Solar PV Sector in India: Challenges & Way Ahead

Solar PV Sector in India: Challenges & Way Ahead
Event Organiser Knowledge Partner
Knowledge Paper prepared by
TATA Strategic Management Group
4th Global Solar EPC Summit 2014
Solar PV Sector in India:
Challenges & Way Ahead
May, 2014

TABLE OF CONTENTS
1. Introduction
1.1 Energy Demand in India
1.2 Import Bill of India
1.3 Energy Sources in India
1.4 Solar Power: An Attractive Option
2. Evolution of Solar Sector: Global
2.1 Solar PV Capacity Addition
2.2 Geographical Distribution of Solar PV Capacity
2.3 Module Prices & Investments in Solar Sector
2.4 Global Regulatory Scenario
3. Evolution of Solar Sector: India
3.1 Solar Capacity Addition
3.2 Grid Parity
3.3 Regulations in India: JNNSM Phase I
3.4 Regulations in India: State Regulations
4. Learning from Solar Sector in India
5. JNNSM Phase II
6. Industry Viewpoint
7. Growth Drivers of the Solar sector
8. Conclusion
Annexure
FOREWORD
EXECUTIVE SUMMARY
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About TATA Strategic
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LIST OF FIGURES
Figure 1: Energy Demand in India
Figure 2: Increasing Crude Oil Imports and Rising CAD
Figure 3: Total Energy consumption in India
Figure 4: Coal consumption and production trends in India
Figure 5: Solar potential in India
Figure 6: World energy consumption by fuel type
Figure 7: Global solar PV installed capacity
Figure 8: Global solar installed capacity share, 2013
Figure 9: PV module prices
Figure 10: Investments in Renewable Energy
Figure 11: Solar capacity addition in India
Figure 12: Comparison of Price trends for Consumers
Figure 13: Capacity addition (Target vs. Actual) in JNNSM Phase I
Figure 14: Progress of States on Solar Energy
Figure 15: State-wise RPO status, FY13
Figure 16: Bids JNNSM Phase II B1
Figure 17: VGF Range JNNSM Phase II B1
Figure 18: Primary Survey I
Figure 19: Primary Survey II
Figure 20: Primary Survey III
Figure 21: Growth Drivers: Solar sector in India

BoP Balance of Plant
CAD Current Account deficit
CAGR Compounded Annual Growth Rate
DCR Domestic Content Requirement
EA Energy Act, 2003
EPC Engineering, Procurement and Construction
EPP Energy Production Payment
EU European Union
FiT Feed-in tariff
FY Financial Year
GBI Generation Based Incentive
GW GigaWatt
JNNSM Jawaharlal Nehru National Solar Mission
kWh/ year Kilowatt hours per year
MMT Million Metric Tonnes
NCEF National Clean Energy Fund
NEP National Energy Policy, 2005
O&M Operation and Maintenance
OA Open Access
OEM Original Equipment Manufacturer
PPA Power Purchase Agreement
PV Photovoltaic
RE Renewable Energy
REC Renewable Energy Certificate
RPO Renewable Purchase Obligation
SERC State Electricity Regulatory Commissions
TOE Tonnes of Oil Equivalent
TWh Terra-Watt Hours
VGF Viability Gap Funding
YoY Year on Year
LIST OF ABBREVIATIONS

The Energy Practice at Tata Strategic has in-depth understanding of Indian Power Sector and has
focus on Renewable Energy, O&M strategy and Strategic Energy Management. Tata Strategic has
supported private sector utilities, energy intensive industries, EPC companies & OEMs in areas of
strategy formulation, market assessment, portfolio rationalization, diversification, energy cost
optimization, RPO & PAT management, scenario planning, feasibility study and comprehensive
performance improvement.
This vast body of accumulated knowledge and experience gives us an additional advantage in the
development of this report. The report attempts to highlight the challenges in the solar PV sector
and possible improvement measures.
India offers unlimited growth potential for Solar PV industry. And the start of this journey from the
onset of RPO regulations and JNNSM programs has been laudable. The way ahead is both
challenging and exciting with solar becoming an integral part of the energy mix of the country. Solar
has the potential of bringing the cost of power down in the long run and is free from any emissions
unlike the conventional sources. However, the in-firm nature of solar power poses serious
challenges in terms of integrating it with the grid. This is a first such comprehensive report on
Indian Solar Industry to be released.
We thank Solar Quarter for giving us an opportunity to be the Knowledge Partner for the 4th Global
Solar EPC Summit, 2014. We are grateful to all the industry leaders for sharing their expert views
while developing this report. As always, it was very insightful experience for Tata Strategic team to
materialize this report. We hope it acts as a guiding star for the stakeholders in the Solar PV sector in
India.
FOREWORD
1

