Abstract: In this work, the impact of component reliability on large scale photovoltaic (PV) systems’ performance is demonstrated. The analysis is largely based on an extensive field-derived dataset of failure rates of operation ranging from three to five years, derived from different large-scale PV systems. Major system components, such as transformers, are also included, which are shown to have a significant impact on the overall energy lost due to failures. A Fault Tree Analysis (FTA) is used to estimate the impact on reliability and availability for two inverter configurations. A Failure Mode and Effects Analysis (FMEA) is employed to rank failures in different subsystems with regards to occurrence and severity. Estimation of energy losses (EL) is realised based on actual failure probabilities. It is found that the key contributions to reduced energy yield are the extended repair periods of the transformer and the inverter. The very small number of transformer issues (less than 1%) causes disproportionate EL due to the long lead times for a replacement device. Transformer and inverter issues account for about 2/3 of total EL in large scale PV systems (LSPVSs). An optimised monitoring strategy is proposed in order to reduce repair times for the transformer and its contribution to EL.
Keywords: ; reliability; real data; energy yield; fault tree analysis; failure mode and effect analysis; availability; failure rates
CEEW Centre for Energy Finance The CEEW Centre for Energy Finance (CEEW-CEF) is an initiative of the Council on Energy, Environment and Water (CEEW), one of Asia’s leading think tanks. CEEW-CEF acts as a non-partisan market observer and driver that monitors, develops, tests, and deploys financial solutions to advance the energy transition. It aims to help deepen markets, increase transparency, and attract capital in clean energy sectors in emerging economies. It achieves this by comprehensively tracking, interpreting, and responding to developments in the energy markets while also bridging gaps between governments, industry, and financiers.
The need for enabling an efficient and timely energy transition is growing in emerging economies. In response, CEEWCEF focuses on developing fit-for-purpose market-responsive financial products. A robust energy transition requires deep markets, which need continuous monitoring, support, and course correction. By designing financial solutions and providing near-real-time analysis of current and emerging clean energy markets, CEEW-CEF builds confidence and coherence among key actors, reduces information asymmetry, and bridges the financial gap.
Financing the energy transition in emerging economies The clean energy transition is gaining momentum across the world with cumulative renewable energy installation crossing 1000 GW in 2018. Several emerging markets see renewable energy markets of significant scale. However, these markets are young and prone to challenges that could inhibit or reverse the recent advances. Emerging economies lack well-functioning markets. That makes investment in clean technologies risky and prevents capital from flowing from where it is in surplus to regions where it is most needed. CEEW-CEF addresses the urgent need for increasing the flow and affordability of private capital into clean energy markets in emerging economies.
CEEW-CEF’s focus: analysis and solutions CEEW-CEF has a twin focus on markets and solutions. CEEW-CEF’s market analysis covers energy transition–related sectors on both the supply side (solar, wind, energy storage) and demand-side (electric vehicles, distributed renewable energy applications). It creates open-source data sets, salient and timely analysis, and market trend studies. CEEW-CEF’s solution-focused work will enable the flow of new and more affordable capital into clean energy sectors. These solutions will be designed to address specific market risks that block capital flows. These will include designing, implementation support, and evaluation of policy instruments, insurance products, and incubation funds.
Renewable energy certificates (RECs) are market-based instruments that allow the unbundling of green power into two products – a green attribute that can be traded in the form of certificates and the commodity itself, i.e., electricity (CERC 2010). Since their launch a decade ago, RECs worth an aggregate INR 9,266 crore (USD 1.24 billion1 ) have been sold on India’s two power exchanges.
RECs play an important supporting and balancing role in India’s energy markets, but insufficient demand has plagued them to varying degrees. Although down from a peak of 18.6 million in October 2017, the December 2020 closing balance of 5.1 million unutilised RECs still points to a seven per cent shortfall in demand. Although 99 per cent of REC purchases on power exchanges are done to meet renewable purchase obligations (RPOs), organisations in India, including state discoms, are far from being RPO compliant. In addition, purchases for voluntary reasons are negligible.
The private sector responded enthusiastically. Tenders for new capacity were oversubscribed and record-setting low tariff levels were achieved both during the lockdown (Mint 2020a) as well as afterwards, when the economy gradually opened up (Mint 2020b). Investors also voted with their wallets, driving up the share prices of RE developers (CEEW-CEF 2020), mirroring a trend seen globally. At the global level, 2020 also saw green bonds cross the USD 1 trillion “cumulative issuances since inception” milestone (BloombergNEF 2020).
floor price reduction (Prateek 2018), the current trading suspension has carried on for much longer. RECs faced other bumps on the road in 2020. Take the revocation of 3.6 million RECs in August, the first such instance since their launch a decade ago. It is important to note that these RECs were not revoked because they had expired, but rather because it was determined that they had been erroneously issued in the first place and the revocation was undertaken to rectify the error (APTEL 2020). More generally, and to allay fears of inventory loss, CERC exercises its power under clause 15 of the REC regulations and extended the validity of RECs from time to time. For example, recently the validity of RECs which expired or were due to expire between April 01, 2020, and September 30, 2020, were extended up to October 31, 2020 (CERC 2020).
As a result, to date, there has never been a revocation of RECs due to lifespan expiry. However, this should not be misconstrued as an indication of robust demand for RECs. This is apparent from the 5.1 million RECs that remained unsold and unconsumed (closing balance) as of December 2020 as shown in Figure 1. Insufficient demand, as represented by the quantum of unconsumed RECs in the closing balance, has plagued this instrument to varying degrees ever since its inception. Although down from a peak of 18.6 million in October 2017, the December 2020 closing balance still points to a 7 per cent shortfall in demand.
Origin of RECs RECs were conceived as instruments that would allow the separation of the green attributes of RE from the underlying electricity generated. They act as a bridge between those generating RE and those not in a position to procure sufficient amounts of RE even though they may wish to do so for either voluntary or compliance reasons. Their origin can be traced to regulatory evolution, which commenced a little over 15 years ago, and which had a wide-ranging impact on the Indian power sector.
Each REC issued corresponds to 1 MWh, or 1,000 kWh, of electricity injected into the grid. Depending on the generating source, there are two types of RECs –solar and non-solar. Power System Operation Corporation (POSOCO) is the REC issuing authority, and as depicted in Figure 2, RECs may be issued to two categories of eligible entities, discoms and RE generators, each with some qualifications. Once issued, sale on the exchange and self-consumption are the only two ways they may be put to use. Further, RECs sold on the exchange must be priced in between the specified floor and forbearance (ceiling) prices, both of which have undergone several downward revisions over the years.
The four key takeaways that follow from Figure 2 are summarised below
An INR 9,266 crore (USD 1.24 billion) market
An aggregate of 59.5 million RECs worth INR 9,266 crore5 (USD 1.24 billion) have been sold on the two power exchanges in the time since they were launched in 2010. Breaking the volume into respective financial years reveals a general upward trend as shown in Figure 3 The sharp peak in volumes recorded in FY18 was a result of buyers taking advantage of a reduction in the REC floor price. The decline in volumes post-FY18 was perhaps inevitable given the significant quantum that was cleared in FY18. However, reduced as they were, the FY19 and FY20 numbers remained consistent with the linear trend line for REC volume growth. The dismal volumes recorded till date in FY21 are of course an altogether different matter, being the result of the ongoing suspension of REC trading, which has carried on for more than six months now.
It is hoped that stricter penalties envisaged in the draft Electricity (Amendment) Bill, 2020, will push discoms towards RPO compliance. But to what extent is it possible for them to do so via REC purchase? The short answer is that there just is not enough supply in the market for that to happen. As Figure 4 demonstrates, bridging the FY20 RPO shortfall of 27 RPO undercompliant states alone would exceed all the RECs issued in the previous decade.
RECs and international relevance: CERs
Market based mechanisms and instruments are not unique to India, and 2021 is poised to be a pivotal year in charting the way forward for certain instruments that straddle the international arena. Specifically, a broad consensus exists on some key issues that need addressing at the 26th United Nations Climate Change Conference (COP26) which is slated to be held in Glasgow in November 2021. Among them is Article 6 of the Paris Agreement, which deals with voluntary international cooperation in the implementation of nationally determined contributions (NDCs), including via market mechanisms that mitigate greenhouse gas emissions.
While RECs were never meant to be mainstays of the energy transition, they remain important supporting instruments that act as a balancing force in India’s energy transition. And with the aggregate value of RECs traded on power exchanges estimated to be INR 9,266 crore (USD 1.24 billion), their scale is not trivial. Moreover, India’s RE ambitions for the next decade far exceed anything seen or even thought of in the previous one. As such, the stakes are that much higher for even supporting instruments such as RECs. Under the circumstances, positioning them to reflect the fundamental changes that the RE ecosystem has undergone in the past decade, and preparing them for the even more dramatic changes that lie ahead, is not just desirable, but imperative.
