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Explanatory Memorandum

For Benchmark Capital Cost Norms for Solar PV Power Projects and Solar Thermal Power Projects

To be applicable

For the year 2011-12

September 2010
CENTRAL ELECTRICITY REGULATORY COMMISSION NEW DELHI

1. Premise for development of Benchmark Norms


Background 1.1 InexerciseofthepowersvestedunderSection61readwithSection178oftheActandafter previouspublication,theCommissionnotifiedtheCentralElectricityRegulatoryCommission (Terms and Conditions for Tariff determination from Renewable Energy Sources) Regulations, 2009, (hereinafter referred to as the RE Tariff Regulations). The RE Regulationsprovidefortermsandconditionsandtheprocedurefordeterminationoftariff ofthefollowingcategoriesofrenewableenergygeneratingstations: (a)WindPowerProject; (b)SmallHydroProjects; (c)BiomassPowerProjects; (d)NonfossilfuelbasedcogenerationPlants; (e)SolarPhotovoltaic(PV)andSolarThermalPowerProjects. 1.2 Further,theCommissionhasnotifiedthefirstamendmenttotheRETariffRegulations2009 videnotificationdated25.02.2010.TherelevantextractofnotifiedFirstAmendmentofRE TariffRegulationsisasunder: (2) Notwithstanding anything contained in these regulations, a) the generictariffdeterminedforSolarPVprojectsbasedonthecapitalcost and other norms applicable for the year 201011 shall also apply for such projects during the year 201112; and b) the generic tariff determined for Solar thermal projects based on the capital cost and other norms for the year 201011 shall also apply for such projects duringtheyears201112and201213, providedthat(i)thePowerPurchaseAgreements(PPA)inrespectof the Solar PV projects and Solar thermal projects as mentioned in this clause are signed on or before 31st March, 2011; and (ii) the entire capacitycoveredbythePPAiscommissionedonorbefore31stMarch, 2012inrespectofSolarPVprojectsandonorbefore31stMarch,2013 inrespectofSolarthermalprojects. 1.3 As per first proviso under Regulation 5 of the RE Tariff Regulations, 2009, the benchmark capital costfor SolarPV andSolar thermal powerprojectsistobereviewed annually.The Commission, for FY 200910, specified the normative capital cost for Solar PV and Solar ThermalPowerProjectsasRs1700Lakh/MWandRs1300Lakh/MWrespectively. 1.4 Subsequently, as per Regulation 5, Commission had reviewed, vide the Order dated 25.02.2010 in Petition no. 13/2010, benchmark capital cost for Solar PV power projects at Rs.1690Lakh/MWfortheFY1011.
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1.5 Ithasbeenobservedthatafterthebenchmarkcapitalcostnormswerereviewedvideorder dated 25.02.2010 in Petition no. 13/2010, there has been significant change in the global market conditions for solar industry which is still evolving and certain development at national level such as announcement of Jawaharlal Nehru National Solar Mission (JNNSM) has taken place, many State Electricity Regulatory Commissions (SERCs) have determined generic tariff for Solar PV and Solar Thermal power project PPA have been signed by the projectdevelopersinvariousStates. 2 BenchmarkCapitalCostNormforSolarPVPowerProjectsfortheFY201112 2.1 InSolarPVpowerproject,thetwomajorsubsystemsareSolarPVmodulesandbalanceof Systems (BoS). Solar PV modules constitute 6570 % of the cost while BoS comprises the rest.TheSolarPVmodulesarepredominantlycrystallineSiliconbased.Withinthemodules theintermediateproductsatdifferentstagesofthemanufacturingprocessarePolysilicon, Silicon Wafer, Solar Cell, and Solar PV Module. There is presently negligible domestic manufacturingcapacityforPolysiliconandSiliconWaferinourcountry.Themanufacturing capacityincludingprojectsunderexecutionforSolarCellsandModulesareabout600MW and 1000 MW respectively. The PV modules manufactured in the country meet the internationalstandards. FactorsaffectingSPVCellsandModuleprice

2.2 SPVcells arepricedbased onthenumberof wattsofelectricitytheycangenerate and on their Conversion Efficiency. Pricing per Watt of SPV cells is principally affectedbyfollowingfactors: i. ii. iii. iv. v. vi. Manufacturing costs Per Watt which depends on the efficiency and yield levelsoftechnologyandthecostofSiliconWafer; OverallmarketdemandforSPVcells; Prevailing market prices when SPV manufacturer enter into sales contracts withcustomers; Sizeofthecontractorthepurchaseorder; Strength, history and prospects of manufacturers relationship with the customer;and Someotherfactors,suchasthecurrencyexchangeandinterestrates.