This report on “Solar PV Sector in India: Challenges & Way ahead”, prepared by Tata Strategic
Management Group, has a holistic view on the current state of solar sector in India. The key focus
of the report is on identifying key challenges faced by different stakeholders in the Indian market
and how a collaborative effort in the right direction could ensure the growth of the sector to realize
its true potential.
Energy demand in India has been growing at 6% CAGR on account of industrial development and
rising population. One of the important challenges that the country needs to address is that of
Energy Security. Price of coal based power generation is on the rise and is likely to follow the similar
trend going forward. Gas based power generation has reduced by half due to gas production and
supply issues. Nuclear power is highly risky especially in a populous country like India. Biomass
based generation has issues with respect to availability, transportation and pricing. This leaves solar
power as an feasible and attractive option for the country to secure its energy need at an affordable
costs in the long run.
The global scenario indicates a shift in capacity addition from Europe to Asian nations like India and
China. An important reason for this growth has been the consistent and rapid decline in module
prices in the last 5 years. This has brought the solar cost of generation closer to the conventional
costs. However, the sector continues to be driven by several government policies like JNNSM and
individual state level solar policies.
Tata Strategic study indicated that the sector is facing several challenges. Stakeholders opined that
current policy declarations are short term and inconsistent. Further, on-ground implementation of
the stated policies has been poor. Developers face several roadblocks in clearances, land acquisition
and financing. Quality of panels, construction and other supporting equipment is also not up-to the
mark leading to reduced actual generation as compared to the designed generation. Availability of
testing facilities and testing equipment is also limited in India. Last but not the least, the financing
agencies need to develop capabilities for effective due diligence of solar projects to enhance more
non-recourse financing.
Going forward, there is likely to be a shift from being policy driven to parity driven. Consistent
policy frameworks with strict enforcement is needed for building investor confidence in the sector.
Quality is another important aspect that needs to be focussed on by the regulators and developers.
Moreover, there is a need to focus on R&D and value added product and services ecosystem in India
including the monitoring technologies and building trained manpower capabilities.
EXECUTIVE SUMMARY
2

1. Introduction
Energy security concerns and limited alternatives to fossil fuels is driving India to harness its large solar potential
1.1 Energy Demand in India
India’s energy consumption is growing at more than 6% CAGR making it one of the fastest growing
countries in terms of energy consumption. Currently, it is the third largest consumer of energy in
the world just after China and USA. This trend of increasing energy need of India is likely to
continue given the still low on-ground rural reach and low per-capita consumption of energy in
India.
Figure 1: Increasing energy consumption in India
1.2 Import Bill of India
India’s import bill has been rising at ~5% YoY which is primarily due to rising crude import as
crude forms >90% of the imports by value. This has led to a grave economic crisis for the
government through deterioration of Current Account Deficit as indicated in the figure below.
Primary Energy
Consumption per
million people (TOE)
Figure 2: Increasing Crude Oil Imports and Rising CAD
India China US Germany
World Average
1.8
Source: Secondary Research, Analysis by Tata Strategic
Trends in Per-Capita
Energy Consumption
(00’ kWh)
3

1.3 Energy Sources in India
Statistics mentioned above is alarming and highlights the energy security challenge for India in
present time and more so in the near future. At present, India is heavily dependent on fossil fuel
(>70%) primarily coal for meeting most of its energy demand. Producing fossil fuels at accelerated
pace is difficult. This has led to increasing coal imports in India which currently stands at ~17-18%
of the total coal consumed. This figure is likely to rise to ~22% by FY18.
Rising oil imports leading to deteriorating CAD has already been discussed in section 1.2. Biomass
sources accounts for ~23% of energy consumption. However, its availability & pricing pose
significant bottleneck for its widespread adoption. Gas accounts for ~8% of the energy mix and its
consumption is primarily constrained by lack of availability either due to production issues or lack
of reliable gas-grid network for gas in India. Another option for power is nuclear energy, however,
due to numerous security risks associated with this technology it does not provide a large scale
solution either.
Therefore, India needs to develop a new sustainable and reliable source of power to meet the
rapidly growing energy demand without putting pressure on the already hefty import bill for energy.
Figure 4: Coal consumption and production trends in India
Imports
Consumption
Production
Figure 3: Total Energy Consumption in India
4

