Blog Type: Market Views

Renewable energy is a major driver for achieving sustainable life on earth, with promising potential in India – a country that ranks third in terms of its energy consumption, right behind China and the United States of America. It also ranks third in oil consumption with over 22 tonnes consumed annually.

With the ongoing depletion of oil and natural gas reserves and the cheaper cost of deploying renewable technology, now is a fantastic time to explore what this trend translates to in the renewable energy market in India this year. Renewable energy adoption in India considerably slowed down in 2020 but recovered by the end of 2021. The government played a pivotal role in catalysing the commissioning of auctioned utility-scale renewable energy projects. It also accelerated the distributed solar PV market with improvements in its renewable energy policies. Such government led implementations and alike have helped  India to double its renewable energy capacity since 2020.

An Overview of India’s Renewable Energy Capacity

Many states in India have improved their renewable energy policies to invite more investment into the sector. North India for example, has a potential capacity of 363 GW, with various schemes being introduced to encourage early adoption of sustainable technology at a smaller scale.

The installed capacity of solar alone has increased by 18x, having gone up from 2.63 GW in 2014 to 49.3 GW in 2022.

As of May 2022, power production from renewable energy sources, with the exception of hydropower, stood at 19.31 billion units.

As of April 2022, India’s installed capacity peaked at 158.12 GW. This translates to about 39.43% of the total power capacity in India. There has been an additional 8.2 GW capacity addition in just the first quarter of 2022 when compared to the first half of 2021.

Renewable Market Developments

• Between April 2000 – March 2021, India has seen Foreign Direct investments (FDI) to the tune of USD 11.62 billion in the non-conventional energy sector. The data released by the Department for Promotion of Industry and Internal Trade (DPIIT) also shows an inflow of USD 70 billion, since 2014.
• According to British Business Energy, India is now ranked third in the world when it comes to attracting renewable energy investments. 

Below are the market highlights that outline its potential.

• Renewable energy investment in India reached USD 14.5 billion in the first half of 2022, which is 125% more than the investment accrued in 2021.
• The Indira Gandhi International Airport (IGIA) in Delhi, became India’s first airport to be powered entirely on hydro and solar power. Solar installations meet about 6% of the airport’s energy demand.
• India was ranked  globally third in the EY Renewable Energy Country Attractive index.
• Creduce Technologies – HCPL JV won the bid for India’s largest hydro power carbon credits project through its partnership with Satluj Jal Vidyut Nigam in February of 2022. This project will deliver over 80 million carbon credits.
• Husk Power Systems is a company working towards rural electrification. In February 2022, this firm secured a USD 42 Million loan from the Indian Renewable Energy Development Agency (IREDA). This funding would go towards developing off-grid power sources with renewable techology in hard to access rural communities in India.
• Karnataka will see investments worth an estimated USD 1.53 billion into renewable energy projects. The projects will be executed by Ayana Renewable Power Pvt Ltd.
• India’s largest energy service provider, Tata Power was awarded a contract by the Maharashtra State Electricity Distribution Company Limited. The project grants end-to-end execution rights to Tata Power Solar, a subsidiary of Tata Power. The 300 MW wind-solar hybrid power plant will be spread out over 130 acres in the Satara District.
• Reliance New Energy Solar Limited made two new acquisitions in October,  2021. The two firms were Sterling & Wilson Solar, based in India, and REC Solar Holdings, a Norwegian firm. The acquisitions exceeded USD 1 billion, and are key to achieving the promised 100 GW of solar power proposed by RNES Limited in Jamnagar.
• Similarly, Adani Green Energy acquired SB Energy India in October, 2021 for USD3.5 billion  to venture into India’s renewable energy sector.
• The NTPC is commissioning India’s largest floating solar power plant in Ramagundam, Telangana, with an installed capacity of 447 MW.
• The Solar Energy Corporation of India (SECI) is implementing large-scale central auctions for solar projects. It has already awarded contracts for 47 parks that will have a combined capacity of 25 GW.

Government Policy Updates to Facilitate the Renewable Market Growth in India

• A budget of USD 132 billion was allocated for SECI, the governing body responsible for the development of India’s entire renewable energy sector.
• The Union budget also allocated USD2.57 billion to a PLI scheme that pushed for the manufacturing of high-efficiency solar modules.
• Nepal and India agreed to form a joint Hydro Development Committee in February, 2022.
• Prime Minister Narendra Modi proposed  to increase India’s renewable energy capacity to 500 GW to meet 50% of India’s energy demand at the COP-26 Summit in Glasgow.
• The Ministry of Power announced an addendum that would reduce the financial stress of stakeholders and ensure timely cost recovery in power production.
• The latest rules for the purchase and consumption of green energy encourages large-scale energy consumers like industries to explore renewable energy for regular operations.
• The Rooftop Solar Programme Phase II rolled out by the Ministry of New and Renewable Energy will oversee the adoption of rooftop solar in urban and rural areas. It aims to reach a capacity of 4000 MW in the residential sector, accelerated by subsidies.
• NTPC Renewable Energy Ltd, is set to build a 4750 MW renewable energy park in Rann of Kutch in Gujarat. This will become India’s largest solar park.
• The Government is also investing USD 238 million as part of a national mission to research and implement advanced ultra-critical technologies for cleaner fossil fuel consumption.
• The Indian Railways is implementing energy efficiency measures and maximizing clean fuel usage. This undertaking is expected to cut down emission levels by 33% by 2030.

