PRELIMIN ARY C ON C EPT N OTE

India Solar Opportunity

Mr. Anmol Sheth

Akash Exports

I.

Why solar makes sense in India

There are four fundamental drivers for solar as an investment option in India.
1.

High Irradiation levels

Irradiation levels in India are between 4-6 kWh/m2/day that is nearly fifty percent higher than the
average annual radiation in Germany (3.28 kWh/m2/day).

(Source: Solar GIS)

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2. Structural Power deficit

India has a sustained power deficit

of nearly 14% at peak times. India is
projected to face a power deficit of
100 TWh by 2017.

3. Rising costs of grid power

Grid prices in India are cross

subsidized.

Commercial

and

industrial consumers pay higher

prices

for

the

subsidy

for

agricultural and residential tariffs.

As a result of unequal pricing, the
power prices for industrial and
commercial

segments

are

increasing between 5-7% p.a.

4. Falling costs of solar PV

Globally, PV module costs have fallen by
nearly 55% since the last two years.
This trend is expected to continue, albeit with
a less sharp fall in prices. Falling costs of
components are driving the solar tariffs to new
lows. India is leading the world in cost
reductions at the Feed-in Tariff (FiT) end.

II. Investment avenues in the Indian solar

market
There are currently two opportunities for large scale investment into solar energy in
India.

Policy Driven Avenues

Non-policy Driven Avenues

National Solar Mission (NSM) Phase 2,

Renewable Energy Certificate (REC)

Gujarat Solar Policy, Rajasthan and other

mechanism, group-captive models and

states across India

independent Power Purchase

Agreements (PPA)

+ Fairly bankable, clear-cut processes +Flexibility of timelines, number of

and defined time-lines, support from

projects, location and equipment used,

government for evacuation of power.

lesser competition, less government

-Business is highly dependent on policy

dependency

announcements, risk of policy changes

-No clear policy support (and sometimes

(as seen recently in the state of Andhra

contradicting policy announcements),

Pradesh), competitive bidding has

diverse and distributed market, finding

reduced available tariffs to new lows,

bankable PPAs can be challenging

severe competition, domestic content

requirement (in some cases)

III. Preliminary financials

Solar projects are long-term investment products. The nature of a solar projects is such that the
over 95% of the capital investment is made upfront and the operation costs are minimum. There are
no fuel costs (and therefore no uncertainties liked to change in fuel costs) and minimum labour
required to operate and maintain the plant.
Having said that solar projects do not bring returns of 30-40% p.a. as in realty or some service
sectors. Solar is a conservative and long-term investment option.

The returns form a solar plant is governed by several factors of which the following factors are
crucial:
1. Policy under which the plant is registered the policy determines the price of the Power
Purchase Agreement (PPA)
2. Location of the plant - Irradiation of site is the biggest contributor to the profitability of the
plant
3. Quality of equipment used high quality equipment ensures projected generation and
lowers the O&M of the plant

The following table enlists the approximate investment and returns expected
Policy Driven Avenues

Non-policy Driven Avenues

Capital Expenditure (CAPEX)

EPC costs

INR 7.0 cr per MW

Project Development*

INR 0.25 cr per MW

TO TAL
Operational

IN R 7.25 c r per M W
Expenditure

INR 11 lakh per annum per MW

(OPEX)
Estimated Equity Internal Rate

12- 15%

13-22%**

of Return (EIRR)
* Project Development includes acquiring irradiation data, legal structuring, permits, licenses,
registrations and any other third party expertise need for the project.
** Considering revenues from Renewable Energy Certificates (REC)

The expected EIRR in case of non-policy driven avenues, depend on the business model explored. In
case of projects based on REC models, there exists a huge upside from the sale of RECs. Current
solar RECs are trading at INR 12,000 per MWh (INR 12.00 per unit of power). This has a strong
potential to skew the profitability of the project in the right direction. However, it must be kept in
mind that the fundamentals of the REC market are not completely secure and is subject to risk.

IV. BRIDGE TO INDIA

BRIDGE TO INDIA is Indias premier solar consultancy. Our clients include some of the largest
corporates across the world. We also believe in engaging policy matters and regularly interact with
some of Indias policy makers. As a company, our goal is to disseminate knowledge (and not just
information) to the market that becomes enablers to a transparent, dynamic and fair market for
businesses.

Sol ar Comp an i e s
Con gl omer ate s
I n st i tu t i on s

Government of
Madhyapradesh

(list not exhaustive)

BRIDGE TO INDIAs in-depth market understanding, analysis and consultancy is presented in the
form of free reports that we publish periodically. Our corpus of reports form the most widely read
reports on the India solar market around the world. Our readership base spans 10,000 industry

professionals from across the world.

BRIDGE TO INDIAs team is headed by Dr.Tobias Engelmeier a PhD is political science, with a focus
on Indian politics. His passion for India and concern for the formulation of business friendly policies
has cumulated in the genesis of BRIDGE TO INDIA. The company has a team of dynamic, young and
entrepreneurial people, who seek to engender change.

V. Next steps
This concept note shall assist Akash Exports to arrive at their decision in order to move ahead into
investing in the solar market in India. Based on this concept note, BRIDGE TO INDIA will be happy to
support Akash Exports in a detailed market entry strategy that covers investment strategy, target
consumer segments, financial modelling of the business case, identification of right technology
partners and other topics.

We look forward to working with you.

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