1.4 Solar Power: An Attractive Option
Solar power with its immense benefits and limited risks offers an attractive option for energy
security of the country. India has high solar insolation & is also densely populated providing an ideal
combination for large scale adoption of solar power in India.
India is blessed with ~300 clear sunny days in a year implying a theoretical solar potential of ~5
trillion kWh/yr or ~ 600 TW in terms of potential install capacity. The daily average solar energy
incident over India varies from 4 - 7 kWh/m2 with about 1500–2000 sunshine hours per year.
Estimates indicate that if 5% of the land were used for harnessing solar energy, the installed solar
capacity would be at ~4,000 GW (which is approx. 20 times the current total installed power
capacity in the country). In terms of power generation even assuming ~15% conversion efficiency
for PV modules, it will still be thousand times greater than the likely electricity demand in India.
Technological improvements especially in battery storage space would further enhance daily usage
of solar power from just 4-5 hours at present.
An important point to note here is that solar power offers a long-term sustainable solution unlike
any other source. Further, it is non-polluting and the source of energy is freely available. Only thing
one needs is to develop right infrastructure to tap this enormous unharnessed potential.
Figure 5:
Solar Potential in India
Source: Solargis
5

2.1 Solar PV Capacity Addition
2. Evolution of Solar Sector: Global
Solar PV has witnessed high growth in the past decade due to falling costs of solar panels, improving
efficiencies and increasing adoption in large Asian markets like China & India
Globally, Solar Photovoltaic (PV) technology has experienced remarkable growth over the past
decade and is on the way to becoming a mature and mainstream source of electricity. Contribution
of renewable energy to the total world electricity generation has increased to ~8.5% by the end of
2013. In other words, if this capacity was not present, an estimate shows that CO2 emissions would
have been higher by ~1.2 Giga tonnes.
Figure 6: World energy consumption by fuel type
Figure 7: Global solar PV installed capacity , (in GW)
The real growth in solar sector has happened post the year 2008. In the last 5 years, global solar PV
installed capacity has grown at >50% CAGR. This trend is likely to continue and it is estimated that
by the end of year 2015 global solar installed capacity would be >200 GW. This would be an
important milestone after achieving the milestone of 100 GW installed capacity in 2012.
In 2013, in spite of the recessionary trends, the capacity addition globally was ~25% more than that
of the year 2012.
Embryonic Phase
Growth Phase
6

2.3 Module Prices & Investments in Solar Sector
2.2 Geographical Distribution of Solar PV Capacity
A noticeable feature is the increasing share of the
Asian nations like India & China in the global solar
installed capacity. In 2011, European Union (EU)
accounted for 74% of the world’s new PV
installations while the same statistics declined to
~58% in 2012. In 2013, the installed capacity of EU
stands at 72 GW or ~52% of global capacity share in
2013. China (with installed capacity of ~20 GW),
Japan (with installed capacity of ~14 GW) and the
USA (with installed capacity of ~12 GW) are the
next in terms of installed capacity. Out of the total
installed capacity in EU, ~50% is contributed by
Germany alone. Majority of the capacity addition
going forward is likely to come from non-European
Figure 8: Global Solar Installed Capacity share, 2013
The investments in renewable energy globally has declined in the last 2 years. However, it is not a
cause of worry as the decline can be attributed to the rapid decline in module prices in the last 2
years from ~$1.10 in 2011 to ~60 cents at present. It is largely believed that the prices have
stabilized and this steep price decline is not likely to be the case in future. This rapid decline of
module prices have brought the solar power generation costs close to the conventional cost of
power bringing it close to grid parity level and leading to solar sector’s rapid growth.
Figure 9: PV Module prices (USD per Watt)
Union countries in particular China, Japan, Australia and India as these countries have currently
harnessed miniscule portion of the enormous potential available. Further, several other countries
especially from large sunbelt regions like Africa, the Middle East, South East Asia and Latin
America are still on the brink of starting their development.
Figure 10: Investments in Renewable Energy, USD Billion
Source: Secondary Research, Analysis by Tata Strategic Source: Secondary Research, Analysis by Tata Strategic
7

