1. Carbon finance potential of renewable
energy technologies in India
Pallav Purohit
International Institute for Applied Systems Analysis (IIASA), Austria
Short-term course on “Economics and Financing of Renewable Energy Technologies”
Centre for Energy Studies, IIT Delhi
25th July 2013

2. Contents
 What is Carbon finance?
 Overview of Indian power sector
 Status and potential of renewable energy in India
 Clean Development Mechanism (CDM)
 Carbon finance potential of RET’s under CDM
 Diffusion of RET’s and associated carbon finance potential
 The way forward

3. What is carbon finance?
• Carbon finance
– explores the financial implications of living in a carbon-
constrained world – a world in which emissions of carbon
dioxide and other greenhouse gases carry a price.
» Labatt & White (2007)
– is the term applied to the resources provided to a project to
purchase greenhouse gas emissions reductions.
» World Bank (2006)
– financial flows associated with society’s response to climate
change – in particular, the flows mediated by market
mechanisms.

4. What needs to be financed?
• Mitigation
– Low-carbon power
generation
– Energy efficiency
– Low-carbon transport
– Elimination of fugitive and
waste emissions
– Phase-out of F-gas
emissions
– Forest protection
– Nitrate- and methane
efficient agriculture
– Sequestration
• Adaptation
– Infrastructure climate
proofing
– Flood defences
– Enhanced insurance
– Efficient water usage
– Desalination and resilient
water supplies
– Durable food supplies
– Drought and heat resistant
crops
– Population relocation
Source: Ascui (2011)

5. How much?
• Additional $16 trillion investment is required as
compared to the new policy scenario in total to 2035.
Without change of the
government policies and
measures that had been
enacted by mid-2012.
Takes into account broad
policy commitments and
plans that have already
been implemented.
Policies are put in place
to allow the market to
realise the potential of all
known energy efficiency
measures which are
economically viable.
Sets out an energy pathway
that is consistent with a 50%
chance of meeting the goal
of limiting the increase in
average global temperature
to 2 C compared with pre-
industrial levels.
Source: IEA/WEO (2012)

6. Why renewable energy?
• Energy security
– Limited amount of fossil-fuel resources (India imports more than
70% of its crude oil requirements
• Ever increasing demand for energy
– Supply regularly being over stripped by demand
• Climate change
– To reduce the emission intensity of its GDP by 20-25% by 2020
through domestic mitigation actions
• Increased financing options
– Govt. incentives/legislations (financial/fiscal incentives, GBI, RPO,
etc.), carbon finance (CDM, GEF, MDI’s, etc.)

7. Macro-economic development and energy use in India
0
10
20
30
40
50
60
70
80
1990 1995 2000 2005 2010 2015 2020 2025 2030
Exajoules/year
Coal Oil Gas Renewables
Hydro Nuclear Biomass
0%
100%
200%
300%
400%
500%
600%
700%
800%
1990 2000 2010 2020 2030
Relativeto2005
GDP Total energy consumption
GDP/capita Population
Source: GAINS/IIASA

8. Overview of Indian power sector
Source: (MoP, 2013)
Thermal Hydro Renewable Nuclear Total
153,188 MW 39,623 MW 27,542 MW 4,780 MW 225,133 MW
As on 31st May 2013

9. Installed capacity of renewables in India
- until 30th June 2013
Off-grid/distributed renewable power
(including Captive/CHP plants)
(895 MW)
Grid-interactive renewable power
(28709 MW)
Source: MNRE (2013)

10. Status of renewables in India
- until 30th June 2013
Annual global (total + diffuse)
radiation varies from 1600 to 2200
kWh/m2. The equivalent energy
potential is about 6,000 million
GWh of energy per year.
Source: (MNRE, 2013; CEA, 2013)

11. Clean Development Mechanism
CDM: a development tool or a market mechanism?

12. CDM Project Cycle

13. Key CDM terms - I
• Baseline
– Emissions level that
would have existed in the
business-as-usual (BAU)
situation (in the absence
of the CDM project)
• Additionality
– A CDM project should be
motivated by the revenue
coming from the CER
sales. If it is already an
attractive business
without the CER benefit,
it is not additional
Year
CO2emissions
Project implemented
Reduced emissions
when credited: CERs
Business as usual:
baseline
 Environmental additionality
 real emissions reduction
 Financial additionality
 ensure that ODA (Official Development
Assistance) is not reclassified as CDM funding
 Technological additionality
 ensures appropriate transfer of technology
 Investment additionality
 baseline FDI is not categorized as CDM funds

