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1、Clean Energy Investment Trends 2021: Evolving Financial Performance Expectations & Power Procurement Mechanisms In IndiaEvolving Financial Performance Expectations & Power Procurement Mechanisms In India Clean Energy Investment Trends 2021Edition authors: Arjun Dutt, Pablo Gonzalez, Nikhil Sharma, L
2、ucila Arboleya, and Ruchita ShahSeries editors: Gagan Sidhu and Michael WaldronReport December 2021Centre forEnergy FinanceClean Energy Investment Trends 2021: Evolving Financial Performance Expectations & Power Procurement Mechanisms In IndiaImage: iStockSolar PV capacity awarded in tenders dropped
3、 sharply to 2.6 GW during H1 2021 from 15.3 GW (including 1.6 GW solar-wind hybrid capacity) in H1 2020 and 21.2 GW for the entirety of 2020 (including 4 GW hybrid capacity).Clean Energy Investment Trends 2021: Evolving Financial Performance Expectations & Power Procurement Mechanisms In IndiaReport
4、December 2021ceew.inEvolving Financial Performance Expectations & Power Procurement Mechanisms In IndiaClean Energy Investment Trends 2021Edition authors: Arjun Dutt, Pablo Gonzalez, Nikhil Sharma, Lucila Arboleya, and Ruchita ShahSeries editors: Gagan Sidhu and Michael WaldronCentre forEnergy Finan
5、ceClean Energy Investment Trends 2021: Evolving Financial Performance Expectations & Power Procurement Mechanisms In India Copyright 2021 International Energy Agency (IEA) and Council on Energy, Environment and Water (CEEW). Open access. Some rights reserved. This work is licenced under the Creative
6、 Commons Attribution- Noncommercial 4.0. International (CC BY-NC 4.0) licence. To view the full licence, visit: www. creativecommons.org/licences/ by-nc/4.0/legalcode. Suggested citation: Dutt, Arjun, Pablo Gonzalez, Nikhil Sharma, Lucila Arboleya, and Ruchita Shah. 2021. Clean Energy investment Tre
7、nds: Mapping Project-Level Financial Performance Expectations in India. New Delhi, Paris: Council on Energy, Environment and Water; International Energy Agency.Third-party content: The IEA and CEEW do not necessarily own each component of the content contained within the work. Therefore, neither the
8、 IEA, nor CEEW warrant that the use of any third-party owned individual component or part contained in the work will not infringe on the rights of those third parties. The risk of claims resulting from such infringement rests solely with you. If you wish to re-use a component of the work, it is your
9、 responsibility to determine whether permission is needed for that re-use and to obtain permission from the copyright owner. Examples of components can include, but are not limited to, tables, figures, or images.Disclaimer: This report is the result of a collaborative effort between the Internationa
10、l Energy Agency (IEA) and the Council on Energy, Environment and Water (CEEW) and was produced by CEEW. This report reflects the views of the IEA Secretariat and the authors affiliated to the CEEW but does not necessarily reflect those of the IEAs individual Member countries, the CEEW, or their resp
11、ective funders, including the European Union (EU). The report does not constitute professional advice on any specific issue or situation. None of CEEW, and the IEA or the EU make any representation or warranty, express or implied, in respect of the reports contents (including its completeness or acc
12、uracy) and shall not be responsible for any use of, or reliance on, the report. For further information, please contact: arjun.duttceew.in and michael.waldroniea.org.reports contents (including its completeness or accuracy) and shall not be responsible for any use of, or reliance on, the report. Cov
13、er image: iStock.Peer reviewers: Findings of this report have been extensively peer reviewed by market participants.Publication team: Alina Sen (CEEW), The Clean Copy, Priyanka Adhikari, Twig Designs, and Friends Digital. Organisations/initiatives: The Council on Energy, Environment and Water (CEEW)
14、 is one of Asias leading not-for-profit policy research institutions. The Council uses data, integrated analysis, and strategic outreach to explain and change the use, reuse, and misuse of resources. It prides itself on the independence of its high-quality research, develops partnerships with public
15、 and private institutions, and engages with the wider public. In 2021, CEEW once again featured extensively across ten categories in the 2020 Global Go To Think Tank Index Report. The Council has also been consistently ranked among the worlds top climate change think tanks. CEEW is certified as a Gr
16、eat Place To Work. Follow us on Twitter CEEWIndia for the latest updates. The CEEW Centre for Energy Finance (CEF) is an initiative of the Council on Energy, Environment and Water (CEEW), one of Asias leading think tanks. CEF acts as a non-partisan market observer and driver that monitors, develops,
17、 tests, and deploys financial solutions to advance the energy transition. It aims to help deepen markets, increase transparency, and attract capital in clean energy sectors in emerging economies. It achieves this by comprehensively tracking, interpreting, and responding to developments in the energy
18、 markets while also bridging gaps between governments, industry, and financiers. International Energy Agency: The International Energy Agency (IEA) provides authoritative data, analysis, and recommendations across all fuels and all technologies, and helps governments develop policies for a secure an
19、d sustainable future for all. The IEA was created in 1974 and examines the full spectrum of issues including energy security, clean energy transitions, and energy efficiency. It is a global leader in understanding pathways to meeting climate goals, reducing air pollution and achieving universal ener
20、gy access, in line with the UN Sustainable Development Goals. The IEA family of countries accounts for 75% of global energy consumption, and includes 30 Member countries and 8 Association countries Brazil, China, India, Indonesia, Morocco, Singapore, South Africa, and Thailand. Council on Energy, En
21、vironment and Water, Sanskrit Bhawan, A-10 Qutab Institutional Area, Aruna Asaf Ali Marg, New Delhi - 110067, India International Energy Agency, 9 rue de la Fdration, 75739 Paris Cedex 15 FranceClean Energy Investment Trends 2021: Evolving Financial Performance Expectations & Power Procurement Mecha
22、nisms In IndiaThe authorsEdition authors: Arjun Dutt, Pablo Gonzalez, Nikhil Sharma, Lucila Arboleya, and Ruchita ShahSeries editors: Gagan Sidhu and Michael WaldronGAGAN SIDHU I gagan.sidhuceew.inGagan is Director of the CEEW Centre for Energy Finance (CEEW-CEF) where his work is focused on advanci
23、ng the energy transition. Prior to joining CEEW, he was CFO of GMR Renewable Energy, and before that he worked in the investment banking industry across multiple geographic locations including Tokyo, Singapore, London, & Dubai. Gagan holds a BA (Hons) degree in Economics from Delhi Universitys Shri
24、Ram College of Commerce, and an MBA from Duke University.MICHAEL WALDRON I michael.waldroniea.orgMichael Waldron is Head of Energy Investment Unit who leads the investment team and the World Energy Investment report at the International Energy Agency. His work focuses on assessing the implications o
25、f energy investment and financing trends for meeting energy security and sustainability goals.ARJUN DUTT I arjun.duttceew.inArjun Dutt is a Programme Lead at the CEEW Centre for Energy Finance. His work is geared towards enhancing the flow of affordable finance towards clean energy in emerging econo
26、mies. This includes analysing the risks constraining the flow of capital towards clean energy and developing suitable interventions to de-risk investments.PABLO GONZALEZ I pablo.gonzaleziea.orgPablo Gonzalez is an Investment Analyst at the International Energy Agency. His work focuses on investment,
27、 financing and modelling in the electricity sector, with a special focus on renewables, grids and storage.NIKHIL SHARMA I nikhil.sharmaceew.inNikhil is a Programme Associate at the CEEW Centre for Energy Finance. He actively monitors market developments in Indias clean market and develops solutions/
28、tools to attract capital in the sector. Previously, he worked as a management consultant in the power and renewables sector.LUCILA ARBOLEYA I lucila.arboleyasarazolaiea.orgLucila Arboleya is an Energy Investment and Financial Analyst at the International Energy Agency, focusing on clean power invest
29、ments, financing costs of renewables and policies to attract capital for the clean energy transition in emerging market and developing countries.RUCHITA SHAH I ruchita.shahceew.inRuchita is a Research Analyst with CEEW Centre for Energy Finance. She creates data-driven insights for various stakehold
30、ers based on global and Indian renewable energy market trends and developments.Clean Energy Investment Trends 2021: Evolving Financial Performance Expectations & Power Procurement Mechanisms In IndiaImage: iStockNo new wind capacity was awarded in 2020. Only 1.2 GW was awarded in H1 2021.Clean Energ
31、y Investment Trends 2021: Evolving Financial Performance Expectations & Power Procurement Mechanisms In IndiaAbout CEEW-CEF and IEA Clean Energy Investment Trends 1. Investment trends 2. Project-level terms of debt 3. Project-level equity returns 3.1 Aggregate EIRR expectations for plain vanilla ten
32、ders 3.2 EIRR expectations for hybrid tenders 4. Sensitivity of equity investor returns to changing risks5. Land and ecological preservation-related issues5.1 Land-related conflicts constraining RE park deployment 5.2 New sites identified for wind and solar-wind hybrids 5.3 Preservation of the Great
33、 Indian Bustard affecting RE projects in Rajasthan and Gujarat6. Industry landscape Annexures References573022253120ContentsClean Energy Investment Trends 2021: Evolving Financial Performance Expectations & Power Procurement Mechanisms In IndiaImage: iStockA 20% increase in realised solar
34、 module prices from those assumed in the most competitive tariff bids could lower equity returns by around 45%.Clean Energy Investment Trends 2021: Evolving Financial Performance Expectations & Power Procurement Mechanisms In IndiaTable 1 The current RE installed capacity and targets of NTPC, SJVN,
35、and Coal India LimitedTable 2 Underlying conditions for hybrid tenders Table 3 Site assumptions for hybrid tendersTable 4 Hybrid tender input data and modelled resultsTable 5 Transactions included in the acquisitions analysisTable 6 Top 10 developers by capacity awarded (2020)Table 7 Top 10 develope
36、rs by capacity awarded (H1 2021)Table 8 Leading developers (cumulative installed capacity, up to June 2021) Figure 1 State off-taker projects predominantly awarded in H1 2021Figure 2 Central government off-takers dominate awarded wind capacity Figure 3 Debt ratios close to 75 per cent are the norm f
37、or both solar and wind projectsFigure 4 Median loan tenures for solar and wind remain in the 16-18-year range Figure 5 CPSUs have access to the lowest-cost debt while market players pay a debt premium for projects with less creditworthy state off-takersFigure 6 EIRRs have generally fallen over the c
38、ourse of 2020 and 2021Figure 7 Higher spreads between EIRRs and sovereign bond yields in India indicate higher sectoral risksFigure 8 Solar and wind have similar average CUFs but very different hourly production profilesFigure 9 The maximum possible EIRR for a hybrid project depends on constraints s
39、et in the tender Figure 10 Configurations meeting tender requirements could entail curtailmentFigure 11 EIRR expectations for hybrid tenders have converged with plain vanilla peers over timeFigure 12 Sensitivity analysis of EIRR to module pricesFigure 13 Expected EIRRs for select utility-scale solar