Country
Germany
Has formulated RE
Targets, FITs, Quota
Obligations policies
Gives capital subsidy or grant,
Investment or tax credits,
Reduction in taxes and EPP
China
Has formulated RE
Obligations,, tradable
RECs policies
Gives capital subsidy or
grant, Investment or tax
credits, Reduction in taxes
and EPP
US
Mainly state level
policies of FIT, Quota
Obligations, net
metering, RECs
credits, Reduction in
taxes and EPP
Japan
RE Targets, FITs, Quota
Obligations, net metering,
RECs, Biofuels policies are
in place
Provides capital subsidy
or grant, Investment or
tax credits
Spain
Has formulated RE
Targets, FITs, Net
Metering, Biofuel
mandate policies
credits and Reduction in
taxes
France
RE Targets, FITs,
RECs, Biofuels policies
are in place
credits and Reduction in
taxes
Australia
Combination of national
and provincial policies of
RE Target, FIT, Biofuels
RECs
Only capital subsidies,
rebates, grants are given
India
Major renewable
policies at the national
level are formulated
recently
Capital subsidy or grant,
Investment or tax credits,
Reduction in taxes and EPP
to promote RE
Other Incentives
Italy
Has formulated RE
Obligations, net metering,
RECs, Biofuels policies
credits, Reduction in taxes
and EPP
Regulatory Environment
2.4 Global Regulatory Scenario
Most favourable Least favourable
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3. Evolution of Solar Sector: India
Solar sector in India is still driven by policy based incentives & government subsidies
3.1 Solar Capacity Addition
India has been a newer entrant to the global solar market. However, installed capacity has increased
by >50% YoY in the last 2 years. In India, the solar sector is largely driven by the government
policies and regulations. The sector is financially incentivised by the government both at centre and
at state through several policy based incentives and subsidies.
3.2 Grid Parity
Grid parity has been partially achieved. A comparison of average commercial tariff in India reveals
grid parity has already been achieved while the same would be the case in FY’16 for the Industrial
sector. However, the actual grid parity timeline would depend on the state electricity regulatory
commissions (SERCs) taking bold steps to rationalize power tariffs to align it with rising coal cost.
Figure 12: Comparison of Price trends for Consumers (Conventional vs. Solar PV)
Capacity pre-FY’12 was mere 35 MW. These
investments have occurred primarily due to
Energy Act (EA) 2003, National Electricity
policy (NEP) 2005 and Renewable Purchase
Obligation (RPO) regulations.
Real growth in capacity terms has happened due
to JNNSM Phase I in FY’13 and various state
policies like Gujarat, Rajasthan and MP in
FY’14. FY’15 growth is likely to be driven
primarily due to the 750 MW allotted under
JNNSM Phase II Batch 1.
Till date, Solar sector growth is largely depended
on policy incentives and regulations.
INRPerkWh
Source: Analysis by Tata Strategic
Figure 11: Solar capacity addition in India, (in MW)
9

In 2010, the Government of India launched the Jawaharlal Nehru National Solar Mission or NSM
with active participation from States to promote ecologically sustainable growth while addressing
India's energy security challenge. Before announcement of JNNSM, India’s solar power capacity was
as low as 17.8 MW in early 2010.
The objective of JNNSM is to establish India as one of the global leader in solar energy, by creating
the policy conditions for its large scale diffusion across the country as quickly as possible.
The mission set an ambitious target of adding 20 GW of Grid connected and 2 GW of Off-grid
capacity by 2022 in three phases, namely Phase I (2010-12), II (2013-17) and III (2017-22).
Figure 13: Capacity Addition (Target vs. Actual) in
JNNSM Phase I
JNNSM Phase I:
Phase I of JNNSM was focused on large-
scale grid-connected power plants, selected on
the basis of competitive bidding with feed in
tariff acting as ceiling rate. This resulted in an
installed capacity of ~1800 MW in the
country by the end of year 2013 of which
>80% is accounted by large scale solar
projects. The bidding processes offered feed-
in tariffs and long-term PPAs to the selected
least-cost developers.
Phase I was a learning phase for all stakeholders including the policymakers and regulators. Capacity
addition targets of 2200 MW for Phase I was not achieved. There were several delays in policy level
clearances and financial closures. In most cases, the project development activities like project
clearances, land acquisition and financial closure took more than 6-8 months of the total 11 months
of allotted time for project development & construction leading to only ~3-5 months for project
construction. This lead to compromised quality resulting in ~25-30% of the installed capacity in
Phase I being substandard. Moreover, funding agencies were also incompetent to evaluate solar
projects leading to prominent balance sheet funding and limited or no project based financing in
Phase I. Loop-holes in ‘Domestic Content’ policy framework helped Chinese OEMs to promote
thin film based solar modules. RPO scheme introduced to promote solar was also a failure due to
poor enforcement by SERCs as far as Phase I was concerned.
A noticeable fact during Phase I was the lowering of average bid rates by ~28% from INR
12.15/kWh to INR 8.77/kWh due to increasing competition and reduction in module prices.
Source: MNRE, Analysis by Tata Strategic
10

3.4 Regulations in India: State Level Regulations
Progressive States
Progressing States
Nascent States
States yet to act on Solar
TN
AP
KA
MP
GJ
RJ UP
PB
CH
Figure 14: Progress of Indian States on Solar Energy
Source: Primary Research, Analysis by Tata Strategic
11
States
Installed Capacity (MW),
Jan 2014
GJ 861
RJ 667
MH 237
MP 196
AP 93
TN 32
KR 31
UP 18
Jharkhand 16
Orissa 16
PB 10
Others 32
Total 2209

