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Scope, Prospects & benefits for greenfield Hybrid projects with Energy Storage

Year 2016 had  been a record breaking year for Solar PV industry globally.

Solar Energy’s role in India’s development

Issuances of bonds, non-convertible debentures (NCDs) included have been witnessing record volumes for past 3 years.

Several generations of solar PV technologies have seen significant progress on many fronts in recent years.

Large-scale project funding crosses $10 billion in 9M 2017

Mercom Capital Group, llc, a global clean energy communications and consulting firm, released a new report on funding and merger and acquisition (M&A) activity for the solar sector in the third quarter of 2017 and the first nine months of 2017.

To learn more about the report, visit: http://bit.ly/MercomSolarQ32017 

Total corporate funding (including venture capital funding, public market and debt financing) in the first nine months (9M) of 2017 was slightly lower compared to the same period in 2016, with about $7.1 billion raised compared to the $7.5 billion raised in 9M 2016. There were 143 deals in 9M of 2017 compared to 125 deals in the same period of 2016.

Looking at just Q3 2017 data, Mercom found that corporate funding in the solar sector grew 74 percent compared to Q2 2017, with $2.4 billion raised in 45 deals. In Q2 2017, $1.4 billion was raised in 37 deals. Year-over-year (YoY), funding in Q3 2017 was about 19 percent lower compared to the $3 billion raised in Q3 2016. 

“Debt financing activity outside of the United States helped bump up corporate funding in the third quarter as financing activity in the United States was muted ahead of the Suniva anti-dumping case decision,” commented Raj Prabhu, CEO of Mercom Capital Group. 

Global VC funding (venture capital, private equity, and corporate venture capital) for the solar sector in 9M 2017 rose a slight seven percent to $985 million from $925 million raised during the same period in 2016, largely due to a strong first quarter in 2017.

In Q3 2017, VC funding for the solar sector doubled with $269 million raised in 23 deals compared to $128 million raised in the same number of deals during Q2 2017. Most of the VC funding raised in Q3 2017 (72 percent) went to solar downstream companies with $193 million in 13 deals. 

The Top VC deal in the third quarter of 2017 was the $100 million raised by Indian rooftop installer CleanMax Solar. It was followed by the $56 million raised by Singapore’s Sunseap Group, the $21 million secured by Sol Voltaics, and Ampt’s $15 million. Ubiquitous Energy also raised $15 million. A total of 35 investors participated in solar funding in the third quarter of 2017. 

Solar public market funding was approximately 12 percent lower compared to the first nine months of 2016, with $1 billion raised in 9M 2017 compared to $1.2 billion raised during the same period of 2016. Public market financing fell significantly in Q3 2017 with just $79 million in four deals, down from $473 million raised in six deals in Q2 2017. 

During the first nine months of 2017, debt financing activity accounted for $5.1 billion in 51 deals, which was almost six percent lower compared to the first nine months of 2016, when $5.4 billion was raised in 55 deals. In Q3 2017, announced debt financing rose steeply to $2.1 billion in 18 deals compared to the $798 million raised in eight deals during the second quarter of 2017. 

In the top debt deals, Greenko Energy Holdings raised $1 billion in green bonds in two separate deals, $650 million and $350 million. Cypress Creek Renewables also received $450 million from Temasek. 

Announced large-scale project funding in 9M 2017 crossed the $10 billion mark, with $10.2 billion raised for the development of 117 projects. For the third quarter of 2017 alone, announced large-scale project funding came in at more than $2.8 billion in 36 deals.

Announced residential and commercial solar funds totaled $2.2 billion in 9M 2017, which was lower by almost 35 percent when compared to the $3.4 billion raised during the same period of 2016. 

The first nine months of 2017 saw a total of 58 solar M&A transactions, compared to the 48 transactions seen in the same period (9M) of 2016. There were 18 solar M&A transactions in Q3 2017, up from 11 solar M&A transactions seen in the preceding quarter (Q2 2017) and equal to the number of transactions (18) posted in Q3 2016. Of the 18 total transactions in Q3 2017, 13 involved solar downstream companies, three involved PV manufacturers, and there was one transaction each by a BOS company and an Equipment provider. 

There were 161 large-scale project acquisitions in first nine months of 2017 aggregating over 14.6 GW, compared to 145 project acquisitions totaling just 7.1 GW during the same period of 2016.

Similar to Q2 2017, investment firms and funds were the most active acquirers in Q3 2017, with 26 projects for over 2 GW, followed by project developers with 16 transactions totaling over 1.1 GW. 

Mercom tracked 296 new large-scale project announcements worldwide in Q3 2017 totaling 15.7 GW. 

To learn more about the report, visit: http://bit.ly/MercomSolarQ32017

 

About Mercom Capital Group

Mercom Capital Group, llc, is a global communications and consulting firm focused exclusively on clean energy and financial communications. Mercom’s consulting division advises cleantech companies on new market entry, custom market intelligence and overall strategic decision making. Mercom’s consulting division also delivers highly respected industry market intelligence reports covering Solar Energy and Battery Storage, Smart Grid, & Efficiency. Our reports provide timely industry happenings and ahead-of-the-curve analysis specifically for C-level decision making. Mercom’s communications division helps clean energy companies and financial institutions build powerful relationships with media, analysts, government decision makers, local communities and strategic partners. For more information about Mercom Capital Group, visit: http://www.mercomcapital.com. To get a copy of Mercom’s popular market intelligence reports, visit: http://eepurl.com/cCZ6nT.

REQUIREMENTS FOR SOLAR PV DEVELOPMENT

Best Practice Guidelines for Risk Identification, Assessment and Mitigation

Foreign debt can increase the amount of capital available for renewable energy and provide a cheaper source of capital.

CRISIL Research believes bidding aggression will continue for a while, despite pressure on returns 

I recently came across an article highlighting subdued M&A activity in the Indian solar space as it appears buyers are now reluctant to acquire older projects with high tariffs due to perceived curtailment and/or tariff revision risk! I guess this means the latest solar tariffs may not be so irrational after all.