DeclineinthepriceofSPVSells
2.3 Increasedeconomiesofscaleandprocesstechnologyadvancementsinthepastresultedina steady reduction in manufacturing costs and the price Per Watt of SPV cells. Since fourth quarterof2008,expectedgrowthrateindemandsloweddownduetotheglobaleconomic
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downturn. However, manufacturing capacity grew at the expected rate. This decline in growthindemandcontinuedinthe2009andisprojectbyindustryexpertstocontinuefor one or two years. The impact of this gap between demand and supply is seen in the decliningtrendinthepricesofPVCells. 2.4 The impact of excess production capacity and the global economic downturn was also observedintheFY0910.AccordingtothedraftRedHerringProspectussubmittedrecently toSEBIbyIndoSolarLimited,aSPVmanufacturer(planningforinitialpublicoffering,having commercial production capacity of 160 MW of Polycrystalline SPV cells with an average conversion efficiency rating of 16+%), the average selling price of their SPV cells since commercial production up to December 31, 2009 is approximately Rs. 58.53 per Watt (@ $1.25perWattwithexchangerateof$1=Rs.46.7).Itfurtherstatesthatincaseofshortage ofSPVcells,thesellingpricewillincrease,however,ifdemandforsolarproductsdeclineand theoversupplyofsolarproductssituationexists,theaveragesellingpriceofSPVcellswill beadverselyaffected.Ifweaddthecostofconversionfromcelltomoduleas$0.5perwatt, themodulecostwouldbe$1.75perWatt.AccordingtoaprojectdeveloperinIndiawhohas commissioned 1 MW solar PV power plant in 2010, delivered price of the module is $1.75/Watt.

Trend of average spot selling prices of Polysilicon, Wafer, Cell and Module from April2009toJune2010
2.5 AccordingtothePVinsight,thePolysiliconpriceshavedroppedgloballyfromlastyearMarch 2009by42.8%.ThefigurebelowpresentsthetrendofPolysiliconpricesfromMarch2009to June2010. PolysiliconPrices
P o ly s ilic o n p r ic e s

Name (US$/KG) Polysilicon

ClosingValue ClosingValue (US$/KG)16th (US$/KG)28th June,10 April,10 55.60

ClosingValue (US$/KG)27th Feb,10

LastYearMarch 2009

54.50(2.00%) 54.75(1.60%)

97.2(42.80%)

120

USD/kg

100 80 60 40 20 0 M a r09 A p r09 M ay09 Ju n 09 J u l09 A ug09 S ep09 O c t09 N o v09 Dec09 Ja n 10 Feb10 A p r10 Ju n 10

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2.6 According to the PVinsight, the Poly Wafer prices have dropped globally from last year March2009by20.3%.ThefigurebelowpresentsthetrendofPolyWaferpricesfromMarch 2009toJune2010. WaferPrices
US$

PolyWaferPrices
4.5 4

3.5 3 2.5 2 M a r- A p r- M Ju n - Ju l09 09 ay - 09 09 09 A ug09 S O c t - N o v- D Ja n - F e b - A p r- Ju n ep- 09 09 ec - 10 10 10 10 09 09

Source:PVinsight MonoWaferPrices
US$ 5 4 .5

4 3 .5 3 2 .5 2 M a r09 A p r09 M ay09 Jun09 J u l09 A u g - S e p - O c t09 09 09 N o v- D e c - J a n 09 09 10 F e b - A p r10 10 Jun10

2.7 According to the PVinsight, the Cell and Module spot prices have been dropped globally fromlastyearMarch2009by18.4%and23.8%.ThefigurebelowpresentsthetrendofPoly CellandModulespotpricesfromMarch2009toJune2010.