3.4 Regulations in India: State Level Regulations
Key States Target Regulatory incentives
Andhra Pradesh
(AP)
None
• No financial incentives
• Exemption on Wheeling and
Transmission charges
Chhattisgarh (CG) 500-1000 MW till 2017
• Exemption from electricity and stamp
duties
Gujarat (GJ)
Targets exceeded
Current installed capacity:
916 MW
• Preferential tariff
• Solar Park provided
Karnataka (KA) 200 MW till 2016
• Preferential tariff based on reverse
bidding
Madhya Pradesh
(MP)
800 MW
bidding
• Solar Parks would be created
Punjab (PB) 1,000 MW till 2022
bidding
• Exemption on Land Stamp duty
Rajasthan (RJ) 750 MW till 2017
Bidding
• Availability of government land at a
low lease price
• Cost of transmission line to be borne
by the Government
Tamil Nadu (TN) 3,000 MW till 2015
• Preferential Tariff
• GBI for residential consumers
• Single Window Clearance
Uttar Pradesh (UP) 500 MW till 2017
Bidding
• Exemption on Wheeling and
Transmission charges
• Evacuation infrastructure construction
by the state
12

2.
3.5
5
Regulations in India: State Level Regulations
Figure 15: State-wise RPO status, FY13
Solar RPO targets have been met only in 2 states – Gujarat and Rajasthan. The major concern is that
in the other states, the actual capacity addition has been far from the targets taken up by the state.
Madhya Pradesh has improved in the last year and is likely to meet the targets through accelerated
capacity addition. The main reason behind the failure of the scheme was lack of implementation
rigour from the state agencies responsible for promotion of renewable energy. Lack of policy
enforcement and poor financial health of discoms are some of the key reasons for the failure of the
RPO scheme.
RPO implementation is one of the most important drivers for the solar sector. It is absolutely
necessary to enforce the regulations like RPO to build investor confidence and also provide a
strategic direction to the sector. Crux of the issue is how strongly can SERCs enforce Solar RPO on
the bankrupt discoms. Probably, funding allocation from NCEF or similar fund could be a solution
going forward.
Source: MNRE, Analysis by Tata Strategic
13

4. Learning from Solar Sector in India
Some key lessons emerge from the experience so far to strategically guide the sector to its real potential
• Focus should be on qualitative capacity addition rather being solely focussed on
quantitative capacity addition
• Policy formulation has been good but it has not translated into policy implementation
especially for the state level programmes
• Monitoring of solar plants is difficult as they are located in remote locations. Several
plants are not monitored while the rest are monitored manually
• DCR (Domestic Content Requirement) is an important step but not enough to develop
solar manufacturing capability in India
Till now the policy makers and regulators have set quantitative targets on capacity but the quality
of installations are not closely monitored. Moreover, there are no targets on the efficiency or the
PLF of the installed panels. There are no generation based targets specified by the regulators
either. There are about 25-30% projects with substandard quality generating far less than the
designed PLF as per MNRE data.
JNNSM Phase I was characterized with intermittent implementation. The affairs are even worse in
state level policies as implementation of such policies could not boost capacity additions in the
state. Only Gujarat, Rajasthan and Madhya Pradesh added ~600 MW solar capacity in FY14.
Under the state led programs, there have been several discrepancies in tendering process and
changes in policy after its announcements leading to loss of confidence from the investors point
of view.
Drawing parallel from the O&M scenario in conventional power plants, there is a need for such
3rd party service providers in Solar sector. Monitoring, cleaning and repair/replacement are the
activities as far as O&M of solar power plants is concerned. Monitoring being the most important
and issue with solar plants is they are established in remote locations. Therefore, it is creating an
opportunity for 3rd party remote monitoring services companies to emerge and address this need.
DCR has been an important and to certain extent debatable regulatory requirement in solar so far.
From the regulators point of view, developing manufacturing capability in India is important and
it would be beneficial to cater to the O&M needs of the developers in the future. Having said that,
the current policy on DCR is not enough. India needs to develop the ecosystem around domestic
capability building which includes manpower training, promoting BoP manufactures, developing
monitoring capabilities, providing fiscal incentives in terms of cheaper financing to capital
intensive cell manufacturing, setting up R&D facilities for efficiency improvement, value added
products and services and many more initiatives along with development and protection of
domestic panel manufacturers. Further, the timelines for such initiatives should be long term (>3
years) and not just a year as is the case today in order to set the industry in the right direction.
Solar sector in India has started its journey in the right direction. However, a collaborative effort from all the
stakeholders is required to strategically push it to the next level in the near future.
14