All of the above schemes and revisions will ease FDI in India’s renewable energy market. It also provides a strong business case to go solar, for both business owners and investors alike. Distributed Energy is an experienced platform aggregator that enables renewable energy projects in underserved economies. The team leverages its technical expertise in optimizing clean energy production. With projects spread across Asia and Africa, businesses and investors can choose to help inch the planet towards net-zero. Visit www.de.energy to learn more about Distributed Energy and what it is like to invest in solar.

Despite solar being a net-zero emission source, there are still reservations about its use, owing to its variable nature. This has led to increased usage of solar trackers for improving the efficiency of systems towards accelerating renewable energy adoption.

What is a Solar tracker?

A Solar tracker is any device that enables the positioning of an object to follow the movement of the sun throughout the day. This technology has increased renewable energy adoption significantly. The older solar panel systems have rigid setups. They are positioned at calculated angles based on geography to get maximum exposure to sun rays. The newer systems integrated with solar trackers enable the panels to move with the sun. They always remain perpendicular to the sun, receiving optimal exposure throughout the day.

This significantly increases the efficiency and output of solar power creating a massive impact on the solar energy market. It also explains the shift from the use of polycrystalline modules to movable mono and bifacial solar panels. Despite the increase in capital costs, they pay for themselves within a short span in efficiency and output.

Types of Solar Trackers

There are 3 types of solar trackers, depending on the type of system involved.

Manual Solar Trackers: Manual solar trackers are manually oriented and latched into place by the user, preferably 3 times a day, in the morning, afternoon, and evening.

Passive Solar Trackers: Passive trackers use compressed gases with low boiling points which move from one side to the other. The panel shifts along with this movement.

Active Solar Trackers: Active trackers employ the use of sensors to track the sun’s movement. The tracker focuses on the brightest point in the sky, to capture the maximum light at any point of the day.

There are 2 additional types of Solar Trackers based on the direction of movement.

Single Axis Solar Tracker: This tracker tracks the movement of the sun from East to West. They are best suited for utility-scale projects. The efficiency of the system is increased by 25-35%.

Dual-Axis Solar Tracker: Dual-axis trackers is capable of tracking the sun’s movement from North to South as well as East to West. They are well suited for commercial and residential projects with space constraints. The energy production is increased by 40% when dual-axis trackers are integrated with the systems.

A 30% Increase in Power Efficiency

Although the solar trackers boost the efficiency of the systems, the initial cost goes up. The cost of solar panels has come down. The debate here is whether to install more panels to increase power production or to install a solar tracker.

Polycrystalline panels of standard 60 cell size have a power rating of 300-330 watts and 18-20% efficiency. Monocrystalline panels of the same size can produce 370 – 440 watts. The cost of installing a tracker in either system remains the same. However, power production can increase by as much as 30% in high-efficiency systems. Integrating solar trackers in both ground-mounted and rooftop solar installations is advisable.

Short-term Capital Returns

Earlier, solar panel efficiency was at 15%. It has now become more than 20%. This increase in efficiency results in the embodied energy being paid for in less than 2 years. This applies to locations with sun exposure for the majority of the year.

The efficiency of solar panels is a direct indicator of their performance. High-efficiency panels employ higher-grade N-type Silicon cells. These cells come with improved temperature coefficients and lower power degradation. Some of the manufacturers offer warranties with 90% or higher retained power output, even with 25 years of use.

Bifacial panels are a perfect example of such high-energy solar panels. They have power output ratings of over 500 watts. Combined with solar trackers they pose the most viable solution to recover the capital costs quickly.

Bifacial panels have been around since the 1960s but the tech didn’t take off as it was too expensive. With reduced raw material costs and improved energy outputs, it is once again gaining traction.

Solar Tracker Market

Bifacial Solar Panels comprised 50% of the Solar energy market in 2021. It is expected to reach 85% by end of 2023. Bifacial panels, combined with solar trackers can enhance energy production by 35%. This combination also brings down projected energy costs by 16%. This is vital to powering remote regions and making it affordable to people in unstable economies.

The global Solar Tracker market alone will be worth around 64.6 Billion USD by 2030. The growth will average a CAGR of 15.6% between 2022 and 2030. From Nil, a few years ago, solar trackers have captured 30% of the utility market in a short period.

With the technology beginning to take off, now is the right time for businesses to go solar and start their net-zero journey. Distributed Energy is an experienced platform aggregator for enabling renewable energy projects. We leverage our technical expertise in optimizing clean energy production. As energy customers, you have a unique opportunity to jump on board and be part of our journey as we embark on addressing issues surrounding energy poverty in the developing world. Talk to us today to know more about clean energy and solar savings.

By Joseph Saviour, Senior Analyst, Distributed Energy

The 100 GW solar power (by year 2022) target set by Govt. of India needs optimum utilisation of available area for deployment of solar PV panels. Though land & roof tops are considered as focus areas, as land availability presents a challenge, Floating Solar PV (FSPV) on large reservoirs & other water bodies also offers significant potential.

According to an article published by Financial Express in late 2019 [1], utilising only 10-15% of India’s water resources for floating solar plants could generate up to 300,000 MW of power. The results also demonstrate that FSPV plants have 10.2% more generating capacity than land-based PV systems and produces 28.38 mega units (known as MU – one million units of electricity) excess generation over the lifetime of the plant [2].

