Tuesday 30 December 2014

CM likely to seek Centre's clearance for proposed power plant in Nalgonda district

HYDERABAD: Chief minister Chandrasekhar Rao is likely to seek environmental clearance for setting up of a 7,500 mega watt thermal power plant in Nalgonda district during his visit to New Delhi in the first week of January.

Last week, after conducting an aerial survey in Veerupalem village area in Damarcherla mandal in the district, it was found that about 7,800 acres area of the proposed project belongs to forest department and is classified as reserve forest. The state will need clearances from the Union ministry of environment and forests for the plant, which is expected to cost about Rs 45,000 crore.

Chandrasekhar Rao is expected to meet Union environment minister Prakash Javdekar and submit the proposal for the power plant and the state government's plans to provide alternate land for reforestation as required under law. The CM is likely to seek similar environmental clearances for various parcels of forest land dotting the 31,000 acres identified in and around Rachakonda area in Nalgonda and Rangareddy districts for setting up of a film, education, pharma and entertainment cities.

It may be recalled that Chandrasekhar Rao during his visit to Damarcherla on December 24 also spoke to Javdekar over phone and sought his assistance in making the power project a reality.

The chief minister is also expected to meet with Union finance minister Arun Jaitely and impress upon him the need to provide more central funds to Telangana to help the new state find its feet and take its welfare programmes ahead.

Monday 29 December 2014

2014: When India inched forward on providing power for all

It was for the first time in Independent India's 67-year-old history that providing 24X7 electricity access to all the citizens became an election issue.

In a country where a third of the population does not have access to electricity and where the remaining face up to 20 hours of load shedding a day, this was a big promise to make. But many believed in the promise made by Narendra Modi, who had earlier managed to provide electricity to all in Gujarat during his tenure as chief minister.

Riding on these expectations, Modi won the general elections and formed the first majority government in India in 30 years. He made his confidant Piyush Goyal the minister in charge of coal, power and renewable energy.

This was followed by the formation of an advisory group under former power minister Suresh Prabhu to identify the challenges to an integrated approach for power, coal and renewable energy, and come up with solutions.

The miscommunication in these ministries was earlier seen as a major handicap in the power sector. There is now a consensus among corporate houses that the government has diagnosed the problem well.

2014 YEAR IN REVIEW: What made buzz in 2014

This led to reforms in the distribution sector, and an amendment related to that was tabled in parliament on December 19. These amendments will promote competition; the aim is to improve efficiency in operations and quality of power supply.

It gels well with state-specific action plans, initiated earlier in states such as Andhra Pradesh, Delhi and Rajasthan.

The aim is to provide 24X7 electricity access to all the citizens there by October 2016. The victory of Modi's BJP in states like Haryana, Maharashtra and Jharkhand has only increased the momentum, and similar plans are being worked out for other states as well.

The government has also moved on e-auction to allocate coal mines. In September, the Supreme Court cancelled the allocation of 214 coal mines allocated from 1993 to 2008, and termed the whole process illegal. The court nullified 47 producing or soon-to-be-producing mines along with 167 other mines.

Efforts have also been made to make government-owned Coal India (CIL) increase its capacity and output. According to latest data of daily stockpiles at 100 power plants in the country, 65 had stocks not enough for even a week. Power plants are required to maintain 15 days of coal stocks, according to guidelines of the Central Electricity Authority.

During the summers, India for the first time generated 9-12 per cent more electricity with a marginal increase of production by CIL. Indian imports of coal might touch 200 million tonnes (MT) for the first time.

However, a target is set for CIL to double its production by 2019, with CAGR of 18 per cent. This looks tough, as the monopoly coal producer has never crossed 10 per cent growth in last one decade and has an average output of 23 tonnes per man shift, compared with the global average of 110 tonnes.

Goyal hopes that improvement in rail connectivity to critical mines in Jharkhand, Chhattisgarh and Odisha will improve the coal production by 200 MT. Rationalisation of coal linkages and logistic supplies would help in unlocking another 200 MT.

Moreover, he is focusing on improving the technology and machinery to increase production from the existing mines of Coal India. However, he ruled out disintegration of this behemoth.

On transmission side of the business, 2014 started on a good note, with Power Grid's announcement of commissioning of first 765kV Raichur-Solapur transmission line, which allowed synchronization of the southern grid.

This meant that India was the biggest grid in the world running on the same frequency of current. The second line is still under construction. Once erected, this will allow flow of the current both ways.
The government has decided to set up Power System Operation Corporation (POSOCO) as an independent government company.

In the process, the institutional framework for an independent, secure and reliable power system operation entity at the national level has been put in place as mandated under the Electricity Act 2003.

POSOCO operates the National Load Despatch Centre (NLDC) and Regional Load Despatch Centres (RLDCs). POSOCO is also designated as the nodal agency for the Renewable Energy Certificate (REC) Mechanism, transmission pricing, short-term open access in transmission, Deviation Settlement Mechanism, Power System Development Fund (PSDF), etc.