5. JNNSM Phase II
With JNNSM Phase II, the policy makers have set the right foot forward incorporating several valuable
lessons from the experiences in Phase I
One of the important targets of the JNNSM scheme is to develop domestic technological
capabilities for solar energy. This is been provided through a provision of preferential tariffs for
domestically sourced materials. In JNNSM Phase I, Batch 1 auctions required crystalline modules
be sourced domestically while cells could be imported while Batch 2 auctions required crystalline
cells also to be locally manufactured, and only thin film technology was allowed to be imported.
This scheme was not a success as majority of the developers switched to thin film technology
leading to most capacity being sourced from China. Therefore, in Phase II, two separate categories
have been created, namely one with Domestic Content Requirement (DCR) and one without DCR.
Further, MNRE has also specified minimum quality and performance requirements for the installed
projects. Policy of one developer not eligible for >100 MW is to foster healthy competition in the
sector.
Phase II of JNNSM aspires to commission
9,000 MW, majority of which will be under
the state schemes (~60%). Bidding scheme
was modified in Phase II compared to Phase
I. This success of the new bidding scheme
could be attributed in terms of the received
bids (2170 MW) being almost three folds
compared to the invited bids (750 MW).
There was more interest shown in the open
category compared to the DCR category as
highlighted in the figure.
Two key features of the JNNSM Phase II are
VGF and DCR schemes.
Bids received had VGF raging from mere
INR 17.5 lakhs/ MW to the ceiling of INR
2.5 Cr/ MW. There was a difference of INR
~1.2 Cr in the starting bids of the Open and
DCR category. The extra VGF under DCR
category is targeted at developing the
domestic solar manufacturing capability. The
tariff for the projects has been fixed at INR
5.45 / kWh and the selected projects will
enter into a 25 years Power Purchase
Agreement (PPA) with Solar Energy
Corporation of India (SECI). The maximum
VGF limit was set at 30% of the project cost
or INR 2.5 Cr/ MW, whichever is the lower.
VGF payments has been proposed in three
tranches.
Figure 16: Bids JNNSM Phase II B 1, (in MW)
Figure 17: VGF range JNNSM Phase II B 1
15

6. The Industry View Point
Industry stakeholders have highlighted several challenges which needs to be addressed for India to realize its
solar potential and achieve the 22 GW target by 2020
6.1 Key Challenges for Indian solar sector
6.2 Snapshots from Select Primary Interactions with Key Stakeholders
Policy
Makers
Developers
EPC
OEMs
BoP
Summary of Comments from Primary Interactions with key stakeholders
“Policy makers have done a wonderful job so far compared to other infrastructure
sectors”
“Policy inconsistency and lack of enforcement is the bottleneck for the sector”
“Developers are aggressive on the sector in spite of several policy uncertainties &
financing difficulties”
“Project development process needs improvement to focus on quality rather than
just cost”
“Lot of world class EPC players have ventured into this segment”
“EPC players are new and often compromise on construction quality to deliver the
project on time”
“OEMs face challenge of intermittent capacity utilization and high currency volatility”
“Domestic manufacturers are always at disadvantage compared to the global peers
due to high rate of interest and taxation in India”
“Less attention is given to BoP area of the solar plant by the developers”
“Several plants are suffering on power generation front not due to poor quality panels
but due to problems in BoP area”
Stakeholders
16

6.3 Comments on Phase II Batch 1 Capacity Targets
Will the DCR targets for Phase II Batch 1
be met on time?
More than half of the industry participants feel that
the DCR capacity addition targets in Phase II Batch
1 would not be met within the scheduled timeframe.
The main reason attributed by more than 90% of
these respondents is the lack of sufficient domestic
capacity given all the projects have to be installed by
the same date.
The domestic OEMs claim that the installed capacity
is more than sufficient. It is the delayed order
placement by the developers that puts the pressure
on the capacity and thus, creates a bottleneck for
delivery.
Developers on the other hand feel constrained to
place early orders due to several risks involved in the
More than two-thirds of the industry participants feel
that the Non-DCR capacity addition targets in Phase II
Batch 1 would be met. Most of participants feel
majority of these capacity would be met through
Chinese OEMs. Anti-dumping duty could completely
change the current scenario. And few stakeholders
opined that it could pose significant threat to
commercial viability of the Non-DCR projects. It
might even result in developers abandoning the allotted
projects.
The concern raised by a few participants here is a
possible cost increase in the panels due to increasing
global demand especially in China. This would lead to
additional cost pressures for the developers. This cost
pressure might trickle down to the EPC players as well.
Will the Non-DCR targets for Phase II
Batch 1 be met on time?
Another concern is about the high USD-INR volatility. More than 50% of the cost of solar farm is
dependent on USD-INR volatility. Hence, an adverse move in currency poses a critical risk for the
industry.
Another point of mention here is the inverted duty structure. There is import duty on the cells
being imported but no duty on import of panels. This leads to non-uniform platform for Indian
manufacturers to compete. Moreover, the higher tax and interest rates further hit the domestic
manufacturers adversely.
Few industry participants believe that the inverted duty structure is justified as the subsidy is given
for cell manufacturing and nor mere cell assembly process. On the other hand, there are others who
promote abolition of the inverted duty to promote the domestic solar manufacturers and reduce
foreign dumping in India. There are expectations that the new government would formulate anti-
dumping regulations and reverse the duty structure in favour of domestic manufacturers.
project. There is need for greater collaboration and flexible approach needs to adopted by both
the parties involved.
Figure 18: Primary Survey I
Figure 19: Primary Survey II
17