A high tariff is only as good as the offtaker - and keep in mind that attractive legacy tariffs are principally the domain of state Discoms as central offtake came into the picture only recently. On the flip side, while tariffs may now be eye poppingly low for central offtakers like NTPC or SECI, they come with the comfort that the resulting top line is being implicitly underwritten by GOI. It is in this backdrop that I don’t completely “get” the concerns that solar projects are unviable at recently discovered low tariff levels.

IRR's may appear low in absolute terms, but they are not in negative territory

First, while resulting Internal Rate of Return to Equity (IRR- and I don’t agree with this single narrow measure as being the last word in investment decision making) gives the appearance of being low in absolute terms, it is still solidly positive – so it is not as if absolute returns have drifted even close to negative territory. Second, once a decision to invest has been made, energy sector project viability in general remains threatened by a host of factors such as cost overruns, constraints on availability of input, sudden increases in price of input and curtailment of offtake.

All of these risks have tended to afflict traditional sources of energy generation in India, more so the recent additions to capacity contracted with various state Discoms for offtake. Solar on the other hand is either inherently immune to these risks or is implicitly covered on the curtailment front by central offtake.

An IRR only investment making process can lead to value destruction if not balanced with an independent assessment of project risk and resulting required capital cost

This brings me back to my earlier point on IRR. Using an ad hoc target IRR derived from some perceived sponsor cost of capital, or even worse, a single ad hoc target IRR for different project types as a one size fits all approach to hurdle rates is fraught with danger. A sound investment decision is one where IRR exceeds a project’s independently calculated Cost of Equity (CoE) for only then will it turn out value accretive, otherwise we are talking value destruction. It’s important not to confuse the investor/sponsor cost of capital with the project CoE here. It’s even more important to ascertain the project’s standalone CoE reflecting all risks in the first place.

India today has thousands of MW of stranded thermal capacity. In many instances investment decisions appear to have been made on the basis of financial models that simply churned out IRR’s that exceeded perceived sponsor cost of capital. A correct approach which calculated a distinct CoE for each project reflecting 360 degree risks for the same, would have most likely revealed a CoE in excess of financial model derived IRR, sending a clear signal to sidestep the opportunity. In other words project risks were greatly underestimated and not adequately captured in the hurdle rate when assessing projected cash flows. Instead, an erroneously lower hurdle rate encouraged unnecessary risk taking.

With thermal, risks were underestimated;with solar, an overestimation of risks appears to be taking place

With solar, it appears the prevailing belief that tariffs are too low flows from the opposite direction, ie an overestimation of risk. Among other features, solar projects benefit from insignificant cost overrun risk in light of ever falling module prices, zero input cost, zero input cost volatility, minimal O&M risk and generation contracted out with an implicit GOI guarantee – so where is the risk? Adding minimal barriers to entry into the mix merely helps to explain the rapid pace of drop in tariffs towards a natural floor but not the level of the natural floor itself.

Returns expectations for solar need to be de-linked from thermal and approached from a totally different perspective

This brings us to the most topical question of all - where exactly does this natural floor lie? To truly understand solar is to appreciate its simplicity and to discard all the baggage accumulated over years of analyzing the economics of traditional, more risk prone sources of energy generation. In this light the natural floor for solar tariffs in India cannot be discerned by starting at the top and chipping away at a thermal derived returns (with its corresponding tariff) benchmark. On the contrary it can only be appreciated by working ones way from ground up. This means identifying an appropriate market determined returns reference benchmark for what solar’s underlying cash flows really represent, and then asking oneself how much additional return one requires beyond that benchmark for the trouble of simply waking up everyday and waiting for the sun to shine. An honest answer to this fundamental question will point to required returns and corresponding tariff, and if one is not happy with those numbers, one can be sure that there are many others who will be.

Page28 Gagan Sidhu GMR

Gagan Sidhu

Renewable Energy Finance/ Investment Banking ProfessionalGMR Group

Issuances of bonds, non-convertible debentures (NCDs) included have been witnessing record volumes for past 3 years.

Impact Of GST On Solar Sector

Key Driving factors for falling bids in india

“A road map has been laid out to set up at least 50 solar parks, each capacity of 500 MW. How do you think the solar parks in India are shaping up?”

Ecoprogetti srl is the leading manufacturer of complete Turnkey Line for module manufacturing.

Growth Opportunities in the Indian PV Market & Requirement of Indian Module Companies

How important it has become for developers to have solar fencing & security systems on the solar projects

Effects of choosing the right type of wires on the overall performance of the product/ project. 

Best Practices in the BOS Procurement Industry

“ACME is really proud to participate in Indian government’s continued effort to make renewable energy more bankable and attractive for both financial investors and Indian utilities.

Mr. Neelesh Garg, Managing Director, Saatvik Green Energy

"When examined in isolation, this target appears daunting. However, viewing it in perspective of land size required, the ask is 4050 hectares of land. It still seems a far cry from reality. Now, consider it as one-third of the entire rooftop space available in Delhi. Does this sound more realistic? This is exactly what it takes to hit that goal, breaking down the numbers to a vision with high clarity and a strong sense of purpose. In a nutshell, once you can visualize it, you can achieve it. The government has launched the National Solar Mission and is providing subsidies, corporates are doing their best to market their product, yet all stakeholders are missing the mark because of one roadblock-awareness.

Mr. Prashant Panda, President, Solar Business, ACME Solar

Let us first understand why there is a thrust on developing Renewable power plants in India. The peak shortage is currently shown to be around 2-4% and of course we have latent demand for which efforts are going to bring into the system which would heighten the peak demand further. Most of the load is being met through fossil fuel based power plants which is about 186 GW, installed capacity, which are working at the PLF of about 58% on an average. Further, Fossil fuels are finites in nature. Therefore, to serve the demand in an efficient way and to use fossil fuels in an optimized manner, it is time for all of us to look for alternative energy sources for our future energy needs and Renewable fits into this very easily. 