SiliconCell&ModulePrices
Closing Closing Value Closing Value Value Last Year (US$/W) (US$/W) (US$/W) March2009 16thJune,10 28thApril,10 27thFeb,10 1.33 1.73 1.35(1.5%) 1.78(2.8%) 1.24(7.3%) 1.63(18.4%)

Name (SpotPrices) Cell Module

1.85(6.5%) 2.27(23.8%)

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S o la r C e ll P ric e

1 .7 1 .6

1 .5
USD/W

1 .4 1 .3 1 .2 1 .1 1 M a r09 Ap r09 M a y- J u n 09 09 J u l09 Au g - S e p 09 09 O c t09 N o v- D e c - J a n 09 09 10 Fe b 10 Ap r10 Ju n 10

S o la r m o d u le P rice 2 .4 2 .2 2 USD/W

1 .8 1 .6 1 .4 1 .2 1 Ma r09 Ap r09 Ma y09 Ju n 09 Ju l09 Au g - S e p 09 09 O ct09 N o v- D e c09 09 Ja n 10 Fe b 10 Ap r10 Ju n 10

2.8 According to the PVinsight, the Silicon Module and Thin Film Modules weekly spot prices per watt as on 25th September 2010 was around US$ 1.70 and US$ 1.31 per Watt respectively.


Solar Panel / Solar Module Weekly Spot Price Item Silicon Module Per Watt Thin Film Module Per Watt Unit: US$ High 1.90 1.50 Low 1.64 1.25 Average 1.70 1.31 AvgChg 0.00 AvgChg% 0.00%

0.00 0.00% Last Update: 2010-08-25

Source:PVinsights
2.9 ThecurrenttrendofspotpriceofSolarcellmatcheswiththeinformationrevealedbyM/s IndoSolarintheredherringprospectusaboutthewholesalepriceofaPVcellasreferredin para2.4.
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2.10 PreliminaryfindingsfromtheQ110issueofIMSResearchsPVSupplyChainHealth Report indicate that from a cost standpoint, major PV manufacturer M/s Trina reported a 14% decline in module costs in Q409 to $1.24/W as shown in Figure 2 and is expecting another5%declineinQ110.IMSresearchestimatedthatmodulecostwillfurtherdecline byanother5%inQ210bringingthemto$1.11/W.Furtheritstatesthat,Trinaistargeting $1.00/W in Q410 which appears achievable if nonsilicon costs approach $0.70/W as indicatedintheirguidance.Trinasblendedpolycostsfellfrom$77/kginQ409to$67/kgin Q110 even though they purchased new poly in Q409 at $55/kg. Blended poly costs of $50/kgshouldgetthemto$1.00/W. 2.11 Figure2:TrinasQ408Q210ModuleandSiliconCosts

Source:TrinaSolar,IMSestimates.IMSResearchsWeeklyPVSupplyChainHealthReport

2.12 Domestic Companies are presently offering complete EPC (Engineering Procurement & Construction) contract on turnkey basis for setting up 1 MW Solar Grid ConnectedPowerPlantwithCrystallineSolarPVModulesataround14.5CroreandwithaSi ThinFilmssolarPVmodulesataround13.5Crore(excludingtransportationcostuptoproject sitelandcostandpreliminaryandpreoperativeexpenses).ThepriceofCrystallineSolarPV ModulesquotedisaroundRs.9.2CroreperMW.Itistobenotedthat,accordingtothesolar PVindustryexperts,suchquotedpricesarenonnegotiatedandcouldbereducedfurtherby 1015% at negotiation stage. These clearly show that price of Solar PV Modules is decreasing.Itistobenotedthateventhe54kWSolarPVprojecthasbeeninstalledbyM/s Moser Bear for NDPL , Delhi at project cost of Rs. 75 lakh last year 200910 with the generation guarantee of 17% CUF, which works out to project cost of less than Rs. 14

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Crore/MW.ItisalsotobenotedthatinthemonthofJuly,2010,aroundmorethan400MW PPAssignedinGujaratStatewithGERCdeterminedlevellisedTariffofRs.12.54perunit. FuturetrendsexpectedinglobalsolarPVindustry 2.13 In2010,increaseinglobalPVmanufacturingcapacityandreductionindemanddue toglobalrecessionhasresultedsolarPVmodulepricedecline.AccordingtotheCleanEnergy Trends2010,thepricedrop,alongwithotherinternalfinancialandpolicydrivers,iscausing some countries to reduce national incentive programs. Germany plans to reduce feedin tariffsatthebeginningofJuly2010by11to16percent,dependingontheapplication.This move will further intensify the demand for less expensive PV in the solar market. Further, according to the Navigant Consulting report, as quoted in the Indian Semiconductor Association s report on Solar PV Industry 2010 : Contemporary scenario and emerging trends:May2010,theglobalcapacityofsolarPVmodulesisexpectedtoreach54GWby endofyear2012asindicatedinthegraphbelow: CumulativecapacityadditionsplannedinsolarPVuntil2012