6.4 Comments on Phase II Batch 1 VGF Payments
Will VGF disbursements be made on
time?
Viability Gap Funding (VGF) payments are ~INR 370
Cr for the non-DCR projects and ~INR740 Cr for the
DCR bids as per the MNRE data.
There is a wide difference of ~INR 370 Cr in funding
both the categories. Many industry veterans believe that
this difference should have been directly extended to
the manufacturing sector. They are of the opinion that
this difference though meant for the domestic
manufacturer would either not reach them or reach
them in diluted form.
60% of the respondents are hopeful of the on time
VGF disbursements by the government. Almost 80%
of the respondents feel that on time VGF payments
are critical for building investor confidence in the sector and more importantly to protect the
solar value chain as any delay would lead to cost pressures throughout the value chain.
6.5 Other comments
Issue of AC/ DC PLF
Solar PV Industry has developed a terminology of its own in the form of AC and DC PLF. This is
confusing for the new entrants and creates a lot of problems in evaluation & benchmarking. Just to
clarify, it is a normal industry practice to install extra capacity than that quoted in the contract. This
increases the capital involved but allows the developer to supply extra power to the off-taker. AC
PLF is the ratio of actual generation and quoted capacity while DC PLF is the ratio of actual
generation and actual capacity. AC PLF is higher and can be misleading in several cases.
For e.g. In a 10 MW quoted capacity plant, there can be 5 MW extra capacity making total install
capacity of 15 MW. If the generation is ~21.7 million units, it implies that DC PLF is ~17% (gen./
actual annual gen. capacity) while AC PLF would be ~25% (gen./ quoted gen. capacity).
Six PSUs building 4,000 MW solar power plant in Rajasthan
This move to set up 4,000 MW solar has received mixed responses. On one hand, it is a good move
towards clean energy and energy security concerns of the country. Another perspective is that
restricting the plant to 6 PSUs is unfair and the capacity should be open to all as the government is
providing VGF for the project. Decision regarding suppliers etc. should be made on merit through a
transparent process. Further, one important advantage of solar power is that it can be distributed in
nature thereby reducing the transmission costs and losses. With a large concentrated solar power
plant, cost of supply and transmission losses would make the delivered cost of energy high.
Anti-dumping duty
Financial viability of Non-DCR segment would be adversely affected if any anti-dumping duty is
announced. Stakeholders were of the view that such a duty is likely to be imposed this year. It is
estimated that anti-dumping duties would push up the prices of non-domestic panels by 50-60%. As
per industry estimates, DGAD has proposed an anti-dumping duty of 100-110% on imports from
China and 50-60% on imports from US. Impact of this would be a game changer in the sector and
would it boost the domestic manufacturing growth is wait and watch.
Figure 20: Primary Survey III
18

7. Growth Drivers of Solar sector in India
Though the sector is currently being driven by policy, its growth is likely to be fuelled by Grid Parity
achievement and net metering regulations going forward
Subsidy and other government incentives primarily at centre and also at states have boosted the
growth in the sector so far. This is likely to be the prime driver in the next 1-2 years.
However, the real growth is likely only after achieving complete grid parity in true sense. Grid parity
has already been achieved in few states and in few consumer segments. For e.g. commercial &
industrial consumers in Maharashtra. However, lack of regulations like clear open access norms act
as a bottleneck for its growth.
Substantial growth in the sector is likely to occur through rooftop installations which is dependent
on the net metering regulations in the states. Globally, the rooftop installations exceed the utility
scale installations by at least 50%. India is going to be no different with high population density and
increasing power tariffs for consumers. Rooftop installations harness the distributed generation
potential of solar power in its true sense.
Another important step in the growth of the sector is enforcement of RPO measures already
announced. This has been a disappointment so far and needs to be addressed soon.
Key bottlenecks in the sector include policy inconsistency, regulatory uncertainty over OA policy
and land availability. Inconsistent policy is a hindrance for serious players across the value chain to
plan their long term strategic roadmap. Lack of OA is limiting the power sell options available to
the developers due to which they are highly dependent on the centre or state sponsored schemes.
Land prices have increased 10 times in several places suitable for solar farms. Moreover, the adverse
land acquisition policies and several clearance requirements is a constraining factor for growth of
the sector.
Subsidy & other
government incentives
Grid Parity
RPO Compliance
Net Metering
Land availability
Policy Inconsistency
DriversBottlenecks
Uncertainty in Open Access policy
Growth Drivers And Bottlenecks: SOLAR SECTOR
19
Figure 21: Growth Drivers: Solar Sector in India
Source: Primary Research, Secondary Research, Analysis by Tata Strategic