Generally speaking, putting solar panels on water bodies avoids land use conflicts and eliminates the need for major site preparations, such as leveling or the laying of foundations, which is a requirement for land-based solar installations. A schematic representation of a typical large-scale FSPV plant with its key components is shown below.

Ground mount solar projects require large land spaces in modern cities and as a result, lead to the escalation of land prices, which consequently increases the levelized tariff on electricity. FSPV plants not only boost PV efficiency due to the temperature-regulating effect of water and minimal shading, but the water bodies also benefit from reduced algae growth (sunlight radiation blocked) and evaporation. Reduced algae growth improves the overall biodiversity of the aquatic ecosystem by boosting the growth of sunlight dependent water plants and subsequent organisms that feed off it. Additionally, as algae growth is reduced, it minimizes the associated treatment and labour costs to maintain the water quality. FSPV plants have low environmental impact due to excavation work not being required, no impact on water quality and in fact, the floating plant helps to reduce erosion of reservoir embankments by reducing waves [3].

Globally, reservoirs are evaporating tremendous amounts of water into the atmosphere. The United Nations Environmental Program (UNEP) estimates that the evaporation from reservoirs surpasses both domestic and industrial water consumption. To put this into perspective, the 1MW FSPV plant installed at Kota barrage, in Rajasthan, India, saves up to 37 million liters of water by reducing evaporation and also brings down emissions by 1714 tons per annum[4]. Countries with similar climate patterns to India, where there are extreme and prolonged summers, can install FSPV plants not only for electrification purposes, but also to help preserve water levels and provide an important source of water supply for irrigation purposes and preserve wildlife ecology.

The deployment of floating solar is well positioned to accelerate in growth as the technologies continue to mature, opening up a new frontier in the global expansion of renewable energy. In 2018, Japan commissioned a 13.7 MW FSPV plant on a reservoir in the Chiba prefecture. The plant provides clean electricity to over 5000 households. In India, bids are being invited for a 50 MW FSPV plant over the water bodies in the southern state of Kerala. Collapsed coal mines in China that were flooded have turned their environmental and social disasters into an opportunity through installations of FSPV plants ranging from 20 MW to 150 MW per site. In this context, another opening would be the effective oversight and management of public spaces within close proximity to the reservoir/water body (where applicable) by the contractor, meaning dedicating a portion of the electricity being generated to subsidise management of public spaces. Furthermore, in the interest of prolonging the life and performance of the FSPV plant, contractors overseeing operations and maintenance of the plant will be incentivised to preserve the water quality, pollution levels of the water and security of the immediate neighbourhood. Reinforced security/CCTV around the boundaries will act as a deterrent to unwelcome behaviour. These actions assist in preserving fresh-water resources where the FSPV plant is in fresh-water reservoirs.

The return on investment of FSPV plants has been another catalyst for the rapid growth in FSPV capacity installation. Standardised equipment to ensure low production costs, competitive system prices and the savings realised on the land cost and yield cost results in the reduced levelized tariff of FSPV plants vs ground mount solar projects – approximately 39% less [5]. The higher initial capital expenditures of a floating system are balanced by a higher expected energy yield to a ground mount system. On a pretax basis, the levelized cost of electricity (LCOE) for a generic 50 MW FSPV system does not differ significantly from that of a ground mount system. Not just that, it does away with the need to source the depleting ground water for cleaning of solar panels. A combination of lower upfront costs coupled with minimal operational costs makes investments in FSPV projects an attractive option for investors looking to make long term investments in physical assets with strong, contracted cash flow profiles. The LCOE being achieved through the cost reductions helps investment/fund managers package attractive investment opportunities for investors, with returns ranging from 12-16% over 20 years. The diagram below provides an overview of the specific cost of FSPV projects below 3 MW across different countries, including India.

There are more than 400,000 square kilometers (km²) of man-made reservoirs in the world [6]. FSPV plants open up new opportunities for scaling up solar generating capacity, especially in countries with high population density and competing uses for available land. When combined with other demonstrated benefits such as higher energy yield, reduced evaporation, and improved water quality, floating solar is a likely option for many countries. There are a sufficient number of experienced suppliers available in the market to structure a competitive tender, and as additional costs appear to be low and falling rapidly, getting a commercial project financed and constructed is starting to make sense more and more economically.

 

Sources:

[1] https://www.financialexpress.com/infrastructure/big-game-changer-how-floating-solar-power-may-help-modi-government-realise-its-renewable-energy-dream/1693123/

[2]https://aiche.onlinelibrary.wiley.com/doi/abs/10.1002/ep.13268#:~:text=The%20results%20show%20that%20floating,life%20cycle%20of%20the%20plant.

[3] http://www.ijirst.org/articles/IJIRSTV2I11050.pdf

[4] https://vivaansolar.com/blog/2018/03/13/floating-solar-power-plant-its-feasibility-and-opportunities-in-india/

[5]https://aiche.onlinelibrary.wiley.com/doi/abs/10.1002/ep.13268#:~:text=The%20results%20show%20that%20floating,life%20cycle%20of%20the%20plant.