The expansion of renewable energy promises a broad array of benefits. That renewables are good for energy security, air quality and health, and the reduction of greenhouse gas emissions is well known. What many do not realise, however, is that the renewable energy transition can boost economic development and create jobs. Global employment in the renewable energy sector grew by nearly 4 million jobs in six years – from 7.1 million in 2012 to 11 million in 2018 (IRENA, 2019a). Renewable energy is creating jobs as fossil fuel industries are shedding them due to rising automation in extraction, overcapacity, consolidation, regional shifts, and the substitution of coal by natural gas in the power sector. IRENA’s socio-economic footprint analysis estimates that employment in renewables will almost triple to 42 million in 2050.
The importance of gender equality Women have long been underrepresented in conventional energy industries such as coal, oil and gas, whether in exploration and extraction activities or in running power-generating plants. All available information suggests that men outnumber women in most of these workplaces, and especially in technical, managerial and policy-making positions (Catalyst, 2019). Energy is still often seen as a man’s domain, where persistent cultural and social norms sway hiring decisions. More prosaically, workplace disparities reflect educational pathways and recruitment networks that remain heavily male-oriented. The widespread perception that the energy field requires technical skills above all else, and that energy is a “dirty” business, reinforce these patterns (Paraskova, 2017). Another factor is the relative scarcity of female role models in the sector, and inadequate mentoring and peer networks for women.
Gender in the context of sustainable development Renewable energy, including wind power, enables the achievement of key social, economic and environmental objectives expressed in the Sustainable Development Goals (SDGs). The triangle of sustainable energy, jobs and gender objectives finds expression in three of the 17 SDGs: SDG 7 (access to modern, clean, and sustainable energy), SDG 5 (gender equality and empowerment), and SDG 8 (inclusive growth and decent work). They are closely interconnected. Achieving SDG 7 is indispensable to a vibrant, clean and inclusive economy. The close interaction between the energy system and the broader economy implies a symbiotic relationship between SDGs 7 and 8. The gender objectives expressed in SDG 5 shape the way the energy industry and the economy at large function, aiming to make them inclusive.
The survey also asked participants to provide information about the segment of the value chain to which their activities belong, and the size of the organisation participating in the survey. Box 1.4 explains what is meant by segments of the value chain and defines two terms – “roles” and “activities” – used throughout this report.
Segment of the value chain. Among replies on behalf of an organisation, 23% of responses received were from developer companies, followed by manufacturing firms (19%), service providers (16%) and operators (15%). “Other”2 was selected by 27% of the responders (see Figure 1.3).
70% of survey participants were women
of the organisation they work for represent a workforce of varying size. Naturally, replies from representatives of large companies or other entities have a significant impact on the overall results. Notably, however, the distribution of total employment by organisation size is unknown; whether the distribution in the survey sample matches that of the wind industry as a whole is therefore also not known.
Survey participation by women and men. Both women and men were invited to respond to all survey questions, but around 70% of respondents were women. This disparity mirrors participation in IRENA’s global renewable survey (IRENA, 2019b) and may serve as an indication that concern about gender issues in the wind sector is still driven by gender itself. The level of education of survey respondents was roughly the same for men and women.
Educational achievement. For individuals, additional questions enabled respondents to provide information about their gender and educational attainment and background, specifically in technical or non-technical fields. The composition of respondents according to these various characteristics can influence survey results, as personal backgrounds and work experiences will colour perceptions of both problems and solutions. As Figure 1.5 on the distribution of educational status shows, 93% of respondents had a university degree, with over half of the total holding a master’s.
large numbers of such workers with limited or less specialised qualifications. The underrepresentation of lowerskilled employees can affect the analysis, both in the quantification of the share of women in the industry and in the qualitative analysis. In fact, parts of the workforce that are less well represented may have very different workplace experiences and could therefore hold views very different from those of the rest of the sample.
Representation of lower-skilled employees in the survey To assemble a meaningful sample, the survey captured a broad cross-section of organisations and individuals in the wind energy sector. However, the self-selected nature of participation in an online survey may influence results in favour of people with a proactive interest in the topic, in this case mostly women with higher levels of education. An online survey, while convenient, may therefore unintentionally limit or exclude part of the population of interest, especially the lower-qualified segment of the workforce. Manufacturing workers on a factory floor or construction workers are difficult to reach, especially in remote project locations, unless an online survey is paired with workplace interviews co-ordinated with employers or labour unions.
As Figure 1.6 shows, personnel in management, STEM, and non-STEM functions (including engineers; technicians; experts in quality assurance, health, safety and environment; experts in law, regulation, standardisation and logistics; marketing personnel; financial analysts) account for about a third of the total labour required for a typical 50 MW onshore wind project. These are the types of employees who may be expected to participate most readily in an online survey. The remaining two-thirds of the labour required is in lower-skilled jobs (such as construction and factory workers). The views of people in these types of positions are far less likely to be reflected in the survey results. Similarly, for a typical 500 MW offshore wind farm, low-qualified individuals again represent the highest category (47%). STEM and non-STEM personnel together account for 41%.
Employment of women in the wind energy sector
This section opens with key findings from IRENA’s wind survey. A series of figures sketch the sector’s gender landscape by region, activity, and organisational size. The next topic is major barriers to women’s entry, retention and advancement in the sector. The discussion of issues relating to pay inequities draws comparisons with IRENA’s earlier survey of the renewable energy sector as a whole. The section then turns to possible solutions. These include networking and mentorship efforts; workplace practices, policies and regulations; and mainstreaming initiatives. It closes with examples of grassroots women’s initiatives in the field.
By activity. Developers and “other” activities along the wind value chain perform best in employing women. By contrast, female employment in equipment manufacturing is below the 21% average for the wind energy sector (Figure 2.4). From the perspective of assessing not just the number of jobs but also their quality, this represents a challenge, given that manufacturing typically offers better-paying jobs than other segments of an industry (Mishel, 2018).
Figure 2.5 disaggregates the findings presented in Figure 2.4. For each major activity, it shows the share of women broken down by STEM, non-STEM but professional, administrative and management roles. Once again, administrative positions are where much higher proportions of women find employment. This is particularly the case among developers and in the “other” category. Repeating findings from IRENA’s survey of the entire renewable energy sector, STEM-related positions also seem to have a significantly lower female presence than other professional jobs (IRENA, 2019b). Indicating an area where gender equality remains a remote ideal, the share of women is by far the lowest in senior management.
Barriers to female entry, retention and advancement in the wind workforce Breaking down the barriers to women’s entry, retention and advancement in the wind workforce requires full awareness of the impediments. Overall, more than half (53%) of the respondents to IRENA’s wind sector survey stated that barriers do exist. But this average figure hides diverging answers. As was true when IRENA canvassed the entire renewable energy sector (IRENA, 2019b), men tended to see fewer genderrelated barriers than women did.
In fact, the replies were mirror opposites, with just one-third of men acknowledging the existence of barriers compared with twothirds of women (Figure 2.7). On a regional basis, respondents from Africa, Latin America and Caribbean, and Europe and North America (in that order) recognised gender barriers in greater numbers than those from Asia-Pacific.
Barriers to entry The survey sought to assess the importance of barriers specific to job entry into the wind sector. Of individual respondents who replied that women do face barriers, a follow-up question was asked to rank specific impediments to entry according to their perceived importance (see Figure 2.8).
Barriers to retention and advancement Once a woman is employed, her ability to stay in a given job and her opportunities for professional growth are shaped by several factors. Women face barriers to retention and advancement that men do not, especially during the childbearing years. Individuals participating in the survey raised several concerns related to the retention of women in the wind workforce (see Figure 2.9). Fairness and transparency in internal policies and processes were identified as the most relevant concerns, followed by some specific policies and working practices that were felt to be lacking in many organisations.
Selected measures to address barriers Measures to improve the gender balance depend on specific circumstances. Survey participants support the need to change the social and cultural norms that rule society. Attitudes generally do not change quickly. But organisations in the wind sector (whether enterprises, industry associations, governmental agencies, non- or intergovernmental organisations, or others) can take steps that will accelerate change, including measures to ensure greater fairness and transparency in internalprocesses and policies to support a better work-life balance.
In addition, many survey participants highlighted the need to support networking, mentoring, training and opportunities for sharing work experiences (see Figure 2.13). Internships and seminars were seen as less important or effective. These responses echo the results of IRENA’s gender survey for the entirety of the renewable energy sector.