The Ministry of Power is also working out the Deendayal Upadhyaya Gram Jyoti Yojana, announced in the budget. The scheme envisaged feeder separation, strengthening of sub-transmission & distribution network including metering at all levels for the rural areas. This scheme may help in round the clock power to rural households and adequate power to agricultural consumers.

The year gone by also saw many power plants changing hands. In the last six months, four power plans saw new buyers. Adani bought two plants, one from Lanco and another from Avantha; Tata Power bought one from Ideal group, and JSW purchased two hydro projects from Jaypee Group.
There is more than 55,000 MW capacity on sale. NTPC is expected to soon announce the purchase of roughly 2,000 MW of capacity.

With not many private players interested in setting up greenfield projects, 2015 could see many corporate houses with good balance-sheets buying more power plants.

Wednesday 17 December 2014

Comparing state solar policies to determine equation for solar market success

Analysts at the Energy Department's National Renewable Energy Laboratory (NREL) have used statistical analyses and detailed case studies to better understand why solar market policies in certain states are more successful. Their findings indicate that while no standard formula for solar implementation exists, a combination of foundational policies and localized strategies can increase solar photovoltaic (PV) installations in any state.

In the report, "The Effect of State Policy Suites on the Development of Solar Markets," NREL researchers examined a variety of policy- and non-policy-based factors that influenced state and local solar markets. On the policy side, two factors strengthen a state's solar market in all contexts: interconnection, or policies that define the procedural requirements for connecting a PV system to the electricity grid; and net metering, or policies that enable the utility to compensate individual PV system owners though a simple billing mechanism. Non-policy issues that have implications for a solar market, such as the amount of sunlight available for potential solar generation, community interest in renewable energy, and the cost of competing grid electricity, were examined in the context of different states and local communities. The authors concluded that:
  • States that have matched their suite of best-practice policies to their unique context have excelled.
  • Both the number of solar policies and the length of time the policies have been in place are important indicators of market success.
  • Support for solar leasing and other increasingly popular third-party ownership models seems to be a distinguishing factor in the success of solar markets in some states-but usually economic factors must also be favorable.
"We built quantitative evidence showing that, across the board, states with three or more market creation or market enabling policies have the most robust solar markets," said the report's coauthor Elizabeth Doris, a technical manager for Policy and Technical Assistance at NREL. "This study provides additional insight into how policies should be considered in light of non-policy factors to best support solar market development."

The findings indicate that, while the age and composition of policy suites are important market foundations, solar policies are more effective when tailored to the economic and demographic background of the state. The report also includes case studies to better understand states that experience lagging solar markets despite having similar best practice policies as states with thriving solar markets. A fact sheet, animated graphic, and other resources summarizing the report's major findings are available at NREL's State and Local Governments website.


This report is the third in a series of analyses that attempt to determine the relationship between demographic and economic contexts, state policies, and distributed solar installed capacity. Related reports include, "The Effectiveness of State-Level Policies on Solar Market Development in Different State Contexts," which found that extreme values of non-policy factors-including personal economic context, solar resource, competing electricity prices, and interest in sustainability-impact solar installation rates, and "Strategic Sequencing for State Distributed PV Policies: A Quantitative Analysis of Policy Impacts and Interactions," which found that nonfinancial incentive policies and population can explain 70% of PV capacity growth.

Monday 15 December 2014

Trends In The Solar Industry: Capital Costs Drop, While Solar Companies Re-invent Themselves

