Renewable energy markets in countries expand and shrink as policies, technologies and financial incentives change. This series of articles examines which technologies are flourishing where.
New Delhi, India -- Developers, manufacturers, investors and other renewable energy industry stakeholders need to know where the next big market is going to be so that they can adjust their business decisions accordingly.
Since 2003, global consultancy Ernst & Young has released its Country Attractiveness Indices, which gives a numerical ranking to 30 global renewable energy markets by scoring renewable energy investment strategies and resource availability. The indices are updated on a quarterly basis and the most recent report can be found here.
Here is the firm’s assessment of India.
General
India’s REC market has experienced a surge in activity through Q3 after a relatively cautious initial seven months. By late October, RECs were selling for double the floor price set by the Government. Excluding solar, RECs sold for INR2,700-INR3,000(€40-€44)/MWh across the two exchanges. The upper and lower prices were due to expire next year; however, in August, the regulator extended the floor price of INR1,500 (€22) through to March 2017 to help create certainty in the market. The ceiling price was lowered from INR3,900 (€58) to INR3,300 (€49). Solar power credits are traded separately and have a floor price set six times higher to account for higher capital costs. The August announcement lowered the floor price to INR9,300 (€138) and the ceiling to INR13,400 (€198).
The increased activity is likely to be evidence of the market’s concern over future energy price increases, which are estimated to increase by up to 18% next year. Such indications are fueling interest in power-saving technology, and will likely support the country’s goal of 15% of green electricity by 2020.
Access to finance
According to BNEF According to BNEF investment in Indian clean, investment in Indian clean-energy projects energy projects reached a record $7.2 billion (€5.3b) in the first three quarters, exceeding the total annual investment of US$5.7b (€4.2b) in 2010. The solar sector has been key to this growth, generating a fourfold increase in investment to $2.4 billion (€1.8b) in the first nine months as a result of federal and state-level policies.
The results are particularly impressive given that rupee borrowing costs are among the highest in Asia – in October, the Reserve Bank of India raised the repo rate for the 13th time since the start of 2010, to 8.5%.
Q3 also saw the announcement that KfW Entwicklungsbank, the German state development bank, has agreed to provide a €250 million loan to help fund one of the world’s largest solar PV plants, a 125-MW (expandable to 150 MW) facility in the state of Maharashtra. Total financing for the project is €370 million, with the remaining amount to be funded by the state.
There was further good news as the US Export-Import Bank announced that it expects India to become its biggest recipient of funding for clean energy projects in the next year. This includes some US$575m (€423m) of funding for solar projects, of which around $75 million (€55m) is already approved, the remaining representing deals in the pipeline. The Export-Import Bank has already approved $1.4 billion (€1.0b) in new deals during this financial year, raising its overall lending to India to $5.5 billion (€4.0b).
Solar
Solar developers were invited to register for the second National Solar Mission auction in August, which will award licenses to build as much as 350 MW of PV plants by 2013. However, the auction guidelines have been slightly revamped with respect to the size and amount of projects companies can win. The Government increased the maximum size of each project from 5 MW to 20 MW, and will allow a successful bidder to win as much as 50 MW of the total capacity. Projects will also be allowed seven months to achieve financial close compared with the previous six. It is hoped these changes will attract larger companies that may have previously been dissuaded from participating based on insufficient profitability from smaller projects. The deadline for submission of a Request for Selection (RfS) was 3 October for batch two, with shortlisted candidates being announced on 8 November. Solar PV projects under batch one — the first auction — are likely to be commissioned by end of 2011, while CSP projects are expected to come online during 2013.
In addition to the Solar Mission, which operates at a central level, various states have been independently taking steps to promote solar power. For example, in September, Rajasthan state issued draft bidding documents to develop 250MW of solar capacity, representing part of Phase 1 of the state’s new solar target of 10-12 GW of new capacity over the next 10 years. Meanwhile, the state of Tamil Nadu has announced plans to create 10 solar parks each with a capacity of 300 MW, at a total cost of around INR450b (€7b).
Wind
The Ministry of New and Renewable Energy has removed a 2002 rule which only permits wind installations at sites with a minimum wind power density of 200W/m2at a hub height of 50 meters. While this change is expected to provide a general boost to the wind sector, it is unlikely to alter its growth potential significantly since it will mainly benefit small-scale rather than larger utility-scale projects.
It was also announced in Q3 that the Government wants to axe an accounting rule that provides a federal tax break for wind farms in the country, which it claims has encouraged investment in wind power as a way of cutting taxes rather than diversifying the energy mix. The Government plans to discontinue the benefit next April and introduce a new tax code; however, the announcement is likely to prompt a rush to build projects in the current financial year, which could temporarily impact activity in 2011, even if the tax break is continued.
The largest private equity investment in the Indian wind sector was also seen this quarter, with Goldman Sachs agreeing to acquire a majority stake in ReNew Wind Power, an Indian renewable energy producer, for INR10 billion (€148m). ReNew plans to expand its capacity by 200 MW to 300 MW annually, and will use Goldman’s investment to acquire new projects.