Large-scale project funding crosses $10 billion in 9M 2017

Mercom Capital Group, llc, a global clean energy communications and consulting firm, released a new report on funding and merger and acquisition (M&A) activity for the solar sector in the third quarter of 2017 and the first nine months of 2017.

To learn more about the report, visit: http://bit.ly/MercomSolarQ32017 

Total corporate funding (including venture capital funding, public market and debt financing) in the first nine months (9M) of 2017 was slightly lower compared to the same period in 2016, with about $7.1 billion raised compared to the $7.5 billion raised in 9M 2016. There were 143 deals in 9M of 2017 compared to 125 deals in the same period of 2016.

Looking at just Q3 2017 data, Mercom found that corporate funding in the solar sector grew 74 percent compared to Q2 2017, with $2.4 billion raised in 45 deals. In Q2 2017, $1.4 billion was raised in 37 deals. Year-over-year (YoY), funding in Q3 2017 was about 19 percent lower compared to the $3 billion raised in Q3 2016. 

“Debt financing activity outside of the United States helped bump up corporate funding in the third quarter as financing activity in the United States was muted ahead of the Suniva anti-dumping case decision,” commented Raj Prabhu, CEO of Mercom Capital Group. 

Global VC funding (venture capital, private equity, and corporate venture capital) for the solar sector in 9M 2017 rose a slight seven percent to $985 million from $925 million raised during the same period in 2016, largely due to a strong first quarter in 2017.

In Q3 2017, VC funding for the solar sector doubled with $269 million raised in 23 deals compared to $128 million raised in the same number of deals during Q2 2017. Most of the VC funding raised in Q3 2017 (72 percent) went to solar downstream companies with $193 million in 13 deals. 

The Top VC deal in the third quarter of 2017 was the $100 million raised by Indian rooftop installer CleanMax Solar. It was followed by the $56 million raised by Singapore’s Sunseap Group, the $21 million secured by Sol Voltaics, and Ampt’s $15 million. Ubiquitous Energy also raised $15 million. A total of 35 investors participated in solar funding in the third quarter of 2017. 

Solar public market funding was approximately 12 percent lower compared to the first nine months of 2016, with $1 billion raised in 9M 2017 compared to $1.2 billion raised during the same period of 2016. Public market financing fell significantly in Q3 2017 with just $79 million in four deals, down from $473 million raised in six deals in Q2 2017. 

During the first nine months of 2017, debt financing activity accounted for $5.1 billion in 51 deals, which was almost six percent lower compared to the first nine months of 2016, when $5.4 billion was raised in 55 deals. In Q3 2017, announced debt financing rose steeply to $2.1 billion in 18 deals compared to the $798 million raised in eight deals during the second quarter of 2017. 

In the top debt deals, Greenko Energy Holdings raised $1 billion in green bonds in two separate deals, $650 million and $350 million. Cypress Creek Renewables also received $450 million from Temasek. 

Announced large-scale project funding in 9M 2017 crossed the $10 billion mark, with $10.2 billion raised for the development of 117 projects. For the third quarter of 2017 alone, announced large-scale project funding came in at more than $2.8 billion in 36 deals.

Announced residential and commercial solar funds totaled $2.2 billion in 9M 2017, which was lower by almost 35 percent when compared to the $3.4 billion raised during the same period of 2016. 

The first nine months of 2017 saw a total of 58 solar M&A transactions, compared to the 48 transactions seen in the same period (9M) of 2016. There were 18 solar M&A transactions in Q3 2017, up from 11 solar M&A transactions seen in the preceding quarter (Q2 2017) and equal to the number of transactions (18) posted in Q3 2016. Of the 18 total transactions in Q3 2017, 13 involved solar downstream companies, three involved PV manufacturers, and there was one transaction each by a BOS company and an Equipment provider. 

There were 161 large-scale project acquisitions in first nine months of 2017 aggregating over 14.6 GW, compared to 145 project acquisitions totaling just 7.1 GW during the same period of 2016.

Similar to Q2 2017, investment firms and funds were the most active acquirers in Q3 2017, with 26 projects for over 2 GW, followed by project developers with 16 transactions totaling over 1.1 GW. 

Mercom tracked 296 new large-scale project announcements worldwide in Q3 2017 totaling 15.7 GW. 

To learn more about the report, visit: http://bit.ly/MercomSolarQ32017

 

About Mercom Capital Group

Mercom Capital Group, llc, is a global communications and consulting firm focused exclusively on clean energy and financial communications. Mercom’s consulting division advises cleantech companies on new market entry, custom market intelligence and overall strategic decision making. Mercom’s consulting division also delivers highly respected industry market intelligence reports covering Solar Energy and Battery Storage, Smart Grid, & Efficiency. Our reports provide timely industry happenings and ahead-of-the-curve analysis specifically for C-level decision making. Mercom’s communications division helps clean energy companies and financial institutions build powerful relationships with media, analysts, government decision makers, local communities and strategic partners. For more information about Mercom Capital Group, visit: http://www.mercomcapital.com. To get a copy of Mercom’s popular market intelligence reports, visit: http://eepurl.com/cCZ6nT.

REQUIREMENTS FOR SOLAR PV DEVELOPMENT

Presently, the unutilized roofs for roof top plant, barren and low vegetation land for ground mounted systems and Building Integrated Solar PV Plants have been using these unutilized locations for solar plant installation as these require large space for installation of power plant.

Mercom Capital Group, llc, a global clean energy communications and consulting firm, released its report on funding and mergers and acquisitions (M&A) activity for the Battery Storage, Smart Grid, and Energy Efficiency sectors for the second quarter and first half of 2017. 

In the first half (1H) of 2017, $1.03 billion was raised by Battery Storage, Smart Grid, and Efficiency companies compared to $807 million in 1H 2016.

To get a copy of the report, visit: http://bit.ly/MercomSGQ22017

Battery Storage

Venture capital (VC) funding (including private equity and corporate venture capital) for Battery Storage companies jumped in Q2 2017 to $422 million in 10 deals compared to $58 million in eight deals in Q1 2017 due to very large funding deal. Year-over-year (YoY) funding was higher compared to $125 million raised in Q2 2016 from 10 deals. In the first half (1H) of 2017, $480 million was raised in 18 deals compared to the $179 raised in 20 deals in 1H 2016. 