2.14 Theabovereferredreportfurtherstatesthatthecapacityadditionreliesmainlyon the implementation of projects in China, which has ambitious plans to add capacity. The graphbelowindicatesChinasgrowthplansinthenext4years.IfChinaachievesitsplanned target,itwillaccountfor32%ofthetotalworldwideproductioncapacityby2012. SolarPVproductioncapacityadditionplansofChina

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2.15 According to thePhoton Consulting newreport on TheTrueCostof SolarPower: HowLowcanyouGO?publishedinApril2010concludesthattheChineseandTaiwanese companies have become the most important cost leaders at the ingot/wafer, cell and module steps of cSi supply chain. Due to silicon feed stock cost reduction and other geographiccoststructureadvantageslike:lowerunitmaterialcosts,lowerequipmentcosts, and lower unit labor costs compared to manufactures in Europe, Japan and the US report conclude that solar cost benchmarks for average and bestpractice cost are falling rapidly withaselectgroupofleadingcompanieslikelytogobelowthe$1perWattallincostbarby 2013. 2.16 AccordingtoGTMResearch,theinstalledcapacityofPVonthewholeisforecasted toreachmorethan20GWgloballyby2013(equatingtoroughlyUS$60billioninrevenue), andthecostofPVpanelsisprojectedtofalltoUS$1.20/Wbythatsamedate.

2.17

Theaboveanalysisrevealsthatthecurrentthinfilmmodulepriceperwattvariesin the range of $1.25 to $1.50 and crystalline module price varies in the range of $1.64 to $1.90. Most of the international studies reveal that the prices are expected to decline in future.TheCommissionproposestoconsiderbasemodulecostat$1.75perwatt(CIF)for thedeterminationofbenchmarkcapitalcostforsolarPVprojects. Withtheexchangerateof Rs 46.70/US$, the module cost works out to Rs. 8.17Crore/ MW.

2.18

Themodulecostwhichconstitutesabout60to65%ofthecapitalcostandcapacity utilization factor (CUF) have the most significant impact on the levelised tariff and consequent cost recovery for the developers. While determining the module price it is thereforeimportanttotakeintoaccounttheCUFspecifiedanditsimpactonthetariff.

2.19

WithdueregardtothisfacttheCommissionhadcommissionedastudytoassessas to whether the CUF of 19% for solar PV was adequate given the solar radiation in the country. The preliminary report suggests that out of 46 selected locations across the country,theaverageCUF at more than 80% locationsworksout to bemore than 19% for solarPVplantbasedonthinfilmtechnology.Similarly,theaverageCUFatmorethan50% locationsworksouttobemorethan19%forsolarPVplantsbasedoncrystallinetechnology. It can thus be inferred that in most of the places CUF is around 19%. In Rajasthan and GujaratCUFisfoundmostlyintherangeof20%forcrystallinetechnologyandaround21% forthinfilmtechnology.Thereare,however,somelocationswheretheCUFisaround18%. TheCommissionisoftheviewthatsincemostofthelocationshaveCUFapproximatingthe benchmarkCUFof19%,noadditionalcompensationisrequiredtothisaccount. Some stakeholders had raised the issue regarding degradation and its impact on tariff.TheCommissiontooknoteofthisconcernandrequiredtheabovereferredstudyto examine the impact of degradation as well. Accordingly, the said study has also examined the impact of degradation, if any on the solar PV plants and found that the module performance degrades over time due to ageing. One can fairly assume degradation of maximum0.5%peryearfrom4thyearofdeployment.TheCommissionfeelsthatthemodule pricetobe consideredfor the purpose ofcapital cost ofsolarPVprojects should factorin reasonablecompensationfordegradationduetoageing.TheCommissionisoftheviewthat

2.20

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additionalmodulecostofRs.4lakhsperyearforadditionof5KWofmodulesperMWper yearfrom4thyearto25thyearofoperationshouldbecompensated.TheNetPresentValue (NPV)ofthisadditionalmodulecostworksouttoRs.15.56Lakhs/MW. 2.21 The Commission, therefore, proposes to fix the module cost at Rs. 8.33 Crore per MW for the FY 201112 for determination of benchmark cost for Solar PV projects for FY 201112.ThisfigureincludesbasemodulecostofRs.8.17Crore/MW(Ref.Para2.17)plus additionalmodulecostduetodegradationofRs.15.56Lakhs/MW(Ref.Para2.20).