[6] http://documents1.worldbank.org/curated/en/579941540407455831/pdf/Floating-Solar-Market-Report-Executive-Summary.pdf

By Shivani Kalbande, Junior Analyst, Distributed Energy

A recent report published by Bloomberg New Energy Finance (BNEF) stated that developing countries are more inclined to transitioning towards clean energy sources compared to developed countries. By 2050, nearly 85 percent of global energy generation is projected to come from renewable energy (IRENA, 2018). Fortunately, most developing countries have abundant renewable energy generation potential, including the likes of solar energy, wind power, geothermal energy, and biomass. This coupled with their ability to manufacture the relatively labor-intensive systems at very competitive prices puts them in a unique position to lead the clean energy transition.

At present, much of the movements in this spectrum are led by the likes of China and India. These developing economies are the drivers behind the growth in the solar capacity we’ve been witnessing, which expanded by 40% in 2019. The International Energy Agency (IEA) has indicated that between 2020 and 2025, solar power is on a trend to becoming a cheaper source of power than fossil fuel-based sources such as coal among several developing countries, including India and China. India plans to generate 100 Giga Watts (GW) of power using solar panels by 2022. According to the Council on Energy, Environment and Water and the Natural Resources Defense Council India, this growth will create an estimated 330,000 jobs in the field of solar. Other developing countries, such as Bangladesh, are also turning towards small-scale solar power in order to improve their access to energy and the overall energy mix of the nation as a means to improve its energy resiliency. The nation now has the largest off-grid energy program in the world, connecting about 5.2 million households to solar power every year, roughly 12 percent of the country’s population. Another notable mention is Rwanda, which is an effort to combat its poverty and provide basic electricity as a means to improve business activity, received a Strategic Climate Fund Scaling up Renewable Energy Program Grant of $21.4 million in 2017 to bring off-grid electricity to villages across the nation. Brazil has introduced innovative schemes to improve the overall competitiveness in the energy landscape by promoting an energy auction system for converting their energy sources (mainly fossil fuel-based) over to renewable energy. Contracts are distributed to the lowest bidding developer with a goal of operation by the end of the sixth year. Brazilian agency Empresa de Pesquisa Energetica (EPE) auctioned off 100.8 GW worth of energy on September 26, 2019.

Appropriate investments in renewable energy are a catalyst for not only facilitating a clean energy transition among developing countries but also in providing adequate energy services to populations that are currently deprived of a fundamental right. Growth in the renewable energy sector will create jobs and also improve the nation’s energy infrastructure, which consequently, will help to alleviate poverty within their societies and improve the overall standard of living. Various developers like Distributed Energy are offering special investment platforms for investing in renewable energy projects in India, Middle East, and East Africa. Our development world-centric approach to making investment decisions is a conscious choice because these are regions where access to capital is low and where we can help investors create the greatest impact with their capital.

According to the World Economic Forum’s 2019 Energy Transition Index (ETI), various emerging and developing Asian countries have earned a place under the list of top 100 countries for conventional to the non-conventional energy transition. The ETI provides a framework that has defined (i) security and access; (ii) environmental sustainability and; (iii) economic development and growth, as the three pillars that can help foster the next energy transition.

The ETI is a fact-based ranking intended to enable policymakers and businesses to plot the course for a successful energy transition. The energy transition refers to the global energy sector’s shift from traditional, fossil fuel-based systems of energy production and consumption as well as the trends in the penetration of renewable energy into the energy supply mix. India for example is one of the few countries in the world to have made consistent year-on-year progress since 2015 and the nation’s improvements have come across all three dimensions of the ETI framework. The renewable power generation systems in many developing countries need to be significantly cheaper in order to justify transitioning away from existing investments, especially those that are still in effect as a result of long-term financing arrangements.

It is up to the government bodies, combined with the support of the public/private sector in developing countries, to continue building on their existing frameworks and provide the necessary incentives designed to encourage the development and deployment of renewable energy sources.

 

By Joseph Saviour, Senior Analyst, Distributed Energy

 

There is a widespread consensus that climate change is occurring, caused by human-induced greenhouse gas emissions, derived from fossil fuel combustion and changes in land use (resulting in land degradation and depletion of natural carbon sinks). Rising sea levels, extreme weather conditions and other environmental pressures have the potential, if not already evident in some cases, to severely impair output and productivity on a global level. Such rising incidences point to the uncertainty of current patterns of energy use. The transition to a low-carbon emissions economy will require sizeable investments in alternative energy sources and while progress has been made over the last decade, the pace truly does need to pick up.

There is no unique definition among investors of what green investing entails. However, this type of investment activity focuses on projects or areas that are committed towards preservation of the environment i.e. pollution reduction, conservation of natural resources, generation of alternative energy sources or any other type of environmentally conscious practices. Most green investments are intended either to reduce pollution caused by energy generation, or to reduce energy consumption. This can be broken down into three main components:

1. Low emission energy supply – shifting from fossil-based energy sources to green energy sources.
2. Energy efficiency – reducing the amount of energy required to provide goods/services.
3. Carbon sequestration – halting ongoing deforestation, promoting reforestation as a means to naturally remove CO² from the atmosphere.

A typical structure of a green investment using the above-mentioned components is illustrated below.