Mercatus just released its North America Solar Trend Report for the first half of 2014. It’s worth paying attention to, as it highlights some interesting industry trends. For those new to Mercatus, the company started in 2009 with the express goal of creating a software platform that would provide more transparency to investors. The idea, according to CEO Haresh Patel was to close “a massive gap between capital markets and developers building projects. They weren’t finding each other, or speaking the same language.” As a result, there were significant inefficiencies that needed to be addressed.
Mercatus has come a long way since 2009, and now serves 60% of the U.S. commercial and utility-scale solar market, including some of the biggest developers, investors, utilities and independent power producers. To date, the company has assessed 22,000 megawatts of projects, with a software-as-a-service platform offering that is an “all-in-one solution for energy investors to screen, diligence, and manage a portfolio of projects, and a platform for developers and asset owners to solicit projects and portfolios to investors and the capital markets.”
By providing this service to much of the industry, Mercatus is extremely well placed to offer informed observations about the industry and emerging trends. I recently spoke with Patel as well as Director of Finance Tom Vogt, who offered their observations of an industry in the midst of significant transition.
Patel noted that one big theme emerging from their review of the information from 2,500 projects – representing approximately 60% of the U.S. market over the past two years – is that the cost of capital has fallen dramatically. He compares this trend to the competitive dynamic that occurred with the solar panel wars in recent years, which commoditized panels and drove the costs down significantly.
The last remaining leg of the stool has been the cost of money and project acquisition. Market forces have taken care of that…Just a year ago, money was in mid to high teens (percentages) for tax equity. That has compressed down. Overall, yieldcos are bringing tremendously lower costs of capital while there is massive potential for REITs (real estate investment trusts) and MLPs (master limited partnerships) to similarly impact the market.
Patel observes that this is a healthy trend, bringing the cost of tax equity money into the low teens, and resulting in bigger and more attractive projects.
He further notes that the overall costs of solar projects have moved from the low teens into the single digits, with the yieldcos putting ever more pressure on the cost of capital. This matters because lower financing costs have a direct and significant impact on the overall price tag.
For every 1% point in lower capital costs, you are seeing a reduction of 20-30 cents per watt in project costs. You are now seeing projects below $2.00 a watt…It’s good for the industry so we can stand alone without subsidies by the end of 2016.
In short, the entire competitive dynamic has changed, with money no longer enjoying the upper hand.
I think the other underlying behavioral change with more money available is that it has to be competitive. Investors are better at providing customer service, responsiveness and speed now that capital is no longer in control.
Image: Mercatus - money gets cheaper, IRR thresholds drop
Image: Mercatus - money gets cheaper, IRR thresholds drop
Vogt and Patel both emphasize that there is another, growing, trend that is beginning to emerge on the radar, and one that may eclipse in importance the falling cost of money. That trend is the movement of some of the major solar companies away from being mere providers and financiers of panels towards becoming energy companies.
Patel sees it this way,
SunEdison’s acquisition of FirstWind is the first shift of the tectonic plate saying ‘OK we are going to be an energy player’. But the NRGs, Exelons, and EON in Germany are not sitting idle. This whole battle is shaping up about who is going to be your future energy provider. It’s not just about solar. To me, this is a bigger story than the cost of money – it’s a recognition that this is about energy solutions.
Image: Sun Edison; TerraForm - 1+1>2?
Image: Sun Edison; TerraForm   1+1>2?
To outsiders, this observation may be striking, although one sees other signs of this, such as SunPower’s recent public statements during their November Analysts Day presentation that they intend to offer a broader suite of services including storage. Solar City has made similar pronouncements, indicating that storage will be a standard part of their offering in a few years. But Patel indicates that this dynamic has been in the works for some time.
We had been hearing this input about two years before it surfaced. We have been retooling our platform to allow our customers to use our platform for solar, wind storage –any distributed asset class. We announced the expansion of our platform into other technologies because our customers have been asking for it.

What does this mean for the industry? For one, it means that it may not simply be ‘the solar industry’ in the future. It may instead be the energy services industry that includes solar as well as numerous other technologies and offerings. It may well come down to owning the customer.

What this also means, according to Vogt, is that the industry may well need to re-tool itself, as it increasingly shifts from utility-scale to distributed energy projects behind the meter at the customer’s site.
What does it mean to your organization when the industry shifts like this? You need entirely new types of people. A lot of this is about how do we scale the financing, analysis, and sales team to be able to support tons of projects. It’s shifted from ten big projects to numerous smaller ones. And these practices will shift from solar to wind. For example, you are seeing people asking ‘How do I get repeatable loans in place and set up for secondary market financing?
Finally, the team from Mercatus forecasts an increasing focus on the commercial sector, on the projects from 50 kilowatts up to 10-15 megawatts.   Vogt expects a pincers movement coming from both sides of the industry.
The large utility-scale guys are saying ‘we are going to buy into this because we want to be in this middle sector.’ Meanwhile, the experts in residential solar are moving to larger projects. There is a lot of movement by both sides to grab this middle market.
Patel feels that while the pending reduction of the Federal Investment Tax Credit from 30% to 10% at the end of 2016 will create some hangover, its long run effect will be beneficial.
I think it’s good to be without subsidies. Eventually people get over the fact ‘well its not 30% but its still 10%’. There may be a bit of pain in 2017, but every month there’s a new state where solar is cheaper than the utility’s levelized cost of energy. It’s when you abruptly change subsidies that we’ve seen markets collapse. Those that plan will do fine, and those that don’t will have problems.
In the end, this is all about market maturity and sustainability of an industry that has existed for decades but just came of age in the last 1,500 days or so, led by states with subsidies such as California, New Jersey, and Massachusetts. The industry is maturing and spreading rapidly, Patel says.
It used to be all about California, and then California and the NorthEast. But now solar is popping up almost everywhere. When you see five MW popping up in coal country, you know it’s mature. We are starting to see other states light up as well.
Image: Mercatus - California shares the wealth
Image: Mercatus – California shares the wealth


Cheaper money, a transformation into energy services companies, and the increased ability to stand on its own with fewer and fewer subsidies. Who would have predicted that five years ago? Only the lunatics, the dreamers, and the extremely farsighted. Like the folks at Mercatus who in 2009 set out to build a platform for an industry that was more notion than reality. Just imagine where we may be five years hence. If you want to know, the folks at Mercatus might be some of the right people to ask…