Overview of Solar Guidebook and Knowledge Management Project Sustainable Business Advisory

April 2012 Knowledge Management Project - the Aim

“to build capacity, capture lessons learned and disseminate and share knowledge on the Indian PV market with the aim of supporting future solar PV projects by IFC and other market players” Utility Scale Solar Power Plants

‡ 7KHJXLGHERRNFDQKHOS ‡ )RUH[DPSOH ƒ ,QWHUIDFHULVNV"6HH ƒ 6HFWLRQ,QWHUIDFH0DQDJHPHQW ƒ $SSHQGL[&²(3&KHDGVRIWHUPV ‡ ZZZLIFRUJSXEOLFDWLRQV   Outline • Presentation 1: Introduction and project overview • Presentation 2: Completion / Technology Risks and Mitigation • Presentation 3: Operating Risks and Mitigation Utility Scale Solar Power Plants – a guide for developers and investors • Solar PV technology • Financing PV projects • The solar resource • CSP annex • Project development • EPC contract heads of terms • Site selection • O&M contract heads of terms • Energy yield prediction • Plant design • Permits and licensing • Construction • Commissioning • Operation and maintenance • Economics and financial modelling Technology Risk, Completion Risk and Related Risk Mitigation Sustainable Business Advisory

April 2012 Risk Identification, Mitigation & Removal

• Ground, weather, access and resource Site Risks • How does resource vary monthly and annually? What is the confidence level?

• Issues that could affect construction milestones, Completion Risks particularly energisation

Technology Risk • Is the technology proven? Is it suitable for the site?

• Issues that could affect project revenue over the project life Operating Risks • Are there contractual or physical mitigants?

• Assess the volatility of cashflow Financial Risk • Are mitigants in place? Completion risks ‡ 3DUWLFLSDQWFDSDELOLWLHV ƒ 2QHRIWKHPRVWFULWLFDODVSHFWV ƒ 6SRQVRUV&RQWUDFWRUV ‡ ([SHUWLVH ‡ ([SHULHQFH ‡ 0DQDJHULDOVXSSRUW ‡ 7HFKQLFDOVXSSRUW ‡ )LQDQFLDOVWUHQJWK ‡ 7HDPRUVLQJOHSHUVRQ ‡ 6LWH,QYHVWLJDWLRQV UHPRYHXQZDQWHGVXUSULVHV  ƒ )RXQGDWLRQUHTXLUHPHQWV ƒ 6RLOW\SHDQGFRQVLVWHQF\ ƒ 6HLVPLF]RQHV ƒ )RUPHUXVHRIODQG Former use of land Completion risks

‡ 3HUPLWWLQJ ƒ $OOUHTXLUHGOLFHQFHV ƒ &RPSOLDQFHZLWKSHUPLWFRQGLWLRQVIRUDOOSKDVHVRIWKH SURMHFW·VOLIH ƒ (QYLURQPHQWDOUHVWULFWLRQV ‡ 1REXLOGSHULRGV ‡ %XIIHU]RQHV VFUHHQLQJ ‡ *ULG&RQQHFWLRQ ƒ 7LPLQJRIFRQQHFWLRQ ƒ &DSDFLW\DQGVWUHQJWKRIJULG ƒ ,VLWFRQWHVWDEOH²ZKR·VGRLQJLW" ƒ ,QWHUIDFHV ƒ $FFHVVURXWHVWRJULGFRQQHFWLRQSRLQW SHUPLWVZD\OHDYHVURDGRSHQLQJOLFHQFHV   Completion risks

‡ &RQWUDFWVWUDWHJ\ (3&RU0XOWLFRQWUDFW  ƒ %RWKKDYHEHQHILWV GUDZEDFNV ‡ ,QWHUIDFHV ‡ 'HVLJQ ‡ &RQVWUXFWLRQ ‡ :KRKDQGOHVWKHP" ‡ 3URJUDPPH ‡ 5HDOLVWLF ‡ /HDGWLPHV ‡ &ULWLFDOSDWK ‡ :HDWKHUGHOD\V ‡ $GHTXDWHOLTXLGDWHGGDPDJHV ‡ 6XSSO\FRQWUDFWV ‡ (3&FRQWUDFW  Supply chain