 

Despite supply chain disruptions and slowdown in installation activity in several key regions, renewable energy has so far been the energy source most resilient to the Covid-19 lockdown measures. In Q1 2020, the share of renewables in global electricity generation jumped to nearly 28% from 26% in Q1 2019. This is because electricity demand reductions, as a result of the lockdown measures, have lifted the share of renewables in electricity supply, as their output is largely unaffected by demand. Whereas demand has fallen for all other sources of electricity, including coal, gas and nuclear power. Having said that, coal and gas sources still represent close to 60% of global energy supply.

 

For many investors looking to participate in green investments, renewable energy presents an attractive option. The main drivers for renewable energy being an appealing option, especially over the last decade or so, can be attributed to global economic growth, increasing prices of fossil fuel, technology advances, renewable energy policy support and increasing demand from communities for a cleaner environment. Out of the renewable energy technologies currently available in the market, solar PV technology is set to grow the fastest by end of 2020. Our article on solar’s future goes into more detail and outlines the principal drivers for this trend. Fortunately, the growth we are witnessing in this sector has paved the way for innovative tech platforms that offer managed portfolio services and a range of other investment options to investors looking to enter into the green investing space.  We work with investors who have a portfolio of investments and that are interested in diversifying with annuity style returns from non co-related and low volatility assets.

If you look at the performance of investments in the renewable energy sector vs fossil fuels in US, the UK and Europe, renewable energy investments are delivering massively better returns than fossil fuels. In a study conducted by Imperial College London and the International Energy Agency, which analysed stock market data to determine the rate of return on energy investments over a 5 and 10-year period, renewable investments in Germany and France yielded returns of 178.2% over a five-year period. Fossil fuels on the other hand delivered negative 20.7%. Similarly, in the US, renewables yielded a return of 200.3%, versus 97.2% for fossil fuels. While this sounds promising and provides evidence to be optimistic for renewable energy investments moving forward, the total volume of investments is still nowhere near what’s required to decarbonise the economy and mitigate climate change.  Even amid the chaos seen in the fossil fuel markets in recent years, many traditional investors still find it hard to let go of hydrocarbons and transition to alternative investments.

 

Investors’ attention to climate change, and green issues in general, have been rising in recent years. Developing countries are playing a growing role in scaling up green investments and while such progress is still being undermined by investments in fossil fuel intensive and inefficient infrastructure, green investing at scale is a precondition for achieving sustainable growth. Closing this gap is possible but needs to be supported by effective public policy and leadership by governments, international financial institutions and private investors.

 

 

By Mathew Mazhuvanchery, CEO and Co-Founder, Distributed Energy

 

Renewable developers and traditional utilities are feuding about net metering, yet this is an arcane struggle to most people outside the energy sphere and most don’t even understand the term. Indeed, while the struggle seems to be inconsequential to laymen and laywomen, however for the concerned parties it is an existential struggle.

Net-metering is a mechanism which is used by utilities which allow a customer with a solar array (the renewable generator) to get the same retail value for every unit produced, whether or not the unit of energy is used by the customer-generator or passed back through the utility meter and fed onto the grid.  Most utilities use net-metering to allow a customer to receive a unit credit on the month’s bill which can be used toward usage in future months. Gross metering on the other hand allows a less than full value to be paid towards the unit generated.

Since 2008, U.S. installations have grown 35-fold to an estimated 62.5 gigawatts (GW) today.[i]In the United States, 41 states have mandatory net metering rules. A general trend we see is that states which have net metering provisions have higher cumulative solar installations. Non-residential solar PV deployment forecasts indicate by 2024 it will reach close to 6000 MW.[ii] Maine, a state in the USA, in the past had removed net metering in favor of gross metering. However, within just a few years, the Governor reset the solar policy by signing a bill to undo the gross metering policy and restore the net metering policy. The main driver for the reversion was due to a decline in solar deployments and the state falling short and lagging behind other states in deployment targets.[iii] A similar event also occurred in Nevada to revive net metering as a means to catalyze solar deployment in the state.[iv]

Most states in India are actively working toward improving the process for net metering, including Maharashtra where gross metering was introduced and then revoked.[v] Kerala has introduced a progressive policy for net metering with exemptions to payment of transmission and wheeling charges and cross-subsidy surcharges for the electricity generated and consumed under the net metering facility.[vi]The one state (Uttar Pradesh) where gross metering was introduced has not been very successful.[vii]The realization of savings came down by 50% to INR 4.0/Kwh which has dissuaded investment in solar assets in the state.

It is clearly evident from the International and National examples that gross metering does not enhance the spread of renewable energy. This policy harms the environment as this energy deficit has to be made up by using thermal power plants and runs counter to the national goal as articulated by The Ministry of New and Renewable Energy. There is also a plethora of expert opinions that net metering is crucial for India if it is to achieve the goal of energy security articulated in the national energy vision 2020. It is a popular and simple way of kickstarting the journey to clean energy. Net metering helps avoid capital and capacity investment (mostly coal so highly polluting) reduced financial risk and electricity prices, increases grid resiliency by decentralizing the grid, and avoids added environmental costs to consumers in the future in way of clean-up costs. Gross metering schemes will defeat the objective of increasing take-up of renewable energy and thus we think that net metering is a net good.