The path ahead
Advancing equality and diversity in the wind energy sector promises winners all around. It establishes greater fairness in an industry critical to making energy use – and thus all economic activities – more sustainable. Women, after all, account for half the human population. That very fact indicates how great a gain the wind industry can expect if it taps into the female pool of talent, skills, and perspectives more fully.
Limitations of the survey As noted in IRENA’s previous gender survey (IRENA, 2019b), online surveys can have several types of bias. However, as this survey was focused on one sector (wind), more is known about the population of interest (employees in the sector) than would be the case in a multisector study. Some of these biases were solved through weighting, by adjusting the responses to reflect the distribution of different characteristics in the underlying population.
Table A.1 shows the distribution of known employment in the wind sector (IRENA, 2019a) across locations and compares it to the survey responses. Africa and Latin America and the Caribbean were over-represented in the responses of both organisations and individuals, while the Asia-Pacific region was under-represented. The share of responses from Europe and North America almost matched the share of employment in the combined region in the case of organisations, but the region was over-represented in the sample of individuals. To adjust for these differences, weights were used to calculate global averages so that they would more accurately reflect the regional distribution of employees in the sector.
The Abu Dhabi Fund for Development (ADFD) in 2013 undertook to support renewable energy projects through a joint initiative with the International Renewable Energy Agency (IRENA). Through that facility, the fund has dispensed AED 1.285 billion (USD 350 million) over the course of seven cycles. In the first six cycles, ADFD has dedicated AED 900 million (USD 245 million) to fund 24 projects, benefitting 23 countries spanning different continents worldwide.
Six annual selection cycles of the IRENA/ADFD Project Facility were completed by January 2019, resulting in the allocation of USD 245 million by the Abu Dhabi Fund for Development (ADFD) to 24 selected projects. ADFD at the outset committed USD 350 million in the form of concessional loans for the implementation of renewable energy projects in developing countries. ADFD allocates funding to the projects based on an agreed evaluation and selection process, and the resulting recommendations issued by the International Renewable Energy Agency.
After announcing the selected projects in each cycle, IRENA connects the project proponents and host government representatives with ADFD to jointly work through five main stages of implementation. IRENA additionally facilitates engagements between ADFD and the various project teams to support communication and monitors the progress of projects and related development impacts. Figure 1 shows the geographical distribution of ongoing projects.
The main post-selection stages are as follows:
Preliminary loan offer, acceptance and onsite project appraisal.
Agreement signing, ratification and loan declaration. This entails processing loan agreement and loan guarantee agreement, where applicable.
Procurement of consulting engineers. Their role is to support the Project Implementation Unit (PIU) in final design and project oversight.
Selection of Engineering Procurement and Construction (EPC) contractor(s).
Construction and commissioning. This stage includes a sequence of disbursements to the project, as per milestones set by the PIU in consultation with ADFD.
Portfolio progress highlights Overall portfolio implementation progress has improved compared to the previous year, with more projects reaching the procurement and construction/installation phases.
Five projects are working through the procurement stages (Stages 3 and 4); another four are at various stages of loan agreement processing (Stage 2) and the remaining project is still at the preliminary loan offer stage (Stage 1) (see Figure 2).
Subsequent sections of this report provide updates on the progress of the projects at various critical milestones and list the challenges faced by each project to date.
Status of loan agreements Thirteen of the 18 progressing projects now have signed loan agreements; 12 of those loan agreements have been ratified and declared effective, paving the way for disbursements. The loan agreements for a further four projects have been drafted and are expected to be signed in early 2020 The last project in the sixth cycle remains at the preliminary loan offer stage and has yet to reach loan agreement processing.
Implementation and process improvements, 2014–2019 The IRENA/ADFD Project Facility has achieved notable successes in the six cycles by applying the lessons learned along the way to improve the evaluation and selection process and facilitate project implementation. IRENA and ADFD continue to actively engage with project development teams to support the implementation process and bring the benefits of renewable energy to the developing world. Project advancement has also been facilitated by joint appraisal missions, together with periodic conference calls with project teams and follow-up missions to monitor and document progress.
Conclusions Progress was made in 2019 in terms of increasing the proportion of projects completing implementation, with 44% of the portfolio reaching the construction stage, compared to 33% in 2018. Several projects began generating electricity, thereby providing renewable energy benefits to target communities. Loan agreement processing also advanced, with three additional projects signed in 2019 and five others under negotiation. Ongoing follow-up activities include an online progress tracking platform, which is being updated and re-deployed to provide project teams with the ability to issue regular reports on progress, challenges and mitigation measures.
The adoption of the United Nations’ 2030 Agenda for Sustainable Development, and in particular Sustainable Development Goal 7 (SDG7) to ensure access to affordable, reliable, sustainable and modern energy for all, has led to a global consensus around the need to substantially increase the share of renewable energy in the global energy mix. Renewable energy is key to sustainable development and will play a crucial role in advancing progress on various Sustainable Development Goals as well as the global climate objectives set out in the 2015 Paris Agreement under the United Nations Framework Convention on Climate Change (UNFCCC; the Paris Agreement; IEA, IRENA, UNSD, WB, WHO, 2019).
Global status and trends Building on its first global mapping of 100% renewable energy targets in 2018, the IRENA Coalition for Action, in a joint effort with several partners, has continued to identify and evaluate national and subnational targets. The updated overview of the global status on 100% renewable energy targets includes new targets announced in the past year as well as further details on the type of targets and their legal.
Mapping of 100% renewable energy targets – national level In 2019, a total of 61 countries had set a 100% renewable energy target2 in at least one end-use sector, up from 60 countries in 2018. Geographically, these 61 countries are distributed as follows: Africa (19), Asia (15), Oceania (10), Central America and the Caribbean (8), Europe (7), and South America (2) (see Figure 1). Of the 61 countries, 14 countries have committed to reaching a 100% renewable energy target in at least one end-use sector by 2030 at the latest, two countries by 2040 and the others by 2050.
The mapping of targets shows a high commitment from countries in Africa, Asia and Oceania to achieve 100% renewable energy. Many of these targets were announced through the Marrakech Communique at COP22 (the 22nd Conference of the Parties to the UNFCCC) by countries that are most vulnerable to the effects of climate change, particularly least developed countries and small island states.
In 2019, the one country to revise its renewable energy ambitions to include a 100% renewable energy target was Portugal. The country announced a strategy for achieving 100% renewable electricity generation by 2050 in its Roadmap to Carbon Neutrality, adopted by the Portuguese government in July 2019. The transformation is expected to be achieved through large increases in solar photovoltaic (PV) deployment, building on the existing high shares of wind and hydropower, and coupled with improved energy efficiency to reduce overall electricity consumption.
Targets by sector While some of the renewable energy targets have been clearly defined in terms of end-use sectors, other targets are broader in scope. In cases where the 100% renewable energy target has not been clearly defined, the category “RE – not specified” has been used in the mapping exercise. Of the countries included in the mapping, 42 fall into this category. In the case of targets that are wellspecified in terms of end-use sector, most are focused on 100% renewable electricity, with few countries having set targets for more than one sector. In fact, the mapping exercise identified 18 targets aiming for 100% renewable electricity. Two countries with a renewable electricity target (Austria and Denmark) have also adopted targets for 100% renewable energy in the transport sector, whereas two (Denmark and Lithuania) have set a target for 100% renewable energy in heating and cooling as well as electricity. Indonesia has thus far announced a 100% renewable energy target in the transport sector. Denmark remains the only country with a 100% renewable energy target that.
Type of target/commitment The degree to which a country’s political leaders and policy makers are held accountable for achieving 100% renewable energy targets depends on the context in which the commitment was made and established. The targets representing the highest level of commitment would usually be those established in national law and are thus legally binding. Other targets may be formally established in policy documents such as nationally adopted energy and climate plans, including the nationally determined contributions(NDCs) under the UNFCCC. Several targets have also taken the form of highlevel policy announcements by national governments or pledges under global initiatives (e.g., the Marrakech Communiqué) but have not been fully integrated into national plans or strategies to date. To provide a comprehensive overview, the mapping in this white paper includes all types of 100% renewable energy targets in its analysis. However, to develop an understanding of the level of commitment, a first attempt has been made in this white paper to distinguish between different target types (see Figure 3).
