The Rise of Solar Industry in India August 27, 2011 ITC Sonar, Kolkata.

The Rise of Solar Industry in India

August 27, 2011

ITC Sonar, Kolkata

© 2011 KPMG Advisory Services Private Limited, the KPMG India member firm of KPMG International, a Swiss cooperative. All rights reserved. KPMG and the KPMG logo are registered trademarks of KPMG International, a Swiss cooperative. 2

What we believe is possible by 2022….

Solar energy can meet 7% of our power requirement

It can save 72 MTPA of coal imports (30%) or USD 5.5 bn of import bill annually from that year

It can mitigate 2.6% of India’s carbon emissions which is one-tenth of our voluntary target of 20-25%

© 2011 KPMG Advisory Services Private Limited, the KPMG India member firm of KPMG International, a Swiss cooperative. All rights reserved. KPMG and the KPMG logo are registered trademarks of KPMG International, a Swiss cooperative.

A PIPE DREAM?

We don’t think so. This can be done!

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Here’s why…

• 55 x 55 km² of installed solar capacity is all we need to meet India’s energy needs today

• Even if 16%* of our middle class households install solar rooftops - It would generate enough power to meet the total power requirements of the country today

Note: Number of Middle Class Households – 80 million; Avg. rooftop area – 250 sq.m, Avg. Solar Insolation – 5 kwh per sq.m per day; Conversion Efficiency – 15%

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“But the cost is too high!”. Not for long! (1/2)

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“But the cost is too high!”. Not for long! (2/2)

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This is our forecast of the market

2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-220

5

10

15

20

25

30

0

10

20

30

40

50

60

70

0.7 1.0 1.5 2.0 2.5 2.72.7

4.5

11.615.6

23.2

1.7 3.25.2 7.7

10.4 13.117.6

29.2

44.8

68.0Solar Market - India

Annual Solar Market - India (GW) Cumulative Solar Capacity - India (GW)

Ann

ual

Sol

ar M

arke

t (G

W)

Cum

ulative Solar M

arket (GW

)

Solar Potential In GW

2011-17 ~10.4

2017-22 ~57.3

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Requires subsidy support


“But what will all this cost us?”

324

634

937 1,196

1,410 1,476

0.5%

0.9%

1.2%

1.5%

1.7% 1.6%

0.0%

0.2%

0.4%

0.6%

0.8%

1.0%

1.2%

1.4%

1.6%

1.8%

-

200

400

600

800

1,000

1,200

1,400

1,600

2011-12 2012-13 2013-14 2014-15 2015-16 2016-17

%US

D M

illio

n

Annual Financial Burden % of Avg tariff

Total financial impact over the next 6 years to meet Solar RPO obligations is USD 6 billion

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Is USD 6 billion a lot?

9 GW of Solar RPO Obligations

Cumulative subsidy in the next 6 years

9

USD 1 per barrel rise of oil price

Cumulative cost impact on economy over 6 years

5% shortage of domestic coal needing imported coal

Cumulative cost over 6 years

= =


Decentralized Stand-alone Applications can contribute 65% of the total demand during 2017-22

Solar Powered Agricultural Pumpsets

16,000 MW by 2022

Solar Water Heaters

70 million sqm of collector

area by 2022

Solar Powered Telecom Towers

3,500 MW by 2022

Solar rooftops

19,000 MW by 2022


Solar water heating systems - Around 70 million sqm of collector area could be deployed in India within the next decade

Solar Water Heating Systems

• India only has an estimated 3.5 million square meters of solar water heating collectors

• About 11 million tonnes of imported coal can be substituted by 2022

4.4 5.8 7.911.3

16.122.3

30.5

40.8

51.1

61.4

71.7

0

10

20

30

40

50

60

70

80

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Mill

ion

Sqm

Annual Solar Water Heating System Market Size – Million Sqm

China with relatively lower insolation has 125 million square meters of SWH collector capacity


17.1 17.6 18.1 18.7 19.3 19.9 20.5 21.1 21.8

7.3 7.6 7.8 8.1 8.4 8.7

9.0 9.39.6

13.1 11.6 10.7 9.9 9.1 8.6

8.2 7.8 7.4

0

5

10

15

20

25

2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20

INR

/kW

h

Diesel agricultural pumpsets Conventional agricultural pumpsets Solar powered agricultural pumpsets

Solar powered agricultural pumpsets can potentially replace conventional powered pumpsets post grid parity

Today, diesel powered pumpsets can be economically replaced by solar powered pumpsets…

Note: Full cost comparison that includes pumpset cost and delivered power costs

Power subsidy to electricity sector is likely to increase from USD 17 Bn to USD 50 Bn by 2022

Solar power is well suited

as an alternate solution!