40、 PV projects awarded over 2016-17 and acquired over 2020-21Figure 14 Share of solar parks in overall capacity auctioned has diminishedFigure 15 Market concentration for solar PV experienced an increase in 2020 and H1 2021 notablyFigure 16 Churn rate saw an increase for solar PV markets in 2020Box 1
41、Assessing the relative attractiveness of the Indian RE sectorBox 2 Implications of acquisitions and refinancing on project-level equity returns932472022238TablesFiguresBoxesClean Energy Investment Trends 2021: Evolving Financial Performance Expectations & Power Procu
42、rement Mechanisms In IndiaImage: iStockWeighted average equity internal rate of return (EIRR) expectations for solar PV declined to 13.3% in H1 2021 from 14.9% in 2020 (nominal terms).Clean Energy Investment Trends 2021: Evolving Financial Performance Expectations & Power Procurement Mechanisms In I
43、ndiaThe Clean Energy Investment Trends series provides a unique benchmark for monitoring and assessing progress in the investments required to meet Indias sustainability goals. Now in its fourth edition, this joint project of the Council on Energy, Environment and Waters Centre for Energy Finance (C
44、EEW-CEF) and the International Energy Agency (IEA) continues to evolve to better track the key market, investment framework and financial performance trends that are central to mobilising capital at scale for renewable energy (RE). It provides insights for policymakers, industry actors, and financie
45、rs on the critical risks and opportunities for investment, as well as draws implications for future policy action and business decisions. Themes examined in the Clean Energy Investment Trends 2021 reportThe Indian utility-scale RE sector was characterised by contrasting fortunes in 2020 and the firs
46、t half (H1) of 2021. Interest to invest remained robust even amid the COVID-19 disruption with solar PV and hybrid solar-wind capacity awarded rising 35% year-over-year to 21 GW in 2020. However, capacity awarded plummeted to 2.6 GW in H1 2021 as a backlog of unsigned power sales agreements (PSAs) h
47、eld up the tendering of new capacity. In parallel, the awards of new wind capacity came to a standstill in 2020 and remained sluggish in H1 2021 amid subdued tendering activity. The RE sector has witnessed considerable innovation in tender design, largely geared towards easing the integration of var
48、iable renewable power. The sector also saw increased participation from central public sector undertakings (CPSUs) as well as new international independent power producers (IPPs) which drove solar tariffs fell to a record low of INR 1.99/kWh even amid considerable volatility in commodity prices. The
49、se developments have intensified the scrutiny on the returns associated with the Indian RE sector. To shed light on these matters, the Clean Energy Investment Trends 2021 report analyses project-level equity returns expectations associated with plain vanilla assets over the period July 2020 - June 2
50、021 as well those corresponding to select hybrid projects. It endeavours to contextualise these returns expectations by comparing them with those in other geographies and examines their sensitivities to solar photovoltaic (PV) module prices, which are now subject to increased volatility. The report
51、also examines land-related challenges inhibiting the utility-scale RE sector and offers updates on debt financing and other key market trends.Key findingsThe Clean Energy Investment Trends 2021 analysis identified the following key trends: The pricing of project debt finance for solar photovoltaic (
52、PV) and wind has declined in the period of analysis enabled by accommodative monetary policy and the increased participation of central public sector undertakings (CPSUs) and new international independent power producers (IPPs) in tenders. The interest rates for solar PV and wind project debt fell b
53、y around 100 basis points to a range of 9.25-10.00 per cent in the period July 2020 to June 2021 from prominent non-banking financial companies (NBFCs), with even cheaper debt available from banks (8.75-9.50 per cent). This was primarily because the Reserve Bank of India maintained an accommodative
54、monetary policy to support the domestic economy amid the disruption caused by the COVID-19 pandemic. In addition, CPSUs and international IPPs have brought in low-cost debt from other sources. Compared with domestic IPPs, CPSUs can access lower-cost debt from the bond market owing to their quasi-sov
55、ereign status, while international IPPs can tap into a wider diversity of debt financing sources. Equity internal rate of return (EIRR) expectations for solar PV declined to 13.3% in H1 2021 from around 14.9% in 2020 (nominal terms). Average EIRRs decreased by over 150 basis points in H1 2021 compar
56、ed to the full year 2020. Greater participation of CPSUs, most prominently 1About CEEW-CEF and IEA Clean Energy Investment TrendsClean Energy Investment Trends 2021: Evolving Financial Performance Expectations & Power Procurement Mechanisms In IndiaNTPC and Satluj Jal Vidyut Nigam (SJVN), and intern
57、ational IPPs in tenders led to record low tariffs of INR 2/kWh and EIRRs of around 12.0 per cent in November-December 2020. In addition to the continued participation of these players, discoms desire for low tariffs amid rising input costs also put pressure on average returns over H1 2021. CPSUs and
58、 international IPPs, which have access to lower cost debt, may be at an advantage under these market conditions. Solar PV capacity awarded in tenders dropped sharply to 2.6 GW during H1 2021 from 15.3 GW (including 1.6 GW solar-wind hybrid capacity) in H1 2020 and 21.2 GW for the entirety of 2020 (i
59、ncluding 4 GW hybrid capacity). The pace of solar capacity awards slowed considerably in 2021 as a result of a backlog of unsigned power sales agreements (PSAs) with the Solar Energy Corporation of India (SECI) of around 20 GW towards the end of 2020. These PSAs correspond to capacity awarded at rel
60、atively higher tariffs compared to average solar tariffs in recent times. Wind capacity awarded continues to be limited, with no new projects awarded in 2020 and only 1.2 GW in H1 2021. A combination of the limited tendering of fresh capacity and challenges with the availability of suitable sites fo
61、r setting up projects has limited the scale of wind capacity awarded. Our first analysis of returns expectations for solar-wind hybrid projects reveals higher initial EIRRs than those for plain vanilla tenders, though expectations have converged over time. The Indian RE sector is witnessing increase
62、d innovation in procurement. While plain vanilla tenders (i.e., for single technology projects) have helped India scale renewables deployment, the country has introduced innovative tender designs to reduce output variability and facilitate RE grid integration. The analysis of solar-wind hybrid tende
63、rs (without storage) in this report indicates that the returns expectations associated with a hybrid tender awarded in January 2020 were around 400 basis points higher than comparable vanilla tenders. However, returns expectations converged with vanilla tenders by the end of 2020. Volatility in capi
64、tal costs, especially solar PV module prices, pose a significant downside risk to realised returns. Rising PV module prices, driven by higher raw material and transportation costs, could significantly lower realised returns compared to expectations. Our analysis indicates that a 20 per cent increase
65、 in realised module prices from those assumed in the most competitive tariff bids could lower equity returns by around 45 per cent. Besides supply chain factors, the Government of Indias decision to levy basic customs duty (BCD) on cell and module imports starting April 2022 is likely to prompt seve
66、ral developers to advance their module purchases to beat the deadline, which may further increase the upward pressure on module prices. If challenges related to reliability of power purchase and timely availability of land and transmission capacity can be addressed, EIRR expectations in India could
67、be lowered by around 350 basis points. To understand how Indias renewable energy sector compares with international markets, we assessed spreads between EIRRs and benchmark sovereign bond yields across markets, which isolated sectoral risks from underlying country and currency risks. Higher sectoral
68、 risks in India have kept return expectations 320 basis points higher than in the United States and 360 basis points higher than in China. The industry market concentration for solar PV development increased notably in 2020 and H1 2021, because of a few players securing a large share of the capacity
69、 awarded, greater participation of CSPUs, and low capacity auctioned in H1 2021. Despite new players entering the market, including Indian and international developers, market concentration reached the highest level seen in the last seven years. Churn rates (the extent of change in the top 10 develo
70、pers with respect to the previous year) also rose, indicating that the players dominating capacity awards in the solar PV space are not consistently the same year-on-year. 2Clean Energy Investment Trends 2021: Evolving Financial Performance Expectations & Power Procurement Mechanisms In India Acquis
71、itions of renewable power companies and assets have surged in 2021, topping USD 6 billion, reflecting opportunities for greater scale and consolidation. Access to a robust secondary market helps developers enhance their ability to finance projects by recycling capital and reinvesting it in new proje
72、cts. Acquisitions also provide a way for developers to realise higher returns by selling operating projects that have been de-risked through the construction phase, and an attractive investment route into renewables for new actors, such as financial investors or investment trusts.1. Investment trend
73、sThe disruptions caused by the COVID-19 pandemic had a considerable impact on Indias renewables investment spending in 2020, with capital expenditure of less than USD 10 billion1. However, as the economy gradually recovers, investments in renewables in 2021 are set to grow by more than 50%. Solar PV
74、 and wind continue to represent the majority of these investments, with around 70% of total spending on renewables in the last 5 years.The insights presented in the Clean Energy Investment Trends are derived from a database of utility-scale solar PV and wind projects sanctioned2 between 2014 and H1
75、2021. The database indicates that solar PV capacity totalling 21.2 GW (including 4 GW solar-wind hybrid capacity) was awarded in 2020, around 35% higher than the 15.7 GW solar PV capacity (including 1.4 GW solar-wind hybrid capacity) awarded in 2019. The pace of capacity awards dropped considerably
76、to 2.6 GW3 in the first half of 2021. With the Solar Energy Corporation of India Limited (SECI), a central government aggregator, accumulating yet to execute power sale agreements (PSAs) totalling 20 GW by the end of 2020, new solar PV tendering from it dried up4. As a result, state tenders accounte
77、d for a greater share of capacity awarded and state off-takers dominated capacity awarded in H1 2021 (Figure 1).The pace of award of plain vanilla wind capacity also dropped considerably, with no new projects awarded in 2020 (though hybrid capacity was awarded) and only 1.2 GW capacity awarded by SE
78、CI in H1 2021 (Figure 2). Challenges in securing suitable sites have dogged project development (see section 5). The tendering of wind projects by both state and central authorities was also sluggish during the period of analysis. The possibility of achieving lower tariffs through solar auctions cou
79、ld have played a role in the sluggish tendering of wind capacity and a greater focus on solar instead4.31. Capital expenditures are measured as the ongoing capital spending in power capacity. Investment spending is spread out evenly from the year in which a new plant or upgrade of an existing one ta
