Partnership to Advance Clean Energy - Deployment (PACE-D) TA Program - - PowerPoint PPT Presentation

Partnership to Advance Clean Energy - Deployment (PACE-D) TA Program

The Solar Rooftop Evaluation Tool

09th September, 2015

Presented at the Workshop for the Launch of the Solar Rooftop Evaluation Tool Mumbai, India

Presented by The USAID PACE-D TA Program

• Solar Rooftop Business Models
• Key Challenges in Financing Solar Rooftop

Projects

• Techno-commercial challenges
• Risks
• The Solar Rooftop Evaluation Tool for Banks
• Key Features of the Tool
• The Working of the SRET
• Feedback

Contents

Solar Rooftop Business Models

Solar PV implementation across the globe has followed two routes – large scale centralized generation or smaller scale distributed generation

Solar Rooftop

Solar rooftop space has seen a number of models emerge – basically based on ownership, metering and types of rooftops

Challenges in Financing Solar Rooftop Projects

However the emergence of these business models and the vibrancy in the solar rooftop market across the globe has been due to a facilitative policy and regulatory framework and access to financing

• Germany – global leader – solar and rooftop solar
• Germany launched the 100,000 rooftop program in 1999 to bring about market

transformation

• The program provided provision of ten-year loans under the program along with

attractive feed-in-tariffs

• Created appropriate market pull desired by policy makers
• United States – the most vibrant solar market across the globe has been one of the

most innovative in financing

• Sale/ lease/ buyback structures
• Flip structures
• Solar securitization

However financing still remains one of the most significant challenges for the solar rooftop sector to scale – due to limited awareness, emerging business models, lack of trained manpower & higher perceived risks associated with the sector

Key challenges confronting financing of solar rooftop projects in India

Understanding of the emerging policy and regulatory scenario Role of varied stakeholders starting from rooftop

• wners to developers and

the utility Clear understanding of new and emerging business models Varied risks - development and operational stage/ understanding of risk mitigation strategies Low ticket sizes, high transaction costs, limited market size & capacity amongst FIs & banks

• Interconnection

process

• Open access

charges

• Infrastructure up

gradation?

• Site related risks
• Grid availability

risks

• Contract

sanctity & host credit-quality

• Role of utility/ electrical

inspector – timelines

• Standards &

Certifications

• Empanelment of

inverter/ meter manufacturers

• Lack of clarity on

business models

• Rooftop leasing
• Utility based

business models

9

Introducing The SOLAR ROOFTOP EVALUATION TOOL (SRET)

The Solar Rooftop Evaluation Tool aims to address challenges faced by banks/ FIs in

evaluating solar rooftop projects using a framework for mapping technical, commercial parameters as well as risks for informed decision making on financing

• Provides a techno-commercial framework to evaluate viability of solar rooftop

projects

• Maps key risks and establishes whether appropriate risk mitigation

methodologies have been followed

• Assists FIs and banks to arrive at an informed decision on financing commercial

and industrial rooftop projects

Objectives

• Focus on commercial and industrial solar rooftop projects especially design and

structure of these projects

• Can be customized for evaluation of any solar rooftop project (residential/

clusters/ portfolio - third party or self owned self consumption projects

• Outlines a risk sharing matrix with focus on specific mitigation strategies
• Incorporates existing and applicable policies, regulations and business models.
• Flexible which allows for changes in regulations, policies, business models and

financial guidelines.

• Designed for FIs & banks, but will benefit developers & rooftop owners in

developing viable rooftop projects

What can the tool do & how can it be used

11

The Solar Rooftop Evaluation Tool (SRET) works by first evaluating broad eligibility, followed by techno-commercial viability and finally risk assessment

The SRET uses three stages for establishing the viability of Solar Rooftop Projects: 1. Screens the eligibility of the rooftop project based on a qualitative checklist 2. Captures and evaluates the technical and commercial parameters of the project 3. Assess the risks and conditions proposed for lending

Step 1: Evaluating Eligibility Step 2: Techno-commercial Assessment Step 3: Risk Assessment and Financial Appraisal

