Seizing Transformational Opportunities: Solar Component Manufacturing in Rajasthan

Converting solar power generation potential to viable commercial manufacturing propositions

Presentation Outline
India as an attractive solar investment destination Rajasthan Upcoming solar component manufacturing hub Opportunities galore along the value chain Way ahead Feedback

India as an Attractive Solar Investment Destination

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India as an attractive renewable energy destination Solar energy poised to grow in near future
Rank
1 2 3

All Renewable index

China US Germany

Rank
1 2 3

Solar index
US India Italy

3
5 5 7 8 9 10

India
UK Italy France Spain Canada Portugal

4
5 6 6 6 9 10

Spain
China Greece Japan Germany Australia France

Ernst & Young Renewable Country Attractive Index tracks the relative attractiveness of renewable energy market of 30 countries across technologies every quarter India is the second most attractive market on the solar index (Latest ranking February 2011)
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National Solar Mission (NSM) US$55-65 bn generation opportunity in the offing

Utility grid power and Off-grid installations (MW)
20,000

Envisages 20GW grid interactive and 2GW off grid solar power by 2022

Off Grid

Grid connected

4,000 2,000 1,000 200 FY13 FY17 FY22 1,000

Solar manufacturing sector

expected to expand production capacities to meet demand

Envisages target production

capacity of 4-5 GW equivalent by 2020 across the value chain, including 2 GW of solar cells

Government thrust: Critical phase

Spur domestic manufacturing
Drive down costs of generation Promote off-grid Applications
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Source: MNRE, National Solar Mission document

Robust solar energy policy framework

Supply side Pricing and taxation Electricity Act National Electricity Policy National National Tariff Policy Integrated Energy Policy Demand side Energy Conservation Act

Special Incentive Package Scheme (SIPS)

Jawahar Lal Nehru National Solar Mission JNNSM Guidelines

CERC Tariff Regulation

Rajasthan Industrial & Investment Promotion Policy State Rajasthan Investment Promotion Scheme Rajasthan Solar Energy Policy, 2011 SERC Tariff and RPO/SPO

Incentives for manufacturing at National level

100% Foreign Direct Investment allowed Zero Customs & Excise Duties on solar cells and modules Zero or concessional custom/excise duty on capital equipment and raw materials Soft loan @ 5% available through IREDA for solar energy equipment manufacturing Special Incentive Package Scheme (SIPS), which closed on 31st March 2010, received 26 applications, cumulatively valued at INR2,290 billion. The scheme has received proposals across the value chain of both crystalline & thin-film segments. NSM policy provides for similar incentives for manufacturing of CSP and niche SPV materials and technologies segments.

Incentives under SIPS, 2007

Unit Fab unit Minimum NPV INR25 billion SEZ 20% Non SEZ 25 % + CVD exemption

Eco system

INR10 billion
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20%

25 % + CVD exemption

Renewable Energy Certificate (REC) Market based instrument to promote solar energy
Issuance: The National Load Dispatch Centre (NLDC) would issue RECs to renewable energy generators.

REC mechanism: Launched in November 2010

To meet their Renewable Portfolio Obligation (RPO) targets To promote renewable energy development.
Pricing: The REC component will be priced on a notional basis and electricity component will be linked to the normative renewable energy tariff.

RPO obligation: Mandates a State to purchase a minimum level of renewable energy

Trading: RECs can be traded on power exchanges approved by the Central Electricity Regulatory Commission (CERC).

Redemption: An REC can be redeemed by presenting it to NLDC for redemption or on expiry of its shelf life (one year from the date of generation of the corresponding unit).

Rajasthan: Upcoming Solar Component Manufacturing Hub

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Critical levers for creating a sound solar manufacturing ecosystem

Government objectives
Attractiveness of end market Availability of raw materials Skilled manpower Investment Generation Employment Creation Economic Development

Levers

Logistics
Policies and Incentives Ease of Doing Business

The roadmap for solar component manufacturing to harness opportunities across the entire value chain

Business objectives
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Competitiveness

Revenue Growth

Profitability

Rajasthan: A beacon of solar development in India

Strategic location and pipeline commitments of solar generation projects augur well for the solar manufacturing sector in Rajasthan
Punjab Haryana Delhi Rajasthan Uttar Pradesh

Highest daily solar insolation: 56.5 kWh/m2 81% of the grid connected projects under NSM Highest number of projects aggregating to 12 MW capacity under Rooftop & Small Solar Power Generation Programme 5% of total projects 52% of projects for Off-grid PV & decentralized solar applications

Gujarat

Madhya Pradesh

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Source: Rajasthan Renewable Energy Corporation Limited, MNRE, IREDA, NTPC Vidyut Vyapar Nigam Limited

Rajasthan is among the top investment magnets in solar generation

Application
ON-GRID Rooftop PV Systems 12 MW

Category
Power plants

NSM allocation
571 MW

Remarks
81% of the allocation under the NSM out of 704 MW 12 SPV projects of each 1 MW capacity have been sanctioned for Rajasthan. Highest sanctioned projects (52%) under NSM

