EPC in full swing at Kutchh solar Power project- Movya Consultancy

EPC: There were no traditional EPC company even with little  knowhow of the solar project installation based out of Gujarat prior to 2009.  On INDIA level if you have observed, Most EPC’s of 2009-11 had little or No experience of building MW scale solar PV project, though they received contract with lower pricing but struggled to set up clients project in Gujarat. Not knowing the local risk factor involved for working in Gujarat environment, if my statistics are correct many EPC’s had very hard time completing project by having accrued high labor cost and out of state procured material cost. Working with these EPC Company, Today there are more than 12 Sub EPC contractors based out of Gujarat who got fine expertise built-up.   Today some of these mechanical and electrical Sub contractors have very much perfected speed versus quality work of solar project installation.  Thus today we are seeing atleast 4 full-scale Gujarat based EPC contractor who got very good hands on experience and labour force on ready to roll.

Land procurement: Definitely land procurement has been a big headache for solar project developers in last two phases. Even government backed Solar Park also went through some of these hiccups related to possessions and pinpointing right land parcel that was allotted to developers. Beside Heavy raining specifically had doomed project development plans of many EPCs and developers. In due time most of these issues been resolved and thus major parts of project allotted were commissioned today and or on the verge of completion. Today you can see there are plenty of land banks has been created by local land bankers paving a way to get easy affordable and paper clear land parcels available on demand for setting up solar power project. In the next phase, few land bankers are bringing an option to lease land through affordable private leasing of a land for complete life of solar project which will speed up development  with bypassing land procurement bottlenecks for solar power generation project installation.

Next phase: Future of solar industry in Gujarat seems very bright as CM is very enthusiast on this renewable option to the energy. As announced many places, on April 19th, during Charnaka solar park inauguration, hoping Gujarat government will announce third phase allotment capacity, process of allotment and may be guideline to final application.

Current data: Time to see field data of existing solar PV project in operation, four more developer have started evacuation in March. Couple of other projects started functioning full capacity energy production and are now evacuating to his max capacity installation.

Interestingly most projects started producing on an average 25% more power compare to the February production data as one can understand summer is started settling in.  as days goes by for next three month, We will see some more increase in the output of every solar PV panel installed having clear sky and perfect lengthy summer day ( day time is now 13+  hours almost in Gujarat now).

Though, summer may not be all fairytale blessing for power productions for solar project developers in Gujarat.  The projects installed in or near to desert region definitely can expect dust storm (Big dust storm that stays for least 10-15 days stretch) likely to start during end of this month and continue till end of summer season. During the daytime this dust storm not only blocks 80% of direct sunlight creating sudden drop in power output, this nano size dust particles keeps hanging in the air for long long time and settles down over the panels very slowly every hour that continue for weeks requiring time squeezed panel cleaning schedule and O & M activity.  Apart from that, there more likely situation of grid transformer failure during every summer as observed in past.  Good news is, GETCO has learned a lot in last few years and Grid outage will be managed more efficiently this summer as I heard of.

Not so good news is, though 26 developers have started evacuating power to the grid, most developers have not seen the payment coming to this date. GUVNL is sincerely revalidating all documents related to project allotment, project financing and other necessary steps prior to release of first payments to this developers.

Below is the March 2012 data of power generation by solar PV power developers of Gujarat.

March solar Power Production Data- MOVYA Consultancy

Nilesh Patel is project consultant for solar PV and Solar Thermal power generation. He owns business Movya consultancy dealing in project consultancy, government liaison, Allotment, signed PPA/ Equity trading and Land banking. He is also independent freelancer expresses his understanding of current issues alike in various national and international magazines and newspaper. If you have questions on above article or business please contact him on Nilesh@movya.com. For his business visit http://www.movya.com/

Below are the latest figures from month of February power generation data from solar PV based power generation projects that are already evacuating power to the live grid of GETCO (Gujarat Energy Transmission Company). (Courtesy:  GETCO). These are the 22 power projects totaling 280MW that are online right now out of 600 MW that’s already been completed but not connected to the grid. There are other few projects who have got evacuation interconnection in march and got commissioned are not part of this list.