As Figure 3 illustrates, many of the commitments to 100% renewable energy targets were established by Climate Vulnerable Forum (CVF) countries under the Marrakech Communiqué at COP22. The communiqué states, “We strive to meet 100% domestic renewable energy production as rapidly as ossible”. Of the 48 CVF countries, 6 (Costa Rica, Fiji, Papua New Guinea, Samoa, Tuvalu and Vanuatu) have taken additional steps to translate this pledge into their NDCs, most of which are conditional upon receiving appropriate international support and funding. Two non-CVF countries (Guyana and Indonesia) have also included 100% renewable energy targets into their NDCs. Of the remaining 11 countries with 100% renewable energy targets, 10 (Austria, Cabo Verde, Denmark, Djibouti, Iceland, Lithuania, Portugal, Solomon Islands, Spain and Sweden) have defined how they intend to achieve their targets in national energy plans or strategies.
The role of utilities in the energy transformation Moving from ambitious renewable energy targets to accelerated implementation will require proactive regulation, new market rules and collaboration between existing as well as new players in the energy market. This is key to making sure that the energy system is fit for renewable energy goals and transitional barriers are removed. In delivering energy to households, businesses and industries, energy utilities have played a crucial role in creating and shaping the current energy system. The ability of utilities to adjust to new demands will partly determine how fast the transformation can happen as well as what their role will be in a future energy system built on very high shares of renewable energy.
Overview of utilities in transition to 100% renewable energy To further illustrate and understand the role that utilities can play in the transformation to 100% renewable energy, this white paper analyses a selected number of companies operating or having previously operated as “utilities” that are moving towards supplying 100% renewable electricity to their customers, either on their own initiative or because of government policies occurring in the jurisdictions they serve. The case studies cover different geographies, technologies, ownership structures and levels of operation including national, regional and local operations. The case studies were selected by members of the Coalition for Action based on first-hand experience from or familiarity with these utilities and build primarily on first-hand data obtained through interviews with senior representatives of the respective utilities. Table 1 below provides an overview of selected case studies, while detailed case studies are provided.
Ørsted is the largest energy company in Denmark, accounting for 50% of electricity generation and 35% of heat generation. Engaged in the generation and distribution of electricity and heat to customers across the entire country, Ørsted develops, constructs and operates onshore and offshore wind farms, bioenergy plants and, to a smaller extent, waste-to-energy plants. In addition to its operations in Denmark, Ørsted is also active as a developer and operator of offshore wind in other parts of the world, with 5.6 gigawatts(GW) in operation in 2019. The Danish government holds a majority stake in Ørsted, owning 50.1% of the company’s shares (Ørsted, 2019a).
In 2018, 75% of Ørsted’s total power and heat generation was achieved through renewable energy sources(41% wind and 34% biomass), an 11 percentage pointsincrease from 2017. The remaining 25% consisted of fossil fuel generation (17% coal and 8% natural gas), as shown in Figure 7.
Ørsted has committed to achieving at least 99% renewable energy by 2025 and to fully phasing out coal from its generation mix by 2023 – well before the national target of 100% renewable energy by 2050 (Ørsted, 2017). The target is set to be achieved through substantial increases in offshore and onshore wind deployment, as well as through the conversion of coal- and gas-fired power stations to sustainably sourced biomass.
Regional/state-level utilities SA Power Networks – South Australia Since the privatisation of the electricity sector in 1999 there has been no vertically integrated electrical utility in South Australia. Currently there are many electricity generating companies and retailers but only one distributor (SA Power Networks) and one transmission line company (Electranet). SA Power Networks is a privately held monopoly regulated by the Australian Energy Regulator. Its primary role is to maintain and operate the state’s distribution network, which serves around 860 000 homes and businesses and 1.7 million people (SA Power Networks, 2019a).
South Australia is at the forefront of the Australian energy transformation, with a target of reaching 100% renewable energy in all end uses by 2050 (AEMO, 2018). For the power sector, with currently committed projects in the pipeline, South Australia is expected to reach 73% VRE in electricity generation by 2021 and effectively 100% by 2025/2026. By the end of 2018, about 53% of South Australia’s electricity came from renewables – 35.2% from wind (1 809 megawatts [MW]) and the rest predominantly from rooftop solar (930 MW), with another 135 MW from large-scale solar farms (AEMO, 2018). Natural gas supplied the bulk of the remaining generation with increasingly diminishing supply provided through interconnection with the eastern states. Some emergency local diesel supply also exists. A 500-MW brown coal power station in the state’s north closed in 2016. Prior to that, the majority of South Australia’s electricity generation was from natural gas and brown coal (AEMO, 2018).
Hawaiian Electric Companies – United States
The Hawaiian Electric Companies – Hawaiian Electric (HECO), Maui Electric (MECO) and Hawaii Electric Light (HELCO) – provide electricity services for the majority of the islands that make up the US state of Hawaii (Figure 9). The companies are all investor-owned utilities and together serve 95% of the state’s 1.4 million residents on the islands of Hawaii, Lanai, Maui, Molokai and Oahu (HSEO, 2018). The renewable share of electricity generation reached 26.6% for the three utilities in 2018, up from 23% in 2015.
Launched in 2008, the Hawaii Clean Energy Initiative (HCEI) was established in Hawaii as a partnership between the State of Hawaii and the US Department of Energy. This initiative’s initial goal was for the state to produce 70% of its electricity from clean and renewable energy by 2030. An RPS of 15% electricity sales by the end of 2015 was also established. The HCEI has since been strengthened and in 2015 the Hawaii State Legislature reinforced the state’s commitment to clean energy by increasing the RPS requirement to 100% renewable electricity by 2045, with interim targets of 30% by 2020, 40% by 2030 and 70% by 2040.
Going from 9.5% renewable electricity generation in 2009 to over 25% in the past decade has required extensive efforts from the utilities, and significant work remains to reach 100% (Figure10).
The Hawaiian Electric Companies have incorporated renewables in the forms of residential and commercial rooftop solar, utility-scale solar, battery storage, wind, hydro and geothermal. The companies’ combined annual oil use for power generation has declined by 88 million gallons (330 million litres), or about 19%, since 2008, and total carbon emissions have been reduced by about 925 000 metric tonnes between 2010 and 2018 (Hawaiian Electric, 2019b). Recently, contracts have been signed for eight new solar-plus-storage projects for over 275 MW of solar and more than 1 GW of battery storage, all at prices well below the cost of fossil fuel generation (HSEO, 2018). In 2019, the companies issued a second request for proposals seeking about 900 MW of additional renewable electricity capacity.
In 2012, in the aftermath of the Fukushima disaster and Germany’s decision to completely phase out nuclear energy, Stadtwerk Haßfurt set itself the overarching target of achieving 100% locally produced renewable energies by 2030. The immediate response from Stadtwerk Haßfurt was influenced by the town of Haßfurt’s proximity to the Grafenrheinfeld nuclear plant, which was shut down in 2015.
The 2030 target is currently planned to be realised across the following sectors: energy generation and distribution, heating and cooling, and industry and sector coupling.
In 2004, the City of Aspen adopted an ambitious goal to supply 100% of the city’s electricity needs from renewable energy resources by 2015. A total of 75% had been achieved by 2014, and by August 2015 the city’s electricity supply from renewables through Aspen Electric was 100% (NREL, 2015). Early in the project, it became clear that some critical definitions and assumptions about the 100% renewable goal needed to be clarified before options could be identified. Although the city had clearly stated a goal of 100% renewable energy, the specific technologies and project types that would be considered eligible as “renewable” energy had not been defined. Clarification was needed about other details that impacted the options available to the city, such as whether the purchase of renewable energy certificates needed to be bundled with an energy purchase. Renewables were determined to include solar, wind, and both small and large hydro. Biomass, landfill gas, sewage gas and directed biogas would be considered on an individual project basis dependent on the conditions of each unique project. Wind and landfill gas became the primary technologies to complete the 100% renewable energy goal (NREL, 2015). Aspen Electric and the City of Aspen partnered with NREL in developing a pathway towards achieving a 100% renewable electricity supply through a combination of their own hydroelectric facilities and PPAs with wind and landfill gas suppliers. The results of this transformation are shown in Figure 12.
The city ran into several barriers that related to the different levels of renewables included in the supply. For example, one barrier came up at around 35% wind energy, which resulted in an energy imbalance. Thus, to further increase wind energy penetration, the city would have to buy more wind energy than it actually needed. Around 2014 this barrier was overcome when MEAN agreed to allow Aspen a different method to buy additional wind that eliminated the surplus under most conditions.
As renewables have become a compelling investment proposition, global investments in new renewable power have grown from less than USD 50 billion per year in 2004 to around USD 300 billion per year in recent years (Frankfurt School-UNEP Centre/BNEF, 2019), exceeding investments in new fossil fuel power by a factor of three in 2018.