 

Sources

[i] https://www.seia.org/news/united-states-surpasses-2-million-solar-installations

[ii] https://www.seia.org/solar-industry-research-data

[iii] https://pv-magazine-usa.com/2019/04/03/its-official-gross-metering-is-over-in-maine/

[iv]  https://pv-magazine-usa.com/2017/06/14/nevada-governor-to-sign-net-metering-revival-bill-tomorrow/

[v] https://www.merc.gov.in/mercweb/faces/merc/common/outputClient.xhtml

[vi] http://www.erckerala.org/regulations/eogfiledownload.pdf

[vii]  https://bridgetoindia.com/uttar-pradesh-deals-a-blow-to-rooftop-solar/

By Shivani Kalbande, Analyst, Distributed Energy

 

Kerala released its Solar Energy Policy in 2013 with a mission to increase the installed capacity of solar to 500 MW by 2017 and 2,500 MW by 2030. As of March 2019, the total installed capacity of solar in the state is 134 MW. To achieve the above set targets, the Kerala government needs to boost up the reforms for the solar installations. Recently, the Kerala State Electricity Regulatory Commission (KSERC) issued a regulation called the “Kerala State Electricity Regulatory Commission (Renewable Energy and Net Metering) Regulations”, 2020”. According to this regulation, the state-directed distribution licensees to constitute an in-house renewable energy cell to promote the deployment of renewable energy projects in the state. The new regulation says that the state will also penalize distribution licensees if they cannot stick to the timelines prescribed by the Commission.

The Kerala Government has also launched a program called “Soura”, which aims to add 1,000 MW of solar projects to the existing capacity of Kerala State Electricity Board Limited (KSEBL) by 2022. Of the 1,000 MW, 500 MW will be from rooftop solar, 200 MW from ground-mounted solar, 100 MW from floating solar, 150 MW from the solar park, and 50 MW from canal top solar projects. To promote and realize the rooftop solar targets, KSERC directed the distribution licensees to provide net metering arrangements to prosumers on a non-discriminatory and “first come, first serve” basis within 10 days from the date of submission of the approval of the renewable project from an electrical inspector. Also, the prosumer will be exempted from the payment of transmission and wheeling charges and cross-subsidy surcharges for the electricity generated and consumed under the net metering facility.

Distribution licensees, captive consumers, and open access consumers in the state will have an obligation to either generate or purchase the percentage of the total consumption from renewable energy projects as a part of their renewable purchase obligation (RPO).

In Kerala, electrical energy consumption has increased to 21,900 MU in 2017-18 from 20,453 MU in 2016-17 with a percent increase of 7.07 percent. As per the 19th Electric Power Survey conducted in the year 2018 by Central Electricity Authority, there will be an increase of 74 percent in commercial consumption and a 60 percent increase in domestic consumption of Energy in the State by 2026-27.

Projected Energy Consumption for the 10 years for Kerala (in MU)-

The major consumption rise is in commercial sectors. Generally, commercial and industrial (C&I)  consumers pay comparatively higher tariff rates than other types of consumers i.e. 6.3 Rs/unit for commercial and 5.75 Rs/unit for industrial in Kerala. Hence, many C&I consumers are trying to switch towards solar PV installations as a means to reduce their electricity expenditure and utilize their available roof space.

KSERC also supports the concept of third party (OPEX) models for rooftop solar. This is encouraging solar companies like Distributed Energy to offer attractive Power Purchase Agreement (PPA) options to consumers with no capital investment. Consumers will benefit from cheaper electricity rates than what the grid is currently offering (minimum 15% reduction), no capital expenditure from the consumer’s side, and utilize energy from a clean and environmentally-friendly source.

As per the current net metering regulations, rooftop solar systems installed by a prosumer at his premises with net metering should not be less than 1 kW or exceed 1 MW capacity. Limiting the size up to 1MW for net metering can in many instances lead to the partial installment of rooftop solar PV instead of meeting the full requirement of the consumer. This can be a bottleneck for meeting solar deployment targets in the state. Additionally, Kerala is a relatively smaller state compared to its neighbors – with fewer open land availability for utility-scale solar projects. Hence, the state needs to focus on rooftop solar PV reforms to encourage solar installations.

Overall, the key takeaways are that Kerala has a good scope of rooftop solar deployments in the C&I sector. The recent mandates expected from KSERC to DISCOM and the availability of net metering favor the customers to choose solar PV solutions. This shows the willingness of the state to achieve its set targets of energy production from solar and renewable energy as a whole.

By Joseph Saviour, Senior Analyst, Distributed Energy

 

The term “low carbon economy” was coined in 2003 and published in a report for the British Department for Trade and Industry. The report urged countries all around the world to prioritize and establish modes of production and consumption patterns corresponding to a low carbon economy i.e. low energy consumption and low pollution by engineering technology with low carbon emission over the whole process of production, use and waste. Later in 2005, during the Davos World Economic Forum, former British Prime Minister Tony Blair reiterated the same message, urging nations to set up domestic and international policies, a legal system, and the market mechanism to encourage a low carbon economy.

Fast forward to 2020, and climate change has already had observable effects on our environment. Glaciers all around the world have shrunk, plant and animal ranges have shifted, accelerated sea level rise and more intense heat waves. According to the latest report published by the Intergovernmental Panel on Climate Change (IPCC), the net damage cost of climate change is likely to be significant and to increase over time.

In low carbon economies, renewable energy sources could be the major supply option, and this can be made possible through disruptive alterations in all the available energy systems. Having said that, the major challenge is the transition from non-sustainable to renewable energy in the energy sector. Unfortunately, even in present day, the policies and regulations aimed at technological innovation in this space prove to be a major barrier to the use of renewable energy sources.