The top VC funded Battery Storage companies in Q2 2017 were: Microvast Power, which raised $400 million from CITIC Securities, CDH Investment, National Venture Capital, and others; Vionx Energy received $12.75; and Moixa Technology raised $3.2 million in funding from the Greater Manchester Combined Authority, Tokyo Electric Power Company (TEPCO), and First Imagine! Ventures. 

Eleven investors participated in Battery Storage funding in Q2 2017 with Lithium-based Battery companies raising the most. 

There were seven debt and public market financing deals in Battery Storage in Q2 2017 totaling $107 million compared to $22 million in two deals in Q1 2017. In 1H 2017, there was $129 million raised in nine deals compared to three deals bringing in $69 million in 1H 2016. 

There was one Battery Storage project fund in 1H 2017 for $152 million compared to three deals raising $195 million in 1H 2016. 

Battery Storage project funding in 1H 2017 totaled $5 million in two deals compared to no deals in 1H 2016. 

There were three M&A transactions involving Battery Storage companies in Q2 2017. In Q1 2017, there was one M&A transaction. In the first half of 2017, there were four transactions (one disclosed) compared to six transactions in 1H 2016 (two disclosed). 

Smart Grid

VC funding for Smart Grid companies in Q2 2017 came to $139 million in eight deals compared to $164 million in 14 deals in Q1 2017. In a YoY comparison, $222 million was raised from 15 deals in Q2 2016. $304 million was raised in 22 deals in 1H 2017 compared to $331 million raised in 29 deals in 1H 2016. 

The top VC funded Smart Grid companies included: Actility, which secured $75 million from Creadev, Bosch, Inmarsat, Idinvest, Bpifrance, Ginko Ventures, KPN, Orange Digital Ventures, Swisscom, and Foxconn; ChargePoint raised $43 million from Siemens; FreeWire Technologies received $7.6 million; and Enervalis secured $4.8 million from LRM, Nuhma, and ABB. 

Seventeen investors participated in Smart Grid VC funding rounds in Q2 2017 with Demand Response companies raising the most. 

There was one debt and public market financing deal in Smart Grid in Q2 2017 totaling $9 million compared to no deals in Q1 2017. In 1H 2017, $9 million was raised in one deal compared to $217 million in three deals in 1H 2016. 

There were six Smart Grid M&A transactions in Q2 2017 compared to seven transactions in Q1 2017. In the first half of 2017, there were 13 transactions (three disclosed) compared to five transactions (two disclosed) in 1H 2016. 

Efficiency

VC funding into Energy Efficiency technology companies fell significantly to $29 million in six deals in Q2 2017 compared to the $213 million in 14 deals in Q1 2017 and $86 million in nine deals in Q2 2016. $242 million was raised in 20 deals in 1H 2017 compared to $297 million raised in 23 deals in 1H 2016. 

The Top Efficiency VC deals included: $15 million raised by CIMCON Lighting from Energy Impact Partners; the $5 million raised by Tendril Networks; OptiWatti raised $4 million from Taaleri Kiertotalous and Butterfly Ventures; and Illumitex raised $4 million from WP Global Partners and NEA. 

Six investors participated in VC funding in Q2 2017. Within the sector, Efficiency Lighting companies brought in the most funding. 

Debt and public market financing for Efficiency companies rebounded to $1.4 billion in six deals in Q2 2017 compared to $301 million in three deals in Q1 2017. In 1H 2017, there was $1.7 billion raised in nine deals compared to $2 billion raised in the same number of deals in 1H 2016. 

There was one M&A transaction in the Efficiency sector in Q2 2017 compared to four in Q1 2017. In the first half of 2017, there were five transactions (two disclosed) compared to 10 transactions in 1H 2016 (four disclosed).

To get a copy of the report, visit: http://bit.ly/MercomSGQ22017

About Mercom Capital Group

Mercom Capital Group, llc, is a global communications and research and consulting firm focused on cleantech. Mercom delivers market intelligence and funding and M&A reports covering Battery Storage, Smart Grid, and Energy Efficiency and Solar and advises companies on new market entry, custom market intelligence and strategic decision-making. Mercom's communications division helps companies and financial institutions build powerful relationships with media, analysts, local communities, and strategic partners. About Mercom: http://www.mercomcapital.com. Mercom's clean energy reports: http://store.mercom.mercomcapital.com/page/.

# # #

Mercom Capital Group, llc, a global clean energy communications and consulting firm, released its report on funding and merger and acquisition (M&A) activity for the solar sector in the second quarter of 2017 and first half of 2017.

Total corporate funding (including venture capital funding, public market and debt financing) in the first half (1H) of 2017 was slightly up compared to the same period in 2016 with about $4.6 billion raised compared to the $4.5 billion raised in 1H 2016. There were 97 deals in 1H 2017 compared to the 79 deals in 1H 2016.

Corporate funding in the solar sector fell in Q2 with $1.4 billion raised in 37 deals compared to the $3.2 billion raised in 60 deals in Q1 2017. Year-over-year (YoY) funding in Q2 2017 was about 17 percent lower compared to the $1.7 billion raised in Q2 2016.

To learn more about the report, visit: http://bit.ly/MercomSolarQ22017

“There is a great deal of uncertainty in the solar markets right now, which is reflected in funding activity. However, solar public companies, especially on the U.S. stock markets, have done well this year. A lot is riding on how the Suniva anti-dumping case plays out as it will dictate market dynamics going forward,” commented Raj Prabhu, CEO of Mercom Capital Group.

Global VC funding (venture capital, private equity, and corporate venture capital) for the solar sector in 1H 2017 was 23 percent higher with $713 million compared to the $579 million raised in 1H 2016, largely due to a strong first quarter in 2017.

In Q2 2017, VC funding for the solar sector saw a steep decline with $128 million in 23 deals compared to $585 million in 22 deals in Q1 2017. Most of the VC funding in Q2 2017 went to solar downstream companies (72 percent); $92 million was raised in 15 deals.

