In The Spotlight
India’s pursuit towards green energy, upholding solar as the tool to build an energy rich future has translated into nearly 12 GW cumulative installed solar capacity in 2017. Considering, that the country stood at 5 GW of capacity in 2015, it is commendable how Indian solar industry has progressed more than doubling the capacity within a bit more than a year. With set targets being achieved, India is constantly trying to increase the capacity of installation for faster green energy transition. It is a smart decision considering the demand for solar in the whole world to save the environment and reduce raising energy cost.
Solar Can save The Environment
Global energy supply through fossil fuels have reached from 6,100 million tonnes of oil equivalent (Mtoe) in 1977 to 13,700 Mtoe by 2014. Moreover, alongside China, and the United States of America, India is one of the top coal-related CO2 emitters, speculated to contribute more than 70% of global CO2 emissions cumulatively in future. Research shows that energy-related CO2 emissions in the world will increase from 32.3 billion metric tons in 2012 to ultimately reaching 43.2 billion metric tons in 2040, if we continue using fossil fuels.
On the other hand, utilizing renewable energy has helped Japan to phase out fossil fuel usage, displaying a decline in CO2 emission by 0.4%/year. Research also suggests that increase in renewable energy (mainly solar) has reduced fossil fuel share by 22 per cent. In the same breath we need to highlight that 1 KW of green energy can reduce more than 3,000 pounds of CO2 annually. So, it is pretty clear that green energy shift is the only thing that can protect us for a dystopian energy starved future.
Pollution Curbing Solar Growth
Although solar is growing globally, a new study has revealed that dust and particulate matter (PM) may be reducing energy yield by 17-25 per cent annually in Northern parts of India. The dust particles create a barrier between sunrays and the solar panels, reducing the exposure to the sun, thus declining energy yield. Since the simple enough technology of solar panels depend on ambiance to capture and harvest energy, ambient pollution can create significant problem for solar yield generation.
In the same breath, we can highlight that similar issues have been identified around the world. For instance, solar panels in Baghdad were seen to be producing less and less energy due to dust particles blocking the sunrays and creating a layer over the panel. Even a fine layer of dust, practically unnoticeable on the solar panels are shown to decline the energy generation by 18.74% annually. Studies also show that poor air quality was the reason behind 15-25% yield loses in Singapore in 2013.
At this point of discussion, it is crystal clear that pollution is not just an eminent threat to our environment, it is also halting solar growth, which is the only viable option for us to build an energy rich future. In order to ensure continued efficiency of performance for the solar power system, the best possible solution would be to frequently clean the panels, wiping out the barrier created of fine dust particles that are rarely visible to the naked eye. As studies show a whopping 50 per cent increase on energy generation after every clean up, the process would be more than enough to solve the yield reduction problem.
In an ideal world, we all would have taken aggressive steps to phase out fossil fuel much sooner than expected, to help clean, green, solar grow. But in the present circumstances, the best alternative would be to increasingly adopt solar energy with a futuristic outlook, and bearing in mind the broader benefits that it would entail, including the environmental implications. Hopefully, with the phenomenal growth of solar and renewable energy across the globe, the use of fossil fuels could become a distant memory in time, for green energy (mainly solar) to acquire the mainstay position.
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India Ratings and Research (Ind-Ra) estimates that INR560 billion out of total debt of INR1,730 billion could be refinanced at a lower borrowing cost across various infrastructure sub-sectors in its portfolio till FY19. Also, there could be a shift in the type of instruments issued for the purpose of raising capital in the sector largely to the capital market instruments, namely bonds, from the conventional term loans.
Ind-Ra estimates that for each 1% reduction in interest rate, the incremental surplus as a % of cash flow available for debt service would be highest in toll roads, followed by solar and wind energy. This could mainly be because the interest burden on these sectors is high as most of these projects are in the ramp-up stage.
Solar energy projects owing to their stable revenue profiles and better counterparties and toll road projects with reasonable track records and stronger sponsors and longer tail period, than other sub-sectors, appear to be the ideal candidates for refinancing. Though Ind-Ra expects a replacement of banks loans by bonds, traction will be witnessed through infrastructure investment trusts.
Also, Ind-Ra observes that the benefit of interest rate reduction will be the least for the annuity sector, followed by the thermal power sector, because refinancing risk has already been factored in at the time of initial funding for the former and due to minimal improvement in persistent issues in the latter.
An estimated INR45 million/project/year is projected to be the surplus for FY18, based on the average interest rate reduction of around 65bp witnessed for Ind-Ra rated entities across various infra sectors. The debt service coverage ratio is likely to improve 0.04x in FY18 across infra sectors.
