Market Research India - Solar Energy Market in India 2009

1. Solar Energy ‐ Solar Energy India February 2009

2. Executive Summary  Solar energy market in India is worth USD 124 mn Market  Accounts for less than 0.1% of total installed renewable energy capacity  Government plans to increase the share of renewable energy to 10% by 2032  Solar energy is harnessed through either of two methods: – Solar Thermal Plant/Concentrated Solar Power Plant – Solar Photovoltaic (SPV)  Drivers: Positive government policies, entry of new players in polysilicon market, abundant solar Drivers: Positive government policies, entry of new players in polysilicon market, abundant solar Drivers & radiation in India, export demand for solar equipment Challenges  Challenges: High unit cost of solar energy, volatility in polysilicon prices, and dependence on raw material imports  Increase in M&A activity in renewable energy sector Trends  Domestic and international players are moving in solar energy space  Public and private investments have increased in solar energy market  Major players include Tata BP Solar, Moser Baer PV Ltd, Reliance Industries etc Competition  New players entering the solar space include Suzlon Energy CCompanies have increased their investments in solar technology and products i h i d h i i i l h l d d SOLAR ENERGY – INDIA.PPT 2

3. •Introduction •Market Overview •Drivers & Challenges •Drivers & Challenges •Trends •Government Initiatives G t I iti ti •Competition •Key Developments SOLAR ENERGY – INDIA.PPT 3

4. Renewable energy sources are gaining share in the total power capacity in India Overview Power Sector Break‐up • Principal renewable sources of energy are: 100 3% 6% 8% Renewable  Wind Energy 80  Small Hydro upto 25 MW  Biogas 60 97% 94% 92% Conventional  Solar Energy 40 • Renewable energy capacity reached 13,242 Mw, 20 accounting for 8% of the total installed power capacity accounting for 8% of the total installed power capacity in India 0 • Renewable energy witnessed the growth of 128.2% in 2002 2007 2008* installed capacity from 3400 MW in 2002 to 7760 MW in Thermal 2007 65% • The Ministry of New and Renewable Energy (MNRE) plans to take the total renewable energy capacity to more than 26,000 MW during 11th Five‐Year Plan • Wind energy accounts for 70% of the total renewable 3% energy capacity Nuclear 8% 25% Renewable Hydro India plans to more than double its renewable energy capacity by 2012 p gy p y y * As of Feb, 2008 SOLAR ENERGY – INDIA.PPT 4

6. Solar energy is at a nascent stage in India and the Solar Photovoltaic method of power generation is dominant Overview Capacity and Growth •Solar energy market is worth USD 124 mn Sources / Systems Estimated Cumulative potential Achievement*  Solar energy accounts for a fraction (less than 0.1%) of the total renewable energy installed capacity in Distributed Renewable Power India Solar power ‐ 2.12 MW •India has long term goal of generating 10% of the Decentralized Energy Systems country’s electricity from renewable sources by SPV Program 20 MW/ Sq.Km 2032 Solar Street Lighting ‐ 70,474 nos. •Solar energy can be harnessed through two Home Lighting System ‐ 4,34,692 nos. methods – Solar Lantern ‐ 6,97, 419 nos. Solar Photovoltaic (SPV) ‐ converts light Solar Photovoltaic (SPV) converts light Solar Power Plants Solar Power Plants ‐ 8.01 Mwp 8 01 M directly into electricity Solar Photovoltaic Pumps ‐ 7,148 nos. – E.g. Standalone Power Plant Solar Thermal Program ‐ – MNRE has funded 33 grid interactive SPV power Solar Water Heating 140 million Sq. 2.45 million Sq. plants with total capacity of 2.12 MW plants with total capacity of 2 12 MW System S t m collector area ll m collector area ll Solar Thermal/Concentrated Solar Power Solar Cooker ‐ 0.63 mn (CSP) ‐ converts light first into heat and then • Distributed Renewable Power – Grid interactive electricity • Decentralized Energy Systems – Off‐Grid –E Examples Water Heating, Solar Ponds, Solar l W t H ti S l P d S l Cooker, Solar Air Heating * As of October 31, 2008 SOLAR ENERGY – INDIA.PPT 6

7. Some players in market have vertically integrated operations while others focus on individual segment of value chain Solar Photovoltaic Market Wafer & Cell PV Module PV Systems & Installation & Silicon Suppliers pp Manufacturers Manufacturers Products Mfg. Products Mfg Services • India ranks 7th in worldwide solar cell production • Solar panel production is done using two technologies –  C Crystalline silicon cells – Most dominant technology with more than 90% market share lli ili ll d i h l ih h 90% k h  Thin‐film cells – Fastest growing technology due to silicon shortage Solar Thermal / Concentrated Solar power Market Equipment Supplier CSP Generation Transmission Distribution Retail Consumer Grid Bulk Consumer • In solar thermal energy plants, sunlight is reflected off concave mirrors or lenses to heat oil in metal tubes, which is then used to generate electricity • P Power generated can be connected to the grid or supplied to retail/bulk consumers t d b t d t th id li d t t il/b lk SOLAR ENERGY – INDIA.PPT 7