Top VC deals in 1H 2017 included the $200 million raised by ReNew Power Ventures followed by the $155 million raised by Greenko Energy Holdings, the $125 million secured by Hero Future Energies, Silicon Ranch’s $55 million, $25 million raise by Siva Power and the $25 million raise by Spruce Finance. A total of 55 investors participated in solar funding in 1H 2017.

Solar public market funding was much higher in 1H 2017 compared to the first half of 2016 with $934 million raised compared to $276 million in 1H 2016. Public market financing was slightly up in Q2 2017 with $473 million raised in six deals compared to the $461 million in 13 deals in Q1 2017.

Announced debt financing in 1H 2017 came to $3 billion compared to $3.7 billion in 1H 2016. In Q2 2017, announced debt financing fell to $798 million in eight deals compared to $2.2 billion in 25 deals in Q1 2017. There was one securitization deal in Q2 2017 by Sunnova which raised $255 million.

Announced large-scale project funding in 1H 2017 came to $7.4 billion in 81 projects. In Q2 2017, announced large-scale project funding came in at $4.8 billion in 48 deals.

Announced residential and commercial solar funds totaled $1.8 billion in 1H 2017 compared to $2.3 billion in the same period of 2016.

In 1H 2017 there were a total of 40 M&A transactions, compared to 30 in the same period of 2016. There were 11 solar M&A transactions in Q2 2017 compared to 29 solar M&A transactions in Q1 2017 and 16 transactions in Q2 2016. Of the 11 total transactions in Q2, eight involved solar downstream companies, two involved PV manufacturers, and one transaction was by a BOS company.

There were 100 large-scale project acquisitions in 1H 2017 totaling 10.6 MW, compared to 90 project acquisitions totaling 4.5 GW in the first half of 2016.

Investment firms and funds were the most active acquirers in 1H 2017, picking up 37 projects totaling 4.2 GW, followed by project developers with 17 transactions for 4.6 GW.

Mercom tracked 206 new large-scale project announcements worldwide in Q2 2017 totaling 11.1 GW.

To learn more about the report, visit: http://bit.ly/MercomSolarQ22017

 

About Mercom Capital Group

Mercom Capital Group, llc, is a global communications and consulting firm focused exclusively on clean energy and financial communications. Mercom’s consulting division advises cleantech companies on new market entry, custom market intelligence and overall strategic decision making. Mercom’s consulting division also delivers highly respected industry market intelligence reports covering Solar Energy and Battery Storage/Smart Grid/Efficiency. Our reports provide timely industry happenings and ahead-of-the-curve analysis specifically for C-level decision making. Mercom’s communications division helps clean energy companies and financial institutions build powerful relationships with media, analysts, government decision makers, local communities and strategic partners. For more information about Mercom Capital Group, visit: http://www.mercomcapital.com. To get a copy of Mercom’s popular market intelligence reports, visit: http://eepurl.com/cCZ6nT.

# # #

Equity IRR seen at 12-13% despite bidding aggression; modules prices a key monitorable

Bhadla Phase-III Solar Park : Key trends indicating how solar become cheaper than coal fired power plant with LCOE of Rs 2.44/kWh

L1 Bid of Rs.2.44/kWh LCOE of Bhadla Phase-III Solar Park Project on 12th May’2017 by ACME Solar.

Solar Power LCOE of Rs 2.44/KWh-

If we look at the last six years, the tariff has been on the downtrend with an unprecedented drop of almost 80% across the world thanks to the aggressive bidding by global players including SunEdison. The few of the recent trends of L1 bid and quoted solar tariff in India:-

On 12 May 2017, Solar Power tariff dropped to 2.44 per unit during an auction of 500 MW of Bhadla Solar Park phase III

On 10 May, Solar Power tariff dropped to Rs 2.62 per unit during an auction of Bhadla Solar Park phase IV

In April 2017, solar power tariffs had fallen to an all-time low of Rs 3.15 per unit quoted by Solairedirect during the auction of a 250 MW project at Kadapa in Andhra Pradesh.

In February 2017, lower capital expenditure and cheaper credit had pulled down solar tariff to a new low of Rs 2.97 per unit (a basic bid of Rs 2.97 a unit) for the first year in an auction conducted for 750 MW capacity in Rewa Solar Park in Madhya Pradesh. However, The lowest tariff quoted by Mahindra Renewables Pvt. Ltd, for a grid connected solar power project before that stood at Rs 3.30 per unit i.e. the levelised tariff (LCOE) for 750MW Rewa solar park in Madhya Pradesh has worked out to be at Rs 3.30 per unit.

In January 2016, solar power tariff had dropped to a new low, with Finland-based energy firm Fortum Finnsurya Energy quoting Rs 4.34 a unit to bag the mandate to set up a 70-MW solar plant under NTPC's Bhadla Solar Park tender.

In November 2015, the tariff had touched Rs 4.63 per unit following aggressive bidding by US-based SunEdison, the world's biggest developer of renewable energy power plants.

bhadla img2

On 10th May (i.e. On Wednesday), the lowest bidder for the solar park in Rajasthan had quoted Rs 2.62 per unit for Bhadla Solar Park phase IV and after two days, on Friday May 12th, ACME Solar Holdings quoted lowest solar tariff at Rs.2.44/kWh for 200 MW followed by Japan's SBG Cleantech One at Rs.2.45/kWh for remaining 300MW during an auction carried out by Solar Energy Corporation of India Limited (SECI) for 500 MW capacity in Bhadla Phase-III Solar Park, Rajasthan. The solar park is being set up by Saurya Urja Company of Rajasthan Ltd, a joint venture between Rajasthan and IL&FS Energy Development Company Ltd. Respectful players like Acme, SBG, Vinnet Mittals – Avada, Hero, Renew Power, Shapporji Palonji etc participated in the bid and it is really heartening and charismatic to see that LCOE of Rs. 2.44 per kWh is not only a finance game but a big game of technology as well.

The projects are likely to be completed in about 12-13 months.