80、kes a final investment decision (i.e. when a project reaches financial close or begins construction) to the year in which it becomes operational. Source: IEA (2021b).2. Project sanctioning refers to the demonstration of the intent to invest by a developer indicated by the successful award of capacit
81、y at an RE auction or an appropriate proxy in case of projects set up under the erstwhile feed-in-tariff regime or captive generation.3. This figure excludes 6.4 GW capacity awarded under an APEGCL tender in February 2021. The capacity awarded was suspended in July 2021 and was pending a court heari
82、ng at the time of writing this report. 4. CEEW-CEF and IEA market intelligence.Image: iStockClean Energy Investment Trends 2021: Evolving Financial Performance Expectations & Power Procurement Mechanisms In India4Figure 1 State off-taker projects predominantly awarded in H1 2021Figure 2 Central gove
83、rnment off-takers dominate awarded wind capacitySource: CEEW-CEF and IEA analysis. Notes: 1. Central = SECI or NTPC, State = state discoms; Central & state = both central and state agencies as off-takers; Third party = private discoms or captive generation; excludes solarwind hybrids.2. Third party
84、share in H1 2021 refers to 300 MW auction conducted by Torrent Power Limited (distribution), Gujarat.Source: CEEW-CEF and IEA analysis. Notes: 1. Central = SECI or NTPC, State = state discoms, Third party = private discoms or captive generation; excludes solarwind hybrids.2. Excludes 728.8 MW of win
85、d capacity awarded under Gujarat Urja Vikas Nigam Limited (GUVNL) 1000 MW Grid Connected Wind Power Projects (Phase II-R) in 2019 for which power purchase agreements (PPAs) were not signed.3. No new wind capacity was awarded in 2020.20322576540524200162017
86、200020H1 2021H1 2023030404050506060707080809090100100CentralCentralCentral & stateStateStateThird partyThird party6987909986141Share of solar capacity awarded (%)Share of wind capacity awarded (%)Clean Energy Investment Trends 2021: Evolving Financial Perf
87、ormance Expectations & Power Procurement Mechanisms In India5Figure 3 Debt ratios close to 75 per cent are the norm for both solar and wind projectsFigure 4 Median loan tenures for solar and wind are in the 16-18-year rangeSource: CEEW-CEF and IEA analysis. Source: CEEW-CEF and IEA analysis. In 2020
88、, the pricing of project-level debt improved slightly, enabled by an accommodative monetary policy and higher participation of central public sector undertakings (CPSUs) in tenders. RE projects continue to access long-tenure debt equivalent to 75 per cent of project costs (Figures 3 and 4).2. Projec
89、t-level terms of debt 201473.373.573.274.374.074.074.374.475.075.075.075.075.073.82000007274767880Median loan tenure (years)SolarSolarWindWind0.05.010.015.015.014.317.415.816.216.518.318.018.519.017.116.220.025.0Weighted average debt ratio (%)Clean Energy
90、Investment Trends 2021: Evolving Financial Performance Expectations & Power Procurement Mechanisms In India6Banks and non-banking financial companies (NBFCs) are the predominant sources of debt finance for greenfield RE projects in India5. These institutions examine project-level cash flow risks to
91、determine the terms of debt offered to RE projects. These risk perceptions may be modulated by guarantees or collateral made available by project sponsors, as well as their credit histories. The terms of debt offered will vary depending on the projects riskiness. However, the following characteristi
92、cs are commonly associated with greenfield RE loans (Dutt, Arboleya, and Gonzalez 2020): Long-tenure (Figure 4) floating-rate debt with periodic reset clauses. Loan tenures typically include a moratorium period of up to one year after the projects scheduled commissioning date. While interest accrues
93、 over this period, loan repayment starts after the expiry of this grace period. Debt-service reserve account (DSRA) requirements of typically one to two quarters. The DSRA is a cash reserve set aside to meet debt-servicing requirements for a specified number of months. Minimum debt-service coverage
94、ratio (DSCR) requirements of 1.1, although the average DSCR varies. DSCR is the ratio of net operating income available to service the debt (both principal and interest) to the debt-servicing requirements.The final cost of debt is the sum of internal benchmark rates (usually the marginal cost of fun
95、ds based lending rate (MCLR) for banks and the prime lending rate (PLR) for NBFCs) and the spreads over the benchmark rates offered to RE projects. Competition among financial institutions can also drive down the interest rates offered to RE projects.Over much of the period of analysis, the Reserve
96、Bank of India (RBI) maintained an accommodative monetary policy stance to support the domestic economy in the wake of the macroeconomic disruption caused by the COVID-19 pandemic (RBI 2020a), in line with accommodative monetary policies implemented by central banks globally. The RBI also implemented
97、 additional measures such as extending liquidity facilities to key financial institutions and relaxing prudential norms for stressed asset recognition (RBI 2020b). These measures exerted a moderating effect on economy-wide interest rates, as reflected in the benchmark rates of financial institutions
98、6.To determine spreads over internal benchmarks, lenders typically assign composite scores to loan proposals. The major factors determining these scores are the creditworthiness of the off-taker, the type of site, and the creditworthiness of the sponsor, taking into consideration any additional corp
99、orate guarantees or collateral offered. In this regard, solar parks help ensure the timely availability of land and grid evacuation infrastructure. Controlling for other factors, projects set up on solar park sites command a small advantage (25 basis points) in borrowing costs relative to non-solar
100、park sites (Figure 5). Further, the creditworthiness of off-takers also has a major bearing on interest rates. Controlling for other factors, signing a PPA with less creditworthy state discoms could add up to 50 basis points in borrowing costs relative to projects with central government entities or
101、 creditworthy state discoms as off-takers (Figure 5).5. Market interactions indicate that NBFCs are the dominant source of finance to RE projects overall. However, anecdotal evidence suggests that abundant liquidity in the banking system over the period of analysis meant that banks could have played
102、 a greater role than their contribution in recent years.6. The one-year MCLR of the State Bank of India, Indias largest commercial lender by assets, stood at 7% over July 2020 - June 2021 (State Bank of India 2021). This averaged close to 8% over the previous twelve-month period.Image: iStockClean E
103、nergy Investment Trends 2021: Evolving Financial Performance Expectations & Power Procurement Mechanisms In India7While domestic financial institutions are the major source of debt capital for the Indian renewables sector, some international IPPs as well as a few domestic IPPs access debt from inter
104、national markets for greenfield projects. While this debt in foreign currency terms is generally considerably cheaper than that accessible in India, the gap narrows when factoring in hedging costs. Further, a number of CPSUs are now actively bidding for projects. These state-owned enterprises typica
105、lly access the bond market for their capital requirements at costs close to those corresponding to the Government of Indias sovereign borrowings (6.0-6.5%) (Economic Times 2021). However, given the longer tenure of renewable energy projects compared to that of bond market borrowings, slightly higher
106、 costs of debt are factored into project-level financing assumptions. Figure 5 summarises the cost of debt assumptions factored into the analysis7.3. Project-level equity returnsWhile utility-scale solar and wind projects are largely financed through debt (Figure 3), equity accounts for around a qua
107、rter of project costs. Debt obligations are serviced first from project cash flows and are secured by covenants associated with debt repayment (refer to Section 2), thus creating greater certainty over debt repayment. Given the relatively junior position of equity in the cash flow waterfall, equity
108、investors returns expectations are higher than those for debt financiers. This section examines the project-level equity internal rate of return (EIRR) expectations factored into RE tariff bids. The EIRR expectations of plain vanilla tenders (i.e., exclusive solar or wind tenders without storage) is
109、 estimated through a discounted cash flow analysis factoring in the associated tariffs, estimated project costs, production parameters, and indicative terms of debt (Dutt, Arboleya, and Gonzalez 2020). Annexures 3 and 4 present the methodology and the input data assumed in the project-level cash flo
110、w model.3.1 Aggregate EIRR expectations for plain vanilla tendersThe analysis of utility-scale solar PV projects in the Clean Energy Investment Trends 2021 report indicates that EIRR expectations for these projects declined from 14.5 per cent in the second half of 2020 to 13.3 per cent in H1 2021 (e
111、stimated on a capacity-weighted average basis, based on awarded capacities). Factoring in implicit EIRRs of 15.3 per cent for H1 2020 from last years report results in EIRRs of 14.9 per cent for the entirety of 2020. This is still slightly lower than our estimate of 15.2 per cent for 2019.7. CEEW-CE
112、F and IEA market intelligence.Figure 5 CPSUs have access to the lowest-cost debt while market players pay a debt premium for projects with less creditworthy state off-takersSource: CEEW-CEF and IEA market intelligence.Note: The bar for CPSUs indicates the range for the cost of debt factored in, rega
113、rdless of off-taker or type of site.Non-solar park and windNon-solar park and windSolar parkNBFCsBanksCPSUsSolar parkSolar and wind68791011Cost of debt (%)Central off-takerState off-taker9.509.259.008.757.50+0.50+0.50+0.50+0.50+0.50Clean Energy Investment Trends 2021: Evolving Financial Performance
114、Expectations & Power Procurement Mechanisms In India8Figure 6 EIRRs have generally fallen over the course of 2020 and 2021Source: CEEW-CEF and IEA analysis.Note: The Kerala State Electricity Board (KSEB) tender of November 2020 witnessed limited participation from developers and the tariff discovere
115、d (INR 2.97/kWh) was close to the ceiling tariff applicable to the tender. Thus, the equity IRR for that tender is an outlier.Oct-18Dec-18Feb-19Mar-19May-19Jul-19Aug-19Oct-19Dec-19Jan-21Jan-20Feb-21Mar-20Apr-21Apr-20Jun-21Jun-20Jul-21Aug-20Sep-20Nov-20Sep-2202422EIRR (%)CPSUsSolar parksCe
116、ntralGujaratKeralaPrivate discomMaharashtraUttar PradeshThe decline in EIRRs can be attributed to aggressive bidding by CPSUs and international IPPs for projects awarded in November and December 2020 resulting in the discovery of record-low tariffs of INR 2.00/kWh and INR 1.99/kWh. International IPP
117、s benefit from access to cheaper credit from international markets, while CPSUs have the ability to secure cheaper debt as a result of their status as quasi-sovereign entities. Furthermore, discom expectations of low-priced renewable power coupled with rising input costs could have had a moderating
118、effect on equity returns factored into tariff bids.Enhanced participation of public-sector enterprisesThe enhanced participation of CPSUs (which were awarded capacity in 6 out of 10 tenders) over the period of analysis stems from corporate decisions to green asset portfolios by adopting RE deploymen