9. Drivers and Challenges Challenges Drivers Solar Power Unaffordable due to high costs Tropical Location High dependence on raw material import Government initiatives Volatility in polysilicon prices New players entering polysilicon N l t i l ili market Land scarcity Major export demand Minimal fuel and environmental risks SOLAR ENERGY – INDIA.PPT 9

10. Positive government policies and entry of new players making India a solar hub Tropical Location Impact • India has high solar insolation with about 300 clear days of sunshine in a year across various locations • India receives solar energy equivalent of over 5,000 trillion KWhr/yr, which is far more than the total energy consumption of the country • The daily average solar energy intake varies from 4‐7KWh per sq m depending upon the location Government initiatives Government initiatives • MNRE is providing various incentives and concessions to the manufacturers as well users of SPV based products ‐  Zero excise duty for manufacturers  100% depreciation in the first year of installations of systems 100% depreciation in the first year of installations of systems  Low import tariff for several raw materials and components  Soft loans users, intermediaries and manufacturers New players entering polysilicon market • About 10‐15 new players are expected to start manufacturing polysilicon – the prime ingredient for solar photovoltaic cells • Increase in supply of polysilicon is expected to bring parity in prices of polysilicon and boost the Increase in supply of polysilicon is expected to bring parity in prices of polysilicon and boost the solar photovoltaic industry SOLAR ENERGY – INDIA.PPT 10

11. Global demand and increasing focus on environmental risk also spurring solar energy Major export demand Impact • After the Kyoto protocol, developed countries like US, UK, Germany are moving towards solar power to bring down pollution levels from power generation sector • These countries are importing solar power generation equipments from countries like India  More than 80% of the solar PV cells produced in India is exported to countries like Japan, US and Australia Minimal fuel and environmental risks • Climatic changes imposing the government to give more importance to alternate sources Climatic changes imposing the government to give more importance to alternate sources  In solar power systems there are no harmful gas emission, no wasted water, no noise and no waste generation • Volatility in oil prices have increased the focus on renewable sources of energy like solar energy  Once solar power system is installed, the cost of generating electricity is fixed over the lifespan of the system with no risk of shortage of fuel or rise in fuel prices h k f h ff l f l SOLAR ENERGY – INDIA.PPT 11

12. Solar industry growth being hampered by higher unit cost, dependence on raw material import.. Solar Power Unaffordable due to high costs Impact • Initial cost of both Thermal and PV based solar energy systems is higher compared to the cost of conventional energy systems and also other non‐conventional energy systems • The capital cost to set up a photovoltaic plant generating 1 MW of electricity is almost USD 5.1 mn • The running cost is also high as the solar cells also need to be replaced after every 7‐8 years Cents per Kwh 50 Minimum 41 40 Maximum Cost of solar energy is 4‐ 30 30 24 5 times higher than 20 20 12 other sources of energy 10 4 4 6 0 Solar PV Solar Thermal Thermal Wind High dependence on raw material import • India does not have any major domestic source for polysilicon, a prime ingredient for solar cell production • Solar cell producers in India import almost 100% of their wafer cell requirement SOLAR ENERGY – INDIA.PPT 12

13. ..increasing polysilicon prices and alternate land requirements Volatility in polysilicon prices Impact • Polysilicon, main raw material for silicon wafer cells, constitutes about 80% of the solar cell cost • Higher polysilicon prices increase the cost of installation of photovoltaic panels and push up the cost of solar power generation f l • Spot prices touched $380‐400/Kg in 2008, almost 10 times the $40/Kg spot prices in 2004 • The prices are expected to come down in 2009 as the global supply is expected to double in 2009 USD Per Kg 400 Long term contract 300 prices and on‐spot 200 prices of silicon have 100 increased 0 2004 2005 2006 2007 2008 2009E 2010E Land Scarcity • Per capita land availability is a scarce resource in India • Dedication of land area for exclusive installation of solar cells might have to compete with other necessities that require land • The amount of land required for solar power plants is about 1 sq km for every 20‐60 megawatts The amount of land required for solar power plants is about 1 sq km for every 20 60 megawatts (MW) generated SOLAR ENERGY – INDIA.PPT 13

15. Key Trends Increase in M&A activity Trends New players entering solar Increase in public and private energy market k t investments i t t SOLAR ENERGY – INDIA.PPT 15