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Diesel generated pumpsets

Solar powered pumpsets

Conventional power pumpsets


Centralized Grid-Connected Power Demand

Utility Scale Solar Farm

20,000 MW by 2022

• CSP provides the benefit of storage.

• Meet peak requirements and reduce intermittency

• Steam augmentation & hybridization


Why we should give a thrust to distributed generation…

Solar power is already competitive for decentralized stand-alone applications

For example:

Pay back period for residential solar water heating system is between 2.5 to 4 years

Solar lanterns replacing subsidised kerosene

Pay back period is between 1 to 2 years.

Potential annual savings, if 50% of un-electrified households switch to solar lanterns ~ USD 1.2 Billion*

Lower network losses

Reduce network burden

Savings in fuel consumption

* Note: - Number of un-electrified households – 78 million, Kerosene consumption per household per year – 50 liters; Price of oil ~ USD 100 per bbl

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What should we do to achieve this potential? (1/2)

Government - Support creation of the ecosystem

• Provide a steady stimulus for market creation – “Market Certainty” is the keyword for investors!

• Support state power utilities financially; create a source for funding!

• Provide sufficient thrust to decentralized generation

• Support the banks in the first phase!

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What should we do to achieve this potential? (2/2)• Banks – invest in understanding this sector well: Bridge the

“knowledge” gap – This is a big funding opportunity in the next 10 years!

• State Utilities & Regulators – Provide supporting infrastructure – grid connections, net-metering, Renewable Purchase Obligation enforcement

• Industry – Innovate – develop suitable solutions for the Indian market e.g.

solarising agriculture pumps Vendor development & Value engineering to reduce costs – the

large players need to invest in this area

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What mankind achieved in 10-year timeframes…

Examples:

•“Man on the moon by end of this decade”: JFK, 1961

•Desktop computers in 1980s: From 1 to 9.5 (Million)

• Internet penetration in 1990s: 2.8 to 360 (Million)

• India’s teledensity in 2000s: 4% to 64%

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Thank You

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Santosh KamathPartnerKPMG Advisory Services Pvt. Ltd.Tel: +91 2230902527Mo: +91 9967016369E-Mail: [email protected]

Anupam RayAssociate DirectorKPMG Advisory Services Pvt. Ltd.Tel: +91 3344034022Mo: +91 9903032879E-Mail: [email protected]

Website: www.in.kpmg.com

The information contained herein is of general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

Contact Us

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mailto:[email protected]

http://www.in.kpmg.com/


A small piece of land in Rajasthan can meet the power requirement of India!

Particulars Units Value

Area Required ( 55 KM * 55 KM) Sq. KM 3,025

Area Required ( 55 KM * 55 KM) Sq.Meters 3,025,000,000

Average Insolation in Rajasthan kwh per sqm per year 2000

Conversion Efficiency % 15%

Total Power Generation Potential MU 907,500

Indian Power Requirement in 2010 - (EPS Estimate) MU 891,163


Cost Reduction potential – What aspects of solar power lead to cost reduction possibilities?

2. Localization 4. Competitive Intensity

We believe multiple levers for cost reduction exist – the pace of cost reduction would largely depend on the pace of capacity addition

3. Govt Incentives

1. Technology innovation

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• Banker education/ incentivization for fair cost financing

• Sustained momentum – accelerates Indian industry; aligns international markets to Indian landscape

5. Other Enablers

• Tariff competition - percolation to suppliers leading to margin reductions on key high value imports

• Cost reduction of EPC ‘wraps’ through innovative contracting models

• Aggregation initiatives (Solar Parks) for scale economies

• Reduction of location sensitive charges – wheeling/ Tx to encourage Sun based siting

• Ongoing R&D – cost reduction/ efficiency improvement

• India suited technology - leveraging of India advantages

• Localization of multiple components possible

• Indigenous manpower for engineering design

Cost Reduction

Levers

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Solar PV Cost Reduction Potential – Manufacturing Innovations

Polysilicon $ 0.30 per Wp 27%

Ingots/Wafers $ 0.25 per Wp 23%

Cell $ 0.22 per Wp 21%

Modules $ 0.30 per Wp 29%

Drivers for cost reduction

Potential for cost reduction

● Costs of Si-FBR processes are around $ 20 per Kg

● Cost reduction potential by 35-40%

● Polysilicon usage is expected to come down from ~ 7-6.5g/W to ~ 3g/W within the next decade

● Cost reduction potential by 45-50%

● Cell efficiencies expected to increase from 16-17% to 18-19% and then later on towards 22-23%

● Cost reduction potential per kWh by 15-20%

Reduction in polysilicon feedstock prices - Deployment of Fluidized Bed Reactor (FBR) process

Technology improvements - Usage of innovations like: Diamond wire wafering, Ultra thin kerfless wafers etc.