The strong payment security mechanism from the counterparty in the recently concluded auctions for 750 MW of solar projects in Rewa Solar Park, Madhya Pradesh, will enable fund raising at competitive rates, says India Ratings and Research (India Ratings). The agency believes that the reduced risk from the counterparty because of payment security mechanisms is one of the levers for the steep fall in tariffs quoted by the bidders.
The new payment security mechanism includes the state government payment guarantee, payment security fund (about 35-40% of revenue at plant load factor of 22%) and a deemed generation compensation for the grid unavailability, in addition to the regular letter of credit. Low tariff will also incentivise the offtakers to pay on-time. Notwithstanding the new payment structure, in the event of the tariffs not being commensurate with the capital cost - reminiscent to the aggressive bids seen in the road sector – will stress the coverage ratios of these projects. Thus the cost of funding and lower solar panel prices (fallen by ~28% yoy) are critical factors for the sharp fall in solar bids.
While the state guarantee and payment security fund (PSF) provides a cushion,however it is imperative to know the terms for invocation of the guarantee and the replenishment of PSF. In the event of guarantee invocation or tapping of PSF after a substantial delay in payments – beyond 60 days – the players could be forced to avail working capital facilities and bear the related financial costs.
In another development, Solar Energy Corporation of India (SECI) is now included as a beneficiary in the tripartite agreement with the Reserve Bank of India, Government of India and the states. This development will allow withholding of central assistance to states in case of a default to SECI. As a result, SECI’s future bids are likely to fall to lower tariffs than earlier. The reduced counterparty risk will aid in curtailing the borrowing costs for these projects.
Evolving Security Mechanism A Positive
Though solar projects relatively enjoy stable receivable days from most counterparties, the underlying risk from the weak financial profile of most distribution utilities remain. Certain distributionutilities however exhibit different payment days for different generation assets (thermal and wind) and this pattern among discoms provides limited comfort in assessing the reliability of the offtakers. Thus the inclusion of SECI as a beneficiary in the tripartite agreement gains significance in providing reliability of collections.
Threat of Grid Uncertainty Partially Addressed
In light of grid curtailment faced by wind projects in few states and also by solar projects in Tamil Nadu, the development of providing deemed generation benefits for grid non-availability is a positive development. India Ratings had highlighted this in the report ‘Market Wire: Grid Curtailment Contagion Puts Pressure on Credit Profiles of Renewable Energy Projects’.
However, Ind-Ra believes that it may be unsustainable for the off-takers to carry this risk as the distribution utilities do not operate the grid. The responsibility of grid operation lies with the loaddespatch centres within the constraints posed by the transmission infrastructure and load-generation balancing. Thus, the onus of enabling evacuation also lies with the open access provider and network operator. Clarity in responsibilities and contractual incentives and penalties will ensure that all the stakeholders (including off-takers, open access providers and network operators) are aligned towards the goal of uninterrupted evacuation for renewable power.
Bids Reach New Lows
Auction for implementing 750MW in Rewa Solar Park was concluded at INR2.970-/kWh, INR2.979 and INR2.974 for three units of 250MW each, with 5 paise per year escalation for first 15 years. Offtakers are Delhi Metro Rail Corporation and Madhya Pradesh Power Management Corporation Ltd. The previous low in terms of tariffs of INR4.34/kWh was offered by Fortum of Finland was exactly a year ago in January 2016. Rewa Ultra Mega Solar Limited, which is developing the Rewa solar park, is a joint venture of SECI and Madhya Pradesh Urja Vikas Nigam Limited. Land acquisition and evacuation are the responsibility of the solar park, thus mitigating significant risks for the project developers. The low tariffs discovered makes the solar projects highly competitive in merit order, as the variable charges of marginal power for most states lie above INR3.5/kWh. - Contributed By ICRA
Indian solar industry has scaled great heights surpassing 10 GW in 2017, from a meagre 10 MW in 2010. Even without huge industrial muscles that other countries keep on flexing, India braved all odds showing continued growth in the solar vertical. From 2015 to the beginning of 2017, Indian solar sector has successfully doubled its solar capacity (5GW in 2015- 10GW in 2017), earning commendations in the global podium and inspiring developing countries to venture ahead. Obviously, Hon’ble Prime minister Shri Narendra Modi created the urgency in the green energy shift by announcing development of 100 GW solar-installed capacity by 2022, which served as the ignition for upward growth that the Indian solar sector is displaying. And it is easy to understand that this much needed boost will bring numerous opportunities.