119、t targets (Table 1). This participation drove aggressive bidding across tenders and led to lower EIRR expectations from November 2020 onwards.Image: iStockClean Energy Investment Trends 2021: Evolving Financial Performance Expectations & Power Procurement Mechanisms In India98. CEEW-CEF and IEA mark
120、et intelligence.9. ibid.Given the draft proposal by the government to permit CPSUs to factor in lower hurdle rates while bidding for projects, the continued participation of CPSUs in the future could exert a moderating influence on equity returns going forward (Dutta 2021). This raises the possibili
121、ty of the potential crowding out of other developers with higher returns requirements.Discom tariff expectations and rising input costsThe decline in solar and wind tariffs discovered in recent years has influenced discom expectations of the pricing of renewable power and their willingness to sign n
122、ew contracts. The challenges faced by SECI in securing PSAs for 20 GW of solar capacity awarded in 2020, including the 12 GW capacity awarded at INR 2.92/kWh under its manufacturing-linked tender, illustrate the potential pitfalls of high-tariff capacity awards. For example, SECI failed to secure of
123、f-takers for a 6GW tranche out of the unsold inventory of 20 GW capacity priced at a pooled tariff of INR 2.66/kWh for over a year before signing a PSA with Odishas GRIDCO for a portion of this capacity in July 2021 (Duggal 2021). Lower pricing expectations coupled with the rising costs of PV module
124、s and metallic commodities could also have contributed to a moderation in equity returns expectations (refer to Section 4 for a discussion on input costs). The imposition of 40 per cent basic customs duties (BCD) on module imports and 25 per cent BCD on solar cell imports starting April 2022 is set
125、to raise input costs going forward. However, bidders have reportedly not factored in duties in the tenders analysed up to June 2021 and expect to procure modules before the BCD kicks in (Ranjan 2021) (Nair 2021)8.Equity IRR of wind power projectsThe pace of wind project sanctioning remained subdued
126、during the period of analysis amid limited tendering of new capacity. With solar auctions yielding lower tariffs, a preference for solar capacity by discoms could have played a role in the sluggish tendering of wind capacity9. In addition, challenges with the availability of sites for setting up pro
127、jects could also have constrained the tendering of new capacity (refer to Section 5 for details). The solitary 1.2 GW SECI Tranche-X tender was awarded in March 2021, with no capacity throughout 2020. The EIRR expectations for this tender stood at 12.7 per cent, which is comparable to the 13.0 per c
128、ent average observed in 2019. Table 1 Current RE installed capacity and targets of NTPC, SJVN, and Coal India LimitedNTPCSJVNCoal India LimitedInstalled RE capacity (GW)CPSUCapacity under implementation (GW)RE Target1.350.10.012.840.15NA60 GW by 20325 GW by 202312 GW by 203025 GW by 20403 GW by 2024
129、Source: CEEW-CEF and IEA analysis. Notes: 1. Installed capacity and capacity under implementation are accurate as of March 2021.2. RE capacity under implementation for Coal India Limited has not been disclosed in its annual reports.NA: Not applicable.Wind EIRR expectations stood at 12.7% for H1 2021
130、, with no wind capacity awarded in 2020.Clean Energy Investment Trends 2021: Evolving Financial Performance Expectations & Power Procurement Mechanisms In India10BOX 1Assessing the relative attractiveness of the Indian RE sectorThe EIRR expectations of solar PV projects in India appear high when com
131、pared to other countries. The average EIRR for utility-scale solar PV projects awarded in 2020 was over two times higher than, for instance, the corresponding figure for the United States 14.9 per cent compared to 6.4 per cent. However, this comparison merits further unpacking.When evaluating projec
132、ts across countries, investors factor in multiple risks, including: Country risk: the extent of favourableness of economy-wide business conditions, including political stability, strength of the rule of law, ease of doing business and sovereign indebtedness. Currency and inflation risk: the risk of
133、foreign exchange fluctuations, domestic inflation, convertibility rules and lower returns for international investors stemming from the depreciation of the local currency (in which project cash flows are denominated) relative to the reporting currency of the project developer. Sectoral risk: risks s
134、pecific to the sector in which the investment is made. For the RE and power sector, this includes off-taker risk, land and transmission infrastructure risk, operational risk, and technology risk. Of these, technology and operational risks do not have a major bearing on sectoral risks as solar PV is
135、a well-understood technology with an extensive track record and minimal operations and maintenance requirements. Liquidity risk: The risk of investing in an illiquid infrastructure asset a RE project as compared to liquid sovereign benchmark securities.This box contextualises how EIRR expectations o
136、f utility-scale solar PV projects in India can be compared with those in other countries (the United States and China), that have cash flows denominated in different currencies. We do this by comparing the spread or difference between the EIRR and local currency sovereign bond yields. We also commen
137、t on the role of currency hedging for these long-term infrastructure projects in India, a market that lacks depth and liquidity, but is growing.Comparing spreads from local risk-free ratesThe local currency sovereign bond yield (e.g. 10-year government bond) factors in the country and currency risks
138、 associated with investing in RE projects. The 10-year sovereign bond yield averaged 6.0 per cent over 2020 in India, 0.7 per cent in the United States and 2.9 per cent in China (Bloomberg, 2021). The difference or spread between project-level EIRR expectations and the 10-year sovereign bond yields
139、captures sectoral and liquidity risks (Figure 7). Assuming similar perceptions regarding liquidity, technology, and operational project risks, the difference in spreads in India compared to international markets (320 basis points bps higher than the spread in the United States and 360 bps higher tha
140、n in China) reflects higher off-taker risk as well as challenges with land availability and transmission constraints. The implication is that investor returns expectations in India could be lowered by a magnitude corresponding to these spreads if challenges such as the poor financial condition of di
141、stribution utilities, and challenges associated with the timely availability of land and transmission can be addressed. Clean Energy Investment Trends 2021: Evolving Financial Performance Expectations & Power Procurement Mechanisms In India Currency risk is a challenge for international investors as
142、 a part of the upfront investment costs are denominated in international currencies (eg. imported modules), while project cash flows are denominated in local currencies. This is a greater concern for foreign players investing in developing countries with borrowings associated with the RE assets bein
143、g denominated in foreign currencies. One way investors can safeguard themselves against currency risk is through hedging arrangements that help fix the exchange rate between local currency denominated cash flows and the international currency denominated borrowings. The investor pays for the protect
144、ion that the hedging arrangement offers against currency risk for a particular period of time. This risk, along with off-taker risk, is the largest perceived risk for RE projects in India for foreign investors (Shrimali 2021).The INR-hedging market is illiquid and generally provides hedging alternat
145、ives for no longer than a year with some medium-term exceptions; further, it is limited to a few hard currencies, and generally provides very simple hedging services, with substantial regulation (Tilotia 2020). It can also be very costly. Anecdotal evidence suggests that the cost of hedging in India
146、 can be around 300400 bps (assuming a one-year forward swap contract that is periodically rolled over).Providing longer-term and lower-cost hedging solutions would help boost foreign RE investments in India. Given that currency risk is, to a large extent, a result of domestic macroeconomic condition
147、s, the Government of India plays an important role in terms of risk management. International efforts, like those of development finance institutions, are also focusing on ways to manage local currency risks for clean energy projects, in part through dedicated facilities backed by development financ
148、e institutions. Enhanced efforts on the part of both domestic and international actors could help reduce the overall cost of capital and subsequently enable RE deployment at a lower cost. 11Figure 7 Higher spreads between EIRRs and sovereign bond yields in India indicate higher sectoral risksIncorpo
149、rating hedging costs Source: CEEW-CEF and IEA analysis. Note: EIRRs and bond yields correspond to average values for 2020.United StatesIndiaChina0426810121416Percentage (%)EIRRSpread10-year sovereign bond yields5.78.95.36.48.26.02.914.90.7Clean Energy Investment Trends 2021: Evolving Financial Perfo
150、rmance Expectations & Power Procurement Mechanisms In IndiaThe contribution of solar PV and wind to Indias power sector has risen steadily over the years. These sources now account for nearly 20 per cent of Indias installed capacity and 10.5 per cent of total generation, which are twice the correspo
151、nding values in 2014. This trend is set to accelerate as India pursues its goal of installing 500 GW of RE capacity by 2030. In its Stated Policies Scenario (STEPS), the IEA estimates that wind and solar PV will account for more than 40 per cent in total installed capacity and around a quarter of to
152、tal generation by 2030 (the Government of India announced a target of 500 GW by 2030 at COP26. However, the IEAs analysis is based on the previous target of 450 GW) (IEA, 2021).However, such high variable RE penetration in the electricity system will entail a massive increase in balancing requiremen
153、ts. In STEPS, the hour-to-hour variation in wind and solar output will create growing pressure on the rest of the power system to balance supply and demand, with hourly variations in these RE sources set to increase more than threefold by 2030.In response to the challenge of integrating larger quant
154、ities of variable RE into the grid, authorities across the world have introduced varied mechanisms, including short term markets to optimise balancing requirements or a more intense electricity trade between regions or states. In India, tendering authorities have innovated with tender design in the
155、form of solar and wind hybrid tenders that seek to leverage the complementarities in their generation profiles to yield more predictable electricity generation overall. More complex tenders, which require the deployment of solar and wind in tandem with storage or other generation technologies have a
156、lso been floated. These mechanisms indirectly shift the onus of balancing onto the developer.In addition to plain vanilla solar and wind tenders, this report also analyses the returns associated with solar-wind hybrids. These tenders have specific requirements related to project performance and conf
157、iguration that need to be satisfied, which have been factored into the analysis (Table 2). 12Table 2 Underlying conditions for hybrid tendersSanctioning dateTender nameCapacityCapacity utilisation factor (CUF)LocationOversizingSECI Hybrid 1,200 MW Tranche-III 2020December 2020Minimum solar (AC) or w
158、ind capacity of 33% of the contracted capacityMinimum annual CUF of 30%Anywhere in India; solar and wind components to be located in the same stateAllowed to oversize hybrid capacity (solar and wind combined) beyond the contracted capacityAEML Hybrid 250 MW 2019January 2020Minimum solar (AC) or wind
