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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Energy Access for All

If you have been closely following the global electrification drive, you would have heard of the ‘Power for All’ campaign. It is driven by a mission to deliver energy access to all by including decentralised energy solutions, mobilizing capital and delivering high quality energy technology solutions. Power for All is supported by UK Aid, UN Environment, Climate Works among other agencies. Partners associated with power for all campaign include various agencies working on energy access in India and Sub-Saharan Africa.

William Brent, a Director in the Power for All campaign joined in the conversation on Emerging Tech Radio podcast to talk about their objectives, progress and particularly on the opportunities for cross-region collaboration between India and Africa in the space of energy access

Part 1

In the first episode, William Brent spoke about Power for All’s  campaign  objectives work and progress in India and Sub Saharan Africa. He did highlight a few key findings from IEA’s recent publication, Energy Access Outlook for 2017. The report incidentally points out to a lack of progress in electrification in Sub Saharan Africa where it is failing to keep track of the population growth in spite of increased awareness. On contrast in India nearly 500m have gained access to electricity since 2000 i.e. close to 85% of the population have access to electricity in comparison to less than 50% in 2000. With the new electrification scheme, Saubhagya, India has a target of 100% electrification by end of 2018. The power for all campaign has also greatly emphasised on the United Nations Sustainable Development goals, particularly, SDG No 7 which aims to ensure affordable, reliable, sustainable and modern energy for all. The Sustainable Development Goals aim to achieve the objectives by 2030.

In the second part of our conversation where we discuss the technical collaborations that is happening between India and Sub Saharan Africa in the space of energy access and what are the key challenges to be addressed if the energy access for all is to be a global reality.

Part 2

You can find out more about the topic here.

Emerging Tech Radio Playlist

 

 

Will Wind-Solar hybrid projects take off?

In the run-up leading to a record installation of wind and solar projects in India 2016 saw a slew of major announcements from the Government. One of the policies that received much fanfare was the announcement of Wind-Solar Hybrid policy. However, its been well over an year and yet there seems to be no final regulation on that front.

Highlights from draft national wind-solar hybrid policy (2016)

  • Wind-solar hybrid capacity target of 10GW.
  • The policy envisages wind-solar hybrid integration at both the DC and AC side.
  • Hybridization of existing wind/solar project permitted provided the total capacity is within the evacuation limit.
  • Tariff for power generated could be FiT fixed by state regulators or discovered through competitive tariff.
  • All fiscal incentives available for wind/solar to be provided for hybrid projects.

Following up on the announcement at the national level, Andhra Pradesh (AP) released its draft wind-solar hybrid policy in 2016. AP govt. went ahead with finer definitions of capacities and other functional modalities but, there is no update on the final policy yet.

  • Target of 3000MW of wind-solar hybrid capacity by 2019-20.
  • System integration permitted in pooling sub-station or co-injection after inverter.
  • The hybrid policy also to look at other emerging technologies like energy storage systems.
  • At locations where wind density is higher, solar capacity to be lower and vice versa.
  • APTRANSCO to consider evacuation based on ampacity rather than MVA/MW connectivity.
  • No additional charges to be levied if additional wind/solar capacity is below the sanctioned transmission capacity.
  • Policy envisages both DC and AC integration. Also supports existing/allotted projects to be integrated as hybrid project.
  • Capacity split between wind and solar to be in the ratio 1:0.6 to 1:1.5
  • Wind and solar generation to be metered separately and paid based on the tariff set by state regulator for different voltage levels at project site.
  • 25 year exemption of transmission, distribution and cross subsidy charges for captive/ open access.
  • Must run status for hybrid projects. (Read more about the latest issue with must-run status)

solarAnother state, Gujarat,  released a draft version of wind-solar hybrid policy in early 2017 but is yet to be finalized. Gujarat, unlike AP lacked clarity even in the draft policy. The basic requirement of allowing wind and solar to use the same evacuation system was being challenged with metering allowed only at the pooled sub-station level. Globally, wind-solar hybrid projects have taken off pretty well (read more about a project by juwi). In India, NTPC has taken the lead role with a project ongoing near its thermal plant in Karnataka which was won by Siemens-Gamesa, 2MW wind and 1.37MW of solar. (Read more)

In order to enable large scale development of wind-solar hybrid projects, there is a need for clarity on the tariff (and metering) considering the recent low tariffs in India (More on solar tariffs in India). Power evacuation has to be on a common transmission line unlike the one proposed by Gujarat state. Its high time the regulators open up the forums for discussion on the draft policies and finalise the regulations, until then the hybrid projects are likely to stay grounded.