However, the obvious question surfacing from this equation is- ‘whether the opportunities will be for domestic manufacturers or not?’ The legitimacy or relevance of this question is absolute, since Indian solar reliance and the foundation of an energy rich future is closely tied to the improvement of domestic manufacturers (for details on how domestic manufacturing and Indian solar success is connected click here). Therefore, it is important to understand how this growth is shaping our future.
Understanding the Glitches
Subsidies and rebates on capital expenditures, additional one-time allowance, tax-free grants, and acceptance to foreign investments have helped domestic manufacturing to flourish in India. And continuous support from the Indian Government (through a plethora of policies) has led these initiatives into success. However, India is spending more in importing solar modules (USD 980 million) than gaining from exporting them (USD 50 million, Sept 2016). This is surprising since India wants to claim a sizable portion of the global solar market and kick back the profits (of exports) for socio-economic reform. Chinese module suppliers have increased their market share in Indian PV market to 75 per cent from 50 per cent last year. And recent market analysis reveals that 8 out of top 10 module suppliers in the Indian market are Chinese. All of this points towards growth devoid of domestic manufacturing progress, which is another way of saying ‘a sound yet unstable solar energy future for India’.
China can produce and sell solar modules at a price range cheaper by INR 5-6 per panel than domestic products (aggressive pricing is the main reason behind India importing Chinese modules), because of volume scale, cheap energy and access to low-cost capital. Additionally, the lack of a uniform quality control for solar modules in India makes it easier for China and other foreign suppliers to introduce low quality modules in our energy mix. Low quality imported modules will untimely add extra expenses in repair or replacement processes, slowing down ‘power for all’ initiatives and affect the trust on the green energy shift.
To ensure India’s vision of self-reliance besides reaching 100 GW target, Government should consider placing MIPs (minimum import price) on imported solar modules. Foreign solar players are selling their modules in India at a lower rate than their actual (global) price. And as India lacks a uniform quality assessment regulation, importers are finding it very easy to dump low quality modules in the market. This practice is recognized by the industry leaders as ‘e-waste dumping’. Having scale and Government subsidies, Chinese solar players can afford to sell their modules at a lower cost than domestic companies do; ultimately, curbing demand for domestic modules and shrinking Indian solar growth.
However, making sure that imported modules cannot be sold in the Indian market below a certain price limit, can bottleneck low quality product access in the country; and help domestic manufacturers to compete on a level playing field. We can look at EU’s MIP imposition on imported solar equipment for example. European Union has changed the MIPs from time to time, going back and forth from 0.56 Euro/Wp to 0.53 Euro/Wp to maintain a healthy demand for domestic manufacturers.
India uses MIPs to regulate the access of imported steel in its market, to safeguard the domestic manufacturers and sellers. Moreover, judging from domestic steel manufacturers’ recent request to Government for continuation of MIPs, we can speculate that it has benefited the industry. The same can be done for the solar industry, mirroring EU’s steps to utilize International trade and competition rules to create a standard quality for import modules and assuring a better future for nation’s solar industry.
Imposing MIP is just one of the many remedies that can help India’s internal solar growth to centralize industry within borderlines. Current growth has paved a path for a better future, but domestic manufacturing is needed to turn the possibilities into reality.
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At its core an Energy Storage System (ESS) is comprised of three major components each bearing equal importance. The battery which is the energy container; the Power Conversion System (PCS) or inverter which interfaces the DC battery system to the AC power system; and the Power Plant Controller (PPC) which governs, monitors and executes the intended functions of the energy storage application.
Although we have no choice but to accept that the battery is the consumable component, the balance of system of an ESS should not be regarded as such. While heavy emphasis is typically placed on the choice of battery technology, it is important to understand that poor selection of the other two core components can severely impact the performance, lifetime and return on investment of the ESS. In this article we will seek to shed some light on the importance of the PCS and the PPC.
The Power Conversion System (inverter)
The PCS can be subjected to brutal utilization as it may be expected to handle varying power levels in both directions 24 hours per day. The stresses imparted on the PCS can easily make it the weakest link.
When procuring a PCS, system owners should select power conversion technology that is designed for high reliability and availability, and up to three decades of service life. It is also essential that the equipment can be operator maintained, tracked, and managed. The PCS should be designed with grid support functionality and should facilitate upgrades as the energy ecosystem advances.
Owners and operators should favor flexible and easily transportable architectures that can be repurposed as needs evolve. Most importantly, they should choose suppliers that will stick around for the long haul.