159、 capacity of 33% of the contracted capacityMinimum annual CUF of 50%Anywhere in India; solar and wind components to be located in the same stateAllowed to oversize hybrid capacity (solar and wind combined) beyond the contracted capacityBlended Wind 2,500 MW Tranche-IXAugust 2020Minimum wind capacity
160、 of 80% of the contracted capacity with no minimum capacity required for solarMinimum annual CUF of 30%Anywhere in India; solar and wind components to be either co-located or in the same vicinityNot allowed to oversize hybrid capacity (solar and wind combined)beyond the contracted capacitySource: CE
161、EW-CEF and IEA analysis. Notes: a. An additional 350 MW was awarded under a greenshoe option for the AEML 350 MW hybrid auction in 2019, taking the total capacity awarded to 700 MW.b. Oversizing refers to the installation of higher power generation capacity behind the meter compared to the contracte
162、d capacity to meet the minimum CUF requirements. However, the AC connectivity and power injection into the grid correspond to the contracted capacity.3.2 EIRR expectations for hybrid tendersbClean Energy Investment Trends 2021: Evolving Financial Performance Expectations & Power Procurement Mechanis
163、ms In IndiaPower generation in a hybrid project, typically oversized beyond the contracted capacity, is constrained in terms of the maximum power (in MW) that can be injected into the grid. In other words, tender conditions require a hybrid project to back down or curtail power generation during tim
164、e slots when the total solar and wind power injected (in MW) is higher than the contracted capacity. In addition, a hybrid project may generate energy in excess of that corresponding to the CUF declared at its commissioning. Tender conditions allow for the sale of this excess generation, solely at t
165、he off-takers discretion and at 75 per cent of the PPA tariff for the tenders specified in Table 2. Since there is no certainty relating to the offtake of the excess generation, the analysis did not factor in any income for the excess generation. A detailed step-by-step analysis of the AEML 350 MW h
166、ybrid tender is presented below to illustrate the process followed to calculate the returns expectations associated with all three hybrid tenders. 3.2.1 Choice of locationWhile a developer is free to locate the hybrid project anywhere in India, factors such as minimum CUF requirement, the appropriat
167、e solarwind configuration, land and grid connection availability govern site selection. CEEW-CEF and IEAs analysis of returns associated with plain vanilla tenders in India indicates that higher returns may be realised at the same tariff using solar PV as compared to wind. Industry interactions corr
168、oborated this finding solar-heavy configurations are suitable for hybrid projects that generate at CUFs of up to 50 per cent. Developers favour the solar-rich state of Rajasthan to maximise generation and returns. Industry interactions further indicated that wind-heavy configurations are favoured fo
169、r hybrid projects required to generate at higher CUFs. Thus, the preferred sites for these projects are located in the wind-rich states of Tamil Nadu, Karnataka, and Maharashtra.10 Industry interactions indicated the selection of the project locations for the lowest tariff bidders as mentioned in Ta
170、ble 3. This was corroborated by public records of transmission connectivity granted at these sites by Power Grid Corporation of India Limited the central transmission utility that operates the Inter-State Transmission System (ISTS) for generation capacities corresponding to those associated with the
171、 hybrid projects (Power Grid Corporation of India Limited 2021). Determining the optimum configuration Various combinations of solar and wind deployment can meet the performance conditions outlined in Table 2. The analysis assumes that the developer would select the specific configuration that maxim
172、ises equity returns for actual deployment. Figure 8 shows the average daily CUFs of stand-alone solar PV and wind in Fatehgarh, Jaisalmer district, Rajasthan. 1310. Sites in Gujarat, one of the most resource-rich Indian wind states, remain inaccessible due to the challenges described in section 5.Ta
173、ble 3 Site assumptions for hybrid tendersTender nameLocationSECI Hybrid 1,200 MW Tranche-III 2020Fatehgarh, Rajasthan (solar CUF - 28.9% 45% DC overloading; wind CUF - 32.9%)AEML Hybrid 350 MW 2019*Fatehgarh, Rajasthan (solar CUF - 28.9% 45% DC overloading; wind CUF - 32.9%)Blended Wind 2,500 MW Tra
174、nche-IXGadag, Karnataka (solar CUF - 27.7% 45% DC overloading; wind CUF - 39.0%)Source: CEEW-CEF and IEA market intelligence. *Note: For the AEML Hybrid 350 MW 2019 tender, an additional 350 MW was awarded under a greenshoe option, taking the total capacityawarded to 700 MW.Clean Energy Investment T
175、rends 2021: Evolving Financial Performance Expectations & Power Procurement Mechanisms In IndiaGiven the performance requirements of the AEML 350 MW hybrid tender, solar-heavy combinations (with oversizing to meet tender performance requirements) should a priori be more profitable. However, increasi
176、ng the extent of oversizing of solar PV to meet the CUF requirements of the tender leads to curtailment around mid-day, when hourly CUFs are near their maximum, negatively impacting equity returns. Thus, there is a point at which adding wind begins to be more profitable than adding solar PV, as addi
177、tional solar PV would result in higher curtailment without significantly higher overall CUFs.To identify the optimal combination of wind and solar PV to maximise returns for investors, we estimate returns for all possible configurations using an algorithm that performs the following functions:i Comp
178、utes hourly electricity generation for the selected configuration using site-specific generation profiles and estimates the resulting annual average CUF and curtailment (if any) to conform to tender requirements. Curtailed power generation is defined as the excess generation in time slots when the t
179、otal solar and wind power injected is higher than the contracted capacity.ii Selects configurations that satisfy the minimum average annual CUF requirements (50 per cent for this tender).iii Computes returns for all configurations meeting tender requirements to arrive at the optimum configuration th
180、at maximises returns.Figure 9 illustrates how the algorithm works. As solar-heavy configurations are expected to yield the highest returns, the analysis evaluates returns for various solarwind combinations starting with combinations that factor in the minimum permissible capacity for wind (230 MW).
181、The algorithm then progressively increases wind capacity and estimates returns for varying capacities of solar. Configurations with annual CUFs lower than 50 per cent are invalid and are represented by dashed lines. A minimum of 530 MW wind capacity is necessary to meet the minimum 50 per cent CUF r
182、equirement, which is then paired with 730 MW of solar PV capacity to arrive at the optimum project configuration.14Figure 8 Solar and wind have similar average CUFs but very different hourly production profiles11 Source: CEEW-CEF and IEA analysis. 5127CUF (%)Solar: h
183、ourly CUFSolar: average CUFWind: hourly CUFWind: average CUF020406080100Hour11. When comparing CUFs for solar (at 45 per cent DC overloading) and wind generation in Rajasthan.Clean Energy Investment Trends 2021: Evolving Financial Performance Expectations & Power Procurement Mechanisms In IndiaFor a
184、 given wind capacity, increasing solar PV capacity leads to higher EIRRs initially since solar generation is more competitive. Returns reach a maximum and then start declining as curtailment increases with higher solar capacity in the combination. For example, curtailment rises from 0.5 per cent to
185、13 per cent when solar PV capacity is increased from 530 MW to 930 MW with 230 MW wind capacity. Importantly, the point of maximum returns is reached earlier with higher wind capacity, as the curtailment effect begins prematurely. The chart indicates that returns are maximum (EIRR of 19 per cent) fo
186、r a combination comprising 730 MW solar and 530 MW wind.Figure 10 presents the hourly average production profiles of the AEML 350 MW hybrid project, which, on average, would experience around 4 per cent curtailment between 11:00 am and 3:00 pm every day.15Figure 10 Configurations meeting tender requ
187、irements could entail curtailmentFigure 9 The maximum possible EIRR for a hybrid project depends on constraints set in the tenderSource: CEEW-CEF and IEA analysis. Source: CEEW-CEF and IEA analysis. Notes: 1. The chart depicts all possible combinations for the AEML hybrid tender at a tariff of 3.24
188、INR/kWh.2. Configurations with annual CUFs lower than 50 per cent are invalid and are represented by dashed lines.3. In the case of lower CUF tenders with other conditions remaining the same, the solid lines would shift leftward in the chart.3063073083093023456243822
189、127CUF (%)EIRR (%)Wind: 230 MW + Solar PV: 680 MWWind: 530 MW + Solar PV: 730 MWAverage CUFAverage CUF9309307307303308308305305304304306306302300020204002512030HourSolar PV capacity (MW)Wind capacity (MW)Clean Energy Investment Trends 2021: Evolving Financial Performance Expectations & Po
190、wer Procurement Mechanisms In India163.2.2 Overall results for hybrid tendersA priori, it is reasonable to expect higher EIRRs among hybrid tenders, given their more complex nature, lower competition, higher barriers to entry and higher realized tariffs (see Table 4). Our analysis reveals that under
191、 similar policy and market conditions (tenders awarded in the same month or closely spaced in time with the same off-taker). EIRR expectations for hybrid tenders with central government off-takers were between 110 to 150 basis points higher than that for comparable solar PV plain vanilla tenders.The
192、 limited number of hybrid tenders make it challenging to draw generalised conclusions. The AEML tender was one of the initial hybrid tenders awarded, with developers relatively unfamiliar with bidding and executing hybrid projects at the time. It also had the highest average CUF requirements of the
193、three tenders analysed, and the greatest need for oversizing. These factors could have resulted in a higher premium relative to comparable central-off-taker plain vanilla tenders, at around 400 basis points. However, both returns expectations and premiums over EIRR expectations for the comparable va
194、nilla tenders were reduced in the next two hybrid tenders.The Blended Wind 2,500 MW tender had very little flexibility, as a minimum of 80 per cent of wind capacity was required, with no oversizing allowed. As solar PV is more competitive than wind on an LCOE basis, the optimal configuration was fou
195、nd at the maximum possible solar capacity. The SECI Hybrid 1,200 MW Tranche-III tender had a relatively small minimum CUF requirement, of 30 per cent. This allowed for solar PV heavy configurations, and might be why the underlying returns are so close to those of the plain vanilla peers. Figure 11 E
196、IRR expectations for hybrid tenders have converged with plain vanilla peers over timeSource: CEEW-CEF and IEA analysis.Dec-19Jan-20Feb-20Mar-20Apr-20May-20Jun-20July-20Aug-20Sep-20Oct-20Nov-20Dec-20Jan-2EIRR (%)Plain vanilla central off-takerHybrid central off-takerHybrid private discomTa
197、ble 4 Hybrid tender input data and modelled resultsAEML 350 MW Hybrid 2019*Blended Wind 2,500 MW Tranche-IXSECI Hybrid 1,200 MW Tranche-III 2020Awarded dateTender nameMin CUF (%)Tariff (INR/kWh)Awarded capacity (MW)OversizingWind Capacity (MW)EIRR (%)Solar Capacity (MW)Jan 20Aug 20Dec 205030303.242.
