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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Is it too late for a public consultation on Electric Vehicles (EV)?

NITI Aayog earlier this month released a Public Consultation document on Zero Emission Mobility. The document as it claims, aims to align with the Government of India’s vision to have a policy that facilitates a transition only Zero Emission Vehicle (ZEV) sale in 2030. The consultation specifically seeks opinions on 12 aspects on the proposed policy namely

  • The global scenario of ZEV in the past few years and future forecasts in terms of technology and performance.
  • Prioritizing the first adopters of ZEV: Which category of vehicles should be prioritized, whether public of private fleet?
  • Charging Infrastructure
  • Manufacturing: Policy options to promote manufacturing of EVs and batteries
  • Balancing energy demand for EVs with influx of Renewable Energy (RE)
  • Regulatory reforms/amendments
  • Fiscal and non-fiscal incentives
  • Promoting Research & Development (R&D) in EV and energy storage
  • Skill development
  • Recycling and treatment at end of life of EV and battery
  • The general user perspective of EVs
  • Potential impact on the automobile industry

NITI Aayog’s open consultation is a welcome step considering it is looking to formulate a road-map that involves multiple government ministries. For once, it is a real test of its ability to break the silos in the government and get every ministry on board through this policy, the very purpose it was entrusted to do at inception.

India’s ambitious Electric Vehicle vision: What does it mean?

Is it too late?

As it stands, the draft of the national Electric Vehicle (EV) policy was first submitted to the inter-ministerial group around September-October 2017. There has been no traction at the ministry level ever since. In the mean time, Karnataka has come up with a comprehensive policy on energy storage and electric vehicles and Telangana is close to releasing its policy.

Irrespective of what happens with the existing draft of the EV policy, there is not much that can get into it from the public consultation that NITI Aayog is currently hosting unless the proposal is any radical step. Sources from the team have already confirmed to me that they are already aware of the popular schemes and are definitely not keen to hear them again through this process. On the other side, the entire process could actually delay the release of a policy. It is definitely a welcome step to open the doors for public consultation, but NITI Aayog should focus its efforts on plugging the regulatory hurdles that are already known. It would enable private players to actual invest and create a market rather than wait for a full policy. All said, now that an opportunity is given, I will definitely submit my views.

Reference:Zero Emission Mobility. (Full document)

 

Karnataka Electric Vehicle and Energy Storage Policy

The Electric Vehicle and Energy Storage policy announced by the state government of Karnataka is well ahead of even the Indian government’s proposed Electric Vehicle policy. The opening lines of the policy declare that Government of Karnataka wishes to make Bengaluru, the Electric Vehicle (EV) capital of India.

Check the link to know more about India’s Electric Vehicle Vision

The statement from the Government of Karnataka looks ambitious, but considering what Bengaluru, the silicon valley of India, has managed to achieve with the IT sector and subsequently turn into a start-up capital, the statement could in fact have more substance than what meets the eye. In the past few years, there has been an upspring of start-ups not only in the IT space but also in alternate energy and electric vehicles in the region.

A key characteristic feature of this policy happens to be the fact it tries to integrate energy storage manufacturing which is key to fostering an electric vehicle industry. The proposed policy as expected is filled with incentives and concession packages to lure investments. The policy has a validity of 5 years or until a new policy is announced.

The policy document intends to align with the national objective of having an all-electric vehicle fleet by 2030. In addition to reducing the dependency on crude oil consumption, where in 80% of India s oil requirement is imported and about 1/3rd of it is used in the transportation sector; the policy also emphasizes to reduce emissions in the sector by promoting EVs, which is laudable. Incidentally there is a mention of recent World Health Organization report that says India is home to 10 of the world’s 20 most polluted cities.

Highlights of the policy

Listen to the conversation to know more.

  • A key major objective of the policy is attracting investments of around 31,000 Crore (about 5Bn$) and employ 55,000 people in the sector.
  • EV manufacturing zones and clusters with complete infrastructural facilities is envisaged like in similar automobile manufacturing.
  • Three wheelers, cab aggregators, corporate fleets and school buses/vans are to be encouraged to shift to electric transportation. Already, non-transport private vehicles are exempt from paying taxes under the Karnataka motor vehicles act. Also, the national committee is evaluating the proposal to use standard batteries for public vehicles like 3 wheeler rickshaws. These are likely to aid this objective.
  • Similarly public fleet operators will introduce 1000 EV buses during the policy period with Bangalore Metropolitan Transport Corporation proposed to have EV fleet services within city by 2018.
  • An emphasis on EVs has been made for goods transportation within city limits operated by logistics firms. Logistics firms operating with e-commerce platforms are likely to benefit.
  • Battery manufacturing will be facilitated by the Karnataka Udyog Mitra who will operate an online clearance system with special incentives for modular lithium ion batteries.
  • The policy proposes to adopt BIS standards for setting up charging infrastructure with proposal to amend any existing bylaws to setup charging stations in public buildings.
  • The government will encourage industry and academia to undertake research in this space and setup charging infrastructure that adheres to ARAI/BIS standards.
  • A Special Purpose Vehicle (SPV) involving different government agencies in Bangalore will be mooted to setup charging infrastructure in the city.
  • A special tariff is likely to be proposed for EV charging in the state including proposals to permit energy resale at charging stations. This is an interesting proposal considering there are regulatory hurdles before any such proposal can go through even at the central level.
  • Fast charging stations and battery swapping networks at every 50km interval to be established on prominent highways of the state including Bangalore-Mysore is also proposed.
  • Public bus and metro stations to have EV charging infrastructure.
  • The policy also intends to encourage lease or pay-per-use business models for battery swapping stations. A few companies in the state are already evaluating the business proposition of swappable batteries.
  • An end of life battery use for solar PV applications is also envisaged including a safe disposal mechanism in Public-Private Partnership model.
  • On the manufacturing side for batteries the state has declared a target of inviting investments up to the tune of 5GWh, which is expected to generate a net employment of over 10,000.
  • Special incentives for skill development in battery manufacturing is also proposed.
    • An Investment Promotion Subsidy (IPS) in the range of 20-25% of total fixed assets shall be provided to manufacturers of EV components.
    • The Investment Promotion Subsidy will be available over and above any subsidy offered by Government of India (GoI).
    • Total exemption on payment of stamp duty, concession on land registration charges, reimbursement of land conversion fee and exemption from tax on electricity tariff are other incentives proposed.
  • A special package of incentives and concessions will be considered for Ultra Mega and Super Mega EV enterprises/Lithium ion battery manufacturers catering to exclusively for EV market based on investment and employment potential.
  • All project proposals and incentives will be subject to the approval of technical committee. A high level inter departmental review committee will also be constituted to regularly review the progress of developments under this policy.
  • Incentives in the form of capital subsidy up to the tune of 25% of capital investment for the first 50-100 fast charging, battery-swapping stations depending on the type of EV served.

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Cover image :Tesla Energy