16. Sector witnessing growth in M&A deals and entry of domestic and international players Increase in M&A activity • Total renewable deals of USD134 mn signed in India in 2008, about 7.3% of total Asia Pacific renewable deals M&A deals  Solar deals in India accounted for 26% of the total solar deals signed in Asia Pacific adding to the adding to the growth of solar • Solar market is attracting players outside energy sector who seek an early entry and aims at energy sector scaling up the required technology Date Announced Target Name Acquirer name Deal Value (USD mn) 04‐Sep‐08 Moser Baer Photovoltaic Ltd Nomura Holdings Inc, Credit Suisse 92.28 Group, IDFC Private Equity Co Ltd, Morgan Stanley, CDC Group 10‐Jun‐08 T F Solar Power Pvt. Ltd. Goldstone Infratech Ltd 34.98 New players entering solar energy market • Many new domestic and international players have entered/plans to enter solar energy market in India  Suzlon Energy, wind power equipment maker, is venturing into solar energy market Various new  US power major AES Corp and private equity firm Riverstone Holdings LLC, which jointly plans to invest USD 1 players looking bn in photovoltaic solar project around the world also eying Indian market for opportunities  German renewable energy firms, Prozop Solar and Q‐Cells, plans to set up manufacturing facilities in India to in solar market take advantage of abundant solar energy in the country take advantage of abundant solar energy in the country SOLAR ENERGY – INDIA.PPT 16

17. Public and private investment has also increased in solar energy market Increase in public and private investments • Government has concisely released funds for various solar energy programs in the country USD 150,000 102,690 90,382 100,000 50,000 50 000 45,189 45 189 0 2004‐05 2005‐06 2006‐07 • Government also plans to set up 60 solar cities p p • The Semiconductor Policy and Government incentives for Grid‐interconnected Solar power plants resulted in several companies aggressively focusing on the Solar PV space in India  India received committed investments of about USD7 bn.  India could potentially receive an additional investment to the tune of USD 15‐20 bn (FDI and private sector) by 2012 SOLAR ENERGY – INDIA.PPT 17

18. •Introduction •Market Overview •Drivers & Challenges •Drivers & Challenges •Trends •Government Initiatives Go ernment Initiati es •Competition •Key Developments SOLAR ENERGY – INDIA.PPT 18

19. Government is providing various direct and indirect incentives to encourage investment in solar energy.. • Financial assistance amounting upto INR 12 (Cents 24) per KW hour in case of solar PV Direct Initiatives with maximum capacity of 50 MW and upto INR 10 (Cents 20) Per KW in case of thermal Power plant for a period of 10 years • Indian Renewable Energy Development Agency (IREDA) provides revolving fund to Indian Renewable Energy Development Agency (IREDA) provides revolving fund to financing and leasing companies offering credit for the purchase of PV systems • Direct Investment of up to 100% is permitted in non‐conventional energy sector through the automatic route • In March 2007 the Indian government announced a semiconductor policy under its Indirect Initiatives Special Incentive Package Scheme (SIPS). Type of Unit Threshold NPV of Incentives in SEZ Incentives in Non ‐ SEZ investment Fabrication* USD 0.51 bn 20% 25% + Exemption from CVD Eco‐System USD 0.20 bn 20% 25% + Exemption from CVD Note : * Fabrication unit means a semiconductor wafer fabrication facility ** Eco‐system units means units, other than a fab unit, for manufacture of semiconductors, displays including Liquid Crystal Displays (LCD), Organic Light Emitting ** Eco s stem nits means nits other than a fab nit for man fact re of semicond ctors displa s incl ding Liq id Cr stal Displa s (LCD) Organic Light Emitting Diodes (OLED), Plasma Display Panels (PDP), any other emerging displays; storage devices; solar cells; Photovoltaics; other advanced micro and nano technology products SOLAR ENERGY – INDIA.PPT 19

20. Government has various schemes in place at central and state level to increase domestic demand for solar power Program / Scheme Target Progress Aditya/Akshay Urja Shops • 1 shop in each district of the • 268 Aditya/ Akshay Urja Shops have been country sanctioned Renewable Energy Parks • 2 District Level Energy Parks (DLEP) • Some 500 odd Renewable Energy Parks are per district already operational • 1 State Level Energy Park (SLEP) Per State Solar Buildings • 8 building Integrated Photovoltaic • Building have been tried out in few sates – System (BIPV) buildings in atleast Administrative building of WBREDA, Punjab 10 states by 2010 Energy Development Agency • Government of Himachal Pradesh have ade it mandatory to contruct all its future buildings d t t t t ll it f t b ildi using passive design features • WBREDA is also actively considering on the lines of mandatory use of solar power in new multistoried buildings multistoried buildings Remote Village Lighting • 5,000 villages and 1,500 hamlets by • Around 3,330 un‐electrified census villages and Program 2012 830 electrified hamlets of electrified villages have so far been provided with basic electricity facilities SOLAR ENERGY – INDIA.PPT 20