The quoted tariff is fixed for 25 years with no escalation and the bidders have sought no VGF (viability gap funding) from the government.

The entire solar power will be consumed in Rajasthan, and power sale agreement with the state distribution companies is already tied up.

The developers are responsible to connect to the pooling sub-station of solar park. The developers will be paying solar park charges of Rs 45.2 lakh per megawatt towards land, connectivity (from pooling substation to state network) and other infrastructural facilities.

bhadla img3

Winning bids for the solar power plant of 500 MW of Bhadla Solar Park phase III, were reportedly made by Acme Solar Holdings Pvt. Ltd (200 MW out of 500 MW plants each) and Japan's SBG Cleantech One (300 MW out of 500 MW plants each) at Rs. 2.44 per kWh and Rs. 2.45 per kWh respectively. ACME Solar Holdings quoted lowest solar tariff at Rs.2.44/kWh for 200 MW followed by Japan's SBG Cleantech One at Rs.2.45/kWh winning remaining 300MW

This news was remarkably in the limelight and the main reason of getting the world's attention was that this level of LCOE happens to be lower or close to the APPC (average power purchase cost)

Nevertheless, the reduction of Rs. 0.18- 0.19 /kWh compared to past bids of Rs 2.62/KWh is impressive.

bhadla img4

In essence GOI Policy, CAPEX, Energy Yield, Leverage factor, Hedging Risk, OPEX are the few key cost drivers responsible for the drop of LCOE from Rs 4.63 / kWh in November 2015 to Rs 4.34 / kWh in January. 2016 again to Rs 3.3 / kWh in Feb. 2017 again to Rs 3.15 / kWh in April. 2017 again to Rs 2.62 / kWh in May10. 2017 and recently again to Rs. 2.44 / kWh in May12. 2017. (LCOE is a ratio puts all costs both fixed and variable in the numerator, and divides it by energy yield in the denominator. Both numerator and denominator involving financial "discounting" using Weighted Average Cost of Capital to bring costs and energy yields from the future to the present).

ujjwal

About Author: Ujjwal Kumar Gupta, MBA - XLRI; B.Tech - IIT; Sectorial experience - Infrastructure, Energy, EPC, OEM, Power, Mining, Construction, Steel

Author's Linkedin Profile: https://www.linkedin.com/in/ujjwal-kumar-gupta-178221101/ 

Article Link: http://bit.ly/2t31a3T

Disclaimer: The author contributed to this article in his personal capacity out of the passion of writing as a hobby and also by doing judicious utilization of available free time. The views and opinions expressed in this article are those of the author and do not necessarily reflect or represent the views or the official policy or position of the any entity, institution and organization. Assumptions made within the analysis are not reflective of the position of any entity, institution and organization. The author disclaim any liability in connection with the use of this information. Examples of analysis performed within this article are only examples. They should not be utilized in real-world analytic products as they are based only on very limited and dated open source information.

 

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The key drivers of lower LCOE (Levelized Cost of Electricity) of solar power is the result of combination of factors and the most important being:-

Cost Driver / Factor # 1 - Favorable Policy of GOI –

Decision by GOI to cover solar power by SECI under the ambit of Tripartite Agreement for payment security against defaults by State distribution companies. This has helped to eliminate the so called inherent risk associated with liquidity generated from power sale by the developers during the entire tenure of 25 Years mentioned in Financial Model

Cost Driver / Factor # 2 - Energy Yield –

Superior energy yield (eg: better solar resource at the site, and operational efficiencies) owing to approximately 7-10% higher yield in Rajasthan due to better solar radiation conditions. Rajasthan happens to be an excellent solar location, with high fraction of DNI (direct normal irradiance). Perhaps the use of mature single-axis tracker technologies that can tilt for a greater angle (e.g.: 55-60 degrees instead of 45 degrees) could enhance yield further. Lower ground coverage ratio (GCR), i.e. more land per MW Peak (MWp) could be additional factors. Use of shorter strings in the inverters could be a factor as well. Another possibility is the use of DC-optimizers in the architecture which would reduce balancing losses.

Cost Driver / Factor # 3 - CAPEX –

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Lower cost of CAPEX owing to drop in module prices in the international markets. Solar module (or photo voltaic panel) costs account for more than 50% of the entire project CAPEX costs in India. The CAPEX segregation mentioned here shows the relative costs estimate of Rs. 400 lakh / MWp. Note that all the non-module costs (Land, Civil & General Works, Mounting structure, Power conditioning unit, Evacuation lines & equipment, power electronics, cabling) are single digit or close to 10 %.

And if we compare this CAPEX segregation with that of many of the western countries then we find that module CAPEX is only about 25-30% of total CAPEX due to their higher standard of living cost and higher commodity cost leading to higher supply chain cost and human installation costs.

Needless to mention here the Chinese factor due to which solar PV module costs have fallen faster. This Chinese factor has been originated by the temporary overcapacity in China resulting from delayed projects in several key markets.

As with every emerging technology, the prices for solar cells are falling with the increase in series production and technological innovations. Because similar programs to the ones in the USA are also being launched in other countries like Japan, Germany, Spain, Netherlands etc., it can be assumed that the costs for solar power will continue to fall in the coming years.

Moreover, based on the experience curve, it can be concluded and interpreted that each time the total production quantity has doubled; the prices for solar modules on the world market have fallen by 20 %.

So the CAPEX factor can be concluded that the ACME and SBG auction at Bhadla Solar Park phase III (Which allows 11 months for the project to be built) allows locking in some of these price-declines, and hedging to capture future price declines over 11 month period. Therefore, it is interpreted that the decline of 40-47% e.g. Rs 4.63 / KWh to Rs 2.44/KWh, essentially financed by bleeding module makers from China.