OFF-GRID

Individual & Commercial Applications

10.268 MW

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Source: Rajasthan Renewable Energy Corporation Limited, MNRE, IREDA, NTPC Vidyut Vyapar Nigam Limited

offering great potential for solar component manufacturing

Technology Allocation under NSM
163.2 MW*

Segment
Polysilicon, wafer and cell

Present status
Absence of players in Rajasthan Production capacity of 22 MW in Module manufacturing

Solar PV

Module Glasses and mirrors Power block

No players in the CSP segment

Considerable supplier base to integrate into CSP related supply chain

Solar CSP

430MW

Iron and Steel Zinc Tubes and pipes

Existing players

Planned projects

Potential sub suppliers

*Includes both on grid and off grid projects

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Source: Rajasthan Renewable Energy Corporation Limited, MNRE, IREDA, NTPC Vidyut Vyapar Nigam Limited

Huge mineral base endowment Solar component manufacturing at an advantage

Largest deposits of lead-zinc ore in India, amounting to 468.51 million tonnes Nearly 99% and 80% of zinc and lead concentrate production in India

Mineral

Share in Countrys Production (%) 99 80

Third largest producer of salt in India with average annual production of 1.2 million metric tonnes
Large reserves of quartz and silica sand for glass manufacturing Second highest cement producing state in India, with 14 major cement plants with a total capacity of 41 million tonnes per annum Around 500 ceramic units, covering Glass and Mineral Grinding units are operating successfully
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Zinc concentrate Lead concentrate

Phosphate rock
Ball clay Calcite

75
71 70

Felspar

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Source: Government of Rajasthan

Cost competitive workforce

Over 122 engineering colleges, 164 polytechnics, 849 ITIs, and 136 MBA institutes 50,000 engineers are produced out of engineering colleges every year Nearly 100,000 ITI and 44,000 Polytechnic seats are available in the state Center of Excellence
IIT

Competitive salary rates in the State*

Peer states

30-40%
Rajasthan

Jodhpur: Centre of Excellence for Solar Thermal Research and Education

Accolades

*Salary of entry level engineer in manufacturing 15

Source: Government of Rajasthan

Ranked No.1 in Talent Sourcing and Employee Costs

General manufacturing skills easily transferable to solar manufacturing and allied industries - specialized glass for Solar PV and Solar CSP

Dedicated Fright Corridor and Delhi Mumbai Industrial Corridor is expected to be a game changer

1483-km long Dedicated Freight Corridor between Delhi and Mumbai is likely to be commissioned by 2016 About 39% of the corridor passes through Rajasthan Delhi Mumbai Industrial Corridor (DMIC) 150km band to be developed on both sides of the corridor 46% of the total DMIC Project Influence Area (PIA) falls in the state.

About 60% of the States area falls under the PIA

Major districts to benefit from project

Jaipur, Alwar, Kota, Bhilwara, Dausa, Pah, Sikar and Sirohi

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Source: Government of Rajasthan

Sound Industrial Policy

Catalyst for investments, socio-economic growth and employment
Benefit of subsidy and exemptions to investors, without any precondition of loan borrowing from any commercial bank.

Features

Precondition of minimum employment of 10 persons has been relaxed to boost MSMEs. Introduction of time-frame for grant of subsidy and exemptions Provisions for e-payment of subsidy have been incorporated Introduction of investment and employment generation subsidy for 7 years and for MSMEs in the notified area for 10 years

Subsidies

Maximum amount of subsidy shall be 50% of the VAT and CST tax deposited Investment subsidy: 30% of the VAT and CST tax deposited Employment generation subsidy: INR10,000 per employee/ annum; INR12,000 for women, SC/ST and persons with disability Simplification of subsidy disbursement by introducing a challan for adjustment through treasury

Exemptions from Taxes

Electricity Duty and Land Tax Stamp duty on purchase or lease of land and construction/improvement of such land Land conversion charge

50% 50% 50%

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Source: Government of Rajasthan

Rajasthan Enterprise Single Window Enabling and Clearance Act (RESPECT)

Ensure time-bound clearances to investors in the State

Notified on 27 March 2011 Notification for Electronic Single Window System issued on 25 January 2011 Projects above INR100 million under the system Mandatory for 10 Departments to receive the application only through Single Window System and process approvals as per prescribed timelines Empowered Committee to provide various approvals in case the competent authority fails to decide on applications within the prescribed period. Investors can file and track applications online through the electronic Single Window portal.

Step towards improving the investment climate and simplifying regulatory approval mechanism in the State. Objective: To serve as a single point interface between investors and various Government departments.