The European Union (EU) has already drawn up a comprehensive strategy on sustainable finance through the European Banking Authority (EBA).

Members of the EU, notably Sweden, Germany, Switzerland and Austria have made tremendous strides in propelling their national green performance by focusing on innovation, green branding and carbon efficiency. These countries have extensively focused on promoting initiatives in the following areas:

• Increased investments in renewable energy
• Funding and research into innovations and technologies
• Behavioural changes (both at an individual and societal level) that reduce carbon footprint
• Support for upgrading technology for sustainable energy services through international collaboration.

Access to capital for stimulating renewable energy deployments has been a challenge in the past and continues to be a bottleneck, especially in developing countries. Now, more than ever, the need to mobilize innovative financial products and services through financial regulators such as central banks can be a catalyst for motivating banks to provide environmental-friendly projects with easier access to capital. Take the example of Malaysia, wherein the Government initiated the Green Technology Financing Scheme (GTFS) that resulted in the participation of 28 banks and financial institutions in 319 green projects (around $875 million in loans) as of 2018.

Using loan finance to fund clean energy infrastructure is not new. In December 2018, in an effort to standardize the industry framework to finance projects that provide clear environmental benefits, the Loan Market Association modelled the Green Loan Principles (GLPs). Applying a globally consistent methodology, such as the GLP, has undeniably increased transparency in project selection, fund allocation and reporting. This has helped financial institutions track the green share of their lending portfolio. More importantly, it provides better clarity for these institutions in terms of redirecting capital flows to meet sustainability targets, and even consider divesting in assets that are seen as exacerbating the impacts of climate change. Like the GLP, there are many other types of loans gaining traction, such as the Sustainability-Linked Loan, also known as the Positive Incentive Loan or ESG-Linked Loan.

Given our emphasis on clean energy deployments in developing countries, we too, have been exposed to the limitations of the existing financial structures and policies. We’ve gone to the extent of raising awareness of renewable energy schemes at a policy-level and in the process have been able to drive forward our financial vision and implementation of portfolios consisting of clean energy projects for our investors.

To keep global warming below the 2°C target agreed in the Paris Agreement will require a sharp ramp up in investments into lower and zero-carbon energy sources. It will also mean a much-needed transition among regions with carbon intensive assets which also happen to be major component of the local economy. Having said that, a transition to a low carbon economy can equally transform the economic activity and revitalize a region through new and better employment conditions and skill development. For this trade-off to be realized, there needs to be a shared understanding of the types and levels of trade-offs that are acceptable for all stakeholders.

 

 

By Joseph Saviour, Senior Analyst, Distributed Energy

 

No investment is without risk. The holy grail lies in striking a balance between high returns & its associated risks. While there are no set formulas to achieve this, three important steps that will help find the right balance between risk and return are:

1) Diversifying your portfolio – by increasing your exposure to diversified investments, you are essentially spreading your risk.
2) Reviewing your investments – evaluate your risk tolerance periodically so that it is aligned to different life stages.
3) Staying invested for the long-term – this will give your investments enough time to generate returns and ride out the periodic market fluctuations.

Now the question is, why the focus on long term investments in renewable energy?

Climate change has been framed as an ethical issue for years, with a mixed success rate.Let’s take a look at the main drivers for this lag – the fossil fuel industry, which has not only exacerbated the impacts of climate change, but also affected the deployment and investments into renewable energy resources. Coincidentally, oil and gas prices historically have been subject to wild fluctuations (even after fossil fuel subsidies)and represent nothing but massive risk exposure for any investor/portfolio manager. The oil industry is now on the front lines of rising investor fears about the long term returns of fossil fuel energy sources.

Now let’s examine renewable energy sources. Let’s set aside the environmental advantages of avoided carbon and the reputational benefits garnered by reaching inspiring corporate sustainability goals. What you are left with are compelling financial reasons to voluntarily source clean energy in your investment portfolio.

Nearly all the costs of solar and wind energy are in the infrastructure required to capture it. Fortunately, these costs have plummeted at a rate beyond what any expert predicted. The same cannot be said for fossil fuels, and these sectors will eventually or are already recognising that the economics of renewables are becoming irresistible. For example, the cost of fossil fuel-based electricity is expected to increase over time, while the cost of renewables is rapidly decreasing. More importantly, mainstream institutional investors are acknowledging that climate change is not just a threat to the environment, but also a threat to the wealth of their clients.

Renewables have been picking pace over the last decade, and taking the example of solar power, it is fair to say that technology and performance have evolved considerably during this time. This is one of the key drivers for companies, such as us, having entered this field. Our business model is more sustainable, and returns on invested capital in our renewable energy projects have improved to the point where a solar plant producing power with a predictable regularity and predefined Power Purchase Agreement (PPA) rates can now be structured as a reliable, long-term financial investment.

Without a doubt, renewable energy is on its way to becoming the new mainstream energy source (refer to diagram below). This is supported by drivers such as:

• Regulatory frameworks and reduction in CAPEX as a result of technological progress.
• Investors and developers looking to inject capital in dormant sectors, opening up substantial growth, especially in developing countries.
• Renewable energy projects continuing to attract institutional investors such as BlackRock and Goldman Sachs, due to attractive and stable yields.

