Green Industry in India – Solar Energy runs into Debt Hurdle even as Government plans Smart Meter Rollout

India’s Solar Energy represents one of the biggest growth opportunities in the Energy Sector.However India’s ambitious JNNSM has run into a familiar problem.India recently opened tenders for 500 MW of Photovoltaic Solar Energy with 5 MW being the fixed size of a plant.According to reports the  government has got bids for 10,000 MW or 20 times the amount to be bid.This implies that the PV portion of the Phase 1 of JNNSM will go for a discount bidding.In layman terms this means that the projects will be awarded to companies willing to build the plants at a discount to the CERC mandated FIT rate of Rs 17.91/KwH.This might mean that it will lead to bidding wars between the developers with the ultimate results that some projects may not get built eventually.However there is a long way to go and every county in the solar subsidy lifecycle goes through birth pains.

Indian Banks Reluctant to Lend to Solar Projects

Indian Banks have raised concerns over lending money to Solar Projects in India.The main problem arises from the fact that State Electricity Boards (SEBs) are counter-parties to the P0wer Purchase Agreements (PPAs) signed by the developers.Most of the State Electricity Distributors are in poor financial shape and have been known to frequently default on their financial obligations.This means that the cash flows of the Solar Project will depend on entities with poor financial reputation.Note the debt financing of the projects is non-recourse which means that Banks have only the Financed Project as collatarel.With the Solar Energy still being almost 3-4 times more expensive than normal Electricity Prices,it means the banks will  suffer a big loss.With almost 70-75% of the estimated $2.2 Billion in the first phase of the PV projects to be financed by debt,this represents a big hurdle for the success of Solar Energy.The government needs to come out with some sort of arrangement of guarantees for the smooth functioning of the Solar Mission and instill confidence amongst investors and Banks.

Banks say PPA structure for solar projects not bankable – Business Standard

Financing of solar projects under the Centre’s ambitious national solar mission has hit a major roadblock as banks have argued that the current structure of the power-purchase agreement (PPA) was not bankable due to the credibility of many states.The existing PPA structure of the national solar mission provides for a trader PPA with NTPC Vyapar Vidyut Nigam, which passes on the risk of default by state distribution companies (discoms) to the developer.

Several banks, including State Bank of India (SBI), Bank of India and Central Bank of India, have argued that many discoms were delaying and sometimes defaulting on payments, and therefore, have called upon the Centre to contemplate a tripartite agreement between the developer, the state discom and the Reserve Bank of India (RBI) to ensure the PPA bankability.Banks said solar power remained a risky and expensive option, despite the support being provided by the Centre and the state governments.

India may gives Subsidies for Smart Meters

The Indian Government is thinking of providing subsidies for the introduction of Smart Meters in the country.Note Smart Meters are  part of the Advanced Metering Infrastructure (AMI) which allows for monitoring of energy usage by customers and utilities and implementation of Smart Grid  Features like Time of Day Differential Metering etc.However the Technology is still being developed and there have been pushbacks from customers in some of the pilot programs in the USA.That said Smart Meters are being rapidly being installed by Power Utilities around the world as Smart Grid becomes a necessity.It will be interesting to see what kinds of incentives the Indian Government gives to this Green Sector.Note GE,Landis&Gyr and Itron are some of the big global players in this segment.

Government may incentivise use of ‘smart’ metres – IANS

The government is likely to incentivise the use of smart metres at homes, enabling users to monitor their power consumptions in real time and save on electricity bills by over 15 percent, officials said.A smart metre is a device that uses smart grid technology, which integrates power generators and consumers to balance supply and demand.

It enables differential charges. At the peak hours charges will be more while at off-peak time or normal hours charges will be lower. This allows users to prioritise things and balance consumptions accordingly.Sam Pitroda, adviser to the prime minister on public information infrastructure and innovation, representatives of power generation and distribution companies, smart metre manufacturers, researchers and officials will meet here Wednesday and take a decision on this.