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Source: Government of Rajasthan

Rajasthan Solar Policy

Creating Favorable Conditions for Solar Manufacturing
Reserved Solar Generation Capacity of 200 MW by 2013 for PV manufacturers from Rajasthan with production capacity of a minimum 25 MW/year Development of Solar Park i.e. zones housed with Solar Power Plants, Manufacturing Zones, R & D and Training Centers zone and other amenities State to extend all facilities and fiscal incentives provided by Central Govt/NSM to manufacturers in Solar Parks State to provide additional fiscal incentives for solar based industries in consultation with Finance Department & Industries Department, GoR Land allotment: As per RIICO Rules and Regulations and Rajasthan Land Revenue (Industrial Areas Allotment) Rules, 1959
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Source: Government of Rajasthan

Manufacturing capacity per annum

Capacity allocation for SPV power plant

More than 25 MW but less than 50 MW

50 MW and above

10 MW
20 MW

Selection of developers through tariff based competitive bidding

Solar Power Producer required to source SPV modules from their own manufacturing unit established in Rajasthan

Rajasthan Shining
Advantage Investors

Solar insolations - comparable to deserts of California, Nevada, Colorado and Arizona

+
+

Clearly articulated, progressive Solar Policy

+
+ + + +

Competitive manpower cost, less by 3040%

Rajasthan is strategically located to access the domestic market

Rich mineral wealth: viz. silica, quartz, zinc, lead, etc.

+
+

Significant potential of allied industries Glass, mirror, Steel etc.

Adequate power supply

Abundance of suitable land for solar power generation and equipment manufacturing

Upcoming DFC/DMIC could be a game changer for logistics

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Opportunities Galore along the Value Chain

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Rajasthan offers strong local manufacturing opportunities

Concentrated Solar Power

Solar Photovoltaic

Mirror and glass production Molten salt Mounting structures Receiver production Collector assembly and installations

Module manufacturing Cell manufacturing Glass production Balance of system manufacturing for SPV power plants/systems Ingot and wafer manufacturing Polysilicon manufacturing

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Way Ahead
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Rajasthan aims to be among the leading states in solar component manufacturing

A minimum share of 10% of installed module manufacturing capacity of India in 2020 from the present 2% and from no installed base in cell manufacturing to 10% in 2020 Impact: Production capacity of 500MWp of PV modules by 2020, including 200MWp of solar cell manufacturing INR10-15 billion (US$200-300 million) of investment with presence of players across value chain creating nearly 20,000 additional jobs* Top 3-4 global integrated photovoltaic and CSP players

*Includes both one time and permanent jobs

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Incentivising development of a competitive solar manufacturing ecosystem (1)

Existing Incentives

What more??
Identify solar manufacturing zone within the state or existing SEZs/Parks Develop an inventory of sites that could meet the needs of solar manufacturing industries, and an analysis of what each of these potential sites needs Deeper local content in generation plants under state policy

Policy framework

Solar specific Renewable Purchase obligation (RPO): 0.5% starting 2011-12, rising to 1% in 2013-14

Adequate fiscal incentive

100% exemption on the VAT on all solar energy equipment 50% exemption from payment of electricity duty for 7 years

Develop a solar manufacturing specific incentive package

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Incentivising development of a competitive solar manufacturing ecosystem (2)

Existing Incentives
Water Treatment (identified manufacturing zone)

What more??

Common Effluent Treatment Plants (CETP): 50% of capital cost for establishment provided unit uses 80% of recycled water

Adequate support infrastructure (Up to gate of the park)

Dedicated HT line to the park Development and facilitation for support infrastructure like approach roads, common industrial infrastructure such as drainage system, electronic exchange, laying of telecommunication cables, water availability etc.

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Opportunity for development of competitive solar manufacturing ecosystem (3)

Existing Incentives
Availability of competitively priced land

What more??

50% exemption from payment of applicable stamp duty

Skill development and manpower availability

50% of capital cost involved in developing a training institute

Vocational courses for targeted skill sets such as glass coating, bending, galvanisation etc. Develop industry driven certification programmes/UG and PG courses in modules & systems, O&M etc. Leverage higher education institutions such as IIT in Solar IT - Related software

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Your Perspective Matters

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Your perspective matters

Is Rajasthan doing enough to develop the solar manufacturing sector?

Where are the gaps? What key challenges do you foresee in setting up solar manufacturing facilities in the state?

What can the state do to further enhance Rajasthan as a solar manufacturing location?

How does the State compare with other emerging destinations (National/International)? What are the lessons to be learnt and best practices to be followed ?

What are the potential areas for engagement between the government and industry to develop the sector in Rajasthan?

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Point of contact

Mr. Nagesh C Sharma: Bureau of Investment Promotion

Cell: 09829055087 Email: bipjpr@raj.nic.in

Ms. Anjali Garg: International Finance Corporation

Cell: 09560874009 Email: agarg1@ifc.org

Mr. Harsh Jhanjaria: Ernst & Young

Cell: 09911445784 Email: harsh1.jhanjaria@in.ey.com
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