We can see that innovations to reduce capital costs or increase energy yield are the key to bringing solar to coal fired without subsidies. Also note the important role played by the "Weighted average cost of capital (WACC)" or “Cost of capital” or discount rate and term (N). We can say that financial engineering innovations have been a big part of solar companies work to make solar affordable to all. For instance in the western countries like US, Japan, Germany, etc., financial innovations have allowed the “cost of capital” to drop significantly, having a huge impact on affordability of solar as 25% decrease in “cost of capital” reduces the LCOE by more than 5 %. We now need to make similar innovations at the technical and financial levels to enhance the solar penetration and also to bring solar affordably to the emerging markets and the poor.

Capital Cost as per the Draft CERC (Terms and Conditions for Tariff determination from Renewable Energy Sources) Regulations, 2017( Dated: 16th February 2017)-

Capital Cost Norms (February 2017) - The Commission shall determine only project specific capital cost and tariff based on prevailing market trends for Solar PV project.

Capital cost as per the Central Electricity Regulatory Commission (CERC)’s proposal on Overall capital cost dated 23rd April 2016 –

Capital Cost Norms (April 2016) -

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Central Electricity Regulatory Commission (CERC)’s Norms on Overall capital cost during Financial Year 2014-2015. The table below indicates CERC determined benchmark cost for Financial Year 2014-15.

Capital Cost Norms (FY 2014-2015) -

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Cost Driver / Factor # 4 - OPEX –

OPEX is not likely to be significantly lower unlike CAPEX, though newly gained capabilities like robotic cleaning, drone-based image analytics (to catch quality/operational issues) are starting to be actively implemented at the commercial level that could reduce costs and revenue losses due to inconsistent operations quality.

In The Financial Model I have estimated OPEX improvement at 5.72% over last year. Also sunk CAPEX dominates OPEX in solar farms especially with high interest rates.

Accelerated Depreciation (AD) rules on CAPEX have tightened up in India since last year (allowing only 40% depreciation per year, down from 80%). This is a modest negative factor relative to 2016 and 2015.

As per the Financial Model, from an LCOE perspective, a net CAPEX drop of 40-47% (aggressive) will lead to a linear drop in LCOE of 40-47% from Rs 4.63/KWh to Rs 2.44/KWh

Cost Driver / Factor # 5 – Debt Equity Ratio (Leverage factor), Hedging Risk, Risk during tenure, Interest Rate, Debt Tenure –

Strengthening of Indian Rupee against US dollar amalgamated with Economies of scale is also a factor as it is a 200 MW / 300 MW plant.

The park capacity, cheap financing / capital options and the lack of any big tender are some of the other contributing factors.

Cheap credit owing to lower Interest rates, lower weighted average cost of capital, including lower risk premium, and longer loan tenure are important factor and this amalgamated with lower risk and higher leverage (i.e. debt-to-equity ratio) matters a lot in reducing the LCOE

As mentioned in my earlier article "Financial Model of 200 MW Solar Park" , A 8-10% decrease in after-tax cost of debt, reduces the LCOE from 2.6 to 3.0%

In the recent past, Infra projects IDC (Interest during construction) is squeezing because of decline of after-tax cost of debt.

Here in India, the long term interest rates for 12-25 year financing are higher than the short term rates and this can be substantiated by the MCLR of 7.5-8.5% by several nationalized and private banks of India.

Many argue on the point that overseas loan offered by Government financial institutions from Japan, Europe and by the World Bank are cheaper and therefore the financing should be sourced from that overseas financial institutions and banks. In spite of minimal interest rate (almost close to zero) associated to overseas funding, we should be aware that these money from overseas sources have the inherent currency risk owing to devaluing Indian currency and subsequent costs of hedging. And there are chances that the bidders have not fully hedged their exposures over the entire tenure of the financing. Therefore, bidders may have inherent risk through currency risks for their un-hedged exposures which will bleed them later unless these bidders and competent enough to be smart currency traders.

If the leverage ratios assumed to have increased beyond the industry standard of 70% debt / 30% equity to 85 % debt / 15% equity then the risk-adjusted interest rates derived from Weighted Average Cost of Capital (WACC) shall drop from 8.36 % to 7.15% under the condition that (i) Loan tenure is 25 years (ii) Beta is 1 (Assuming that in Rajasthan the sun rises every day and the yearly irradiance averages are relatively stable and solar PV equipment is relatively long lived) (iii) the risk free rate of return is 1.5% (iv) the expected market return is 14% and (v) after-tax cost of debt is 9%. All these has been estimated in the Financial Model

Cost Driver / Factor # 6 - Grid integration-

Grid connected solar power plant is a big hidden cost of renewables that is being absorbed by the government today. Currently we are more focused on decreasing LCOE (Rs/KWh) and now-a-days constantly decreasing quoted LCOE is considered a milestone for India. On the brighter side for the perspective of GOI, in future, we can see the movement from LCOE to balancing cost where this hidden cost shall be borne by developers.

Line Graph perception is that the solar power price has gone down by half since Q1 2016:-

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 ujjwal

About Author: Ujjwal Kumar Gupta, MBA - XLRI; B.Tech - IIT; Sectorial experience - Infrastructure, Energy, EPC, OEM, Power, Mining, Construction, Steel

Article Link:https://www.linkedin.com/pulse/bhadla-phase-iii-solar-park-key-cost-reducing-factors-gupta?trk=v-feed&lipi=urn%3Ali%3Apage%3Ad_flagship3_profile_view_base_recent_activity_details_shares%3BFPx8xq3ayL1Hibo37DbNYw%3D%3D

Author's Linkedin Profilehttps://www.linkedin.com/in/ujjwal-kumar-gupta-178221101/

Disclaimer: The author contributed to this article in his personal capacity out of the passion of writing as a hobby and also by doing judicious utilization of available free time. The views and opinions expressed in this article are those of the author and do not necessarily reflect or represent the views or the official policy or position of the any entity, institution and organization. Assumptions made within the analysis are not reflective of the position of any entity, institution and organization. The author disclaim any liability in connection with the use of this information. Examples of analysis performed within this article are only examples. They should not be utilized in real-world analytic products as they are based only on very limited and dated open source information.

Indian solar tariffs are in a state of free fall. New record lows are created in the recent round of auctions of 500MW solar projects.