Gujarat solar project performance data by Movya Consultancy

*=   Capacity mentioned may not have been fully operational in few cases from 1^st of February.

**= Data gathered officially from the government publication and MOVYA does not take any responsibility of the correctness of this data in whatsoever manner. There are other projects who have got evacuation interconnection in March and got commissioned are not part of this list.

Nilesh Patel is project consultant for solar PV and Solar Thermal power generation. He owns business Movya consultancy dealing in project consultancy, government liaison, PPA Allotment, signed PPA/ Equity trading and Land banking. He is also independent freelancer expresses his understanding of current issues alike in various national and international magazines and newspaper. If you have questions on above article or business please contact him on Nilesh@movya.com. For his business visit http://www.movya.com/

Trying to answer those questions…

-          Preface:

As per the 2010/11 PPA  signed by all solar PV power project developer who got allotment in Gujarat part of Phase I and Phase II, government of Gujarat obligated GETCO  to provide free of charge interconnection to the solar power project site up till 15 KM from the 66kv substation. If solar developer purchases land parcel more than 15 km distance from nearest 66KV/11KV substation, responsibility falls with solar Developer to complete the power evacuation by himself bearing all cost and expense associated with. Few of Gujarat solar developer trapped into that problem as executives of the company didn’t understood the complexity of power evacuation while finalizing the land parcel for the solar Power project besides absorbing high cost of right of way land from the local farmers for HT line installation.

-          Let’s flashback:

Out of 84 Solar power project developers, more than 40 have finalized the land around august/ September time frame. More than 30 decided land in November.

-          Revisiting PPA story and GETCO work on hand:

For promotion of solar industry, government became generous and hooked up GETCO with responsibility of providing  free of cost interconnection to all solar PV power projects, though Government of Gujarat does not extend same generosity to wind power projects getting installed in Gujarat every day.  Considering  40 solar developers with land in hand around September, with atleast 10 KM of power evacuation per Solar Power project site, boils down the complete work estimate to be of 400KM with timeframe of completion within 4 months, i.e. December 31^st of last year.

-          GETCO STORY:

With privatization move in the government of Gujarat to bring effectiveness and speed, GETCO now outsource power evacuation project work to private market via official tender process.   Before floating any tender GETCO must have, exact location of the power exit point of each solar power plant, evacuation route for each power plant, capacity of the 66kv substation taking new power load and exact material to be procured and supplied to the sub-contractor for each solar power project site.   Now with all 40 develop contacting GETCO to start evacuation at same time, how can someone expect GETCO to complete everything from getting all details from all solar project developers, finalizing evacuation plan for each, looking at power load at each substation with distribution company and then awarding a tender to private subcontractor in a month and then expect sub contractor to complete all ROW and installation be complete in next three month after?  But though GETCO was super fast awarding contracts quickly and letting tender awardees to start the work by asking them to send material requirement timeline ASAP.

-          GETCO Sub-contractor story:

It’s nowhere a cakewalk. For any power evacuation HT line implementation between solar power plant site and nearest 66KV station, there happens to be many hurdles like road crossing, water canal crossing, private farmer land retention or public land leasing.  Once sub contractor finalizes final route plan for power evacuation, first thing they will check out the exact locations where steel structure to be erected to support HT line. This land procurement for installing structure on someone else’s property is called ROW (right of way).  ROW always has lots of resistance from local farmer as well as different government bodies like village panchayat.  There comes the right match of people skills and local environment understanding to get through the exact land require, at right place and with affordable price. Having land pricing soaring day in day out in Gujarat, getting ROW for sub-contractor has became damn difficult these days.