• Objective: Establish broad

viability by assessing key risks

• Qualitative checklist –

analysis critical shortcomings which impact viability

• Utilizes key technical,

commercial & regulatory parameters

• Objective: Analyze techno-

commercial viability of project

• Focus on demand analysis,

technical architecture & risks, costing & financing

• Utilizes technical &

commercial inputs from applicant & lenders engineer

• Objective: Analyzes risks &

financiability of the project/s with basis for a Go/ No Go decision

• Maps key risks associated

with the project, evaluates whether appropriate mitigation strategies adopted

12

The Solar Rooftop Evaluation Tool (SRET) layout shows the three stage/ sub-stages as well as the source of inputs for analysing the rooftop project

Consumption Net and Gross Metering Profile of Roof Solar plant design Solar elec. gen. and consumption Operation and Maintenance Electricity Cost PPA Tariff Project and operation cost Term Loan Electricity Cost (Officer) PPA tariff (Officer) Term Loan (Officer) Risk Matrix Detail list of Contractual Risk Establishing Eligibility

Stage 1

Techno-commercial Assessment

Stage 2

Risk Assessment and Financial appraisal

Stage 3

Relationship Manager Applicant & Lender’s Engineer Lender’s Engineer and Banker

Inputs Flow Components/Forms

RESCO MODEL

Third Party Based Business Model – Net Metering

14

Business Models & Their Variations covered by the SRET

15

Heading of the form Subheadings in the form Tool name and version

Navigation buttons Navigation Links

Legends

SRET formats use specific navigation buttons and protocols

16

Stage 1- Establishing Eligibility

17

Stage 1- Establishing Eligibility (1)

• Stage 1 screens projects using a qualitative check list.
• Based on screening, the financer can decide whether to go ahead with some changes/ suggest

deferment or reject the project.

Arrangement Name of the applicant X Proposed Solar Capacity in kW (AC- total Inverter Rating) 450 State in which the project is located Andhra Pradesh Nature of the applicant RESCO Purchaser of solar energy produced from rooftop project Consumer Metering arrangements Net Metering Category of the electricity consumer Commercial Name of the distribution utility the project will be connected Y Has the utility defined an interconnection process? Yes Stage of Project development Vendor identified

Lists all states - automatically takes applicable state‘s regulations Three parameters define arrangement / business model:

• 1. Nature of Applicant:

RESCO/Consumer/Third party (Building

• wner or Manager)
• 2. Buyer of Solar energy:

Consumer/Utility

• 3. Metering: Net/ Gross Metering/Self

consumption Category of electricity consumer - Industrial and Commercial.

Establishing Eligibility

18

Ownership of the roof Owner of the roof Third Party Name of owner of roof Tenure of lease agreement (Remaining) between consumer and rooftop owner 9 Is lease further extendendable (after the end of the remaining tenure) Yes For how many years the lease agreement is extendable? (in Years) Is the No Objection Certificate available from the rooftop owner? Yes Power Purchase Agreement PPA signed by the electricity consumer? Yes Tenure of PPA? 25 Features of the roof New buildings coming up around creating shadow effect? Yes Any new buildings likely to come up in near future? Yes What is the remaining age of the roof? 9 Adequacy of the access to the rooftop for installation and operation? No Roof access - limited or open for public? Yes Availability of synchronizing voltage Grid availability (uptime percentage) 94% Average downtime of grid during daytime Alternate source of synchronizing voltage (DG set or battery bank with inverter)? No

Availability of the Roof for solar project during loan repayment tenure. PPA tenure vis a vis loan tenure Risks with rooftop - Shadows/ structural integrity/ remaining age of the roof/ Access to the roof Findings based on which the bank will decide Go / no Go

• Life of building / roof lease /PPA tenure less than loan tenure
• Possible loss of generation due to outages
• Grid uptime not adequate

Establishing Eligibility

Stage 1- Establishing Eligibility (2)

19

Stage 2- Techno-Commercial Assessment

Consumption Net and Gross Metering Profile of Roof Solar plant design Solar elec. gen. and consumption Operation and Maintenance Electricity Cost PPA Tariff Project and operation cost Term Loan

20

Load profile of end user (As per consumption pattern of end user) Proposed solar capacity in KW 300 Base load during daytime in KW Working days- week in days 7 Working days-annual in days 365 Average Daily Power Outage (daytime hours) 2 Is base load run on DG during outage? Yes

Monthly Electricity consumption pattern - based on electricity bills of past 12 months

Monthly Energy consumption pattern DISCOM Captive power plant (onsite and off site) Diesel Generator Other (third party etc) Total