21. Gujarat Government announced a radical solar policy in 2009 to encourage solar power generation Gujarat Solar Power Policy 2009 • Gujarat Solar policy allows installation of maximum of 500 MW project , while minimum installed capacity of any project is at 5 MW  State's policy is radical since it put a cap 10 times more than the Centre's cap of 5 MW for solar power projects in India is 50 MW • Any company or entity is allowed to set up the solar power project for either captive use or for selling of electricity • No fossil fuel (coal gas lignite naphtha wood etc) is allowed to be used in solar thermal No fossil fuel (coal, gas, lignite, naphtha, wood etc) is allowed to be used in solar thermal power project • Policy allows developers to sell solar energy for 25 years to licensee distributors in the state under a Power Purchase Agreement (PPA) to be specified by the state utility ‐ Gujarat Urja Vikas Nigam Limited (GUVNL) Solar Photovoltaic Solar Thermal Project commissioned before December • INR 13 per unit for the • INR 10 per unit for the 31, 2010 first 12 years first 12 years • INR 3 per unit form 13th to • INR 3 per unit form INR 3 per unit form 13t to INR 3 per unit form 25 th year 13th to 25th year Project commissioned after December • INR 12 per unit for the • INR 9 per unit for the 31, 2010 and before March 31, 2014 first 12 years first 12 years • INR 3 per unit form 13th to • INR 3 per unit form INR 3 per unit form 13 to INR 3 per unit form 25th year 13th to 25th year SOLAR ENERGY – INDIA.PPT 21

23. Major players in solar market have increased investments in solar sector value chain Major Players • Solar PV Market:  There are 9 solar cell manufacturers, 22 PV module manufacturers and 50 PV systems manufacturers in India  Key players in Indian Solar PV market are BHEL, BEL, Tata BP Solar, Central Electronics, Maharishi Solar Technology, Synergy Renewable Energy, Schott solar, Moser Baer, and Signet Solar India. • Solar Thermal Market:  Acme Energy Solutions plans to set up Asia’s biggest solar thermal energy power plant of 10 MW capacity in Nagpur Many companies have announced sizeable investment in solar power ‐ Company Name Products Investments (USD) Reliance Industries Solar fabrication‐ Assembly‐ Test‐ Mark‐Pack (ATMP) 4.63 bn Solar Semiconductors Pvt Ltd Solar PV 2.96 bn Reliance Industries Solar PV – Polysilicon, Wafers, Cells and modules 2.91 bn Signet Solar Inc. Solar PV and associated products (this film based) 2.42 bn Moser Baer PV Silicon cells, modules, thin film concentrators 1.50 bn Titan Energy System Ltd Solar cells, solar grade semiconductor wafers, solar PV modules and polysilicon 1.47 bn KSK Energy Ventures Pvt Ltd Integrated solar panel based on thin film and Cadmium Telluride (CdTe) technology 0.80 bn TF Sola Power Ltd Solar thin film panels 0.59 bn Tata BP Solar India Ltd Solar PV 0.42 bn Phoenix Solar India Ltd Solar PV 0.30 bn SOLAR ENERGY – INDIA.PPT 23

25. Key Developments Date Development 15‐Jan‐09 MNRE is considering a proposal to set up a company for generating power from renewable sources. The government is expected to be a 100% owner of the proposed firm and it will tap solar, geothermal, wind, biofuel and biomass sources for power generation 08‐Jan‐09 Gujarat Government is giving a thrust to solar power generation and offering a number of incentives under its new solar energy policy (2009‐14). Government would provide incentives to those installing a minimum SPG capacity of 5 MW in case of solar photovoltaic or solar thermal means. Electricity generated from the SPGs for self‐consumption or sale to licensees or third parties shall be exempted from payment of electricity duty 27‐Oct‐08 Trans‐India Acquisition Corporation has entered into a definitive agreement to acquire not less than 80% of privately held Solar Semiconductor Ltd in a share‐swap deal worth USD375 mn. 04‐Sept‐08 DuPont has opened a solar‐materials business in India. DuPont Photovoltaic Solutions will sell films, resins, encapsulant sheets, flexible substrates and conductive pastes for both crystalline silicon and thin film modules to the Asian nation's solar industry. 17‐Mar‐08 Tata BP Solar today announced that they had signed an agreement with Calyon Bank (Credit Agricole CIB) and BNP Paribas and among others, to raise USD78 mn to fund its 128MW Solar Cell Expansion Project SOLAR ENERGY – INDIA.PPT 25

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Market Research India - Solar Energy Market in India 2009