198、992.49.717.413.3730325805101282001.81.01.3Source: CEEW-CEF and IEA analysis. *Note: For AEML Hybrid 350 MW 2019 tender, 700 MW was awarded under greenshoe option.Clean Energy Investment Trends 2021: Evolving Financial Performance Expectations & Power Procurement Mechanisms In IndiaThe pre
199、vious section examined the returns expectations of equity sponsors for solar and wind projects at the time of the award. However, these could be different from the eventual realised returns. As shown in the Clean Energy Investment Trends 2020 report, realised returns can be affected by payment delay
200、s or lower performance of renewables (where curtailment risk seems to be the largest volume-related risk perceived by investors). Last years sensitivity analysis showed that, for example, a three-month delay over a five-year period could reduce the expected EIRR by 80 basis points. In addition, for
201、every 2.5 per cent of solar PV production lost in the first five years the realized EIRR would lower by around 70 basis points compared to the expected EIRR. Given current inflationary pressures, realised returns can also be affected by construction and equipment costs. Modules typically comprise ar
202、ound 50-60 per cent of total capex and thus, variations in realised prices from those assumed can have a material impact on realised returns. The period of analysis (July 2020 - June 2021) was characterised by considerable volatility in module prices. Prices started rising in mid-2020 due to disrupt
203、ions to major Chinese facilities producing polysilicon, a key intermediate product in the solar PV value chain (Hall 2020) (Bloomberg Quint 2020). Prices stabilised towards the end of 2020, with bidders factoring in aggressive module pricing assumptions as India achieved record low solar tariffs in
204、November and December. However, prices started rising again as the global economic recovery put pressure on supply chains. Firming commodity prices, higher freight costs amid a global container shortage, and solar PV-specific supply chain limitations (polysilicon and tempered glass shortages) drove
205、up prices over the course of Q1 2021 (Nagaraj 2021; Bellini 2021). As a result, supply contracts agreed at USD 0.19/Wp in December 2020 were being renegotiated to USD 0.23/Wp barely one quarter later (Bhaskar 2021). The Indian governments decision to levy BCD on cell and module imports from April 20
206、22 is likely to prompt a number of developers to advance their module purchases to beat the April 2022 deadline (Hall 2021). Elevated demand could maintain upward pressure on the landed price of modules in India heading into 2022. These developments could translate to higher module prices than those
207、 factored in at the time of bidding and therefore these represent downside risks to realised EIRRs. To quantify the extent of the downside, the sensitivity of realised returns to module prices is illustrated in Figure 12. Figure 12 captures the range of realised EIRRs for the GUVNL 500 MW tender for
208、 module pricing assumptions ranging between those assumed to be factored in at the time of bidding and an upper bound of USD 0.23/Wp - which was the prevailing price around June 2021, when the period of analysis concludes. As illustrated by the figure, there is a possible downside of around 47 per c
209、ent from the assumed EIRR (from 11.8 per cent to 6.3 per cent) corresponding to a 20 per cent increase in module prices (from 0.19 USD/Wp to 0.23 USD/Wp). 4. Sensitivity of equity investor returns to changing risks17Source: CEEW-CEF and IEA analysis.Note: Sensitivity based on changes in module price
210、s applied to the 500 MW solar PV tender run by GUVNL (Phase XI) in December 2020.0.180.190.20.210.220.230.245791113EIRR (%)Module prices (USD/Wp)Figure 12 Sensitivity analysis of EIRR to module pricesClean Energy Investment Trends 2021: Evolving Financial Performance Expectations & Power Procurement
211、 Mechanisms In India18BOX 2Implications of acquisitions and refinancing on project-level equity returnsGrowing demand for sustainable investments and accommodative financial conditions are supporting a rebound in global acquisitions of renewables companies and projects in 2021, following a dip durin
212、g the previous two years. Historically, most such transactions have been concentrated in the United States and Europe. Through early October 2021, India has been the third largest market for acquisitions in the renewable power sector, based on data from IJ Global, with reported financial closures to
213、pping over USD 6 billion equivalent to over 40 per cent of the expected capital expenditures for new renewable plants in India this year. Acquisition activity in India has rebounded strongly from 2020, when transactions declined to less than USD 1.5 billion. The upswing in 2021 is marked by Adani Gr
214、een Energys acquisition of SB Energy at an enterprise value of USD 3.5 billion, along with several other large corporate finance transactions. On the asset side, acquisitions of already operating projects (at under USD 1 billion) have so far remained somewhat below the level of the previous two year
215、s.Such deals are indicative of the move towards greater scale and consolidation in Indias solar PV and wind markets. Asset acquisitions also provide an exit opportunity for developers, allowing them to swiftly recover their capital and reinvest this in new projects. Having access to a robust seconda
216、ry market remains important to help developers to extend their balance sheets. Depending on the cost of capital and return expectations of the buyer, it can also provide a way for developers to realise higher returns by selling operating projects that have been de-risked through the construction pha
217、se.Based on reported transactions, we have assessed expected EIRRs for sellers and buyers from three representative utility-scale solar PV acquisitions over the past year, from projects that were commissioned in the CY 2017-18 timeframe. While such examples do not provide a complete picture of the f
218、inancial performance implications of projects changing hands, they do provide indications of the return premium associated with taking on upfront development and construction, as well as the market expectations for returns from the purchase of operating projects. The publicly available details of th
219、ese three transactions are shown in Table 5, and assumptions for underlying transaction data (pertaining to costs, financial terms, etc.) correspond to those used for the project analysis in this report series. Other assumptions are spelt out in the annexures. Table 5 Transactions included in the ac
220、quisitions analysisPavagada PV Plant (100 MW)Shapoorji Pallonji Group Medak Solar PV Plant (75 MW)FRV Andhra Pradesh Solar Farm-I and FRV India Solar Park II (100 MW)SellerAcquirerProject (Capacity)Date of financial close for acquisitionReported transaction value (INR billion)PPA tariff (INR/kWh)ACM
221、E SolarSterling and WilsonFRVAmplus (Indian subsidiary of Petronas)Adani Green PowerIndia Grid Trust10/09/202030/03/202115/07/20218.04.56.64.795.594.43Source: Mercom (2020), Adani Green Energy (2021), IndiGrid (2021). Note: The reported transaction value refers to enterprise value associated with th
222、e acquisition.Clean Energy Investment Trends 2021: Evolving Financial Performance Expectations & Power Procurement Mechanisms In India19Asset sales are a means for project owners to realise higher returns than if these assets were held for the duration of their useful life (Figure 13). However, the
223、higher returns associated with asset sales are realised over much shorter durations, which exposes sellers to reinvestment risk. At the same time, buyers generally realise returns lower than those realised by the seller and even those corresponding to the returns for project developers holding asset
224、s for the duration of their useful life. This reflects the lower risk profile of operational assets, which are not characterised by the execution risk typical to greenfield assets.Another option for the project owner might be to refinance the existing construction debt with cheaper debt, if possible
225、. With todays cost of debt notably lower than 3-4 years ago, and the construction risk already covered for an operational project, we estimate that the EIRR for the original project could be around 300-350 basis points higher by pursuing this strategy. Source: CEEW-CEF and IEA analysis.Pavagada PV P
226、lant Shapoorji Pallonji Group Medak Solar PV PlantFRV Andhra Pradesh Solar Farm-I and FRV India Solar Park II 20010304050EIRR (%)Figure 13 Expected EIRRs for select utility-scale solar PV projects awarded over 2016-17 and acquired over 2020-21SellerBuyerEIRR if refinancing done in 2021 instead of se
227、llingEIRR for original projectThis simplified analysis raises a number of potential future research questions. Better understanding of the types and availability of returns for sellers in the secondary market can provide a useful valuation benchmark to help reduce uncertainty associated with project
228、 development. It can also provide a clearer route for companies and investors looking to enter the renewable power market, but who are less able to take on early stage development and construction risk.39.030.131.011.510.011.6Clean Energy Investment Trends 2021: Evolving Financial Performance Expect
229、ations & Power Procurement Mechanisms In India205.1 Land-related conflicts constraining RE park development RE parks provide a plug-and-play solution (land, evacuation, and other supporting infrastructure in exchange for a fee) to investors for installing RE projects. The MNREs focus has been on dev
230、eloping solar parks to improve solar developers ease of doing business. In November 2020, the MNRE issued a concept note for developing wind/windsolar hybrid parks to extend similar benefits to wind/windsolar hybrid developers (Ministry of New & Renewable Energy 2020).While land for setting up solar
231、 parks is generally identified in remote locations, acquiring this land from local communities has proved to be an onerous process (Aggarwal 2021). Disputes and litigation have held up the acquisition of land and thereby the construction of solar parks, particularly in Rajasthan, Gujarat, and Madhya
232、 Pradesh (Chari 2020). The same is evidenced by the diminishing share of solar parks in the overall capacity auctioned between 2017 and 2020 (Figure 14). Government agencies did not auction projects at solar park capacity in 2020. While this figure rose to 650 MW in H1 2021, it is still considerably
233、 short of the 3.0 GW auctioned in 2017. Wind resource potential in India is concentrated in two states Gujarat and Tamil Nadu. These states account for nearly 47 per cent of Indias cumulative installed wind capacity as of August 2021 (India Renewables Dashboard 2021).However, developers have been fa
234、cing challenges in acquiring land for wind projects, particularly in Gujarat. Changes in the states land policies made Figure 14 Share of solar parks in overall capacity auctioned has diminishedSource: CEEW-CEF and IEA analysis. 2020020H1 20250050020008025
235、009030001003500Share of capacity awarded (%)Nameplate capacity (MW)Solar park projects (left-side axis)Non-solar park projects (left-side axis)Nameplate capacity of solar park projects awarded (right-side axis)97627846767693382254242471005.2 New sites identified for wind and solar-wind hybrids5. Lan
236、d and ecological preservationrelated issuesClean Energy Investment Trends 2021: Evolving Financial Performance Expectations & Power Procurement Mechanisms In India21it challenging for project developers to lease state-owned land for wind auctions conducted by central agencies 2018 onwards. In respon
237、se, the Government of Gujarat modified its land policy in January 2019. The state made it mandatory for wind and solarwind hybrid projects to be developed in earmarked RE parks. It also made it mandatory for central agencies to consult with state agencies while tendering wind or solarwind hybrid cap
238、acity to ensure the timely development of these parks (Government of Gujarat 2019; Prateek 2019). In September 2020, the state allocated land for development of a 41.5 GW wind and hybrid RE park to key park developers as well as the SECI in the windy region of Kutch (Renewable Watch 2020). However,
