Part 1 Downstream ScenarioPV world

Solar power

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• Solar power has been increasing its share within the renewable energy sources

• Due to its renewable and sustainable nature, many governments have been supportive in developing solar power along with wind energy

• European countries pioneered in solar power by incentivised solar power generation using FiT and tax benefits

• Due to development of solar PV manufacturing industries, LCOE has come down significantly

• This has led solar power being developed at other markets across globe

• But still the solar power development is heavily dependent of geopolitical factors

Region wise scenario• Solar boom has always had non homogenous growth across globe. Initial

growth were fuelled by European countries and Japan

• More recently by China and US which have been focus after sudden collapse in European markets due to policy changes

• Now countries like India, Middle East, Chile and other South American are growing and making emerging solar markets

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• Mix between distributed and utility scale PV are different across countries depending on policies and market scenarios

• Distributed had predominant share till 2010s, whereas utility took over 2012-13, exhibiting greater growth (in 2014, 20GW each were installed)

China China had dominant share in solar water heaters both manufacturing and

installations from 1990s China’s solar PV industry is built upon its strong upstream industries starting

from 2004 European solar boom started by German Renewable energy act (EEG) in

2004 enabled the PV manufacturing industry in China

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From 2008, China formulated policies on developing market based solar power industry, created benchmark feed-in tariff and demonstration projects

Public funded demonstration projects were developed under NEA using two programs

Large scale power plants concessional bidding (4.2GW during 2009-12) and Golden sun Projects Distributed and Off grid program (5.8GW during ‘09-’12)

In 2013, Twelfth five year plan, NEA issued plan for solar power generation development, with feed-in tariffs and roadmaps, targets

It also issued several technology standards for projects and construction

China manufacturing powerhouse

Progress in downstream market activities

ChinaCurrent Market volumes• China had installed capacity of 43.2 GW, of which 15.1 GW added tin

2015 and also have set target of 143GW of installed capacity by 2020• Out of 10.2GW installed in 2014, 2 GW installed in distributed solar, 8.2

GW installed in utility scale• Total installed capacity had break up of 4.67 GW in distributed and

23.38GW in utility scale power plants

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Rising hindrances to future growth• But with rising new coal fired power plants, transmission companies prefer

buying cheaper power than wind or solar generation, local governments also endorsed it

• China recently enacted strict law (document 625) which enforced mandatory 100% upliftment or compensation for renewable power like solar and wind

• Within Chinese PV manufacturers, Tier 1 firms are primarily export focused, use internal demand as a means for improving plant utilisation rates

• But other smaller and poorly managed Chinese firms heavily depend on Chinese markets for sustenance

JapanInitial solar policies

• Japan started its solar program in 1993 with New Sunshine Program, it gave subsidies of 50% of total initial cost, subsequently it was reduced to 10% of the cost

• Along with it, RPS law was passed to make distribution companies diversify their portfolio with renewable energy sources

• Since 2000, Japan topped total annual power generated from solar • In 2009, Japan passed bill for incentivising distributed solar in residential area,

commercial and public establishments

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Kick-starting solar boom• After 2011, Japan closed down 50 nuclear plants, and launched aggressive

solar program• Feed in Tariff for solar generator more than 10 kW was set at JPY 42/kWh,

which is double the German rate and thrice Chinese FiT rate. Now, proposal to adjust FiT semi-annual basis based on prevailing system costs

• Switching to mandatory power purchase from building integrated solar, and doubling the purchase price from JPY24/kWh TO JPY 50/kWh

• Japan has installed capacity of 23 GW with 9.3 GW commissioned in 2014• Current FiT rates are 27JPY/kWh for capacities more than 10 kW, and

35JPY/kWh for lesser capacities

Japan

Current Market volumes• Japan had installed capacity of 34.7 GW by 2015 end, of which 7.1

GW added in 2013, 10.3 GW in 2014, 12.3 GW in 2015• Projection for 2016 and 2017 stands at 17.2 GW and 9.7GW

respectively

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Rising hindrances to future growth• As of August 2015, 81.7 GW of solar installations are approved under

FiT but only 22.2GW installed as other approvals and grid availability causes delays

• Delays are due to land availability, stricter rules enacted after overload of applications and curtailment issues in islands

