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Excerpt of a presentation from the EAI Solar PV Developer – EPC Meet, Chennai, Jan 22, 2013

Solar Power Plant Option Opportunities, Challenges and Pitfalls – Ramakrishnan G K, Head Strategic Sourcing and Product Development Solar L&T Constructions

Mr. Ramakrishnan, Head Strategic Sourcing and Product Development for Solar at L&T Constructions, made a presentation to the audience at the Developer-EPC meet on Solar Power Plant Option Opportunities, Challenges and Pitfalls. During his speech he discussed the outlook for solar power in India, the recent solar policies from Andhra Pradesh and Tamil Nadu, challenges faced in building solar plants, and the questions that need to be raised by developers.

Mr. Ramakrishnan began his presentation by saying that India lives in its villages but the quality of power available to villages is questionable. He continued by describing the power situation in Tamil Nadu

  • 12,000 MW – Average demand
  • 2,000 MW – Average power deficit
  • 3,500 MW – Peak power deficit

This deficit results both in quantity of power being restricted through load shedding as well as the quality of power being affected. He added that the situation is more or less the same in Andhra Pradesh. These problems are compounded by the grid structure where the southern grid deals with the integrated North-East-West grids through HDVC lines which prevents power available in the North being transferred to the South. These problems also represent opportunities for businesses.

Electricity from Coal and DG sets is a major polluter

  • Every unit of electricity generated releasing 0.82 kWh of CO2
  • India is the 5th largest contributor to Green House Gasses emissions

All this adds up to the need for renewable sources of energy. Wind power is already well developed in India, with India having 11,000 MW of wind farms of which Tamil Nadu contributes over 7,000 MW of wind farms. Solar power has several advantages over other energy sources

  • Still in its nascent stage, with only 1 GW of solar power being generated in India
  • Is not location specific
  • 5.5 kWh/m2/day –  Average radiation across Central, Western, and Peninsular India (Europe experiences only 4-4.5 kWh/m2/day)

Solar Power in India

  • Achievements
    • Gujarat – Out of Phase 1 (650 MW) and Phase 2 (640) MW of allocations, 600 MW of solar plants are currently running with 300 MW contributed by Charanka Solar Park alone
    • Rest of India – Power plants of about 250 MW have been commissioned
    • Project size and cost
      • Size – From 1 MW 3 years ago, we are now seeing 100 MW projects at a single location
      • Cost – From 13-15 Crores/MW 3 years ago, we are now implementing projects at Rs. 8 Crores/MW
      • Growth
        • Photovoltaic (PV) and Concentrated Solar Power (CSP) combined are projected to grow at 30% over the next 3 years (compared with 40% worldwide)

Tamil Nadu Solar Policy

  • 3,000 MW by 2015
    • 1,500 MW – Utility scale projects
      • 1,000 MW via tender
      • 500 MW via Solar Purchase Obligations (SPOs)
  • 1,100 MW – REC projects
  • 500 MW – Rooftop projects
    • 350 MW – Government projects
    • 150 MW – Private projects
    • Renewable Purchase Obligations – High Tension (HT) customers will have to consume either through captive generation or by buying REC credits
      • 3% by 2013
      • 6% from 2014 onwards
      • For residential customers, in addition to the incentives under JNNSM (30% of capital subsidy up to 1 kW for residential and 100 kW for commercial and institutional projects), a further generation incentive is provided
        • Rs. 2/kWh (first 2 years)
        • Rs. 1/kWh (next 2 years)
        • Rs. 0.50/kWh (next 2 years)
        • Tariff based bidding for 1,000 MW

Mr. Ramakrishnan now shared an evacuation map for Tamil Nadu, stating that the 1,000 MW from the tariff based bidding cannot be injected into the grid at any one point, but has to be distributed across the state. He pointed to the experience of wind farm operators who have achieved Plant Load Factors (PLF) of 28-32% but are unable to meet their financial targets due to poor evacuation.