Another defining trend of renewable energy investments has been a geographic shift towards emerging and developing markets, which have been attracting most of the renewable investments each year since 2015, accounting for 63% of 2018 renewable power investments (Figure 1). Besides China, which attracted 33% of total global renewable energy investments in 2018, other top emerging markets over the past decade include India, Brazil, Mexico, South Africa and Chile (Frankfurt School-UNEP Centre/BNEF, 2019). Nevertheless, many developing and emerging countries in Africa, the Middle East, South-East Asia and South-East Europe still have a largely untapped renewables investment potential.
In addition to the growing technological and geographical diversity, the renewable energy investment landscape is also witnessing a proliferation of new business models and investment vehicles, which can activate different investors and finance all stages of a renewable asset’s life. Examples include the rise of the green bond market, growing interest in corporate procurement of renewable power and new business models for small-scale renewables such as the pay-as-you-go model.
WHY GREEN BONDS MATTER
Green bonds help bridge the gap between providers of capital and green assets, helping governments raise finance for projects to meet climate targets and enabling investors to achieve sustainability objectives. Along with other innovative capital market instruments, green bonds can support new or existing green projects through access to long-term capital.
A green bond is like a conventional bond in the sense that they both help the bond issuer to raise funds for specific projects or ongoing business needs in return for a fixed periodic interest payment and a full repayment of the principal at maturity. A green bond differs in the “green” label, which tells investors that the funds raised will be used to finance environmentally beneficial projects. The green bond market started about a decade ago and has undergone rapid growth in the past five years (2014-2018), as global efforts to scale up finance for environmentally beneficial assets intensified. From a market dominated by development banks, green bonds have experienced not only growth in the total amount issued, but also a diversification of issuer types and sectors financed, and a widening geographic spread.
The green bond market continues to offer enormous growth potential. The cumulative issuances of green bonds are below USD 1 trillion, while the global bond market is valued at around USD 100 trillion. On an annual basis, green bonds raised USD 167 billion in 2018, while the total bond market raised around USD 21 trillion (CBI, 2019a; SIFMA, 2019), as seen in Figure 2.
The green bond market has taken off in the past five years, with 2019 issuances expected to reach USD 190 billion. Along with the growing amount of capital raised, the market also expanded in its geographic reach, diversification of issuers and currencies in which green bonds are offered. Renewable energy leads the use-of-proceeds categories and is present in around half of all green bonds issued.
Overall, annual global green bond issuances rose from EUR 600 million in 2007 to USD 37 billion in 2014 and USD 167 billion in 2018 (Figure 3) (CBI, 2019a). For 2019, a new high of USD 190 billion is expected (CBI, 2019b).
Green bonds are also issued in more currencies than ever before. While the US dollar and the euro are the top two currencies of issuances (accounting for 83% of issuances, by number, in 2018, followed by the Chinese renminbi), green bonds were issued in a record 30 currencies in 2018 (CBI, 2019a).
Renewable energy dominates green bond issuances, followed by energy efficiency projects and clean transport. Most green bonds finance multiple “green” categories (Figure 5). Out of the sample of over 4 300 green bonds analysed by IRENA, 50% of the bonds (by volume, in USD) had renewable energy as one of the use-of-proceeds categories, while 16% were solely earmarked for renewable energy assets. On a regional basis, 21% of green bonds in Europe were dedicated only to renewables (by volume, in USD), 19% in Africa, 16% in the Americas and 14% of green bonds in AsiaPacific (IRENA, forthcoming (a)).
OPPORTUNITIES FOR ENGAGEMENT
While the promise and potential of the green bond market is large, scaling up current issuance levels will require co-ordinated actions from multiple stakeholders to reduce market barriers. Those barriers include lack of awareness of the benefits of green bonds and hence a lack of local investor demand, lack of clarity regarding green bond guidelines and standards, a shortage of green projects and high transaction costs for green bonds compared to traditional bonds.
KEY GREEN BOND STANDARDS
Green Bond Principles (GBP): Core components
Use of proceeds: Bond proceeds should be described in the bond offering documentation, with projects’ environmental benefits described and, if possible, quantified. Share of financing versus re-financing amounts should also be provided by the issuer. The GBP list the most commonly used types of projects supported by or expected to be supported by the green bond market. These are:
Renewable energy (production, transmission, appliances and products);
Energy efficiency (e.g., new/refurbished buildings, energy storage, district heating, smart grids and products);
Pollution prevention and control (e.g., reduction of emissions, waste prevention/ reduction);
Environmentally sustainable management of living natural resources and land use (e.g., sustainable agriculture, fishery, aquaculture and forestry, natural resources preservation or restoration);
Terrestrial and aquatic biodiversity conservation (protection of coastal, marine and watershed environment);
Clean transport (e.g., electric, hybrid, public, rail transport or infrastructure, reduction of emissions);
Sustainable water and wastewater management (e.g., sustainable water infrastructure, wastewater treatment, drainage systems, flood mitigation);
Green buildings meeting applicable standards or certifications.
Bonds could facilitate vast global capital flows into low-carbon assets. Through co-ordinated action between policy makers and the financial sector, green bonds can mobilise the large capital pools owned by institutional investors.
Electricity storage refers to technologies that store electrical energy and release it on demand when it is most needed. The storage process often involves conversion of electricity to other forms of energy and back again.2 With its unique ability to absorb, store and then reinject electricity, electricity storage3 is seen as a key solution for addressing the technical challenges associated with renewables integration alongside other solutions (e.g. more flexible demand, accelerated ramping of traditional power plants). Consequently, storage is garnering increasing interest in the power sector and is expected to play a key role in the next stages of the energy transition.
Based on recent analysis by the International Renewable Energy Agency the renewable share of global power generation is expected to grow from 25% today to 86% in 2050. The growth is especially strong for VRE technologies – mainly solar photovoltaic (PV) and wind power – with an increase from 4.5% of power generation in 2015 to around 60% in 2050. Furthermore, almost half of PV deployment could be achieved in a distributed manner in the residential and commercial sectors, in both urban and rural locations (Figure 1).
The role of electricity storage in VRE integration Since the first quarter of the 20th century electricity storage, mainly in the form of pumped hydro, has been used to provide a wide range of grid services that support the economic, resilient and reliable operation of power systems. The great majority of global electricity storage capacity deployed up to the present day is pumped hydro due to its favourable technical and economic characteristics (IRENA, 2017a). Over the last hundred years, the electricity storage industry has continued to evolve and adapt to changing energy and operational requirements and advances in technology.
The services that electricity storage can provide depend on the point of interconnection in the power system. For example, when connected to the grid at the transmission level, electricity storage can support increasing shares of VRE (as explained above), participate in electricity market bidding to buy and sell electricity, and provide ancillary services at the various timescales relevant to technical capabilities of each technology. When connected at the distribution level, electricity storage can provide all of the above services and in addition can be used to provide power quality and reliability services at the local substation, defer distribution capacity investment, and support integration of distributed renewable energy. It can also be connected to other generation facilities, allowing for higher price capture, provision of grid services and at the same time savings on connection costs. Finally, electricity storage can be placed behind the meter (Figure 5) to support a customer in increasing PV selfconsumption, thereby reducing electricity bills (where time-of-use demand-side management schemes exist), improving power quality and reliability, and potentially enabling participation in energy management, wholesale and ancillary services markets through aggregators.
Physical location and operational mode (coupled with generators or standalone), along with the regulatory environment and market structure under which electricity storage operates, greatly affect the type of analysis needed to estimate both system-wide and project-wide benefits of electricity storage. These considerations are explained in more detail in Phase 3. For example, electricity storage can be operated as a standalone unit or co-located with generation facilities, e.g. solar PV and wind farms. In the case that storage is co-located with a PV farm, rather than being a standalone unit it is an asset of a “hybrid power plant.
Utilising the system-marginal prices from Phase 3, the various services a storage project can provide can be optimised to maximise the revenue the project receives. As a result of the optimisation, the hour-to-hour (or intra-hour) dispatch of the electricity storage project and stacking of its various revenue streams can be visualised. Figure 7 shows the type of output from storage service stacking that can be expected from Phase 4. In this illustration, the entire capacity of a 6 megawatt-hour (MWh) electricity storage facility is used to shift VRE from hours 11–14 to hours 18–21.
Figure 8 shows an example of the outcome from a project feasibility model. In this particular example, although the system benefits outweigh the costs, the monetisable benefits are less than the costs, making the project economically infeasible for the project owner. The difference between the cost and the monetisable benefit, or the economic viability gap, if greater than zero, could be due to high storage capital costs or unfavourable market mechanisms.