14. Key CDM terms - II
• Crediting period
– Duration for which a CDM project can generate CERs. Either
10 years or three times 7 years
• Small-scale projects
– Projects of less than
• 15 MW for renewable energy
• 60 GWh annual savings for energy efficiency
• 60,000 t annual CO2 reductions for other types
• SSC projects benefit from
– simplified rules, especially pre-defined baseline methodologies
– lower fees

15. CDM projects by expected CER volume June 2013
• More than 12000 projects
were submitted until June
2013 of which 6989 projects
were registered and 170
projects were requesting
registration.
• 19% registered projects
(with 93 million annual
average CERS) are located
in India (2nd after China).
• More than 70% RE based
CDM projects contribute to
34% and 48% of CER
supply by 2012 and 2020
respectively.
• The carbon market is
forecasted to touch 12
billion CER’s by 2020 and
20 billion CER’s by 2030.Source: Fenhann (2013)

16. Investment in registered CDM projects
• The estimated
investment in
registered CDM
projects is more
than 387 billion
until June 2013.
• China accounts
for more than
61% ($237
billion) of the
total investment
and India
accounts for
13% ($52
billion) in CDM
projects.
Source: Fenhann (2013)

17. Programme of activities (PoA)/
CDM programme activity (CPA)
• A programme of activities (PoA) is
– a voluntary coordinated action;
– by a private or public entity which coordinates and implements any
policy/measure or stated goal (i.e. incentive schemes and voluntary
programmes);
– which leads to GHG emission reductions or net removals by sinks
that are additional to any that would occur in the absence of the
PoA;
– via an unlimited number of CDM programme activities (CPAs) .
• A CDM programme activity (CPA) is :
– a project activity under a programme of activities (PoA),
– a single, or a set of interrelated measure(s), to reduce GHG
emissions or result in net removals by sinks, applied within a
designated area defined in the baseline methodology.

18. Regional distribution of pCDM and CDM
44% PoA’s (175 out of 397)
are based in India out of which
119 PoA’s are registered and 4
PoA’s requesting registration
from CDM EB until June 2013
Source: Fenhann (2013)

19. POA distribution by type
Source: Fenhann (2013)

20. Solar energy in India – Resource availability
Source: MNRE
• Natural availability
– Many parts of India have 300~330 sunny
days in a year
• Current potential
– Daily solar radiation 4 - 7 kWh per sq. m.
which translates into a potential for 600 GW
• Potential to meet future demand
– 5000 trillion kWh solar radiation incident in
a year which is a thousand times greater
than the likely demand in electricity in the
year 2015
• Jawaharlal Nehru National Solar
Mission
– Increasing solar capacity to 20GW by 2020,
100GW by 2030 and 200GW by 2050
– Solar power cost reduction to reach grid
parity by 2020
– Solar power cost reduction to reach parity
with coal based thermal generation by 2030
No. 1 along with US in terms of
solar energy yield as per survey
conducted by McKinsey & Co.
(1700 to 1900 kWh/kWp/yr.)
Among the top 5 in terms of
overall country attractiveness for
RE as per E&Y’s report (Ranking
based on regulatory
environment, fiscal
support, unexploited
resources, suitability to
technologies etc.)

21. Box-type solar cooker
0.6 million box type solar cookers installed until March 2006

22. Potential assessment of box-type solar cooker
• Number of box type solar cookers
– Where
• Nhh,i = number of households in the ith state
• ξ1 = fraction of households living in the geographical
areas with adequate solar radiation availability
• ξ2ri = fraction of total households living in the rural
areas of ith state
• ξ3ri = fraction of households above the poverty line in
rural area in the ith state.
N
n
1i
3ri2riihh,1scN
Other factors? (e.g. Urban areas -
accessibility to solar radiation, etc.)

23. Solar lanterns and solar
home systems
Solar home systems
Solar lanterns

24. Solar lanterns and solar home systems (Contd.)
• Number of solar lanterns and/or solar home systems
– Where
• Nhh,i = number of households in the ith state
• ξ1 = fraction of households living in the geographical
areas with adequate solar radiation availability
• ξ2ri = fraction of total households living in the rural
areas of ith state
• ξ3ri = fraction of households above the poverty line in
rural area in the ith state.
N
n
1i
3ri2riihh,1// scshsslN
Other factors???