 

ACME Solar emerged as the lowest bidder followed by SBG Cleantech. The auction was a very tightly fought one with Hero Solar Energy and Renew Power missing out by 0.02 paise and 0.03 paise respectively.

Here are the details

 

Bidder's Name Tariff Bidders Quantity
ACME Solar Holdings Private Ltd 2.44 200
SBG Cleantech One Ltd 2.45 500
Hero Solar Energy Pvt. Ltd. 2.46 300
Renew Solar Power Pvt. Ltd. 2.47 500
Awaada Power Pvt. Ltd. 2.6 200
Shhapoorji Pallonji Infrastructure Capital Company Pvt. Ltd. 2.65 400
RatanIndia Solar 3 Pvt Ltd.  2.87 100
Duroc Solar 2.88 100
Orange Renewable Power Pvt. Ltd. 2.95 200
Lightsource Renewable Energy Holdings Ltd. 2.98 100
Solairedirect Energy India Pvt. Ltd. 3.08 300
Mahoba Solar (UP) Pvt. Ltd. 3.14 300
Aditya Birla Renewables Ltd. 3.18 200

 

History is created today, as the record low tariffs achieved in the auction concluded on 09.05.2017 for Bhadla Phase-IV Solar Park, Rajasthan has been broken, with even lower tariff of Rs. 2.44 per unit discovered in the auction carried out by Solar Energy Corporation of India Limited (SECI) for 500 MW capacity in Bhadla Phase-III Solar Park, Rajasthan. The park is being set up by M/s Saurya Urja Company of Rajasthan Limited, a joint venture between the Govt. of Rajasthan and M/s IL&FS Energy Development Company Limited. This tariff is fixed for 25 years with no escalation and the bidders have sought no VGF from the Government. The winners are M/s ACME Solar Holdings Pvt. Ltd. (200 MW) at a tariff of Rs. 2.44 per unit and M/s SBG Cleantech One Ltd. (300 MW), quoting a tariff of Rs. 2.45 per unit.

The entire solar power will be consumed in the State of Rajasthan and power sale agreement with the State Distribution Companies is already tied up. The developers are responsible to connect to the pooling sub-station of solar park. The developers will be paying solar park charges of Rs.45.2 lakh per megawatt towards land, connectivity (from pooling substation to state network) and other infrastructural facilities. The projects are likely to be completed in about 12-13 months.

The earlier lowest tariff of Rs. 2.62 per kWh, was discovered recently in the auction conducted by SECI for 250 MW Bhadla Phase-IV Solar Park in Rajasthan.

It is understood that this fall in solar tariffs is the result of combination of various factors, most important being the decision of the Government of India to cover solar power by SECI under the ambit of Tripartite Agreement for payment security against defaults by State distribution companies. Other factors contributing are about 7-8% higher yield in Rajasthan due to better solar radiation conditions, drop in module prices in International market, and strengthening of Indian rupee against US dollar.

For the present bid, the bids were submitted by 24 bidders for a capacity of 5500 MW which is 11 times of the bid capacity. Bid received overwhelming global response including developers from Finland, France, Saudi Arabia, Singapore and Japan. This became possible only due to constant endeavor at SECI to streamline the bidding process with highest level of transparency and integrity under the guidance of Ministry of New and Renewable Energy.

In Conversation with Mr. DV Manjunath, Managing Director, EMMVEE Group

 

  1. Let’s begin with a glimpse of your company’s presence and offerings in India? 

    EMMVEE is the market leader in solar industry with global presence since 1992. Since then we are setting new trends with its comprehensive system solutions. Emmvee, manufacturer of photovoltaic modules and solar water heating systems with 2 specialized manufacturing facilities and employs over 650 people. Emmvee at present has 0.5 GW per year solar module manufacturing capacity and has plans to expand as per the market development and needs in future. 

    We are also very active in EPC space of large solar photovoltaic based power projects. The company has a great deal of experience in developing and commission many power projects in Europe. The company owns and operates 4 power plants in Germany. In India too, the company has successfully completed power projects aggregating to a total capacity of 100MW as on date, which also includes roof top projects.

  2. What have been some of the recent developments at your organisation?

    •  We have installed the world’s most advanced cell stringer machine and multi-stack laminator, beside other sophisticated machine in our facility.

    • Emmvee commissioned 1MW Roof–top solar power plant at its solar water heater manufacturing facility in Dabaspet, Karnataka, India, has a production area of 25,000 Sq. mtrs.

     • Emmvee is also a successful bidder for developing 3 power projects of total capacity of 40 MW in Karnataka. These projects are being developed at the cost of around 280crores.

    • Emmvee’s Joint Venture with Dr. Reddy’s Lab, Hyderabad for the supply of solar power for their facilities for next 25 years. The capacity of solar power plant is 15 MW.


  3. What are your growth plans for the Indian market?

    Based on market demand and needs, Emmvee want to expand the manufacturing production facility considering both backward & forward integration.

  4. Tell us a bit about the recent technology advancements in your sector? 

    It has been a significant improvement in solar cell efficiency, today solar cells used in large projects has hit 19.5%. Many new cell technologies have also made inroads. For example HIT, BIFACIAL, PERC, organic cells are raising good interest as future technologies.

  5. What have been the latest trends in demand for your products & services in India? Where do you see the next demand growth coming from?

    As India is growing rapidly in adopting solar energy. There are number of power projects coming up in India. Large corporates are investing in solar power production and most of our modules goes to these big projects, besides this there are many residential projects coming up in the country. We produce modules that are more appropriate for such applications.

  6.  Anything else you would like to add for our readers.
    Emmvee thrive towards qualitative and quantitative optimization in providing customers with Sustainable Wide Ranging Solar Power Solutions.We believe in quality and our infrastructure, specialist staff and engineers, and state-of-the-art process make sure we achieve optimum production quality and well satisfied customer .We are committed to offer highly reliable product and solar power solution .

In Conversation with Mr. Anurag Garg,Vice President Solar & Energy Storage Business Schneider Electric India

In Conversation with Mr.C Chaudhary, Head –Solar OstroEnergy Pvt. Ltd.

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