By the end of 2018, renewables represented more than a third of the world’s installed capacity. This translates to more than 26% of global electricity produced.

Advances in renewable energy technology, coupled with growing cost-competitiveness have strengthened the business and investment case for renewables. This has opened up new investment opportunities that will transform the energy systems for many countries, particularly developing countries that are looking to improve their energy infrastructure and broaden their energy mix. Accelerating the deployment of renewable energy will fuel economic growth, create new employment opportunities and contribute to a climate safe future.

Policy makers will have a key role to play in maximising the benefits of the transition to renewable energy.In a post COVID-19 era (so to speak), where global economies have slowly started opening up, world leaders are faced with a choice to either reopen economies powered by the failing fuel sources of the past, or jump-start their path towards a clean, secure and more energy resilient future.

By Joseph Saviour, Senior Analyst, Distributed Energy

 

According to the International Monetary Fund (IMF), the human tragedy of the COVID-19 pandemic and global restrictions resulting in business closures and travel prohibitions may contribute to the worst economic downturn since the Great Depression. As a result, the global economy is expected to contract by 3 percent in 2020.

The scale of this crisis is generating unparalleled challenges for the global economy. Businesses are growing wary of large capital investments as the economic risks are the most likely and concerned fallout i.e. prolonged recession of the global economy. Some companies are already inevitably being pushed into bankruptcy as the number of indebtedness, both public and private, increases.

In light of this crisis, it’s important to not overlook other, equally important global risks and challenges we have been facing for decades now. A passage in a recent publication by the World Economic Forum does a compelling job in capturing this and I’d like to share the same:

“One of the most important fallouts for the world when dealing with a global crisis like COVID-19 is ignoring other existential global risks – in particular, any shortfall inactivity to address sustainability risks, especially climate change adaptation and mitigation. As countries emerge from the immediate health crisis and reboot their economies, changes in our working practices, attitudes towards traveling, commuting and consumption might make it easier to find business opportunities to capitalize on lower carbon and more sustainable recovery. This could enable society to adapt responsibly, to return cleaner and greener, and to develop through sustainable growth with people and communities at the centre of society.”

Governments around the world are ramping up stimulus packages to create jobs and reflate their economies. These actions have made two things very clear (WRI, 2020).

1. We should invest in things that strengthen the health and well-being of our citizens; and
2. We must look at reducing economic and infrastructure vulnerability. Propping up old, polluting industries is not a solution.

Renewable energy investments, on the other hand, can help avoid greenhouse gas emissions and protect communities from dangerous health and environmental effects of climate change. According to the World Health Organization (WHO), about 4.2 million deaths every year occur as a result of exposure to ambient (outdoor) air pollution, while a recent Harvard study showed that people living in contaminated cities were more likely to die of COVID-19.

Solar PV and onshore wind are now the cheapest sources of new-build generation for at least two-thirds of the global population.

 

In the most recent Global Renewables Outlook published by the International Renewable Energy Agency (IRENA),  they present a “Transforming Energy Scenario” – an ambitious yet realistic energy transformation that would limit global temperature rise to below 2 degrees Celsius. To make this a reality, it would cost an additional $19 trillion more than the current business as usual approach. However, this would bring benefits worth $50-$142 trillion by 2050 and grow the world GDP by 2.4 percent. The report also details a “Deeper Decarbonisation Perspective”. This basically outlines that a net-zero emission world by 2050-2060 would cost anywhere between $35-$45 trillion BUT yield $62-169 trillion in cumulative savings.

Now let’s put this into context in terms of the current COVID-19 crisis. In USA itself, we’ve just seen the House pass a $3 trillion coronavirus relief package.These relief packages are trending on a global level. It’s not hard to argue that some, if not more, of the current economic fallouts could have been mitigated or better managed if there was a relevant framework in place to apprehend and address this crisis. While the R&D and associated costs require preliminary capital, the accrued tangible and non-tangible benefits to be realised as a result of this pre-emptive measure needs to be properly studied and documented.

It’s not only about renewable energy investments. It’s an investment that also mitigates the financial and other risk of climate change. With this mandate in mind, our company, Distributed Energy, was formed in early 2019. We leverage finance, technology and innovation to accelerate our commitment to sustainability and drive a low-carbon transition in developing countries.

 

The COVID-19 crisis reinforces the need to adopt and capitalise on lower carbon and more sustainable recovery.In parallel, the fossil fuel industry is now in the spotlight, as it happens to be one of the hardest hit sectors – a consequence of curtailing of commercial air travel and stay-at-home orders. The pandemic has caused massive declines in demand for oil and gas. Leading oil, gas and petrochemical companies lost an average of 45% of their total market value since the start of 2020 and their stock prices continue to plummet.

In the midst of this crisis, oil, gas, and petrochemical companies are lobbying governments worldwide to seek direct and indirect support, including bailouts, buyouts, regulatory rollbacks, exemption. This has resulted in some of the largest financial institutions i.e. BlackRock, to rapidly divest from fossil fuels, having recognized the growing financial risks of carbon-intensive investments.

Bloomberg New Energy Finance (BNEF) estimated last year that between now and 2050, 77% of investments in new power generation will be in renewables. There is a compelling case, now more than ever, that governments and investors treat COVID-19 not as a signal to slow down, but rather to ramp up and embrace renewable energy.