239、amendments to the policy issued at that time, imposed strict timelines on project commissioning for these park developers and the SECI, failing which, the land allocated would be taken back by the state (Government of Gujarat 2020). As per our industry consultations, factors such as high project cos
240、ts due to difficult terrain, need for additional permissions and uncertainties around the timely construction of evacuation infrastructure may make it challenging for developers to locate projects in the park. Although the resolution of these uncertainties may attract wind/hybrid project developers
241、to Gujarat in the future, no wind/hybrid projects are planned to be located in Gujarat (as of October 2021) for the auctions concluded in 2020 and H1 2021 (Power Grid Corporation of India Limited 2021). Further, finding suitable land for locating a wind/hybrid project is also a challenge in Tamil Na
242、du, due to the limited availability of state-owned land for projects.Given the challenges in Gujarat and Tamil Nadu, new wind-project sites have been identified in other states of Karnataka, Maharashtra, and Rajasthan. Evacuation infrastructure has been developed by PGCIL at these sites (Power Grid
243、Corporation of India Limited 2021). These favourable sites are located in Koppal, Gadag, and Karur in Karnataka, Kallam in Maharashtra, and Fatehgarh in Rajasthan. This has given developers alternative options for locating wind or hybrid projects. 5.3 Preservation of the Great Indian Bustard affecti
244、ng RE projects in Rajasthan and GujaratAn important consideration for developers while bidding for a tender is the cost of setting up the evacuation infrastructure. Developers typically locate the project in the vicinity of the delivery point into the transmission grid to minimise these costs. A rec
245、ent order by the Supreme Court of India requires existing or upcoming power projects in certain regions of Gujarat and Rajasthan to be installed with underground transmission lines (Supreme Court of India 2021). This court order was made in response to concerns over dwindling populations of the Grea
246、t Indian Bustard (GIB) an endangered bird species that lives in parts of Gujarat and Rajasthan that are also favourable for setting up RE projects. The electrocution of these birds as a result of collisions with power lines has contributed to a reduction in their population. The court order requires
247、 the shifting of existing low voltage transmission lines as well as the construction of new ones underground in the GIB habitat. Shifting transmission lines or constructing new ones underground entails additional costs for project developers that could affect the viability of projects in Indias comp
248、etitive RE sector. This has also affected the sanctioning of new solar capacity in the region. Based on consultations with the industry, constructing underground transmission lines typically costs twice as much as overhead lines (Priya 2021). Setting up underground transmission lines also entails ad
249、ditional complications associated with right-of-way issues (the permission for an individual or entity to enter private property and use it as a passage). Our stakeholder consultations revealed that developers may consider locating upcoming solar and solarwind hybrid energy projects in states other
250、than Rajasthan and Gujarat. However, the actual impact of this order will only be known in the coming months when the feasibility of moving the identified transmission lines underground is evaluated by a committee formed by the Supreme Court (Supreme Court of India 2021).Clean Energy Investment Tren
251、ds 2021: Evolving Financial Performance Expectations & Power Procurement Mechanisms In IndiaFigure 15 Market concentration for solar PV experienced an increase in 2020 and H1 2021Source: CEEW-CEF and IEA analysis. Note: Solarwind hybrid projects are excluded.2095772747861002015
252、200192020H1 202060708090100Share of top 5 firms in awarded solar projectsShare of top 10 firms in awarded solar projectsShare of top developers in awarded solar capacity (%)226. Industry landscapeThe Clean Energy Investment Trends series tracks the degree of competition in the
253、RE sector through a market concentration metric. Market concentration is defined as the share of top developers in the total project capacity auctioned in a particular year (Dutt, Arboleya, and Gonzalez 2020).Indias solar PV market became highly concentrated in 2020 owing to the 8 GW manufacturingli
254、nked tender awarded to two developers (through an option exercised by the two developers as part of the original tender awarded in December 2019). Market concentration further increased in H1 2021 with low capacity tendered and fewer players bidding in the auctions. The year 2020 and H1 2021 saw new
255、 players entering the market including Indian private-sector developers such as O2 Power and, HES Infra and international developers like Al Jomaiah Energy and Water Co. As they have access to low-cost debt (fully hedged basis), these international developers can bid competitively for capacity. The
256、auctions also saw participation from Indian CPSUs (mainly NTPC and SJVN) that have been able to access debt at 7.508.00 per cent, which is lower than the typical commercial debt rates of 8.7510.00 per cent for private-sector developers in India (see Figure 5). This may be attributed to access to che
257、aper debt on account of their quasi-sovereign status. The continued participation of CPSUs could keep market concentration at elevated levels in the short to medium term.For wind markets in India, market concentration could not be determined owing to tepid auctions in 2020 and H1 2021. However, a no
258、table capacity of solarwind hybrid was auctioned in 2020 with a high market concentration of 83 per cent and 100 per cent for the top five and top ten developers, respectively.Clean Energy Investment Trends 2021: Evolving Financial Performance Expectations & Power Procurement Mechanisms In IndiaFigu
259、re 16 Churn rate increased for solar PV markets in 2020Source: CEEW-CEF and IEA analysis. Note: Solarwind hybrid projects are excluded.20060606070709020030405060708090100Top 10 solarTop 10 windChurn rate (%)Table 6 Top 10 developers by capacity awarded (2020)Table 7
260、Top 10 developers by capacity awarded (H1 2021)AdaniAzure PowerEDEN RenewablesO2 PowerNTPCReNew PowerTata PowerAxis Energy GroupGreen Infra Wind EnergyIB VogtTP SauryaSJVNRising Sun EnergyAdaniNTPCTorrent PowerSprng EnergyCoal IndiaAdaniJSW EnergyReNew PowerAxis EnergyTata PowerVena EnergyAmP Energy
261、Acme SolarJSW EnergyAdaniAyana RenewablesEverGreen Power MauritiusCapacity awarded (MW)Capacity awarded (MW)Capacity awarded (MW)Capacity awarded (MW)Solar-wind hybridWindSolar PVSolar PV7,2002,300900780760600600400400350301,3008300300150Source: CEEW-CEF a
262、nd IEA analysis. Note: No wind capacity was auctioned during 2020.Source: CEEW-CEF and IEA analysis. Note: No solarwind hybrid capacity was auctioned during H1 2021.23Clean Energy Investment Trends 2021: Evolving Financial Performance Expectations & Power Procurement Mechanisms In IndiaAn interestin
263、g feature of Indias RE industry landscape is that while a few developers secure the bulk of the capacity awarded each year, it isnt the same developers every year. The Investment Trends series defines the churn rate as the extent of change in the top 10 developers with respect to the previous year (
264、Dutt, Arboleya, and Gonzalez 2020). For example, a churn rate of 30 per cent in 2019 means that 30 per cent of the top 10 developers of the previous year did not feature in the top 10 of 2019. Both 2020 and H1 2021 saw a higher churn rate in the solar PV markets, in part due to the entry of new inte
265、rnational and CPSU players. Given the ambitious RE expansion plans of CPSUs, churn rates could reduce in the upcoming years with these companies taking the lead. As a result of limited project sanctioning, no churn rate has been indicated for wind for 2020.The table shown below captures a list of le
266、ading companies in cumulative installed solar and wind capacity. Table 8 Leading developers (cumulative installed capacity, up to June 2021)AdaniAcme Solar HoldingsReNew PowerGreenko Energy HoldingsAzure Power Tata PowerNLCNTPCAvaada Power Hero Future EnergiesGreenko Energy HoldingsReNew PowerSembco
267、rpMytrahTata PowerCLPContinuum EnergyHero Future EnergiesTorrent PowerAdaniCapacity (MW)Capacity (MW)WindSolar PV4,7232,9002,6882,1752,1021,7651,3701,1409007943,1922,9121,7501,469932925807806649647Source: CEEW-CEF and IEA compilation based on data sourced from company websites and annual reports.24C
268、lean Energy Investment Trends 2021: Evolving Financial Performance Expectations & Power Procurement Mechanisms In India25AnnexuresAnnexure 1 Terms and definitionsEquity internal rate of return (EIRR) The EIRR is the nominal internal rate of return for providers of equity capital at the project level
269、. It is estimated through a discounted cash flow analysis of project cash flows net of payments to debt holders (Dutt, Arboleya, and Gonzalez 2020). In our analysis, we have estimated the post-tax EIRR that is, the returns net of project-level taxes.Debt service coverage ratio (DSCR)This refers to t
270、he ratio of the net operating income available for servicing debt to the overall debt repayment obligation for that year (principal and interest); i.e., DSCR = net operating income/total debt service (Dutt, Arboleya, and Gonzalez 2020). Churn rateThe churn rate is defined as the extent of change in
271、the top 10 developers with respect to the previous year (Dutt, Arboleya, and Gonzalez 2020). For example, a churn rate of 30 per cent in a particular year means that 30 per cent of the top 10 developers of the last year did not feature in the top 10 of the current year.Market concentrationThe share
272、of top developers in the total project capacity awarded in a particular year (Dutt, Arboleya, and Gonzalez 2020); e.g., market concentration of top five developers in year x = capacity awarded by top five developers / total capacity awarded in year x. Table A1 Expected EIRRs for solar projects with
273、central off-takers (%)Feb-2115.2Aug-2016.3Nov-2012.3Source: CEEW-CEF and IEA analysis.Table A4 Expected EIRR for solar-wind hybrid projects (%)Table A3 Expected EIRR for wind projects (%)Table A2 Expected EIRRs for solar projects with state off-takersStateJan-20Mar-2119.7*13.7GujaratKeralaMaharashtr
274、aUttar Pradesh11.8Dec-2013.214.312.7May-2112.2Mar-21Dec-2013.3Aug-2017.422.8Nov-2013.8Feb-21Source: CEEW-CEF and IEA analysis.*Note: The hybrid projects auctioned had central off-takers except for AEML Hybrid 350 MW auctioned in January 2020.Source: CEEW-CEF and IEA analysis.Note: Only one wind proj
275、ect was tendered during 2020 and H1 2021.Source: CEEW-CEF and IEA analysis.Annexure 2 EIRR by project typeThe tables shown later capture EIRR expectations for solar, wind, and hybrid projects analysed for the period of 2020 and H1 2021. Tender details such as award date, tariff, capacity awarded, et
276、c. are captured in Annexure 5. Annexure 3 details the methodology for project selection.Clean Energy Investment Trends 2021: Evolving Financial Performance Expectations & Power Procurement Mechanisms In IndiaAnnexure 3 Methodology EIRR analysisProject selection Several inputs are taken into consider
277、ation when determining the EIRR expectations of project developers. For plain vanilla solar or wind projects, these typically include off-taker type (central or state), project location, and type of site (solar park or non-solar park). Additional considerations that affect offtake certainty, such as
278、 a ready counterparty to sign PSAs also impact returns expectations. On the other hand, for special tenders (e.g., hybrids, round-the-clock RTC energy, assured peak power) additional factors such as minimum CUF requirements and the extent of oversizing necessary also impact returns expectations.The
279、report analyses variations in EIRR according to the off-taker, project location and configuration, type of site, and various policy developments for both plain vanilla solar/wind and hybrid projects. However, due to limited clarity regarding the configurations associated with the RTC and assured pea