Module Inverter Module supply eased Talk of quality inverters since 2008, but quality become issue tightening Range of quality Range to types & quality/suitability Bankability Bankability

Supply chain problems lead to:

• Technology risks • High prices / poor contract terms • Extended project schedules Completion

‡ Trial Operation (10 days - 4 ‡ Acceptance weeks) ƒ Provisional Acceptance ƒ Reliability of: ƒ Final Acceptance ‡ Inverters (12-24 months later?) ‡ Tracking ‡ Whole System ƒ Performance Ratio Tests Sapphire – construction / completion issues

13 Technology Risks - Modules 5HOLDELOLW\,VVXHV ƒ 4XLFNFRQQHFWRUUHOLDELOLW\ ƒ &RUURVLRQ loss of grounding ƒ ,PSURSHULQVXODWLRQ ƒ 'HODPLQDWLRQ ƒ *ODVV GLVFRORXUDWLRQ Physical degradation ƒ 0RLVWXUHLQJUHVV ƒ %\SDVVGLRGHIDLOXUH  IEC Certification?

,V,(&RUSURRIWKDWDSURGXFW LVGXUDEOHDQGUHOLDEOH"   1R  1RWLQWHQGHGRUFDSDEOHRIVKRZLQJORQJ WHUPSHUIRUPDQFH  6RPH$FFHOHUDWHG/LIH7HVWLQJ  %XWQRWUHSUHVHQWDWLYHRIUHDOILHOG  FRQGLWLRQV  ,(&3URYHVWKDWWKHPRGXOHPHHWV FHUWDLQVWDQGDUGV IEC Certification

/RRNLQJIRULQIDQWPRUWDOLWLHV           $FFHOHUDWHG/LIH7HVWLQJZLWKFRPELQDWLRQVRIZHDWKHUFOLPDWH Suitable for location ‡ 6DOWPLVWFRUURVLRQWHVWLQJ ƒ :LWKLQNPRIWKHVKRUH ƒ ,(&  ‡ 6QRZORDGLQJ ƒ 7HVWLQJWRWKHKLJKHUORDG3D  Inverters – very important component!

Quality counts Reliability Suitability Maintenance response Inverters

‡ 7HPSHUDWXUHIDFWRUV ƒ 'HUDWLQJ ƒ 6KXWGRZQ ‡ (QFORVXUHUDWLQJV ƒ ,QGRRURXWGRRU ‡ &RROLQJ ƒ )RUFHGRUQDWXUDO ‡ )DQV²GXVW\HQYLURQPHQWV ‡ 0DWFKHGWRWKHPRGXOHVDQGVWULQJV ‡ (IILFLHQF\ (XŤ  ‡ /LIHWLPH ƒ 0LGWHUPUHSODFHPHQWV  Mounting systems

‡ 6HFXULW\RIIRXQGDWLRQV • Security of modules 

• Theft prevention Mounting systems

• Soil Consistency and Stability • Domino effect • Module bending stress Tracking systems Tracking systems

‡ 6WRUPPRGH ƒ /RVVRIWUDFNLQJERQXV ‡ ,QFUHDVHGPRGXOH WHPSHUDWXUH ‡ 7UDFNLQJHUURU PLVPDWFK  ‡ )DXOWVLQPRYLQJSDUWV ‡ 5HJLRQDOGLIIHUHQFHV ‡ 2SHUDELOLW\LQKDUVK FOLPDWHV  Key Messages Risk Identification, Mitigation & Removal

• Ground, weather, access and resource Site Risks • How does resource vary monthly and annually? What is the confidence level?

• Issues that could affect construction milestones, Completion Risks particularly energisation

Technology Risk • Is the technology proven? Is it suitable for the site?

• Issues that could affect project revenue over the project life Operating Risks • Are there contractual or physical mitigants?

• Assess the volatility of cashflow Financial Risk • Are mitigants in place? Post Construction Risk and Related Risk Mitigation Sustainable Business Advisory

April 2012 Risk Identification, Mitigation & Removal

• Ground, weather, access and resource Site Risks • How does resource vary monthly and annually? What is the confidence level?

• Issues that could affect construction milestones, Completion Risks particularly energisation

Technology Risk • Is the technology proven? Is it suitable for the site?