The Power Plant Controller
Many are of the opinion that an energy storage control system is not difficult to implement. This outlook is based on assumptions that the hardware can be assembled from off-the-shelf components, and that there is an abundance of skilled software programmers to create algorithms. Energy storage is a critical power application and as such controlling it is by no means a trivial task.
Some argue that since ESS controls is a new technology sector, there are no real industry experts or veterans. On the contrary, those with experience in critical industrial and power systems controls are indeed the experts who can utilize equipment and best practices from those applications to create solid energy storage control platforms. It is imperative that control system providers have the means and experience to address important factors such as redundancy and cybersecurity.
All considered, system owners should select the ESS control provider based on demonstrated success and experience in related critical power control systems and industrial automation. They should also consider the longevity and staying power of the provider they choose.
The bottom line is that the PCS and Plant Controller are just as important to the ESS as is the battery. A poor choice of one or both of these two core components can result in an unprofitable and dysfunctional ESS that will be fraught with recurring repair and replacement costs.
Want to learn more about Energy Storage? Watch the video here.
Living at the edge of the grid, a distant community in Western Australia experienced severe power quality and uptime issues. Bush fire, a natural disaster common in the area knocked down the poles and overhead lines, with a high cost for the local utility to restore and maintain. Thomson Solar and Schneider Electric partnered to create a solution by powering the community with a standalone off-grid system. This solution is replicable to all small and mid-size dwellings living at the edge of the grid suffering from power-quality issues and where utilities must invest a large amount to maintain the commitment of reliable power for a small customer base.
As the homeowners were electing not to reconnect to the local utility grid, the system had to meet certain operating standards. The goal was to generate electricity on-site independently of the grid, using storage to assist in operating large three-phase loads while also providing power at night and during cloudy conditions. The system was designed to provide grid autonomy, yet with no undue inconvenience for the homeowners.
Schneider Electric provided a solution at a fraction of the cost of replacing power poles and overhead lines. The entire system is self-contained, and was deployed in a short time frame to restore power to the site. It shows that solar energy can be more cost-effective. This, in short, is the promise of standalone energy systems.
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No decision has more impact on the system cost and performance than the choice of inverters as this dictates design constraints for much of the balance of system. Today, system designers have more options than ever when architecting solar systems. While this may seem like a great advantage, these options necessitate an ever-growing number of decision points in the design process.
Before selecting brand or model the designer must first choose the macro level class of inverters, central or three phase string inverters. Until recently, the normalized price of string inverters (as measured in $/W) was much higher than central inverters, making the decision to use central inverters for utility-scale quite straightforward. That unit price gap has greatly diminished, resulting in a heightened debate on the relative merits of central and string inverters, often without empirical data to support the arguments.
The jury is still out on which is the so-called “best solution” and likely for good reason as the overall system size has such a significant impact on the relevant answer. In my article for Renewable Energy World, I analyzed the relative merits of central and string inverters in a typical system in North America.
The analysis is limited to the relative costs of central and string inverters for utility-scale projects in North America in three areas: CAPEX, inverter service life and true cost of service.
An excellent day 1 Opening panel Discussion at India Rooftop Solar Congress 2017. Panel was moderated by Mr. Parag Sharma, COO, Renew Power.
- 18 May 2017 - 18 May 2017
- Hotel Holiday Inn
- Asset Area 12, Aero City Hospitality District, New Delhi, Delhi 110037
- 27 April 2017 - 27 April 2017
- Hotel Mirage
- Tulsi Niwas Chawl, Marol Village,, Sir Mathuradas Vasanji Rd, Marol Village, Andheri East, Mumbai, Maharashtra 400047
- 04 May 2017 - 04 May 2017
- Pride Plaza Hotel Aerocity, New Delhi
- Asset 5A, Hospitality District, Aerocity, Indira Gandhi International Airport, New Delhi, Delhi 110037
- 13 January 2017 - 13 January 2017
- THE SURYA
- NEW FRIENDS COLONY, DELHI 110025
- 25 January 2017 - 25 January 2017
- Hotel Pride, Bangalore
- 93, Richmond Road, Langford Gardens, Bengaluru, Karnataka 560025
Lightway solar (BaoDing Lightway Green Energy Technology Co., Ltd) is a LONGJITAIHE group company. Longjitaihe established in 1995, is a fortune 500 company of China.
Below are the excerpts of our recent interview with Mr. Rajnikanth Umakanthan, Managing Director, 3TIER India