Using power system models to assess value and viability
In these cost-effective cases, a variety of regulatory options should be considered to ensure that costeffective projects are deployed. Policy makers and regulators can then use the results of this analysis to identify the economic viability gap and devise appropriate incentives so that projects that are seen to be worthwhile at the system level are sufficiently compensated at the project level to move forward. This is particularly relevant in the case of a liberalised market.
The weighted average competitive scores for each technology and for each case are calculated by multiplying the competitive scores, weighting and suitability matrices in Steps 1 to 3. Technologies are then ranked based on their weighted average score for a given case, with 1 being the most suitable for a specific application, 10 the least suitable. Rankings can be shown as a heat map of how suitable each technology is for each case (see Figure 17 and Figure 18). A green colour denotes most suitable technologies while red shows less suitable ones. The topranked technologies are used in the subsequent project feasibility analysis phase of the ESVF. Please note that values in this section are purely indicative, and they have to be adjusted case by case when performing the analysis depending on the system, the technologies and other specific conditions.
Marginal peaking plant cost savings Power systems are designed with enough firm capacity to accommodate expected demand under both normal operations and contingencies. In a grid system with a growing load, the corresponding increasing peak is usually fulfilled by building new peaker capacity, the generation resources that are only utilised during peak hours. In systems with increasing proportions of VRE, peaks in the net load become higher and narrower, reducing the operating hours for peaker plants and making a business case for electricity storage with limited capacity to replace peaker plants cost-effectively. Electricity storage can potentially provide firm capacity to the system, deferring the need for new peaker plants.
With the energy and reserve prices from the system value analysis, and the optimal dispatch results from the pricetaker storage dispatch model, the revenue of the storage project can be calculated. Based on the application ranking from the storage technology mappings – stating which technologies are most appropriate for the case – the cost side of the analysis can be determined, including CAPEX, OPEX, depreciation and taxes. The cash flow, as well as the net present value (NPV) and internal rate of return (IRR) for the project can be calculated (Figure 25).
Using power system models to assess value and viability As the proportion of VRE in power systems increases, electricity storage is becoming recognised by stakeholders as an important tool for effective VRE integration. Several examples of how electricity storage can facilitate VRE integration are discussed in the next part of this report (Part 3), showing how early business cases are already driving deployment of storage in some jurisdictions. Depending on the primary service the electricity storage provides, however, other technologies may be capable of meeting the same need. The cost-effectiveness of electricity storage must therefore be assessed at system level and compared against other technologies. Past research has demonstrated that stacking revenues from the variety of services that electricity storage can provide is key to accurately accounting for the benefits of electricity storage, as well as a necessary condition for its commercial viability. The ESVF described in this report puts emphasis on the benefits (including revenue streams) electricity storage can bring both to its owners and, more importantly, to the power system.
Real-world cases of storage use in power systems
Renewable energy has advanced rapidly in recent years, driven by innovation, increased competitiveness and policy support. This has led to the increased deployment of renewable energy technologies worldwide, with their share of annual global power generation rising from 25% today to 86% in 2050 under the International Renewable Energy Agency (IRENA) Paris compliant REmap scenario In the same year about 60% of total generation comes from variable renewable energy (VRE), mainly solar photovoltaic (PV) and wind, which are characterised by variability and uncertainty.
Electricity storage systems have the potential to be a key technology for the integration of VRE due to their capability to quickly absorb, store and then reinject electricity to the grid. Because of this, electricity storage is gaining an increasing interest among stakeholders in the power sector. Policy makers therefore need to understand the value of these resources from a technology-neutral perspective. The IRENA Electricity Storage Valuation Framework (ESVF) aims to guide the development of effective electricity storage policies for the integration of VRE generation. The ESVF shows how to value storage in the integration of variable renewable power generation. This is shown in Figure 28.
When the share of variable renewable energy (VRE) in the system is low, operating reserve requirements have traditionally been defined as a percentage of the load or as the largest contingency of the system, or in other words, the largest generating unit at that time. With this low VRE penetration, reserves have been divided into FCR or primary reserves, FRR or secondary reserves and RR or tertiary reserves. FCR is used to stop the frequency deviation and needs to act within the first seconds after the contingency, FRR restores the frequency to its nominal value and acts within 30 seconds and RR is used to replace the FRR and acts within 15 minutes.
In this regard, the United Kingdom system operator, National Grid, developed the EFR product, which it defines as a dynamic service where the active power changes proportionally in response to changes in system frequency. The EFR service was created specifically for energy storage and requires a response within 1 second once the frequency has crossed a threshold, which can be either ±0.05 hertz (Hz) (service 1, wide-band) or ±0.015 Hz (service 2, narrow-band). In Figure 30 the EFR service is positioned with respect to the other frequency response services in the United Kingdom.
Besides the EFR product, which is already implemented and being used in daily system operation in the United Kingdom, there are other examples of power systems with similar products that, although not implemented yet, will encourage the participation of energy storage in reserve provision. For example, the Australian Energy Market Operator (AEMO) has developed an FFR product. AEMO refers to it as “the delivery of a rapid active power increase or decrease by generation or load in a timeframe of two seconds or less, to correct a supply–demand imbalance and assist in managing power system frequency.
As for the value, batteries are proven to have lowered the cost of FCAS in South Australia, as shown in Figure 34. Data show that during the end of 2016 and in 2017 payments to existing fossil fuel generators were very high, being over AUD 7 million in some six-week periods. With the installation of the Hornsdale project, this service can be provided in a cheaper way. In 2018 the total savings in the FCAS market are estimated at AUD 40 million.
The duck curve is already prominent in California, where it first appeared. But it has also been observed in other parts of the United States, such as in the New England states (Roselund, 2018). To manage this net load curve, the grid operator needs a resource mix that can react quickly to adjust production and meet the sharp changes in net demand. In California the first ramp in an upward direction occurs in the morning, starting around 4 am.
Figure 58 shows the solar PV share in a least-cost minigrid in 2017 and in 2030, considering two types of Liion batteries (nickel manganese cobalt [NMC] and nickel cobalt aluminium [NCA]). The graph has been prepared using results from energy modelling software (HOMER Pro) and input data from IRENA’s latest cost report on storage (IRENA, 2017a). It shows that, in 2017, development projects with a 2.5% nominal discount rate had an optimal solar PV share of about 90% with either NCA or NMC batteries. Commercial projects in a low-risk context (10% weighted average cost of capital [WACC]) had renewable share values of 44.5% with NCA and 50.7% with NMC. The results for the optimal PV share in mini-grids in a riskier context (15% WACC), typical of offgrid locations, showed a renewable fraction of only 36% using NCA and 38% using NMC batteries.
Storage deployment in an off-grid context There has been a rapidly increasing interest in deploying storage solutions in off-grid contexts, especially in minigrids that are located in rural areas where there is no access to the electrical grid or on islands that rely on expensive and polluting diesel generation. This has been driven by the need to accommodate increasing amounts of solar PV, and to a lesser extent wind, to provide electricity access or displace diesel generation.
The role of aggregators and the value they can provide to BTM storage should be noted. Aggregators are new market participants that operate a virtual power plant, which is an aggregation of dispersed distributed energy resources with the aim of enabling these small energy sources to provide services to the grid. Figure 63 is an overview of how an aggregator works.
Aggregators allow enhanced participation of BTM storage in the different electricity markets, help decrease the marginal cost of power and optimise investment in power system infrastructure; however, they require a proper regulatory framework and advance metering infrastructure in order to exploit their full potential.
Floating solar photovoltaic (FPV) technology offers a new and additional pathway to realize India’s clean energy ambitions. It taps the country’s large water reservoirs to overcome some of the persisting issues of ground-mounted solar, such as the lack of levelled land, evacuation infrastructure and performance degradation due to high operating temperatures. Concurrently, FPV provides additional employment opportunities. The Council on Energy, Environment and Water (CEEW), the Natural Resources Defense Council (NRDC), and the Skill Council for Green Jobs (SCGJ) have undertaken periodical studies to estimate the direct jobs created in the solar and wind industry since 2014. In this study, we estimate the direct employment potential across the project deployment cycle in the FPV sector. This estimate is drawn from project-based case-studies generated through surveys and interviews with manufacturers, developers, and EPC (engineering, procurement, and construction) providers. We also provide an insight into the operational strategies and team structure in addition to discussing the typical duration of different phases of project development and the corresponding workforce employed.
• A small-scale FPV plant (capacity <1 MW) directly employs 58 workers while a mid-scale (capacity <10 MW) plant 45, over the course of their deployment.
• The FPV sector generates indirect job opportunities through manufacturers of specialized components like floats, anchors, and mooring system as well as domestic module manufacturers.