-          GETCO comes back:

GETCO was very much known to time consumption process of procuring such a huge quantity of material from the vendors and ship it to the individual solar power project developer’s site.  That’s the reason GETCO was calling all developers time to time to confirm the land location at the earliest, despite none actually provided any information about land. Bear in mind all Gujarat solar developers were tirelessly searching for source of funding those days, finalizing land requirement for solar power project and providing information in this regard to GETCO was last priority. As repeated attempt by GETCO to get land location identified by the solar developers went nowhere, finally GETCO alarmed it to GUVNL with inability to complete free power evacuation for most solar developer in time. Hence supplementary PPA came in picture.

-          GUVNL comes into picture:

In late July, solar developers who had changed the land location (what they have mentioned earlier during signing of GUVNL PPA) were notified by GUVNL to sign supplementary PPA with a clause that passes the 100% interconnection responsibility on the shoulder of solar developer, where GETCO pays the money and provides all material, but work must have to be carried out by developer by hiring any sub-contractor from the open market.  Inside that supplementary PPA clause, GUVNL explicitly clarified of no obligation to GETCO or GUVNL if power evacuation not completed on time for any hurdles to be faced by the solar project developer to complete the work. Hurdles.. Yes, delay in getting material supply, ROW issue, absorbing unimaginary high cost of work due to unavailability of GETCO approved sub contractor in the market, and many other small issues…

-          The end:

Ultimately most solar project developer ended up in the fierce task management about getting sub-contractor for power evacuation, getting material issued on time from the GETCO which they haven’t stockpiled, getting ROW cleared for HT line beside all procurement and installation going on at the solar PV project site.  Thus creating delayed feedback from every party involved, many sub contractor aren’t able to complete power evacuation facility on time and so this developers  though their solar PV power project are completely installed as per record, are waiting for grid to be available.  Solar Developers part of Solar Park story has same ending too, having issue with land and procurement of material even though that was GPCL’s (government enterprise) job.

As of this writing, leaving very few, most of the solar developers have not received project commissioned certificate till date.  Though 21 (twenty one) projects are already started pouring electricity to the grid prior to end of January, that means out of 60 project that was commissioned or ready to be commissioned list that I posted in my last article, 39 developer  either had no power evacuation line completed or ???????

English Proverb:  The road to hell is always paved with good intentions.

Nilesh Patel is project consultant for solar PV and Solar Thermal power generation. He owns business Movya consultancy dealing in project consultancy, government liaison, Allotment, signed PPA/ Equity trading and Land banking. He is also independent freelancer expresses his understanding of current issues alike in various national and international magazines and newspaper. If you have questions on above article or business please contact him on Nilesh@movya.com. For his business visit http://www.movya.com/

http://www.movya.com/gujarat3rdphasepressnote.pdf

courtesy GERC website

Its 25^th January  not-so-cold Ahmedabad evening and I am sure people who are connected with Solar power project development in Gujarat are utmost desperate to hear news from GERC (Gujarat electricity Regulatory commission). Most desperate are three parties biting their nails awaiting final decision from GERC. These parties are,

One, a solar project developer from phase I or Phase II who have not made much of a progress on the ground and are not able to complete their project even on 28^th January deadline of FIT control period. A developer who have filed for an extension of this control period to GERC, who have hired top-notch-highly-expensive lawyer to argue his case in GERC

Second, a GUVNL, who’s chief, in response to the project commissioning deadline extension appeal filed to the GERC by some project developers, has recently replied as “unconvincing reasons for delay”, likes to understand consequences of extra burden of payment incase deadline being extended for all projects

Third, in-waiting prospective 3^rd phase solar PPA aspirants, waiting to find out if their IRR calculations makes sense with new Feed-in tariff.  This tribe also includes Indian and international manufactures and EPC providers planning to set their presence in INDIA starting with Gujarat, having favorable business environment and bureaucracy for solar power project development.

Finally, this expectation will be over by 27^th January evening. GERC should be delivering two details. Whether extension will be permitted for all developers or case to case basis or none? Second new FIT for control period from 29^th January 2012 through 1st March 2015. If rumors are to be believed, new FIT will be near to Rs. 8/Kwh. While discussing about this with few top industry individuals, I hear huge cry as completely absent minded FIT which can get down entire Gujarat solar power project generation industry overnight.