• Issues that could affect project revenue over the project life Operating Risks • Are there contractual or physical mitigants?

• Assess the volatility of cashflow Financial Risk • Are mitigants in place? Energy Yield Prediction Accuracy ‡'RFXPHQW&RQWURO GHVLJQYHUVLRQ  ‡6LWHFKDUDFWHULVDWLRQ ƒ 7LOWDQGRULHQWDWLRQ  ƒ 6KDGLQJ ‡ +RUL]RQ ‡ 1HDUVKDGLQJ ‡ ,QWHUURZ ‡6RODU5HVRXUFH ƒ 6RXUFHRIGDWD ƒ 3HULRGRIGDWD ƒ 8QFHUWDLQW\LQGDWD 

28 Energy Yield Prediction Accuracy  • /RVVHV • 0LVPDWFK • 6RLOLQJ • $&'&FDEOH • 7HPSHUDWXUH • ,QYHUWHU • 0337UDFNLQJ • 7UDQVIRUPHU • 'RZQWLPH  • 0RGXOHGHJUDGDWLRQ • 7RWDOSUHGLFWLRQXQFHUWDLQW\ 

29 Operating Risk

$QH[SHULHQFHG2 0FRQWUDFWRUUHTXLUHGWRFDUU\RXW PDLQWHQDQFHWDVNV ERWKSUHYHQWDWLYHDQGXQVFKHGXOHG  ‡ 5HJXODULQVSHFWLRQV ‡ 0RGXOHFOHDQLQJ ‡ +RWVSRWGHWHFWLRQ ‡ 5HSDLUV ‡ 'DWDFROOHFWLRQDQGUHSRUWLQJ ‡ 6LWHVHFXULW\ ‡ 0DLQWDLQLQJDVWRFNRIVSDUHV  ,QHIILFLHQFLHVLQWKHRSHUDWLRQDQGPDQDJHPHQWRIWKH SURMHFWPD\UHGXFHWKHFDVKIORZ Mounting Structures

([SHQVLYHUHPHGLDOZRUNFDQEH DYRLGHGE\FKHFNLQJIRU ƒ (URVLRQRIIRXQGDWLRQV ƒ 7LJKWQHVVRIEROWV WRUTXHZUHQFK  ƒ &KDQJHVLQJHRPHWU\ ƒ 6LJQVRIFRUURVLRQ ƒ 'HIHFWVLQJDOYDQLVDWLRQ Modules ƒ &KHFNIRU ‡ 'HODPLQDWLRQ ‡ *ODVVIUDFWXUH ‡ 0RLVWXUHLQJUHVV  ƒ &OHDQPRGXOHV ƒ 7LJKWHQEROWV  ƒ &KHFNFDEOHFRQQHFWRUV  Inverters  ‡ &OHDQLQJ ƒ $LULQWDNH ƒ +HDWVLQN ƒ )DQV ‡ 7LJKWHQFDEOHFRQQHFWLRQV ‡ &KHFNIRU ƒ XQXVXDOQRLVH ƒ 'LVFRORUDWLRQ ‡ )XVHV ‡ 5HIXUELVKUHSODFH ƒ 0LGWHUPUHSODFHPHQWV" ƒ 'HSHQGVRQVLWHWHPSHUDWXUHIDFWRUV ƒ 0HFKDQLFDOYHQWLODWLRQ"QDWXUDO"DLUFRQ"  O&M contract Operational risk mitigated by a robust O&M contract ‡ &ODXVHVWRPLWLJDWHSODQWXQGHUSHUIRUPDQFH  ‡ $YDLODELOLW\JXDUDQWHH"  ‡ 3HUIRUPDQFH5DWLRJXDUDQWHH" ‡ 3HQDOWLHVIRUQRWDFKLHYLQJWDUJHWV"   ‡ /LTXLGDWHGGDPDJHVFDSSHGDWRIFRQWUDFWSULFH" ‡ %RQXVHVIRUH[FHHGLQJWDUJHWV"  Financial Risk

‡ Can the project generate sufficient revenue to cover annual debt payments and operating costs?