• The FPV sector offers opportunities for people qualified in hydraulic engineering, marine architecture, and plastic blow-moulding techniques, some of the key skills required for bringing an FPV plant to life, in addition to those required in groundmounted solar operations.
• By setting time-based targets for FPV capacity, the government could widen the employment potential of this sector, which would bolster efforts to drive India’s COVID-19 economic recovery and achieve its Paris Agreement goals.
Employment Insights from the Development of a Mid-Scale Plant
Floating photovoltaic (FPV) solar is an emerging technology in which solar photovoltaic (PV) modules are installed (floated) on a water body. Asia has taken a lead in FPV solar deployments, driven by rapid capacity deployments in China, India, South Korea, Taiwan, Thailand, and Vietnam, and is expected to host two-third of the global capacity. FPV’s global installed capacity was 2.6 GW by August 2020 and a study projects a 20 percent annual growth till 2025.1 A conservative estimate puts the global FPV potential at 400 GW, which indicates enormous opportunities for this sector’s growth.
For clean energy transition, FPV technology offers immense opportunities for India, as water bodies are spread across its vast landscape. By the middle of 2019, India had about 2.7 MW of installed FPV capacity and projects with a combined capacity of 1.5 GW capacity are under development.3 The Government of India has set a target of achieving 10 GW of FPV capacity by 2022.4 According to someestimates, India can build 280 GW of FPV capacity by by utilizing about 30 percent area (nearly 1,800 square kilometres) of its medium and large water reservoirs.5 The bid prices for FPV tenders are also steadily declining, registering a 45 percent drop in prices between 2016 and 2018. As a result, India has achieved the lowest cost for FPV projects at `35 ($0.5)/watt, which was offered during the bid for 70 MW FPV capacity in Kerala.
OPPORTUNITIES FOR FPV IN INDIA FPV offers a promising option for supporting India’s clean energy transition. FPVs face fewer challenges compared to ground-mounted solar plants which are often confronted with issues such as unavailability of levelled land for installation, lack of power evacuation infrastructure in proximity to the installation site, and performance losses due to high operating temperatures. FPV eliminates the need for land by exploiting the existing artificial and natural water bodies like reservoirs and lakes. When these water bodies are in close proximity to an electricity generation site (e.g. hydropower dams or thermal power plants), an easy access to the transmission network is assured. The efficiency of solar generation is also enhanced by cooling effect of the water beneath and reduced soiling of the module surface.
Overview of floating solar technology
An FPV system consists of PV modules mounted on a floating structure, supported by mooring lines and anchors embedded in the water bed. The floating structure consists of a float, commonly made of high-density polyethylene (HDPE), designed to withstand water currents, local wind, and weight of the PV modules and auxiliaries. The floats are occasionally made of fibrereinforced plastic (FRP) and metals. Cables connect the modules to the inverters, which are typically installed at the shore. Figure 1 shows a schematic representation of a typical FPV system with its main elements.
METHODOLOGY As FPV is a sunrise sector of the economy, we use a project-based analysis to assess the employment potential in the sector. We derived insights about operation strategies, organisational structure, and employed workforce at a project level through surveys and interviews with manufacturers, developers, and engineering, procurement, and construction (EPC) providers.
KEY FINDINGS AND DISCUSSION We provide insights from the survey responses and telephonic discussions in this section. We have gathered details on the average duration of activities and number of people employed along with how the duration of activities and workforce employed change based on the project size and company profile. These are indicative numbers based on the limited responses. A more comprehensive study undertaken when the sector matures would provide a clear picture of overall employment created over the course of an FPV project.
OPERATION AND MAINTENANCE Operation and maintenance (O&M) of FPV plants are relatively smoother than ground-mounted solar. This is because installations on water do not give rise to issues like accumulation of dust and/or sand, common in groundmounted installations. Therefore, periodic maintenance, which includes activities such as module cleaning and site cleaning, is done only four times a year for a small-scale plant and 28 times a year for a mid-scale plant.
We are upbeat about the sector’s potential to grow, and our respondents foresee an increase in employee strength in the coming three years. An interesting observation from our case-study is the possibility of additional employment prospects for local boatmen in project sites. Since the FPV project is primarily accessed by a boat, for carrying out installation and maintenance activities, the developers and EPCs can outsource these services to the local community living close to the water body. Although the number of jobs created would be small, it surely opens up an additional source of livelihood.
In 2015, India announced ambitious targets for renewable energy—175 GW by 2022—one of the largest expansion initiatives in the world. Just four years later, at the United enewable energy (RE) capacity to 450 GW by 2030 (PIB 2019). India’s journey to reaching these targets is at a critical juncture. The pace of capacity addition in utility-scale wind and solar power, which saw a rapid increase during 2014–2017, has since slowed down (Figure ES1).
Private investment has shaped deployment trajectories so far. Today, solar and wind technologies have advanced, supply chains have strengthened, and expertise has developed. Despite the highs and lows, investor confidence in India’s RE sector continues to remain robust. Further, many factors favour investments in RE. It has proved itself to be resilient in times of crisis, including the COVID-19 induced shocks in 2020. There are strong signals that RE is a preferred choice, not just because of its green attributes, but because of its favourable cost economics for all stakeholders.
Central policies: kickstarting solar but leaving wind behind The initial drivers for RE capacity addition were fiscal, financial, and tax incentives, like accelerated depreciation, generation-based incentives, and feed-in tariffs (FiTs) determined by state commissions. Wind turbine manufacturers were the first movers. The de-licensing of generation under the Electricity Act 2003 (EA) set the stage for private investments in RE.
Currently, apart from setting up inter-state projects, there are no other mechanisms to equitably share the costs of hosting RE projects to supply power to other states. Further, despite RE tariffs attaining grid parity, investors continue to rely on RPOs for demand creation, indicating deeper causes obstructing further RE penetration in markets. Inadequate compliance of Central policies by states also point to certain legitimate state concerns that may not have been addressed (Figure ES2).
Private investment has shaped deployment trajectories so far. Today, solar and wind technologies have advanced, supply chains have strengthened, and expertise has developed. Despite the highs and lows, investor confidence in India’s RE sector continues to remain robust. Further, many factors favour investments in RE. It has proved itself to be resilient in times of crisis, including the COVID-19 induced shocks in 2020. There are strong signals that RE is a preferred choice, not just because of its green attributes, but because of its favourable cost economics for all stakeholders.
From approximately 21 GW of utility-scale solar and wind capacity at the end of financial year (FY) 2012 (1 GW solar and 20 GW wind), India achieved 70 GW capacity by 31 September 2020 (32 GW ground-mounted solar and 38 GW wind) (MNRE 2020b). This growth story is undoubtedly remarkable. Solar and wind energy have also proved to be resilient in times of crisis, including during the COVID-19 pandemic in 2020, and have continued to attract investment and attention from policymakers.
Before we embark on a policy analysis to determine the best tools to address the above challenges, we look back and study the sector’s evolution and evaluate the policies’ impact on RE. As RE growth slows and faces newer challenges, it is the right time to conduct such an analysis. Such an exercise will enable us to understand what are the gaps in the existing policies that need to be mended to adapt to the changing dynamics and yet achieve our objectives. The legislative architecture, along with a diversity of stakeholders and their objectives and interests, makes power sector policymaking and governance a complex space. Therefore, policy evaluation can be done through multiple lenses. This study focuses on the evolving risks for project developers in the bulk RE procurement market and the policy response of the Centre and states to those risks.
Solar Park Scheme Land procurement in India is hugely complicated, with challenges ranging from the legal to the political (TERI 2017). For developers, private procurement is expensive and timeconsuming. This is evidenced by the consecutively increasing time limit for obtaining possession under the NSM. In Phase I, 180 days was the time limit; in Phase II, Batch I, the time limit was increased to 210 days; and currently, developers must show possession only at the time of commissioning the project.
Renewable purchase obligations – a regulatory mechanism for creating demand
The NSM, Solar Park Policy, and other fiscal incentives are supply-side measures, targeted at reducing investment risks. However, a measure to create demand was essential because RE was considerably more expensive than conventional power in 2010. Demand for RE was created through the RPO mechanism.
Setting RPO targets The RPO targets notified by states are set out in Table A1 in the Annexure. As is evident, states’ RE ambition varies widely, and there was considerable variance between them and the NAPCC targets. Karnataka, Tamil Nadu, Maharashtra, and Rajasthan set relatively high targets, while Andhra Pradesh, Bihar, Madhya Pradesh, and Uttar Pradesh set quite low targets.