Improvement of cell efficiency - Increasing light absorption layers, Usage of better absorption material etc

Source – DOE – USA Estimates, Other Analyst Reports, KPMG Analysis

Cost Structure

Module Costs: $1.1-1.2 per Wp

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http://www.google.co.in/imgres?imgurl=http://www.schott.com/newsfiles/20071029151252_08_Polysilicon_solar_cell.jpg&imgrefurl=http://www.schott.com/english/news/press.html?NID=2172&usg=__Veq2ZPPFh_51llU-8P9X-5UwjWg=&h=1535&w=2126&sz=1592&hl=en&start=8&zoom=1&tbnid=FcsNboxTcQfk8M:&tbnh=108&tbnw=150&ei=3BN_TZefCcrtrQfP8_GzBw&prev=/images?q=polysilicon&um=1&hl=en&sa=N&tbs=isch:1&um=1&itbs=1

http://www.google.co.in/imgres?imgurl=http://solarabb.com/images/ingot2.jpg&imgrefurl=http://solarabb.com/ingot_wafer.html&usg=__UJiTXECdixICecppetoanXQ3kjM=&h=189&w=224&sz=9&hl=en&start=16&zoom=1&tbnid=WK2HqXF4v1sQJM:&tbnh=91&tbnw=108&ei=FxR_TY3GDcexrAedrpSmBw&prev=/images?q=solar+ingot&um=1&hl=en&sa=N&tbs=isch:1&um=1&itbs=1

http://www.google.co.in/imgres?imgurl=http://cdn.physorg.com/newman/gfx/news/2007/solarcell.png&imgrefurl=http://www.physorg.com/news99904887.html&usg=__TTD9QmMAa9NJE7qqDBU16ex3QJE=&h=250&w=280&sz=142&hl=en&start=1&zoom=1&tbnid=OIl8xqtMI-3N7M:&tbnh=102&tbnw=114&ei=OhR_Tf3VF5CqrAe0-PC1Bw&prev=/images?q=solar+cell&um=1&hl=en&sa=N&tbs=isch:1&um=1&itbs=1

http://www.google.co.in/imgres?imgurl=http://dynamicpatents.com/blog/wp-content/uploads/solar_panels.jpg&imgrefurl=http://www.dynamicpatents.com/2008/12/no-shortage-of-activity-in-solar-panel-market/&usg=__oNIvKWxUyndH7jPrdiFnJr835Sw=&h=960&w=1280&sz=457&hl=en&start=6&zoom=1&tbnid=s0PyGF4NoiO8dM:&tbnh=113&tbnw=150&ei=fxR_TYuyBcfKrAfi6_mlBw&prev=/images?q=solar+panels&um=1&hl=en&sa=N&tbs=isch:1&um=1&itbs=1


Solar PVCost Reduction Potential – Non module BOS Costs

Transformers, switch gears and cables

Inverters

Potential for cost reduction LOW

• Majority of inverters are imported currently

• Players are looking at assembly of inverters in India which could contribute towards cost reduction

• Market and technology already established

• Driven by prices of commodities like Copper and CRGP coil

Civil & General Works

Installation and Commissioning

IDC and Financing Charges

• Driven by localized site conditions and low labour costs

• Availability of manpower for design engineering

• Local sourcing of materials

• Driven by low cost innovative financing options

• Exim route

• Tax free solar bonds

LOW HIGH HIGH HIGH

Balance of System costs are likely to come down due to local sourcing and lower labor costs

Key Considerations

Balance of System (~45- 50% of total solar system cost)

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Solar CSP Localization Potential – Key high value CSP components lend themselves to high localization potential

Parabolic Trough Mirrors

• Most raw materials available locally

• Manufacturers with required competence present in India

Molten Salt Storage Components

• Requires fabrication of pipes, tanks

• Manufacturers with required competence present in India

• Pumps may still be imported

Power Block

• Turbines are specialized but global suppliers have Indian presence – can localize

• Heat exchangers – Local designs available

Trough Structures & Associated Works

• Most fabrication requirements – welding, casting etc available

• Localization possible with design transfer and hand-holding

Engineering Design/ Execution

• Limited capabilities with Indian vendors however, required CAD/ CAM facilities available

• Local manpower available

• Most components can be localized readily or with limited assistance – pace would depend on industry willingness based on market size visibility

• Certain complex items (e.g. Absorber tubes, Heat transfer fluid, C&I components, Specialized pumps) may take time due to limited suppliers and concentration of technology

11-15% 9-12% 5-7% 12-15% 7-9%

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The Rise of Solar Industry in India August 27, 2011 ITC Sonar, Kolkata.

Documents

kpmg logo

swiss cooperative

solar rooftops

solar insolation

solar capacity

solar energy

solar water heaters

solar powered pumpsets