Grid connectivity of end user Sanctioned demand in KW 500 Contracted demand in KW 200 Power factor 0.95 Transformer capacity in KVA Sanctioned demand in KW 475 Consumption voltage KV 33.00kV

Vis a Vis

Self Consumption Net/Gross Metering

Inbuilt database of Net / Gross metering regulations - automatically reflected in this form based on the state selection In the presenting case study Net Metering is applicable

Consumpti

• n

Net/Gross metering Profile of Roof Plant Design

• Elec. gen.

and cons. O&M

• Elec. Cost

Stage 2- Electricity Consumption

21

Number of roofs applied for 1 Area of the roof Area available for solar installation in square meter Inclination of roof (will act as input for costing) Inclination of roof Flat Orientation of roof (incase of inclined roof) North Angle of inclination (incase of inclined roof) in degree Type of roof (will act as input for costing and designing) Does the design include enhancement of roof solar installation (e.g., railing over metal structure etc) Yes If Yes, what are they? Material of roof Asbestos sheet Are any special requirement considered in the design? No Please mention the special requirement? Load Bearing Capacity Documents demonstrating Load bearing capacity of roof Attached Capture profile of one roof or a group of multiple roofs in a campus. Drop down list Flat/ Inclined Asbestos/ Metal Sheet/ RCC

Consumpti

• n

Net/Gross metering Profile of Roof Plant Design

• Elec. gen.

and cons. O&M

• Elec. Cost
• Information on the profile of roof filled by lender’s engineer and applicant
• Assess the suitability of the roof for solar installation.

Stage 2- Profile of Roof

22

Capacity of solar PV in KWp Modules Name of manufacturer Module model Technology Mono-crystalline Module capacity in Wp No of modules Annual Deration in % 0.50% Certification IEC 61215 / IS14286/ IEC 61646 Yes IEC61730 (P1-P2) Yes IEC 61701 / IS 61701 (Incase of corrosive) Yes Test reports From Accredited Lab following IEC Not Attached Warranties Output peak warranty First 12 years 90% At the end of 25 years 80%

Layout for Solar plant Design Attached Consumpti

• n

Net/Gross metering Profile of Roof Plant Design

• Elec. gen.

and cons. O&M

• Elec. Cost

Stage 2- Solar Plant Design

• Information filled by the lender’s engineer and / or applicant.
• The tool also captures similar data for Inverters, Module Mounting Structures, DC Cables etc

23

Opinion of Lenders' Engineer on Solar Plant Design Do Lenders' Engineer recommend the Solar plant design? No If NO, please include the lender's engineer recommendations as against the applicable part of the project Modules Inverters Module of mounting structure DC cables Certification for Balance of plant Are the solar panels supplied by Tier 1 Manufacturers? Are the equipments covered for third party insurance? Do applicant accept the recommendation and amend the design? Yes

Consumpti

• n

Net/Gross metering Profile of Roof Plant Design

• Elec. gen.

and cons. O&M

• Elec. Cost

Stage 2- Solar Plant Design

Based on the information provided by the applicant, the opinion will be filled by Lender’s Engineer.

24

Proposed Solar PV capacity 300 Connected Voltage 11 Monthly Generation pattern (submitted by developer) in KWh State Delhi Settlement cycle Annually No of months in a settlement 12 Limit on export Not Specified Limit of export NA Consolidated Energy Accounting As per Developer As per Lenders' Engineer Total Solar Energy generated 394,000 338,000 Total Solar Energy Consumed 133,000 133,000 Unutilized Solar energy (incase of Self Consumption)

• Uncompensated Solar energy (incase of Net metering)
• Amount of Energy displaced by Solar energy

133,000 133,000 Energy imported in addition to solar energy consumed

• Energy compensated under Net metering

261,000 261,000

Fill in month wise power generation pattern. The tool calculates consolidated energy consumption.

Consumpti

• n

Net/Gross metering Profile of Roof Plant Design

• Elec. gen.

and cons. O&M

• Elec. Cost

Stage 2- Solar Generation and Consumption

25

Current Cost of electricity in INR/KWH DISCOM As Proposed by Applicant Base tariff 4 Fuel Surcharge/Fuel Adjustment Charges 0.5 Electricity duty 0.5 Others 0.5 Total 5.5 Captive power plant Diesel Generator Others Average Cost of electricity 5.5

applicable for the arrangement where the consumer is project

• wner.