NonModuleCostComponent:
2.22 Thenonmodulecostcomponentscomprisecosttowardsland,civil&generalworks, ground mounting structures, power conditioning unit, cabling & transformer/ switchgears and preliminary/preoperating expenses & financing costs. The nonmodule component togethercontributestoapproximately35to40%ofoverallcapitalcostrequirementofsolar PVbasedpowerprojects.Eachcomponentof abovereferrednonmodulecostofSolarPV basedpowerplantisestimatedasunderforthedeterminationofbenchmarkcapitalcostof SolarPVprojectsforFY201112.

Land:
2.23 The land requirement for Solar PV based power project depends upon the technology employed i.e. Crystalline or Thin film, conversion efficiency and solar radiation incidentinrespectivearea.TheCommission,whiledeterminingthebenchmarkcapitalcost forSolarPVprojectsfortheyear201011,hadconsideredlandrequirementof5Acre/MW and its cost was considered as Rs. 3 Lakh/Acre or 0.15 crore / MW. The Commission proposestoconsiderthesamelandcostforthedeterminationofbenchmarkcapitalcostof SolarPVprojectsforFY201112.

CivilandGeneralWorks:
2.24 The cost associated with civil works includes testing of soil, preparation of soil/ground with all necessary works like earthmoving, digging holes for the foundations/pilingsandleveling,fencingoftheland,developmentofapproachroad,cable trenches, water supply arrangement in solar farm, control room etc. The General works includesecurityofsolarfarm,settingupofpowerbackupgenerator;yardlighting,Earthling Kits, etc. The Commission, while determining the benchmark capital cost for Solar PV projectsfortheyear201011,hadconsideredthecivilandgeneralworkstogetherasRs.0.9 Crore/MW. After allowing cost escalation of 5% over the last years cost the Commission proposestoconsider0.95Crore/MWasthecostforCivilandGeneralworkforbenchmark capital cost of Solar PV projects for FY201112. The escalation of 5% is based on the escalationofIronandSteelandElectricalMachineryindicesoverthelastquarter.

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GroundMountingStructures:
2.25 This expenditure includes costassociatedwithmanufacturing,delivery, installation andcalibrationofeitherhotgalvanizedsteeloraluminumstructuresincludingallnecessary material, works and installation on prepared foundations/pilings. The Commission, while determining the benchmark capital cost for Solar PV projects for the year 201011, had consideredthecostofgroundmountingstructureasRs.1.0Crore/MW.Afterallowingcost escalation of 5% over the last years cost the Commission proposes to consider 1.05 Crore/MWtowardsthecostforGroundMountingStructuresforbenchmarkcapitalcostof SolarPVprojectsforFY201112.Theescalationof5%isbasedontheescalationofIronand SteelandElectricalMachineryindicesoverthelastquarter.

PowerConditioningUnit

2.26 Power conditioning equipment is an important component of the balanceof system.PowerconditionersprocesstheDCpowerproducedbyaphotovoltaicsystemtoAC power and match the same with utility's power. According to the project developer, who have commissioned 1 MW Solar PV plant and running it successfully, it contributes to approximately10%ofthetotalcapitalcost.Presently,theEPCcontractorsareofferingEPC cost which includes cost of grid inverters at Rs. 1.2 Crore/MW. The Commission, while determining the benchmark capital cost for Solar PV projects for the year 201011, had consideredthecostofpowerconditioningunitasRs.2.0Crore/MW.Consideringthefactsas mentioned above as well as reduction of inverter prices globally, it is proposed that expendituretowardsPowerConditioningUnittobeconsideredasRs.1.6Crore/MW.