8. Conclusion
Co-ordinated efforts from all stakeholders is required for solar to contribute significantly to the overall power
generation in India
The Indian Solar sector is undergoing a transformation from being a nascent sector. Several global
players have entered into the foray now. Decline in cost of modules has made positive impact on
cost of generation for solar power, and this has brought the prices close to the conventional
power especially for industrial and commercial consumers. Moreover, rising energy demand,
increasing coal prices, increasing diesel prices and with grave energy security concerns Indian solar
sector is poised to grow rapidly in the next 5 years.
Findings from the study conducted by TATA Strategic revels that most of the industry
stakeholders in India have been focused on quantitative capacity addition and have not paid
adequate attention to the qualitative aspects leading to lesser than designed generations for several
solar plants. Various shortcomings such as, lack of standard approach for installation, long &
tedious clearances and land acquisition process, not enough time provided for construction, lack
of attention towards operations & maintenance, inefficient & untrained labour at site and poor
monitoring of performance parameters at site have been observed across plants. Therefore,
though solar insolation is a free resource and solar power an efficient means of generating power,
the stakeholders need to pay adequate attention to quality aspects of the installations to ensure
return on investments and win investors confidence. The need of the hour is to focus on value
added product & services, build R&D and testing facilities and develop trained manpower to
support the growth of the solar in India.
The success of this approach requires the coordinated participation from all the key stakeholders
in the sector and with right set of guidelines being set by the policy makers. These efforts,
sustained over time, can help in achieving the true potential of solar in the country.
Going forward new government is expected to works towards investor and industry friendly solar
sector policies. This would definitely boost the growth of solar industry in India
20

Annexure
21
List of Primary Interactions
ACIRA SolarABB Azure Power
DSMCREDA Enersan Power
FortumFirst Solar Ganges International
IndosolarGSECL Juwi India
Renewables Energies
MPNREDMNRE RREC
SECI Tata Power Solar
United Laboratories
TCE
Waaree Energies Solar Quarter

24
Industry Domains and Functional Areas

Solar PV Sector in India: Challenges & Way Ahead 22
Overview of Energy Practice
Our Client Service Offerings

OVERVIEW OF ENERGY PRACTICE OFFERINGS
23
Select Experience in Renewables Energy Sector
1. India Entry strategy and Partner Identification for an international
renewable energy company
a. Develop in-depth understanding of solar PV scenario in India
b. Understand key strengths and limitations of the company
c. Identify suitable partners for addressing the identified gaps
d. Formulate a go-to-market strategy
4. Solar and Non-solar RPO compliance strategy for a leading chemicals
company in India
a. Develop an in-depth understanding regarding the current and future
regulatory scenario
b. Generate various options for compliance and evaluate them
c. Conduct pre-feasibility study for the selected options
d. Devise a strategic roadmap for RPO compliance
5. Feasibility study and business model formulation for a leading MNC for
usage of Lithium Ion batteries on ‘pay per use’ model
a. Ascertain feasibility of electric commercial vehicles in India and application of
Li Ion in the same
b. Develop business model for primary usage, secondary usage and tertiary
usage of Li Ion batteries
c. Develop business plan for pay per use model of usage of batteries
2. B2B Go-To market strategy in Solar DG solutions for a leading Indian solar
solution provider
a. Develop an in-depth understanding of solar DG market
b. Identify opportunities in three segments: RPO, Diesel Abatement and Green
mandate
c. Developed a go-to-market strategy and a business model for the venture
3. Opportunity Assessment in materials/ applications in solar module for
leading MNC in Chemicals
a. Comprehensive study to understand the key trends in the Indian solar market
b. Conduct primary interactions with various players across the value chain in
the solar industry
c. Formulate an Indian entry strategy with partnership options

TATA Strategic Contacts
25
Manish Panchal
PRACTICE HEAD – CHEMICAL & ENERGY
E-mail: manish.panchal@tsmg.com
Phone: +91 22 6637 6713
Shardul Kulkarni
PRINCIPAL – ENERGY
E-mail: shardul.kulkarni@tsmg.com
Phone: +91 22 6637 6728
Shailesh Agrawal
ASSOCIATE CONSULTANT – ENERGY
E-mail: shailesh.agrawal@tsmg.com
Phone: +91 22 6637 6706
Mumbai
B - 1001, Marathon Futurex,
N.M. Joshi Road
Lower Parel (East),
Mumbai 400 013. INDIA
Tel:+91 22 66376789
Fax: +91 22 66376600
Delhi
Level 12, Building No.8, Tower C
DLF Cyber City, Phase II
Gurgaon – 122002
Haryana, INDIA
Tel:+91 124 4696692
Fax: +91 124 4696970

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