GermanyGerman policy boost, Use of FiT• German policy was based on FiT, but the cost was passed onto end

user by rising on-grid price (EEG act)• Germany also has preferential tax cuts for solar investments, to boost

upstream and downstream industry• Germany started the solar boom across Europe and help mature PV

technology as a whole

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Germany

• Slowdown in German new installations as scaling down FiTs and curtailment issues

• Now, Germany is started piloting reverse auction based tariff rather using fixed FiT

• Transmission grid constraints and combined renewable portfolio’s strain on grid combined with lack of storage system

• Consumers paid renewable energy surcharge of 6.24ct/kWh in 2014, 6.35 ct/kWh in 2016 surcharge levied increase more as the new solar installations come up

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Current Market volumes

• It has set target of 52 GW cut-off for solar power generation with current installed capacity of 40.2 GW with 1.2 GW in 2015

• After installing around 7.5 GW each year from 2010-12, market slowed down to 2GW to 1.5GW per year

Rising hindrances to future growth

US

• Major boost to solar industry is extension of ITC (investment tax credit) till 2020 and scheme to be beneficial to project under construction also not just when it is made online

• Government policies are primarily use RPS and net metering, but each states have varying degree of incentives and mandates

• It also provides Financial support in form of loans to tune of 26 bn$ and guarantees

• With levy of antidumping duties on Chinese and Taiwanese Modules and cell, average module price was 0.74$/kWp

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Rising hindrances to future growth• Rising disputes on net metering, lobby by utilities against distributed solar

• Financial health of certain players in PV and CSP projects causing trouble in sourcing funds for industry as a whole

US Federal policy boost, Use of FiT

US

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• US had total installed capacity of 25.6 GW with 6.2 GW added in 2014, 7.3GW in 2015

• Breakup in 2014 was 8.57 GW in distributed solar with 2.3 GW installed that year, and 9.74 GW in utility scale with 3.9 GW newly installed

• About 18GW of utility scale projects are under pipeline and RPS targets for 2016 onwards in several states requires significant additions in renewable portfolio

Current Market volumes

Europe

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• Europe is predominantly Germany, Italy, Spain and UK• FiT policy was used to scale up the solar projects fast, subsidy burden

made the program unsustainable in Italy and Spain• Average solar utility size is 9MW, largest being 300MW, focus was on

distributed power generation

Europe

• Currently UK leads Europe in new installations with 3.4 GW in 2015,taking total to 8.4GW

• But FiTs are being scaled down and EU set Minimum Import prices for modules, pipeline of new projects have dried up

• UK had policies based on ROCs (REC), FiT which caused the boom but, now ROC is available only for plants size less than 5 MW

• Projects above 5 MW is under CfD (VGF) along with wind energy projects, for 2015-16, only wind projects have selected

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Italy• Italy once fledging market, but was busted as incentives were scaled back• Italy have highest PV penetration with 7.5% share out of total power

consumption, with installed capacity of 17.6 GW, adding about only 0.3 GW/yr • Italy’s solar industry firms are grid players also with solid expertise in solar

development,• Many seeking foreign investments opportunities in Latin Americas and

especially North Africa, where plans to connect grid with EU for solar power evacuations

UK story

Americas

• Chile is most promising player with installed capacity of 1GW capacity with combination of PV and CSP plants

• Chile solar markets is based on Renewable energy law which mandates renewable quotas and higher market spot prices for electricity due to mines consumption

• But Chile faces severe problem of grid connectivity issues with two separate grids in Northern and Southern region. Northern Region is abundant of desert solar energy, but commercial loads are in southern network

• With commodity prices low, mining operations has been stopped, making spot electricity prices on which solar are being sold to almost zero

• Mexico has become new focus for utility scale developers, 1.8 GW were won by solar projects in clean energy auctions, which has expected project deadline of March 2018

• Mexico had installed capacity of 240 MW in 2015, with 400 MW likely to be added up this year

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Mexico

Chile

MENA and Africa• UAE have successfully auctioned DEWA projects with highly competitive bids

for 1.2GW till now in 3 phases

• In total 2.7GW is tendered out in this regions with progress made only UAE, some extent in Jordan, Algeria

• Even though, abundant potential for solar energy, lack of administrative support and focus, low power demand causing very slow start to the solar industry

• South Africa has installed capacity of 1 GW with both CSP and PV projects

• Almost, all of the installation in emerging markets are in utility scale projects with emphasis on higher installations

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