Biomass
In order to boost biomass-based power generation in the country, the Government is preparing a national bioenergy program which will be launched in the 12th Five-Year Plan (2012-17). The Government has allocated INR34 billion (€1b) for the biomass mission and it is hoped the national initiative will replicate some of the success of the National Solar Mission.
Here is the firm’s assessment of India.
General
India’s REC market has experienced a surge in activity through Q3 after a relatively cautious initial seven months. By late October, RECs were selling for double the floor price set by the Government. Excluding solar, RECs sold for INR2,700-INR3,000(€40-€44)/MWh across the two exchanges. The upper and lower prices were due to expire next year; however, in August, the regulator extended the floor price of INR1,500 (€22) through to March 2017 to help create certainty in the market. The ceiling price was lowered from INR3,900 (€58) to INR3,300 (€49). Solar power credits are traded separately and have a floor price set six times higher to account for higher capital costs. The August announcement lowered the floor price to INR9,300 (€138) and the ceiling to INR13,400 (€198).
The increased activity is likely to be evidence of the market’s concern over future energy price increases, which are estimated to increase by up to 18% next year. Such indications are fueling interest in power-saving technology, and will likely support the country’s goal of 15% of green electricity by 2020.
Access to finance
According to BNEF According to BNEF investment in Indian clean, investment in Indian clean-energy projects energy projects reached a record $7.2 billion (€5.3b) in the first three quarters, exceeding the total annual investment of US$5.7b (€4.2b) in 2010. The solar sector has been key to this growth, generating a fourfold increase in investment to $2.4 billion (€1.8b) in the first nine months as a result of federal and state-level policies.
The results are particularly impressive given that rupee borrowing costs are among the highest in Asia – in October, the Reserve Bank of India raised the repo rate for the 13th time since the start of 2010, to 8.5%.
Q3 also saw the announcement that KfW Entwicklungsbank, the German state development bank, has agreed to provide a €250 million loan to help fund one of the world’s largest solar PV plants, a 125-MW (expandable to 150 MW) facility in the state of Maharashtra. Total financing for the project is €370 million, with the remaining amount to be funded by the state.
There was further good news as the US Export-Import Bank announced that it expects India to become its biggest recipient of funding for clean energy projects in the next year. This includes some US$575m (€423m) of funding for solar projects, of which around $75 million (€55m) is already approved, the remaining representing deals in the pipeline. The Export-Import Bank has already approved $1.4 billion (€1.0b) in new deals during this financial year, raising its overall lending to India to $5.5 billion (€4.0b).
Solar
Solar developers were invited to register for the second National Solar Mission auction in August, which will award licenses to build as much as 350 MW of PV plants by 2013. However, the auction guidelines have been slightly revamped with respect to the size and amount of projects companies can win. The Government increased the maximum size of each project from 5 MW to 20 MW, and will allow a successful bidder to win as much as 50 MW of the total capacity. Projects will also be allowed seven months to achieve financial close compared with the previous six. It is hoped these changes will attract larger companies that may have previously been dissuaded from participating based on insufficient profitability from smaller projects. The deadline for submission of a Request for Selection (RfS) was 3 October for batch two, with shortlisted candidates being announced on 8 November. Solar PV projects under batch one — the first auction — are likely to be commissioned by end of 2011, while CSP projects are expected to come online during 2013.
In addition to the Solar Mission, which operates at a central level, various states have been independently taking steps to promote solar power. For example, in September, Rajasthan state issued draft bidding documents to develop 250MW of solar capacity, representing part of Phase 1 of the state’s new solar target of 10-12 GW of new capacity over the next 10 years. Meanwhile, the state of Tamil Nadu has announced plans to create 10 solar parks each with a capacity of 300 MW, at a total cost of around INR450b (€7b).
Wind
The Ministry of New and Renewable Energy has removed a 2002 rule which only permits wind installations at sites with a minimum wind power density of 200W/m2at a hub height of 50 meters. While this change is expected to provide a general boost to the wind sector, it is unlikely to alter its growth potential significantly since it will mainly benefit small-scale rather than larger utility-scale projects.
It was also announced in Q3 that the Government wants to axe an accounting rule that provides a federal tax break for wind farms in the country, which it claims has encouraged investment in wind power as a way of cutting taxes rather than diversifying the energy mix. The Government plans to discontinue the benefit next April and introduce a new tax code; however, the announcement is likely to prompt a rush to build projects in the current financial year, which could temporarily impact activity in 2011, even if the tax break is continued.
The largest private equity investment in the Indian wind sector was also seen this quarter, with Goldman Sachs agreeing to acquire a majority stake in ReNew Wind Power, an Indian renewable energy producer, for INR10 billion (€148m). ReNew plans to expand its capacity by 200 MW to 300 MW annually, and will use Goldman’s investment to acquire new projects.
Biomass
In order to boost biomass-based power generation in the country, the Government is preparing a national bioenergy program which will be launched in the 12th Five-Year Plan (2012-17). The Government has allocated INR34 billion (€1b) for the biomass mission and it is hoped the national initiative will replicate some of the success of the National Solar Mission.
