NLC’s solar hybrid project could finally kick-start Make in India for energy storage

The release of the public procurement notice by the Department of Industrial Policy and Promotion (DIPP) in June 2017 would have been lost amidst the uncertainty of the Goods and Services Tax (GST) rollout in India. The clean-tech sector in turn was disappointed with GST as most components were slotted in a higher tax slab. Subsequent clarifications did bring relief, but the solar sector went through another round of uncertainty with the hearing of the anti-dumping case filed by Indian manufacturers. In between all this, NLC India limited closed one solar project bid and scrapped another one. The tender for 709MW of solar projects saw the inclusion of DIPP’s local content clause for the first time in a Renewable Energy (RE) project. However, it was not raised as there was no scope for bidder to match the lowest bid (L1) and add 50% of project value in India. The second tender, for energy storage with solar PV plant was scrapped and retendered this year and as it stands, it will witness the clause being leveraged to win a project in the clean-tech sector for the first time.

Key points from the public procurement policy under Make in India

  • Local supplier is one who guarantees to offer minimum 50% local value add (in terms of total project value) to the project.
  • Among the qualified bidders, if Lowest bidder (L1) is from a local supplier, contract shall be awarded to him.
  • If L1 is not from a local supplier, L2 shall be given a chance to match L1 if he is a local supplier.
  • The difference in price of L1 and L2 has to be within 20%.
  • If L2 fails to match L1, subsequent bidders would be given an option to match L1 if they remain within 20% higher than L1.
SFR_Solar_preview

A solar- storage hybrid project in Australia (Cty:juwi)

The NLC energy storage project

The energy storage project is for a 20MW PV plant to be developed in Andaman and Nicobar islands. The battery capacity is 8MWh (16MW) which is lower than the 28MWh tendered in the previous round last year. As summarised in this article by PV tech, the bidders at the end of reverse auction were as below.

L1 : Mahindra Susten (1,327,938,040 INR) / ($ ~20.291m)

L2 : Pennar (1,337,938,040 INR) / ($~20.44m)

L3 : Larsen and Toubro (L&T) (1,377,938,040 INR) / ($~21.055m)

L4 : Hero Solar Energy (1,407,938,040 INR) / ( $ ~21.513m)

L5 : Bharat Heavy Electricals Limited (BHEL) ( 1,487,938,040 INR) / ($~22.736m)

The bid is currently being evaluated as both Larsen and Toubro (L&T) and BHEL have both opted to meet the local content requirement of the tender and are well within the +20% price margin from the L1 bidder, Mahindra Susten. In all likelihood one of them would win the contract with a high probability of L&T staking claim to the bid. However, I must confess there are other bid criteria which L&T has to fulfill if it has bag this award under the Make in India directive. Under the current market dynamics and the appetite of developers, I personally don’t see why L&T wouldn’t want to take risks and bag the project.

Is the clause a big boost to local manufacturing in India for RE systems?

It’s still early days to evaluate the impact of the clause in other sectors but if L&T manages to win and execute the NLC energy storage project it will be a big boost for domestic manufacturing in the Indian clean-tech sector. Providing impetus to Indian solar manufacturing through Domestic Content Requirement (DCR) in solar bids dint do much in addition to getting into a tangle with WTO for international trade compliance in the pact. If the NLC bid goes to the L1 bidder, the battery system would be completely shipped in containers to the site in addition to importing solar modules. On the contrast if L&T manages to bag the bid under domestic content requirement it would be importing only battery cells and doing the assembly and complete system integration in India. Lithium battery pack assembly is currently happening in India but on a small scale for telecom towers and other back-up applications. If the 8MWh battery system is assembled in India, it would be one of the largest lithium based battery system assembled in India at the moment. For a sector that has been warning against a repeat of battery imports from China (just like solar PV modules); raising issues related to high GST (28%) and no impetus for local manufacturing completing this procurement through a significant value add in India will go a long way before India sees Giga factories for batteries being built.

So, all in all, public procurement agencies in the clean-tech space can definitely learn something from how the NLC bid has unfolded. The make in India policy clause formulated by DIPP can indeed create traction towards local manufacturing. It shouldn’t take long before other state agencies and central agencies like SECI and EESL incorporate this clause in upcoming tenders.

The DIPP’s note on public procurement can be found here.