CablesandTransformers

2.27 ThisexpenditureincludesEPCcosttowardsDCcaballingbetweenSolarPVpanels& Inverters including junction boxes, AC cabling between Inverter & substation, Earthling arrangements and Transformer. The transformer cost includes the EPC cost of a step up outdoortypetransformer,breaker,CurrentTransformers,PotentialTransformers,Isolators, LAs, protection relay and TOD meter. The Commission, while determining the benchmark capitalcostforSolarPVprojectsfortheyear201011,hadconsideredthecostofcablesand transformersandotherassociatedequipmentsasRs.0.85Crore/MW.Afterallowingcost escalation of 5% over the last years cost, the Commission proposes that Rs. 0.90 Crore / MW may be considered as expenditure towards cables and transformers for solar PV projectsforthedeterminationofbenchmarkcapitalcostofSolarPVprojectsforFY201112.

Preliminary/PreoperatingexpensesandFinancingCosts
2.28 The preliminary/preoperating expenses include transportation of equipment, storage of equipment at site, insurance, contingency, taxes and duties, IDC and finance chargesetc.DetailedbreakupofPreliminaryandPreoperativeexpensesandfinancingcost, lumpsuminpercentageoftotalcapitalcostisproposedasunder:

i. InsuranceCost:0.5%
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ii. iii. iv. v. vi.

Contingency:1% InterestduringConstruction(IDC):5% Financingcost:1% Projectmanagementcost:1% PreoperativeCost:1.5%

2.29 Preliminary/PreoperatingexpensesandFinancingCostcontributetoabove10%of total capital cost on average basis. Accordingly, Rs. 1.44 Crore /MW is proposed to be consideredaspreliminary/PreoperatingexpensesandFinancingcost. 2.30 ThetablebelowpresentsthebreakupofbenchmarkcapitalcostnormforSolarPV projectsfortheFY201112:

Sr. Particulars No.

Table:BreakupforCapitalcostprojection
CapitalCostNormfor SolarPVproject (RsCr/MW) 8.33 0.15 0.95 1.05 1.60 0.90 1.44 14.42 %oftotal cost

1 2 3 4 5 6 7 8

PVModules LandCost CivilandGeneralWorks MountingStructures PowerConditioningUnit EvacuationCostuptoInterconnection Point(CablesandTransformers) PreliminaryandPreOperativeExpenses includingIDCandcontingency TotalCapitalCost

58% 1% 7% 7% 11% 6% 10% 100%

2.31 Considering the above facts into consideration, the expenditure towards Non ModulecomponenttogetherworksouttoRs.6.09Crore/MW.ThetotalcostofSolarPhoto voltaic power projects for the FY201112 as Rs. 14.42 Crore/MW is proposed to be consideredasbenchmarkprojectcostofSolarPVprojects. 3 BenchmarkCapitaCostforsolarThermalPowerProjects 3.1 Solarthermalpowerplantscaptureenergyfromsolarradiation,transformitintoheat,and generate electricity from the recovered heat. Over the years, four main types of solar thermalpowerplantshavebeendeveloped: Parabolictroughtechnology PowerTower
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ParabolicDishenginesystem Continuous\linearFresnelReflector 3.2 These systems are all different and within each grouping of plants, different technology concepts have been developed. Moreover, the experience and prospects for each of the differenttechnology concepts looks different. Accordingtothe PhotonInternational 2010, detailedbreakupofCSPtechnologysharesincurrentlyinoperation,underconstructionand inneartermdevelopmentareasUnder: Operational UnderConstruction NeartermDevelopment by2013 12460MW 51.1% 30% 17.9% 1%

MWCapacity Parabolictrough PowerTower Stirlingdish CLFR

821.9MW 93.6% 5.1% 0.2% 1.1%

918.5MW 94.7% 5.0% 0.3% 0.0%

Source:PhotonInternational

3.3 Fromtheabovetableitappearsthatnearly94%ofthe822MWoflargescalepilot orcommercialCSPplantscurrentlyinoperationrelyonparabolictroughtechnology, whilepowertowersaccountforonly5%,continuousLinearFresnelReflector(CLFR) systemonly1.1%anddishconcentratorslessthan1%.Ofapproximately918.5MW ofCSPplantnowunderconstruction,troughbasedplantsmakeupnearly95%,while powertowerrepresentsabout5%andStirlingdisheslessthan1%.Theshareofnon trough technologies in deployment picture could change significantly. Of the approximately 12.5 GW of CSP projects scheduled to break ground between 2010 and2013,parabolictroughsharefallstoabouthalf,whilepowertowerandStirling dishprojectsrisetoabout30%and18%respectively.Onlyabout1%ofthenearterm CSPprojectsusesCLFRstechnologywhichinpartisduetothecancellationoflast yearofa177MWcontractinCaliforniabyAusraInc.(Estimatedprojectcostaround $3.1/W)