Though my take is different, today most comprehensive calculation of per watt cost of solar PV Crystalline based Power generation cost comes close to Rs. 7.25/Kwh.  Caveat here, we use cheapest, yet all certified Chinese/ Taiwan made modules, book all Copper in advance and have EPC team who can commission project on war-footing basis.  No doubt this doesn’t make your IRR so lucrative what you have had yesterday but still for the long term return this can’t be ignored, if developer really wants to remain in the industry for long time or manufacturer wants to consume his own panels for his self sustaining in everyday declining module prices.

There are stories all around about trends going in the market about module prices. 50 billion dollar investment by government with 4% interest loan and 30% other subsidies for doing solar business in china have caused really big manufacturing base out there. Anyone can understand this price panic when your warehouses are full. But that is going to end with filing bankruptcies by these manufacturers with trend of vanishing FIT internationally and so module prices are poised to shoot up at the end of 2012.

But all in all, lower module prices, higher copper prices, higher land and labor cost still makes a case if FIT is enough to sustain the business, if not MW scale, government can look at rooftop with huge potential of net metering. Expect some in new announcement.

Let me conclude with final words on what’s what in Gujarat. As of this writing, nearly 300MW of solar PV power generation project has been commissioned so far in Gujarat. Considering final deadline of 28^th January 2012 for FIT, Final inspections of some of late projects are going in full swing by department. The GERC already sympathized with developer by not attaching penalty with project that will be completed prior to 27^th January. The fate of rest of 645 MW solar power project developers holds till 27^th January evening. I see clearly a panic of selling PPA or completing project ASAP in those project-not-complete developers.

And so fate of solar power generation industry of Gujarat is attached with these remaining 645MW PPA holders.

Happy Republic Day to all

Nilesh Patel is project consultant for solar PV and Solar Thermal power generation. He owns business Movya consultancy dealing in project consultancy, government liaison, Allotment, signed PPA/ Equity trading and Land banking. He is also independent freelancer expresses his understanding of current issues alike in various national and international magazines and newspaper. If you have questions on above article or business please contact him on Nilesh@movya.com. For his business visit http://www.movya.com/

]]> http://movya.com/blog/?feed=rss2&p=147 1 http://movya.com/blog/?p=145 http://movya.com/blog/?p=145#comments Sat, 31 Dec 2011 04:43:09 +0000 Nilesh Patel http://movya.com/blog/?p=145 24th Hour Update..

- Gujarat Electricity Regulatory Commission (GERC) is hearing all petitions filed for getting extension of Rs. 15 /Rs.5 FIT control period by first and second phase solar PV power project developers.  First it was heard in November and was postponed on 22nd December and then to 30th December again. With all tooth and nail, lawyers are knee bending to convince GERC  bench with long long lectures about why they have right to get an extension. Not sure  what will be the outcome but after very very long day, GERC still has still to hear another 11 of remaining petition and will be further continued on January 7th.  Not sure whether GERC will issue control period deadline extension decision on 7th but  must have to decide for FIT to avoid creating black hole of days if any project been commissioned after 28th January. As most of you know 28th january is final deadline when current GERC solar policy order of 2009-11 is ending.

-Rajsthan solar business looks like on track. 3rd january is  to be final date for RFS filers. a bid date.

Analysis:

Solaire Direct  SA  batted lowest of all for Rs. 7.49 for 5 MW while  Green Infra got 20 MW for Rs.9.39 the highest FIT in the band. Welspun has headed the pack with 50MW allocation on lower FIT, while Mahindra solar got 40mw on higher side of FIT allocation band. Azure got 35MW also batted low. Jackson power got 20 mw on lower FIT while Fonoche Energies AS also got 20MW but on higher side of FIT band. Having in nutshell entire 350 MW allocation of phase I batch II of NVVN nearly 76% allocation goes to 10 companies while rest of 24% of allocation is distributed among rest of the 10 developers.