Images courtesy: juwi

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Doing business amidst India’s Electric Vehicle conundrum

The National Electric Mobility Mission Plan 2020, when first launched in 2012 with a target of having 6-7 million electric/hybrid vehicles in India by 2020 wouldn’t have turned many heads in the sector. Five years down the line in 2017, with a new government at the helm, an announcement of having only Electric Vehicle(EV) sales by 2030 has definitely fueled speculation from all quadrants of the country. How else do we expect the sector to react, considering auto sector contributes to over 7% of GDP (~25% of manufacturing GDP), transport fuel accounts for 5% of the GDP and about 30 million direct and indirect jobs are at stake.

Ever since, the announcement was made, I have managed to keep track of the proceedings at both the central and state level with interactions with relevant stakeholders in the process.

The first discussion I had was with my colleague, Harsh Thacker, looking at the situation in India from a common citizen’s perspective.

A month down the line, Karnataka turned up with the country’s first policy on electric vehicles. It was a comprehensive policy looking at both the electric vehicles and energy storage sector.

I was also able to record the opinion of R V Deshpande, Minister for Industries, Gov. of Karnataka who was instrumental in bringing out the policy on EV and energy storage.

Simultaneously, the report commissioned by the Forum of Regulators to evaluate the impact of electric vehicles on the grid was released. Mahesh Patankar, who was the lead author in the study joined me for a discussion elaborating on the methods behind the study and why he the grid would be safe with an increasing EV penetration. The report worked on the premise, that India would have 6-7 million EVs by 2020, the only official target till date.

Prof. Ashok Jhunjhunwala an adviser to the government of India who was one of the early proponents of the all EV vision shared his reasoning on what he calls Blind Men and an Elephant.

At the same time, the Industry body, SIAM released its white paper advocating an electric vehicle roadmap for the nation, which indirectly hinted that an all-electric vehicle fleet was not possible by 2030 and India could target the same by 2047, India’s 100th year of Independence.

Talking of industries, I happened to be part of a stakeholder consultation hosted by NITI Aayog who claims to have been given a mandate to formulate India’s electric vehicle programme. Awadesh Kumar Jha from Fortum India who has been evaluating the market for setting charging infrastructure was also part of the consultation. He joined me to discuss the outcomes of the stakeholder consultation.

Finally on a positive note, amidst the uncertainty on the policy front, the government sanctioned subsidy under the FAME programme to roll out electric buses. Funds for procurement of 390 buses were released with a deadline to place orders by end of March 2018. The state transport utilities proactively went ahead with bids and 3 companies won contracts for supply. I was glad to chat with Nikhil Dhamkar from Sun Mobility, who along with their JV partner Ashok Leyland will supply electric buses in Ahmedabad.

With the elections just a year away, we could expect some announcements in the EV space in the next few months, however, if we miss that, we could probably lose a year of action.

Image cty: Tesla

What the union budget (2018-19) means for Renewable Energy?

As yet another annual budget is presented, its time for a review just like in the previous years (Read more). This time, reviewing the budget from the Indian clean-tech sector’s perspective including a discussion with an expert from top global tax and advisory firm.

Listen to the complete budget discussion on the Emerging Tech Podcast (below).

Key Highlights

  • Renewable Energy budget outlay increased for wind 400 to 750Cr for 4GW target RE capacity expected to contribute to 17% of power generation in 2018-19
    • Decreased outlay for solar 2661Cr to 2045 (10GW grid and 1GW rooftop target)
    • Green Energy Corridor outlay increased from 500 to 600Cr
    • Off grid solar budget increased from 700 to 849Cr
    • DDUGJY outlay decreased from 4814 to 3800Cr although Saubhagya has a separate allocation of 3700Cr
    • Integrated Power Development Scheme has an outlay reduction from 5821Cr to 4935Cr
    • FAME has been allotted 260Cr (Subsidy for 1000 cars and charging infra)
  • Smart Cities : Budget Increased from 9000Cr to 12169Cr
  • Promotion of Manufacturing (though MSIPS and other schemes) increased from 745Cr to 864Cr
  • Budget outlay increased for MNRE from 9466 to 10317Cr with MOP declining from 64318 to 53469Cr with major reduction for NTPC
  • Electrification of railways: 4000kms targeted for commission in FY 18-19
  • Customs duty reduction from 5% to 0% for solar glass
  • Customs duty increase for Complete Knock Down (CKD) of automobile parts from 10% to 15%
  • Customs duty on Lithium ion batteries for mobiles increased from 10 to 20%.
  • Social welfare surcharge of 10% instead of existing 3% on imports.