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3.4 CostandtechnologyfeaturesofselectCSPplants: Technology:ParabolicTrough


Location Developer Status Nevada SolarOne Spain Spain Nevada USA Solar ACS, Cobra Acciona Millennium Group Operational Operational Operational Andasol1 Extresol1 ShamsOne AbuDhabi Masdar, other Under development 2011 100MW 4000 C Solana Valle1&2

ArizonaSolar Spain Torresol Energy Under Under development construction 2013 2011 280MW 100MW 3710C 3930 C Abengoa

Online 2008 2009 2007 Capacity 50MW 50MW 64MW 4000C Max. 3930 C 3930 C operating Temperature Storage (full <8h 7.5h 0.5h none 6h load) Cooling wet wet wet dry Wet*4 Solar resource 2136 2168 2606 2200 2700 (annual) kwh/m2 kwh/m2 kwh/m2 kwh/m2 kwh/m2 Solar to 15% 15% 1314% 14% 15% electrical efficiency (annual) Electricity 158GWh 158GWh 134GWh 220GWh 903GWh generation (annual) Capital cost $8.2mn $ 11.1 mn $4.5mn $45mn $3.57mn (per *2 megawatt) Contract price 36.4C 36.4C 18C 14C (per kilowatt *2 *2 hour) *2:NewEnergyFinanceEstimate *4:expectedtouse75%lesswaterthanfallowedagriculturaloperationonsamesite Source:PhotonInternational

7.5h wet 2097 kwh/m2 15%

340GWh

$10mn

36.4C

3.5 Fromtheabovetable,itappearsthatinvestmentcostvariesfrom$3.57to11.1millionper MW(equiv.Rs.16.67croretoRs.51.83crore/MW@$1=Rs.46.7) 3.6 Technology:PowerTower


Location Developer Status Online Capacity Max. operating Temperature Gemasolar Spain TorresolEnergy UnderConstruction 2011 17MW 5650C Ivanpah California,USA BrightSourceEnergy UnderDevelopment 2012 400MW 5500 C PS10 Spain Abengoa Operational 2007 10MW 2570C

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Storage(fullload) Cooling Solar resource (annual) Solar to electrical efficiency(annual) 15h Wet 2062kwh/m2 18% *1 none Dry 2717kwh/m2 18% 1079GWh $3.4mn 11C *2 1h Wet 2012kwh/m2 18% *1 23.4GWh $5.3mn *2 36.4C

Electricity generation 100GWh (annual) Capital cost (per $23.5mn megawatt) Contract price (per 36.4C kilowatthour) *1:PhotonInternationalEstimate *2:NewEnergyFinanceEstimate Source:PhotonInternational

3.7 Fromtheabovetable,itappearsthatinvestmentcostofaprojectunderdevelopmentstage without storage facility is as low as $ 3.4 million per MW. (equiv. Rs. 15.87 crore /MW@ $1=Rs.46.7) Technology:FresnelLensReflector&Stirlingdish
Technology Location Developer Status Online Capacity Max. operating Temperature Storage(fullload) PuertoErrado2 FresnelLensReflector Spain NovatechSolarEspana Underdevelopmet 2011/2012 30MW 270 None WesternRanchSolar Stirlingdish Texas,USA TesseraSolar Underdevelopment 2011 27MW 750 none dry 27% <$3mn 15C

Cooling Dry Solar resource 1700 (annual) Solar to electrical 1012% efficiency(annual) Electricity generation (annual) Capital cost (per $5.4mn megawatt) Contract price (per 36.4C kilowatthour) Source:PhotonInternational