He next touched upon wheeling and transmission charges for the non tariff based projects which are borne between the developer and consumer of solar power

  • At 110 KV generation and consumption voltage – Rs. 1.60/kWh open access charges without considering duties and other losses
  • At  110 KV generation and consumption at 33/22/11 KV (Discom) voltages – Rs. 1.82/kWh comprising open access and wheeling charges and excluding transmission losses
  • At 33/22/11 KV generation and consumption voltage (any commercial or industrial HT consumer) – Rs. 0.23/kWh of wheeling charges and excluding transmission losses

Andhra Pradesh Solar Policy

  • No cap or target on generation
  • 1,000 MW government tender
  • Captive generation, wheeling of power inside and outside the state, being a merchant plant, etc., are all permitted provided wheeling, transmission, and access charges are paid. REC benefits are also available (though whether such benefits are bankable is debatable)
    • Wheeling and transmission charges are waived for captive generation under certain conditions (not applicable for REC projects)
    • Energy banking is allowed (this is not clear in the Tamil Nadu policy) except in the peak season (February-July) and at peak times (6-10 PM). Banking charges are not as high as in Tamil Nadu

Challenges facing the Solar PV sector

After discussing the opportunities in the Solar PV sector, Mr. Ramakrishnan now spoke on the challenges faced

Financing

Raising finance for Solar PV projects continues to be a challenge due to

  • High capital costs – Despite prices reducing by 50% over the last 3-4 years to about Rs. 8 Crores/MW, the cost of a Solar PV continues to be high on a PLF basis when compared to Wind farms and even higher compared to conventional thermal plants which cost about 4-5 Crores/MW
  • Low PLF – The Plant Load Factor of a Solar PV plant is only 20% or less, compared to 80% and above for a thermal plant
  • Policy and regulatory issues
  • Knowledge barriers amongst financial institutions – Only a few banks are offering non-recourse project based funding
  • Reliable EPC partner – It is the EPC who can give some assurance that the plant will keep running as equipment manufacturers may not continue to function

Challenges faced by Developers during project execution

  • Local law and order problems
  • Usage of local labour – This could become a local obligation
  • Site conditions – Water logging, right of way, etc.
  • Poor infrastructure – These sites are usually barren and basic infrastructure, starting with access roads, are an issue
  • Clearances for commissioning – There are many regulations to be complied with, such as clearing the land for industrial use with local authorities
  • Labour licenses, etc.
  • MNRE exemptions – A module can be imported at zero duty, but every component in the module is levied a duty if it is manufactured in India. This leads to a preference for imported panels. A concessional duty of 5% (as against the prescribed duty of 28%) is levied on inverters and other imported systems, and excise duty of domestic products is completely waived provided all documentation is clear
  • Choice of vendor and subcontractor – This is critical depending on the timelines of the project. The transformers and HT switchgear alone usually take 12-18 weeks to be manufactured, whereas the entire solar project has to be completed in that time or less
  • Choice of components
    • Modules – These have issues related to Snail Trail, Hot spots/Thermal cycling, Light Induced and Potential Induced degradation, etc.
    • Inverters – Many inverter manufacturers do not have experience with bad grids and cannot handle the grid conditions in India – 33KV line has +10%/-15% fluctuations, frequency of +-3Hz, and unusual reactive power requirements. Manufacturer should have adequate testing facilities and be able to tune the inverter to Indian conditions with snubbers and filter circuits
    • Structures – Corrosion issues are faced with different soil and subsoil conditions. Lightning arresters, adequate earthing, galvanising etc., need to be taken care of

Mr. Ramakrishnan shared a few pictures of snail trails and hot spots on panels with the audience. He also shared photos from plants outside India of improper installations with hanging combiner plugs, missing fuses or surge arrestors (which would send a lightning strike to the inverter), incorrect joining of DC cables, and trackers losing accuracy due to thermal cycling.

Questions to be addressed by the Developer

Mr. Ramakrishnan concluded his speech by discussing the various factors that need to be decided or ascertained by the developer before the project can commence

  • Project type – Captive, REC, RPO, or merchant power plant
  • Installation
    • Ground mounted or rooftop
    • Fixed tilt, seasonal tilt, or tracker
    • Crystalline or Thin Film
    • Central or String inverters – Choice depends on the topography of the land, AC vs. DC losses, and central vs. String monitoring
    • Nature of land – Layout, soil, water logging, highest flood level, distance to substation, etc.
    • Evacuation scheme
      • Voltage – The significance of this has been explained previously with the discussion on access and wheeling charges at different voltages. In Tamil Nadu 11 KV is permitted for 1-2 MW plants while 33 KV is standard for 1-5 MW plants in Andhra Pradesh. Higher voltages make for a more reliable grid but the higher voltage switchgear has to be built into the plant which adds to the developer’s cost
      • Distance – The lower the voltage, the lower the transmission cost to the nearest injection plant but grid instability is higher
      • Approvals – Various permits and clearances need to be obtained

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