Gujarat Phase III solar PV/Thermal Power project under new policy 2012-2015:

Looking at above scenario, Gujarat Phase III FIT rate of Rs. 10.27 for 25 years mentioned in the draft policy automatically becomes invaluable for all developers. This Draft policy in Gujarat is expected to be getting finalized soon and expectations are that same will be out by January 2012. From the NVVN bid conference yesterday many must have booked the flight to Gujarat for sure and surely its right time to look into Gujarat for next phase allocation if investors are interested in the piece of solar development pie in INDIA.

Gujarat Phase I and Phase II solar project development issue and progress:

Out of 84 developers most have picked the hat and are now on the field. Comprehensibly speaking 80 MW of solar PV power projects are already commissioned and addition to that there are 40 MW of solar PV projects are installation complete waiting for grid to get connected.

There are few developers who are in Catch 22 position. Most developers signed one-way GETCO derived supplementary PPA with GUVNL because of a land change. As per the Clause in this new agreement, GUVNL is no way responsible to evacuate power from developer site to nearest 66KV substation, hence not responsible to have power evacuation  completed either to the project deadline of a developer i.e.31^st December.

Under this special agreement, GETCO suppose to supply all materials to Developer and then developer has to find contractor to get this power evacuation set up for their project. No doubt, GETCO/GUVNL will bear this cost of power evacuation but that again will be on Government SOR (standard of rate) basis for which no contractor will take your order.  Though developers are ready to pay all extra that private contractor asking to complete this power evacuation work, GETCO now doesn’t have material to supply to this developer hired contractor.   While GUVNL  has taken all hands off taking any responsibility of the delay  of project commissioning,  Developers are in FIX and they have no way but to push GETCO official to get this material granted to them  ASAP so they can commission the project.   There will be many developers running around for this material to finish the evacuation work as December end is just around the corner now.

Anyway, good thing, There is more than 500MW of project land has been legally rightfully procured and more than 200 MW of modules are already on the site with 300MW projects are undergoing CIVIL construction at top speed. Some smart EPC/ Developer have procured most material in advance and are warehousing all modules, inverters, transformers, cables, panels boxes every nut and bolt at site, in ready condition to implement them.

Gujarat Phase I and Phase II solar PV project commission Deadline extension and GERC

Last few weeks scenario of project deadline extension for Phase I and Phase II Gujarat solar projects are taking some serious ups and downs.  Much awaited hearing of deadline extension petitions from Moser Baer, Sun Edison, Kemrock and other parties to the GERC was postponed till 22^nd December now, making all developers nail-biting until.    Though most developer assumed to have this hearing decision would have blanket Yes or NO for all developers for deadline extension. But now some information out tells me, government may take deadline extension on case to case basis.  Question is does GERC has time to hear 60 petitions of extension?  And that before 31^st December?

Leaving standard claims for extension of project deadline like, unprecedented rainfall, land registration issue, revenue issue and delay in getting custom/excise duty exemption on material procured, every developer has been into one or another unique issue that delayed their project.  But in the end, if market rumors are correct, GUVNL has determined not to extend any project deadline but allow them to falls into Phase III FIT and also it seems logical as Module prices in August are down to more than half price today, which automatically makes project viable for next phase III under Rs.10.27 FIT. GUVNL has also planned to cancel all phase I, phase II project allotment that did not made more than 20% progress.

Anyway wait and watch what unfolds in next few weeks, In Gujarat, though cold season is late this year, hearing this rumors some developers will get fever for sure as their BG in going to tank otherwise.

Nilesh Patel is project consultant for solar PV and Solar Thermal power generation. He owns business Movya consultancy dealing in project  consultancy, government liaison, PPA Allotment, signed PPA/ Equity trading and Land banking. He is also independent freelancer expresses his understanding of current issues alike. If you have questions on above article or business please contact him on Nilesh@movya.com. For his business visit http://www.movya.com/