The tool captures the amount of electricity from different source and respective cost of procurement. Escalation rate (CAGR) Past Trends Future Expectations Past trends 3 year 5 year Considered by Applicant DISCOM 5% 5% 5% Captive power plant 8% 4% Diesel Generator 15% 10% Others 20% 10% Escalation rate of the cost of the electricity from different source is linked with the projections of the cost during the project tenure for financial analysis. Consumpti

• n

Net/Gross metering Profile of Roof Plant Design

• Elec. gen.

and cons. O&M

• Elec. Cost

Stage 2- Electricity Cost

26

Tariff in INR/kWh 7 Tenure of the PPA in Years 15

Tariff Structure and escalation rate

• 1. Constant Tariff throughout

the PPA tenure

base tariff 7 RS/KWH

• 2. Constant Escalation in Tariff base tariff 7 RS/KWH

Escalation Rate

7%

Frequency of Escalation

In 5 years

• 3. Variable Escalation in Tariff base tariff 7 RS/KWH

Beginning year Ending year Annual Escalation rate 1 5 5% 6 10 6% 11 15 7% 16 25 8%

This is applicable for the project developed under RESCO mode.

PPA tariff Capex and Opex. Term Loan

Other parameters in PPA Billing Cycle Monthly Is there any payment security provided? Yes If Yes, for how many months? In Months 2 What is the payment security instrument? Letter of Credit Payment credit availability in Months 2 Penalty for late payment in INR/kWh Is there any incentive for early payment? Yes If yes how much? In INR Amount of Guarantee? In INR Net Metering in INR/KWH

Stage 2- Power Purchase Agreement

27

PPA tariff Capex and Opex. Term Loan Appraisal Risk Matrix List of Contractual risk

Stage 2- Cost (Project and Operation)

• Applicant to provide
• Stage and type of procurement
• O&M arrangements
• Construction period
• Guarantee on performance ratio and warranties on technical risk
• Lender’s Engineer to assess and comment on
• Adequacy of the warranty period and coverage
• Adequacy of the performance generation guarantee
• Timely completion of the construction

Arrangements for project construction, operation and maintenance

• Applicant to provide
• Cost of the PV modules, inverter, module mounting structure, roof design enhancement (if

applicable), Balance of Plant, taxes etc

• Capital subsidy, expected term loan and proposed equity
• Annual O&M cost and escalation
• Cost of insurance and spares
• Lender’s Engineer to assess and comment on
• Are all the cost considered and they are inline with the market trend
• Bank will review the debt equity ratio and counter propose the suitable capital mix

Cost of the project and source of fund

28

Term Loan Amount INR Lakh 150 Term Loan % of project cost 85% Interest rate % 10% Moratorium Quarters 2 Repayment Years 10

• A separate form to fill the term loan conditions expected by applicant is provided in the

tool.

• It is linked with the financial analysis worked out by the applicant
• Term loan requested by the applicant. Bank will review and propose the term loan

PPA tariff Capex and Opex. Term Loan Appraisal Risk Matrix List of Contractual risk

Stage 2- Term Loan

29

Overall Summary of Stage 2

Nature of the Applicant RESCO Name of the applicant X Owner of Roof Consumer Connectivity Scheme Net Metering State in which the project is located Karnataka Consumer category Commercial Location Proposed Solar Capacity kW 300 Expected Generation kWh 3,94,000 Savings INR/kWh 7 Revenue/Deemed Revenue in INR 2,810,200 Project Cost in INR Lakh 177

Summary of Opinion of Lender's Engineer at Stage 2

Are roofs suitable for the proposed design? Yes Do Lenders' Engineer recommend the project design? No If no, do applicant accept the recommendation and amend the design? Yes Do project cost include all the costs? Yes Is Project cost inline with the current market trend? No

Project funding sources

Grants in INR Lakh 26.55 Proposed Equity in INR Lakh 150 Proposed Term Loan in INR Lakh 0.45 Interest rate in % 10% Moratorium in Quarters 10 Repayment period in Years 10 Expected DSCR 1.27 Expected Project IRR 6%

Data filled by applicant and lender’s engineer to generate OVERALL SUMMARY At stage 2, the techno commercial data filled by the applicant will be assessed by lender’s engineer based on which it will provide its OPINION which are summarized here. The PROJECT FUNDING parameters worked out at stage 2 by the applicant is summarized here.