280、k power tenders, they have been excluded from the analysis. Table A5 captures the tenders excluded from the analysis. Tariff selection and weighted average EIRROur EIRR analysis for each tender is based on the lowest discovered tariff (L1 tariff). This is primarily because the terms of debt finance
281、associated with each bidder are not known. We factor in the most competitive terms of debt corresponding to the given tender conditions (based on off-taker and type of site) and bidder and assume that these terms of debt apply to the L1 tariff. From the perspective of calculating the weighted averag
282、e EIRR for the period of analysis, the EIRR corresponding to the L1 tariff is assumed to apply to the entire awarded capacity in that tender. This implicitly factors in the assumption that each winning bidder has access to debt on similar terms. Given the highly competitive nature of Indias RE lands
283、cape, this assumption is likely to be a fairly close approximation of reality. The weighted average EIRR for the period of analysis is the capacity-weighted average EIRR across all plain-vanilla tenders.Sensitivity analysisThe sensitivity analysis is based on making changes to one input of the base
284、case expected EIRR analysis. Given the current inflationary pressures in global markets in general and in construction and equipment costs in particular, this years sensitivity analysis is focused on the impacts of changes in module prices to EIRRs. Table A6 illustrates the sensitivity of realised r
285、eturns to module prices in different tenders across 2020 and 2021.26Table A5 Tenders excluded from the analysisTender nameDate of awardTariff (INR/kWh)ReasonSECI, 1,200 MW ISTS RE Peak Power Supply, Tranche-VII, Pan IndiaSECI, 400 MW RE Power RTC Supply to NDMC, New Delhi and Dadra and Nagar Haveli
286、Tata Power-D, 225 MW, Hybrid, MaharashtraSECI, 10 MW, Solar, Rajasthan31/01/2020 08/05/2020 16/07/202006/09/20204.30Hybrid tender that required a specific generation profile and has higher minimum CUF requirements Solar, wind and storage hybrid tender with specific CUF requirementsSolar-wind hybrid
287、tender with specific CUF requirements Small-scale project3.602.592.58Source: CEEW-CEF and IEA analysis.Clean Energy Investment Trends 2021: Evolving Financial Performance Expectations & Power Procurement Mechanisms In India27Table A6 Sensitivity analysis of EIRRs to higher module pricesNTPC, 1,200 M
288、W, ISTS-connected, Solar, Pan India KSEB, 200 MW, Solar, KeralaSECI, 1,070 MW, Solar, Tranche-III, RajasthanGUVNL, 500 MW, Solar, Phase XI, GujaratNTPC, 190 MW, Solar, Nokh solar park, Jaisalmer, Rajasthan0.190.20.210.220.23Awarded dateEIRR depending on module pricesAug 2016.3%14.8%15.2%13.6%12.1%10
289、.6%22.8%21.1%12.3%10.8%9.4%8.0%6.7%11.8%10.3%8.8%7.5%6.3%Nov 20Nov 20Dec 20Feb 21GUVNL, 500 MW, Solar, Phase XII, Gujarat13.5%12.2%Mar 21Torrent Power Limited, 300 MW, Gujarat13.8%12.2%10.7%9.2%Feb 21Source: CEEW-CEF and IEA analysis.Annexure 4 Assumptions Performance parametersSolar The DC side of
290、a solar project is typically overloaded to enhance its capacity utilisation. We assumed 45 per cent DC overloading in our analysis. Our industry consultations and the transmission connectivity documents by CTU helped us identify the location of projects under consideration. The following table summa
291、rises the AC CUF assumptions for these locations. The AC CUF for each location was derived based on solar power generation potential GIS data for various districts in each state and was then verified through inputs from market participants.WindThe state of Karnataka (Gadag) was assumed to be the loc
292、ation for wind projects. Based on market intelligence, a CUF of 39 per cent was assumed. For solarwind hybrid projects, the location was assumed to be Rajasthan (Fatehgarh, Jaisalmer) and Karnataka (Gadag) with a wind CUF of 32.9 and 39 per cent, respectively. Capital costsThe capital costs exclude
293、land-related costs as we assumed a land-leasing model for securing land for solar, wind or hybrid projects (except for solar park projects, where solar park charges apply).Module pricing assumptions are based on industry consultations. These also indicate that developers associated with the projects
294、 analysed (up to June 2021) intend to procure modules before April 2022, and thus the corresponding tariff bids do not factor in BCD. Table A7 Module performance parametersState (District)Rajasthan (Jaisalmer)Rajasthan (Jodhpur)Gujarat (Banaskantha)Karnataka (Gadag)Maharashtra (Dhule)Uttar Pradesh (
295、Jalaun)28.9%28.8%28.7%27.9%27.7%25.8%AC CUF (45% DC overloading)Source: Global Solar Atlas - World Bank, CEEW-CEF and IEA market intelligence. Notes: Projects under solar tenders that permit installation anywhere in India are assumed to be set up in Jodhpur, Rajasthan. For GUVNL (Gujarat) tenders, p
296、rojects are assumed to be set up in Banaskantha, Gujarat. Solar-wind hybrid projects set up are assumed to be located in Jaisalmer (Fatehgarh), Rajasthan and Gadag, Karnataka. The analysis factors in an annual degradation in solar generation of 0.6 per cent per year.Module prices (USD/Wp)Clean Energ
297、y Investment Trends 2021: Evolving Financial Performance Expectations & Power Procurement Mechanisms In IndiaTable A10 Other CAPEXTable A11 Capital expenditureSolar parkNon-solar parkCAPEXOther CAPEXParameterINR million/MWValue (INR million/MW)9.014.065Source: CEEW-CEF and IEA market intelligence. N
298、otes: Other CAPEX includes balance of system, civil works, mounting structures, preliminary and pre-operative expenses, and evacuation infrastructure up to the inter-connection point for non-solar park projects and up to the pooling substation in solar parks.Other capex for the Raghanesda solar park
299、 stands at INR 19 million/MW.Source: CEEW-CEF and IEA market intelligence. Notes: This figure excludes land acquisition costs, as a lease model has been considered in the analysis. For hybrid tenders, a wind capex of 63 INR million/MW was assumed for lower resource-rich sites in Rajasthan.28Table A1
300、2 Operating expensesTable A13 Recurring costs in solar parksO&M expensesAnnual escalationLand lease expensesAnnual escalationLand requirementsO&M expenses of INR 100,000/MW with an annual escalation of 5 per centLand-related costs of INR 10,000/hectare/year escalating at 15 per cent every three year
301、s O&M expenses of INR 150,000/MW with an annual escalation of 6 per centLocal area development charges of INR 100,000 for five yearsO&M expenses of INR 233,000/MW with an annual escalation of wholesale price indexLand lease rent of INR 89,000/MWParameterRaghanesda Solar ParkUP Solar ParkDondaicha So
302、lar ParkUnitSolarWind13%37,5005%1.8 0.55%37,5005%3.5INR million/MW%INR/acre%Acre/MWSource: CEEW-CEF and IEA market intelligence.Source: RfS documents pertaining to the relevant tenders.Note: The RfS document for the Nokh Solar Park was not publicly available at the time of writing. Hence, capital an
303、d operating costs corresponding to non-solar parks were assumed though lower cost of debt associated with solar park projects was factored into the analysis.Module costsWindOperating costsSolar park charges (applicable to projects set up in solar parks)Other CAPEXTable A8 Module costsTable A9 Solar
304、park chargesTime periodSolar parkJul 20Oct 20Nov 20Dec 20Jan 21Feb 21Mar 21Jun 21Raghanesda Solar ParkUP Solar ParkDondaicha Solar Park0.220.190.200.232.204.81INR 10.6 million (payable over 25 years)16.3 14.114.817.0PV modules cost (USD/Wp)*INR million/MWINR million/MWpSource: CEEW-CEF and IEA marke
305、t intelligence. Notes: No basic customs duty was considered for the projects analysed. A currency exchange rate of 74.0 INR/USD was assumed. *For SECI Hybrid Tranche-III 1,200 MW 2020 and AEML Hybrid 350 MW 2019 tenders, the module costs were assumed to be 0.18 and 0.21 USD/Wp, respectively. Module
306、costs were assumed to be 0.22 USD/Wp for Blended WInd 2,500 MW Tranche-IX tender.Source: Request for Selection (RfS) documents pertaining to the relevant tenders.Notes: The RfS document for the Nokh Solar Park was not publicly available at the time of writing. Hence, capital and operating costs corr
307、esponding to non-solar parks were assumed though lower cost of debt associated with solar park projects was factored into the analysis.Clean Energy Investment Trends 2021: Evolving Financial Performance Expectations & Power Procurement Mechanisms In IndiaFinancing parametersIn the case of private se
308、ctor developers, project loans are assumed to be sourced from banks at interest rates specified in Table A14Analysis on project-level equity returns in case of acquisitions and refinancing Except where otherwise indicated in reporting, it is assumed that the seller fully pays off the outstanding pro
309、ject debt, with a prepayment penalty of 2% of the remaining principal. The seller is assumed to pay a capital gains tax at 20% at the time of the transaction. The existing greenfield debt at the SPV is assumed to be refinanced upon acquisition. It is assumed to be upsized to a 70:30 debt-equity rati
310、o at the time of acquisition, with the refinancing entailing an interest rate of 8.5% for the next 17 years.Table A14 Interest rates for projects awarded between July 2020 and June 2021Table A15 Other financing parameters BankNBFCCPSUDebt-equity ratioTax rateMinimum debt service coverage ratioDebt s
311、ervice reserve accountDepreciationReceivablesEntityLoan tenure17 years (including a one-year moratorium on principal repayment)17 years (including a one-year moratorium on principal repayment)18 years (including a one-year moratorium on principal repayment)Off-takerSolar parkSolar parkNon-solar park
312、Non-solar park and windWind9.00%9.009.50%9.50%9.5010.00%8.75%8.759.25%9.25 %9.259.75%7.508.00%Central off-takerState off-takerCentral off-takerState off-takerCentral off-takerState off-taker75:2575:2575:2517.16%17.16%17.16%1.11.11.16 months6 months6 monthsStraight lineThree months receivables for st
313、ate discom off-takers in UP and Kerala; no payment delays for central off-takers, state discoms in Gujarat, Maharashtra, and private discoms in Maharashtra and Guajrat Straight lineStraight lineSource: CEEW-CEF and IEA market intelligence. Note: For the CPSU bidders, the cost of debt factored in for
314、 NTPCS is 7.5% and for SJVN is 8%.Source: CEEW-CEF and IEA market intelligence.Notes: For solar-wind hybrid tenders, a long tenure of 17 years was assumed (including one-year moratorium on principal payment) with similar other financing parameters.Source: CEEW-CEF and IEA market intelligence.Note: M
315、edak solar PV plant assumes 20% DC overloading, while the other two projects assume 40% DC overloading.29Table A16 Assumptions for acquisition and refinancing transactionsTender complete nameYear of operationCUF (%) CAPEX (INR lakh/ MW)Cost of debt of seller (%)Pavagada PV PlantShapoorji Pallonji Gr
316、oup Medak Solar PV PlantFRV Andhra Pradesh Solar Farm-I and FRV India Solar202055052026.522.726.512.513.512.5Clean Energy Investment Trends 2021: Evolving Financial Performance Expectations & Power Procurement Mechanisms In IndiaTable A17 Summary of plain-vanilla tenders analysedTender co
317、mplete nameDate of awardEIRRCapacity tendered (MW)Capacity bid for (MW)Capacity awarded (MW)L1tariff (INR/ kWh)Capex (INR lakh/ MW)NTPC, 1,200 MW, ISTS-connected, Solar, Pan India KSEB, 200 MW, Solar, KeralaSECI, 1,070 MW, Solar, Tranche-III, RajasthanGUVNL, 500 MW, Solar, Phase XI, GujaratTorrent P
318、ower Limited, 300 MW, GujaratNTPC, 190 MW, Solar, Nokh solar park, Jaisalmer, RajasthanSECI, 1,200 MW, Wind, Tranche-X, Pan IndiaGUVNL, 500 MW, Solar, Phase XII, GujaratGUVNL, 100 MW, Solar, Phase X-R, Raghanesda solar park, GujaratUPNEDA, 75 MW, Solar, Tikar, Makrecha and Banghauli solar parks, Utt
319、ar PradeshMAHAGENCO, 250 MW, Solar, Dondaicha solar park, Dhule, MaharashtraAug 20Nov 20Nov 20Dec 20Feb 21Feb 21Mar 21Mar 21May 21May 21May 2116.3%22.8%12.3%11.8%13.8%15.2%13.7%12.2%13.2%12.7%14.3%1,2002001,0705003001901,200500100752501,700NA3,280NANANA3,200NANANANA1,1702001,0705005001901,200500100752502.432.972.001.992.222.252.772.202.642.682.54435535565038745938534230Annexure 5 Investor participation at solar and wind tendersSource: CEEW-CEF and IEA analysis.NA = Not available.