‡ To assess the financial risk carry out a “sensitivity analysis” i.e. modify financial model input parameters according to stress test scenarios Financial Risk

‡ Stress test scenarios: ƒ Annual module degradation 0.3% - 0.5% - 0.8% ƒ O&M costs ±10% ƒ Inverter replacement- once over project life? ƒ Module soiling losses: 2% , 3%, 4% (O&M dependent) ƒ Unavailability: 99%, 98% and 97% (dependent on grid strength)

‡ Reduce the likelihood or impact of the risk ƒ Module cleaning linked to performance monitoring ƒ Include a maintenance reserve account

‡ Yield is often skewed to the summer months ƒ Include additional financial reserves to ease financial strain Sapphire Industrial Infrastructures 5 MW PV Project, Tamil Nadu, India

‡ Energy yield prediction ƒ Only one resource database considered ƒ Uncertainty and confidence in prediction not considered (P90)

‡ Operation and Maintenance ƒ Site found to suffer from extreme soiling - cleaned continuously ƒ String level performance monitoring not undertaken Key Messages Resource risk: Uncertainty in energy yield prediction is dominated by resource uncertainty Use several resource datasets Understand the uncertainty and probability of exceedance in energy yield prediction (P90)

Operating risk Use experienced O&M contractors Have a well defined O&M contract with performance targets

Financial risk Carry out appropriate stress tests Reduce the likelihood or impact of stress scenarios  SgurrEnergy

• Leading independent engineering consultancy

• International - (UK Head Office) - Portland , Maine (America) - (France) - (China) - Pune (India) - Wexford (Ireland) - Vancouver (Canada)

• Experienced - Over 100 responsive engineers and consultants

• Professional - Triple accreditation to British quality standards

Leading position by experience We have consulted on over 65,000 MW of in over 30 countries covering both project development and due diligence

Europe Asia Africa • Belgium • China • Angola • Bulgaria • India • Kenya • Estonia • Korea • South Africa • France • Pakistan Oceania • Germany • Sri Lanka • Australia • Greece • The Philippines • New Zealand • Ireland • Turkey • Italy • Vietnam • Malta North America • The Netherlands • Canada • Poland • USA • Portugal South America • Russia • Brazil • Romania • Chile • Slovakia • Galapagos Islands (Ecuador) • Spain • Sweden • UK Any questions? [email protected]

41 IFC Advisory engagement in India to support new markets and business models in Solar energy Ongoing Activities

Projects Focus

6LYDJDQJD3URMHFW²0:6RODU3URMHFWProject operational 7ULDORI7KLQ)LOPWHFKQRORJ\XQGHU,QGLDQFRQGLWLRQV3RZHUSHUIRUPDQFH (Advisory Services and Concessional Financing) YDOLGDWLRQ5HVRXUFH9DOLGDWLRQ5HSOLFDWLRQLQ0DUNHW

*UHHQ7HOHFRPV²,QGLDExpansion of new and existing business models 5HJXODWLRQ7HFKQRORJ\GHYHORSPHQW%XVLQHVVPRGHOGHYHORSPHQW for ‘greening telecom towers’ and ‘community power’ 5HSOLFDWLRQLQ0DUNHW

6RODU 0DQXIDFWXULQJ 3URMHFW  Support to current Investment Climate %XVLQHVVPRGHO(FRQRPLFPRGHO0DQXIDFWXULQJ7HFKQRORJ\ efforts in Rajasthan (3GW+)

6RODU5RRIWRS²*XMDUDWPPP transaction being supported %XVLQHVV PRGHO &RPPHUFLDO PRGHO 6WDQGDUGVJXLGHOLQHV 333 7UDQVDFWLRQ5HSOLFDWLRQLQ0DUNHW

Activities under development Projects Focus

Concentrated Photo Facilitate pilot trials to validate financial and technical feasibility of business models Voltaics Status - Help create business model for Solar CPV to have the technology adopted in India

Lighting Asia Expand the usage of Solar Lanterns and the concept of micro grids through supporting business models and industry standards Status - Evaluating the market and the business models

Rooftop Solar Scale-up PPP business model expansion Expansion into creating business models for private home owners to own and operate rooftop solar projects Status - Evaluating the different potential PPP transactions Case Study – Thin Film 5 MW Solar Plant in India • Client Need

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43