Stage 2- Summary

30

Stage 3- Risk Assessment and Financial Appraisal

Electricity Cost (Officer) PPA Tariff (Officer) Term Loan (Officer) Risk Matrix Detail list of Contractual Risk

31

Cost consider ed for appraisal Tariff Considered for appraisal if PPA not signed yet

In Stage 3, the bank will fill in the values used for financial appraisal as against the value proposed by the applicant. Based on the appraisal the bank decided the Term loan.

Appraisal Risk Matrix List of Contractual risk

Stage 3- Financial Appraisal

32

The tool provides a risk matrix in which the risks involved in the solar rooftop project are identified and

• categorized. A process is defined to conduct the risk mitigation analysis

Risk Identified and categorised in the tool Assess each risk in the tool for the proposed project Is this a risk ? Can this risk be mitigated? Rate the risk (High/Medium/Low) Define the Mitigation proposed Define the stakeholder to bear the risk.

YES YES NO

Decision Support System

NO

Stage 3- Risk Matrix

`

Appraisal Risk Matrix List of Contractual risk

33

Stage 3- Risk Matrix

Various aspects of the project under which detail risk analysis matrix is provided by the tool. The tool also provides a detail list of contractual risks which supports the bank to assess the coverage of the contracts.

• Risk of early termination (lease/contract)
• Payment record

Ownership of the project and rooftop

• Access rights to the roof (limited or delay in gaining rights)
• Approvals (clarity on procedure/ delay/ unavailability)
• Delays in procurement and COD
• Regulations
• Adequate bridge finance in case of delays

Risk during construction

• Loss of generation (displacement/unavailability of the roof)
• Insurance
• Underperformance
• Provisions (Deemed generation/ delays in accounting etc)

Risk during operation and maintenance

• Termination
• Consumer/ RESCO default
• Contractual Risk
• Force Majeure

Other

`

Appraisal Risk Matrix List of Contractual risk

34

Ownership of the project & rooftop Is this a risk? How critical is the risk? If yes, is it mitigable ? If yes, what is the mitigation proposed? If no, who should bear the risk and is that stakeholder bearing the risk? In RESCO mode, if the PPA is with the consumer, is there a risk of the consumer undertaking early termination of the contract? Yes Medium Yes To include the Novation clause with penalty in PPA In case of third party ownership of rooftop, is there a risk of the lease agreement between the rooftop owner and the consumer being terminated early (before the end of the loan tenure)? No In RESCO mode, if the PPA is with the rooftop owner, is there a risk of the rooftop owner undertaking early termination of the contract? Yes Medium Yes To include the Notation clause with penalty in PPA Does the signee of the PPA have a good payment record (for services)? Yes Medium Yes PG or Revolving LC

Stage 3- Risk Matrix

`

Appraisal Risk Matrix List of Contractual risk

35

Stage 3 Summary

Overall Summary of Stage 3 Nature of the Applicant RESCO Name of the applicant X Owner of Roof Consumer Connectivity Scheme Net Metering State in which the project is located Karnataka Consumer category Commercial Location Proposed Solar Capacity kW 300 Expected Generation kWh 3,94,000 Savings INR/kWh 7 Revenue/Deemed Revenue in INR 2,810,200 Project Cost in INR Lakh 177 Summary of Opinion of Lender's Engineer at Stage 3 Are roofs suitable for the proposed design? Yes Do Lenders' Engineer recommend the project design? No If no, do applicant accept the recommendation and amend the design? Yes Do project cost include all the costs? Yes Is Project cost inline with the current market trend? No Project funding sources Grants in INR Lakh 26.55 Proposed Equity in INR Lakh 150 Proposed Term Loan in INR Lakh 0.45 Interest rate in % 10% Moratorium in Quarters 10 Repayment period in Years 10 Expected DSCR 1.27 Expected Project IRR 6%

Bank officer’s assessment and its proposal on loan OVERALL SUMMARY Opinion by lending engineer’s supporting the bank

• fficer’s loan

decision is presented here The PROJECT FUNDING parameters worked

• ut and proposed by

Bank officer is summarized here.

Output of the Risk Matrix Weightage of Risks Mitigated Not Mitigated High Medium 42 Low

36

Thanks !

Discussions and Feedback

• n Solar Rooftop

Evaluation Tool