual India Solar Market Update.

Even though downstream investments fell YoY due to a decrease in solar installations and decline in system costs; the total investment reached almost $10 billion as the upstream activity increased due to investments in new manufacturing facilities.

2018 was a challenging year for the Indian solar market with GST rate issues, the imposition of safeguard duty on solar cells and modules from China and Malaysia, and the cancellation of more than 4 GW of auctions by government agencies citing high tariffs, leading to the first decline in installations since 2014.

The Indian solar market added 8.3 GW in new large-scale and rooftop installations in the calendar year 2018.

However, the imposition of safeguard duty also led to manufacturing capacity addition domestically.

Investments in Indian Solar Sector Dips to $9.8 Billion in 2018

Few Noteworthy Deals

In January 2018ReNew Power raised ₹22.35 billion (~$352 million) to be used for its expansion and loan-payment plans. ReNew Power raised the amount through Non-Convertible Debentures (NCD) which were issued in two parts. The company raised ₹14.75 billion (~$232 million) through a multi-issuer cross-collateralized rupee bond. The remaining ₹7.6 billion (~$120 million) was raised through a credit enhanced NCD and has a tenor of 17 years.

In the same month, solar firm Orb Energy raised over $14 million (~₹954 million) in equity and debt to expand its in-house finance facility of rooftop solar projects for Small- and Medium-sized Enterprises (SMEs) in India. The Netherlands Development Finance Company (FMO) provided $4 million (~₹254 million) in equity funding, the Overseas Private Investment Corporation (OPIC) provided $10 million (~₹636 million) as long-term debt.

Mahindra Renewables, a wholly owned subsidiary of Mahindra Group, achieved financial closure for a 250 MW solar project in the Rewa District of Madhya Pradesh. YES Bank will provide financing in the form of to ₹7.5B ($115.5 million) in project debt, and other financial institutions will provide up to ₹2 billion ($30.8 million). In January 2018, the International Finance Corporation (IFC), a member of the World Bank Group, had announced it will provide $50 million (~₹3.2 billion) as senior or IFC-A loan to Mahindra Renewables. Back then, the IFC had also announced, “Apart from loaning the $50 million (~₹3.2 billion), the IFC will also assist in mobilization of the syndicated parallel loan of up to $100 million (~₹6.4 billion).”

Vector Green Energy completed the refinancing of two solar projects with 223 MW of combined capacity in Telangana. The refinancing was initially sought after the company acquired the projects from First Solar. IndusInd Bank and L&T Finance together sanctioned more than ₹10 billion (~$156 million) to Vector Green toward the acquisition of the First Solar portfolio.

In May 2018Sunsure Energy, a solar turnkey solutions provider, raised zero-collateral based debt capital worth $2.2 million from TATA Cleantech Capital, L&T Finance, and cKers Finance to be used as working capital to construct solar photovoltaic (PV) projects up to 100 MW in FY 2019.

In June 2018, Indian renewable energy project developer Azure Power raised $135 million in debt financing from a consortium of development finance institutions. The line of credit was led by International Finance Corporation, a member of the World Bank Group and attracted the participation of leading institutions, including FMO – the Dutch development bank, Société de Promotion et de Participation pour la Coopération Economique (Proparco) – the French development finance institution, and Oesterreichische Entwicklungsbank AG (OeEB) – the development bank of Austria.

The same month, Fourth Partner Energy, a distributed energy management company, raised a $70 million investment from The Rise Fund, a global impact investment fund managed by TPG Growth.

In August 2018, Cygni Energy Private Limited, a solar DC and microgrid solutions provider, raised $6.4 million in funding through a combination of equity and debt funds. The equity funding was provided by Endiya Partners, a leading early-stage venture capital firm that invests in product start-ups. The debt funding was made possible by IndusInd Bank, a leading private bank in India.

In November 2018Freyr Energy, a Hyderabad-based rooftop solar company, raised ₹270 million (~$3.81 million) through a mix of equity and debt investments. The round was led by C4D Partners, a Netherlands-based Impact Investment Fund.

Indian solar companies did not receive any significant venture capital or private equity investment in 2018.

Full list of Q4 2018 funding and M&A deals and investment details: 2018 Q4 and Annual India Solar Market Update


MNRE Issues Testing Guidelines for Battery Storage

Author: Saumy Prateek

Guidelines to Facilitate Product Approval

The Ministry of New and Renewable Energy (MNRE) has issued draft guidelines for performance testing of batteries (lead-acid and nickel-based chemistry type) series approval for mandatory registration with the Bureau of Indian Standards (BIS).

The draft guidelines for series approval (grouping) are open to comments which are due by 18th April. The draft copy was prepared with inputs from stakeholders, including experts from test labs, BIS, and the battery storage industry.

Battery energy storage system (BESS) was brought under the ambit of the Solar Photovoltaics, Systems, Devices, and Component Goods (Requirement for Compulsory Registration under the BIS Act Order 2017) which was implemented on April 16, 2018.

As the Indian renewable energy industry expands, the government is trying to catch up with quality issues and is setting up testing guidelines to ensure all products sold meet established standards. MNRE issued a new National Lab Policy in December 2017 to improve the quality and reliability of renewable energy projects in India.

Because batteries are of varying sizes, ratings, and types, each category of batteries is to be grouped when submitting samples to test labs and will be granted approval for the series (group) of products based on testing of representatives’ models.

Grouping by category for testing is a good move by the MNRE. Grouping had become an issue with testing inverters where labs had no clarity on this issue, and testing of individual models became cumbersome, expensive and delayed.

According to MNRE, the information regarding the material of the containers, the separator used, and the type of sealing adopted (in the case of sealed batteries) and the overall dimensions must be provided by the manufacturer while submitting the batteries for testing.

The manufacturer will need to recommend the procedure to be followed to charge the cells and batteries. If the information is not provided by the customer, the procedure described in applicable standards will be followed.

The short-term tests (capacity test, retention of charge, sulphation test and water loss test) will be performed on all ratings included in the series. In case any test samples fail any one of the short term tests, the particular rating will be resubmitted for the testing.

Among the product range of cells and batteries from a manufacturer, the representation model of that particular cell and battery will be tested. The highest rated capacity sample will be subjected to all tests (including endurance tests), and the qualifying product will be issued test reports to all samples covered in the series.

For cells and batteries to be considered in the same series, the manufacturer has to submit an assurance to the test lab that all the models have been manufactured with no change in the grid alloy composition, grid purity, grid thickness, ingredients used in the electrode preparation, method of preparation and the thickness of the electrodes and quality systems followed for manufacturing.

The government issued a proposal to set up a national mission on transformative mobility and battery storage initiatives last month. The Cabinet has also approved the creation of the Phased Manufacturing Program (PMP) to support the development of large-scale, export-competitive integrated batteries and cell-manufacturing giga-scale projects in India. The Phased Manufacturing Program will be valid for five years until 2024 and help in localization of production across the entire electric vehicles value chain. The program is expected to be finalized by the national mission on transformative mobility and battery storage.

Unlike for solar components, battery testing guidelines are being established before the announcement of the national mission for battery storage.

Image credit: Central Power Research Institute