25. Domestic solar water heating system
7.07 million m2 installed until June 2013

26. Potential of domestic solar water heating system
• Number of domestic solar water heating systems
– Where
• Nhh,i = number of households in the ith state
• ξ1 = fraction of households living in the geographical
areas with adequate solar radiation availability
• ξ2ui = fraction of total households living in the urban
areas of ith state
• ξ3u = fraction of households in the urban areas having a
piped water supply in the household premises.
uswN 3
n
1i
2uiihh,1 N
Other factors???

27. SPV water pumping systems

28. SPV pumps
• Number of SPV pumps
– Where
• NSAs = net sown area in the state,
• ξs = areas in the state with surface water availability
(as a fraction of the net sown area in the state),
• ξg-10 = area with ground water table up to 10m (as a
fraction of the total area requiring ground water
in the state),
• ξlh,j = net sown area operated by jth category of farmers
• ζj = average size of land holding of jth category of
farmers
5
1
,101
j j
jlhgss
spv
NSA
N

29. Estimated potential of solar energy technologies
End use Technology Theoretical
Potential
Factors taken into account
Lighting SPV lanterns 97 million Total number of households in rural areas, availability
and accessibility of solar radiation, and households
above the poverty line in rural area.Solar home lighting
systems
97 million
Cooking Box type solar
cookers
97 million Total number of households in rural areas, availability
and accessibility of solar radiation, and households
above the poverty line in rural area.
Water heating Domestic solar water
heaters
45 million Total number of households in urban areas, availability
and accessibility of solar radiation, and households in the
urban areas having a piped water supply in the
household premises.
Water
pumping
SPV pumps 0.6 million Solar radiation intensity, extent of surface water
irrigation, ground water table, affordability and propensity
of farmers to invest in SPV water pumps.

30. Financial attractiveness of solar energy technologies?
Source: Purohit and Michaelowa (2006)
Break-even price of
CER <5 Euro???

31. Baseline methodology used to estimate the carbon
finance potential of SETs in India

32. Carbon finance potential of SET’s
State Theoretical mitigation potential (million CERs)
SPV lanterns SHL systems SPV pumps SWH systems solar cookers
Andhra Pradesh 1.3 2.6 17.5 2.0 5.2
Assam 0.3 0.6 6.1 0.1 1.2
Bihar 0.8 1.6 41.3a 1.0 3.2
Chhattisgarh 0.2 0.5 --- 0.4 1.0
Delhi 0.1 0.1 --- 1.2 0.1
Goa 0.1 0.1 0.2 0.1 0.1
Gujarat 0.6 1.3 5.2 2.0 2.5
Haryana 0.3 0.6 1.9 0.5 1.1
Jharkhand 0.2 0.5 --- 0.7 1.0
Karnataka 0.7 1.4 9.7 1.5 2.7
Kerala 0.5 1.1 11.6 0.8 2.1
Madhya Pradesh 0.6 1.2 14.3b 1.6 2.4
Maharashtra 1.0 2.1 18.7 4.5 4.1
Orissa 0.4 0.8 10.6 0.8 1.6
Punjab 0.3 0.6 1.6 0.7 1.3
Rajasthan 0.7 1.5 5.2 1.0 2.9
Tamil Nadu 0.8 1.6 15.0 2.8 3.1
Uttar Pradesh 1.7 3.4 39.2 2.5 6.6
West Bengal 0.9 1.9 15.6 3.1 3.7
Total 11.6 23.3 213.7 27.4 45.9
a: including Jharkhand; b: including Chattisgarh

33. Wind energy in India - Potential
Source: C-WET
Sea coast + Desert
Areas (Av. PLF
of 18-20%)
Forest & Mountainous
region (Av. PLF
of 18-30%)
Mountainous, Sea
coast areas (Av.
PLF of 25-30%)
• Current Scenario
– 5th largest producer of wind energy
in the world with a capacity of >19
GW
– Tamil Nadu, Gujarat, Maharashtra
and Karnataka are the leaders in
wind capacity.
• Key Issues
– Short construction period and low
O&M cost make it an attractive
proposition
– Some regulatory /institutional
hurdles exist for wheeling
• Future Potential
– >20% CAGR over the last 10 years
– 5000 MW annual market by 2015
(WISE)
– Reassessment of true wind potential
of India. (C-WET: 49 GW/103 GW,
IWTMA: 65-70 GW, WISE: 100 GW,
GWEC:250 GW).