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3.8 Fromtheabovetable,itappearsthatinvestmentcostforFresneltechnologyis$5.4million andforStirlingdishtechnologyis<$3millionperMW(equiv.Rs.14Crore/MW). 3.9 Itisalsoevidentfromtheabovetablesthatfor large,stateofthearttroughplantsunder development, with storage facility, current minimum investment cost is around $ 3.57 /W (equiv.Rs.16.6Crore/MW)andforPowerTowerplantunderdevelopmentwithoutstorage facilitycurrentminimuminvestmentcostsis$3.4/W(equiv.Rs.15.87/Crore/MW). 3.10 Investmentcost fortroughplants dependson labourand landcosts, technologies, theamountanddistributionofDNI,theamountofstorage,heattransfermediumandthe sizeofthesolarfield,sizeoftheproject,dry/wet/hybridcooling.Plantswithoutstoragethat benefit from excellent DNI are on the low side of the investment cost range; plants with large storage and a higher load factor but at locations with lower DNI (around 2000 kWh/m2/year)areonthehighside.FollowingFigurebreaksdowninvestmentcostsofa50 MW trough plant with 7 hour storage under Spanish skies (as per IEA 2010 report on TechnologyRoadmapforCSP).

3.11 According to IEA report, for solar towers, investment costs are more difficult to estimate, but are generally higher than for trough plants. It also states that increasing efficiencyfrom15%to25%willallowa40%reductionininvestmentinsolarspecificpartsof the plants, or 20% of overall investment costs. The recent trends toward numerous mass produced,small,flatmirrorspromisestobringcostsdownfurther,astheproblemsofwind resistance and precision in pointing are resolved using computers. As the solar tower industryrapidlymatures,investmentcostscouldfallby40%to75%. 3.12 Further,thecostofCSPcanbefurtherreducedthroughindigenization.Thecritical components of parabolic trough technology are mirrors, heat transfer fluid, receivers and turbine.Outofit,turbinecanbemanufacturedinIndiawithaveryshortgestationperiod. There is also possibility of mirror manufacturers putting up manufacturing lines for specializedmirrorsprovidedthatthemarketforthesespecializedmirrorsisassured.Only heattransferfluidandreceiversmayrequiretobeimportedforsometime.Thecapitalcost forsolarthermalpowerplants(withoutstoragefacilities)whichisunderdevelopmentand
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to be commissioned by 2012 has been reported around US $ 3.4/ W (equiv. Rs. 15.87 Crore/MW) can be reduced further upto 15 Crore/MW with indigenization of balance of systemincludingpowerblockandstructuresalongwithlowerlabourcostprevailinginIndia. 3.13 Since there is very limited experience in the field of electricity generation utilising SolarThermalPowertechnology,comparableprojectshavenotyetbeensetupinanyState inthecountry,reliancecouldbemadeontheexpertopinion,otheravailableliteratureand details available from international experience, details available from the various manufacturersthroughpetitionsfiledbeforetheSERCs. 3.14 ThecomparativeanalysisoftheCapitalCostrequirementassubmittedbytheM/s AcmeTelePowerLtd.andM/sEntegraLtd.,withRERC,aregiveninthetablebelow:
Plant Details Technology Options COST ITEMS Civil and Structural Solar Field Thermal Storage System(cost to be reconfirmed) HTF System Incl.Solar Heat Exchangers Power Block/BoP Mechanical System Power Block/BoP I&C and electrical system Total Equipment Cost Contractors (interface) engineering EPC Contract Owners/operators cost Contigencies IDC Total Project Cost Capacity Utilisation Factor (CUF)% Acme Tower Rs L/MW 64 Entegra * Trough Rs L/MW 129 2198 413 976 255 76 1371 4 1375 14 27 78 1494 24% 163 309 35 3570 5 3575 29 322 3926 50.5%

*Withsolarthermalstorageof8hoursoperation
TheCommissionisoftheviewthatincreaseinCUFofaprojectwithstoragefacilityshould notincreaseCapitalCostofprojectexorbitantly.TheCapitalCostrequirementassubmitted bytheM/sAcmeTelePowerLtd.isalsoinlinewiththeobservationmadeunderPara3.12 above. 3.15 Keeping the above facts into consideration, it is proposed to consider benchmark capitalcostnormforsolarThermalPowerprojectsforFY201112asRs.15Crore/MWwhich isclosetoestimatesofAcmeaswellasprojectsunderdevelopmentinUSA.

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