34. Wind energy in Indian states
- potential and installed capacity
*Estimation is based on meso scale modelling (Indian Wind Atlas).
Source: C-WET

35. Carbon finance potential through
wind power projects in India

36. Windmill pumps
• The annual useful energy AUE (in MJ) delivered by a
windmill can be estimated as
• where
– hp : efficiency of pump used with the wind rotor,
– g : windmill pump mechanical availability factor
accounting for downtime during maintenance,
– P(v) : power produced by the windmill at wind speed v
– F(v) : Weibull probability distribution function
– vci : cut-in wind speed
– vco : cut-out wind speed of the windmill.

37. Windmill pumps
• Number of windmill pumps
• where
NSAsi,k : The net sown area in the ith
district of kth
state
ξwi,k : the areas with annual monthly mean wind speeds greater than 10 km/h
(as a fraction of the net sown area),
ξsi,k : the areas in the ith
district of kth
state with surface water availability (as a
fraction of the net sown area)
ξg-20i,k : the fraction of total area requiring ground water with ground water table
up to 20m in the ith
district of kth
state
ξlhj,k : the net sown area operated by jth
category of farmers (on the basis of
land holding size) as a fraction of net sown area in the kth
state
z j,k average size of land holding of jth
category of farmers in the kth
state
ξaj,k : the correction factor for the affordability of the jth
category of farmers in
the kth
state
ξpj,k : the propensity of farmers to invest in windmill pumps.
Source: Purohit and Purohit (2007)

38. Carbon finance potential of windmill pumps

39. Biomass gasifier-based power generation system

40. Agricultural residue availability and its alternative uses
Source: Purohit et al. (2006)

41. Biomass gasifier-based power generation system:
Potential assessment
• Market potential of biomass gasification projects
• where
– CUFbg = capacity utilization factor of the biomass gasifier based power project
– sbc = specific biomass consumption in biomass gasification route
– Ai, j = area of ith crop in the jth state
– Yi, j = yield of ith crop in the jth state
– RCi = residue to crop ratio for ith crop
– αi = fraction of crop-residue lost in collection, transportation, storage etc.
– βi = fraction of remaining crop residues used in other applications
nm
ji
iiijiji
bcbg
bg RCYA
sCUF
P
,
1
,, 11
8760
1
Effective crop residue
availability for ith crop per
unit crop produced
Effective gross annual
crop residues
availability, for energy
applications

42. Annual potential availability of agricultural residues
for energy applications in different states of India

43. Carbon finance potential of biomass gasification projects

44. Sugar map of India
Intensity and spatial distribution of sugarcane
production in (tonne/km2)

45. Area, production, and yield of sugarcane in India
Source: MOA (2012)

46. Bagasse cogeneration technology
An extraction-cum-back-pressure turbine (EPBT) route An extraction and condensing turbine (ECT) route.
The condensing route based on the dual fuel system

47. Bagasse cogeneration
 Net availability of bagasse for the cogeneration
– As,i = area under sugarcane production in ith state
– Ys,i = yield of sugarcane in ith state
– RCs = residue to crop ratio for sugarcane
– 1 = fraction of sugarcane production being used for several other
competitive applications (such as molasses, alcohol, etc.).
– 2 = fraction of bagasse being used for other applications (pulp and paper
industry, particle board, etc.)
 Annual electricity generation potential through bagasse cogeneration
– SFCb = specific bagasse consumption
– = fraction of the AEPbc for the own consumption in the cogeneration
system.
n
i
sisis RCYABP
1
,,21c 11
b
n
1i
si,si,s21
bc
SFC
RCYA-111
AEP
Total bagasse availability

48. Electricity generation through bagasse in India
aThe net electricity consumption takes into account the electricity used for the own consumption in the cogeneration plant.

49. Carbon finance potential of bagasse cogeneration
• Net annual CO2 emissions mitigation potential by the use of
bagasse cogeneration (NCEbc) can be estimated as
– Where
• FFz = quantity of fossil fuel type z combusted in the
biomass power plant
• CEFz = CO2 emissions factor of the fossil fuel type ‘‘z’’
• k = number of bagasse-based project activities co-
firing fossil fuels (such as coal) during off-season
to a limited extent.
Annual electricity
generation through
bagasse
Co-firing fossil
fuels during off-
season to a
limited extent

50. Carbon finance potential of bagasse cogeneration (Contd…)

51. Sensitivity analysis

52. Small hydro power

53. Carbon finance potential of small hydro projects in India

54. Diffusion of RET’s
• As per the logistic model, the cumulative number, N(t), of the
renewable energy systems disseminated up to a particular
period (tth year) can be expressed as
where the regression coefficients a and b are estimated by a
linear regression of the log-log form of the above equation, i.e.
bta
bta
e
e
MtN
1
tba
M
tN
1
M
tN
ln

55. Time variation of cumulative number of SET’s
0
3
6
9
12
15
18
21
24
27
1990 2000 2010 2020 2030 2040 2050 2060 2070
Year
Cumulativenumberofdomesticsolarwaterheating
systems(million)
SS
OS
0
10
20
30
40
50
60
70
1990 2000 2010 2020 2030 2040 2050 2060 2070 2080 2090 2100 2110 2120
Year
CumulativenumberofSPVpumps(million)
SSpump
OSpump
0
5
10
15
20
25
30
35
40
1990 1995 2000 2005 2010 2015 2020 2025 2030 2035
Year
Cumulativenumberofsolarhomelightingsystems(million)
SSshs
OSshs
0
5
10
15
20
25
30
35
40
1990 1995 2000 2005 2010 2015 2020 2025 2030 2035
Year
CumulativenumberofSPVlanterns(million)
SSspvl
OSspvl
SPV lanterns Solar home lighting systems
SPV pumps Solar water heating systems

56. Projected values of the cumulative number of SET’s and
associated CER generation
Year Cumulative number of SETs
(million)
Annual CER generation
(million)
SS OS SS OS
1. SPV Lanterns
2008 1.0 2.8 0.1 0.3
2012 2.7 7.9 0.3 1.0
2016 7.7 20.7 0.9 2.5
2020 15.8 38.0 1.9 4.6
2. Solar home lighting systems
2008 0.6 1.8 0.1 0.4
2012 2.0 5.9 0.5 1.4
2016 6.7 18.3 1.6 4.4
2020 15.6 37.4 3.7 9.0
3. SPV Pumps
2008 0.01 0.01 0.03 0.04
2012 0.02 0.04 0.06 0.11
2016 0.04 0.10 0.12 0.27
2020 0.09 0.26 0.25 0.72
4. Solar water heating systems
2008 0.7 2.1 0.8 2.3
2012 1.7 4.8 1.8 5.0
2016 3.8 9.4 4.0 9.8
2020 7.8 15.4 8.2 16.1
5. Box type solar cookers
2008 0.9 2.8 0.4 1.3
2012 1.5 4.4 0.7 2.1
2016 2.3 6.8 1.1 3.2
2020 3.6 10.3 1.7 4.9

57. Projected values of the cumulative capacity of grid connected
RETs and associated CER generation

58. Key barriers to the deployment of RE projects
under carbon finance
Source: Río (2005)
Technology adoption and diffusion
(characteristics of the
technologies, adopters etc.)
High up-front (capital) cost, high
transaction cost, risk for investors,
financing, etc.
High transaction
cost, risk for
investors
(plitical, market, et
c.), low CER price
etc.
CER price, renewable
energy potential, high
risk, etc.

59. The way forward
• Driving new and additional investment of US$15-20 trillion over the
next 20 years will not be easy.
• Carbon finance can provide substantial value for RE businesses and
support the development of new and renewable energy technologies.
• Carbon abatement potential of RET’s in India is estimated over 400
million tonnes annually.
• Carbon finance could help to achieve the maximum utilization potential
of RET’s more rapidly as compared to the current diffusion trend of
RET’s in India if supportive policies are introduced.
• In case of SET’s and windmill pumps, to close the gap between the
mitigation cost and the CER price subsidies are required.

60. Thank you!
For further information:
purohit@iiasa.ac.at