Compliance with RPO The obligated entities can comply with their RPOs through two routes: direct procurement (FiT/competitive bidding) and purchasing RECs from power exchanges. State regulations typically contain provisions for monitoring compliance, which require the obligated entities to submit information to the state nodal agencies, and the nodal agencies are required to file periodic compliance reports with the SERC. The SERC can also initiate suo moto proceedings to verify compliance.
Variance in compliance within states The MNRE has consistently been urging states to align their RPO trajectories with that of the Central Government and ensure strict compliance. In August 2019, the MNRE sought APTEL’s intervention to nudge SERCs to enforce and align RPOs and not to allow any waivers or carrying forward (MoP 2020a). In 2019–20, some RE-rich states, including Maharashtra, Gujarat, Tamil Nadu, Rajasthan, and Telangana, fell short of meeting their RPO targets. Apart from Andhra Pradesh, Rajasthan, Karnataka, and, more recently, Tamil Nadu, no other state has met their RPO targets (MoP 2020a). Figure 4 compares the RPO compliance situation across 2015–16 and 2017–18 of Tamil Nadu, Maharashtra, Bihar, and Punjab and is representative of the compliance situation across the country.
Participation in the REC market mechanism The trading mechanism instituted for RECs in the power exchanges has not led to its uptake, as there has been a consistently high number of unredeemed RECs (see Figure 5). In addition, developers installed only around 2266 MW of RE capacity in 2010–2017 under the REC mechanism.
Policy evolution in RE-rich states
The southern and western states of India have a long history of RE development since RE resources are concentrated in these states (Figure 7). These states attracted investments in solar and wind energy well before the launch of NAPCC and the NSM. This section recounts the journey of RE policies in states that have high solar and wind energy potential. The RErich states covered are Andhra Pradesh, Gujarat, Karnataka, Madhya Pradesh, Maharashtra, Rajasthan, Tamil Nadu, and Telangana.
Policies pre-2014 In January 2009, Gujarat became the first Indian state to launch a solar power policy (Economic Times 2010). In 2012–13, over 40 per cent of Tamil Nadu’s total capacity was based on wind power (TN Energy Department 2012), well before the Government of India adopted the ambitious target of 175 GW RE capacity by 2022, including 60 GW wind.
Global market developments Apart from reduced risk perceptions due to stronger institutional mechanisms, developers’ expectation of fall in solar module prices also drove them to place extremely aggressive bids in the auctions (Deign 2017). Solar module prices witnessed an overall drop in prices (see Figure 9). However, even small fluctuations in module prices can affect project economics adversely.
There were short periods when module prices increased during 2017–2020 due to various reasons such as China slashing its subsidies, reduced polysilicon supply in China, module suppliers demanding price renegotiation, and supply chain disruptions due to the COVID-19 pandemic (Bridge to India 2017). Excessive reliance on imported modules and largely from a single country, makes the projects vulnerable to geopolitics and domestic policies intended to promote domestic manufacturing (Chawla 2020).
2016 onward, SECI’s tendering activity has shifted towards ISTS-connected solar projects. Between 2016 to 2019, it issued tenders worth 13,000 MW of solar PV capacity (ISTS I to ISTS IX) and 12,600 MW of wind capacity (Tranche I to Tranche IX). Figure 12 shows the deployment progress of solar projects awarded under the ISTS I to ISTS IX tenders by the SECI (as of August 2020).
Policy evolution in RE-deficit states
As discussed above, southern and western states in India have abundant RE and land resources to develop large-scale wind and solar power projects. However, the northern states in the Indo-Gangetic plains are densely populated, agricultural states. The mountain regions in the north have excellent solar resources and are sparsely populated but have forest areas and difficult terrains and low transmission capacities. The coal economy is dominant in the eastern states.
Looking back to look ahead
With the evolving policy landscape at the Central and state level, we have seen India’s renewable energy sector grow tremendously. In 2010, the total installed RE capacity was just about 18 GW, which has grown almost five-fold over the decade. As our analysis suggests, there were high and low points in this journey. Every time a roadblock emerged, India has been successful in testing and identifying alternate approaches and solutions. Some of these include bundling solar power with conventional power to counter high tariffs in 2010; introducing solar parks when deployment became slow and tough; increasing RPO targets to create the necessary demand; creating and backing SECI to address counterparty risks; accelerating tendering activity to signal a commitment to creating strong pipelines; encouraging solar–wind hybrid parks to improve utilisation factors; introducing protocols and mechanisms such as market-based economic dispatch, a real-time market, and a green term ahead market to optimise grid integration costs. With economics favouring RE, its share in India’s electricity mix is only expected to grow.
India is the world’s third largest carbon emitter, with emissions expected to rise as the economy grows. While this economic growth is important for advancing development objectives, especially in the wake of a likely recession due to the COVID-19 pandemic, it also poses a challenge as around 600 million people in India are at risk from the impacts of climate change such as floods, wildfires, and heat waves. Additionally, inaction on this threat could shave USD 1.12 trillion off the country’s GDP by 2050,2 eroding progress on sustainable development and poverty alleviation in a country that already struggles with meeting basic needs.
India has set ambitious targets to increase the share of renewable energy (RE) in its energy mix. The Government of India (GoI) plans to install 175 GW of renewable energy projects by 2022 and 450 GW by 2030. To put that in perspective, total installed energy capacity in India at the end of 2020 was 379 GW, or which 93 GW (25%) was RE. To date, the government’s primary focus of RE expansion has been on large grid-scale solar. However, achieving India’s ambitious RE targets will also require an increase in distributed renewable energy (DRE) projects. If a more favorable regulatory and policy environment is created, such DRE projects, though smaller in size, have greater scalability potential. They also avoid the long lead times and execution bottlenecks associated with public-sector offtake procurement projects.
Backed by central government incentives, states had initially created a favorable policy environment for DRE. However, in recent years, a number of these incentives have been rolled back. For example, due to RTS subsidy rollbacks, state electricity distribution companies (DISCOMs) are turning hostile towards RTS as they foresee a loss in revenue, an increase in costs, and the longer-term threat of disintermediation. In addition, the COVID-19 outbreak has had a severe financial impact on all stakeholders, leading to a conservative outlook on demand, profitability, and cash flows.
POLICY GAPS AND OPPORTUNITIES
In addition to its current focus on large grid-scale projects, to meet its sustainable energy goals India needs a shift in policy focus towards creating a robust private market for the DRE sector. A stable policy environment with incentives for all stakeholders is required to accelerate growth and would help direct more public and private financing, from domestic and international sources, into the DRE sector. Specific examples developed further in this report include:
• Rooftop Solar: A more holistic demand aggregation model integrated into the GoI’s Phase II grid-connected RTS scheme would allow DISCOMs to get both a transaction fee for facilitating the installation as well as monthly fee for Operation & Maintenance (O&M), such that billing/collection would better allow them to stay relevant and eliminate the threat of disintermediation.
• Distributed Storage: Distributed energy-storage policy should be integrated with the Phase II RTS scheme. Instead of promoting a capital-subsidy based model, the government should create a more favorable environment for operational models with the involvement of DISCOMs.
• Smart Energy Management: Creating incentives for Internet of Things (IoT) based energy efficiency retrofits, that can attach to existing home circuits, will accelerate energy consumption optimization in households and small commercial establishments. This would not only help reduce energy bills and carbon footprint, but could strengthen overall grid resilience. For example, DISCOMs could move more quickly towards Time-of-Day billing as a part of their demand-side management.
• Electric Vehicle Charging Infrastructure: India’s EV-charging infrastructure should be treated as a public good. Policy should support a decentralized approach, with DISCOMs being the implementing agency for a franchise-based model. Allowing commercial establishments that produce excess solar power from RTS to set up retail charging points would be another step in the right direction.
• Solar Agricultural Pumps: The GoI’s KUSUM scheme currently has a centralized tendering process. Allowing state DISCOMs to partner with private installers at a local level should be considered. DISCOMs could facilitate commercial partnerships with solar pump installers and local farmer co-operatives. The DISCOM, through the installer, could pool the excess power generated from solar pumps into a single point of injection into the grid and pay power purchase costs, net of service fees, to farmer co-operatives.
• Solar Cold Storage: The GoI currently offers a 30% subsidy on solar cold storage installation under its broader rural livelihood subsidy scheme. However, considering the importance of cold storage in the agriculture supply chain, it is vital to create a separate solar cold storage program to bring down capital costs.
• Productive Use Appliances: It is imperative to shift the focus of grants from subsidizing product purchases to providing project development support to entrepreneurs developing the products. Equipment subsidies limit grant usage to the number of assets that it can fund, whereas project development support allows entrepreneurs to both defray technical assessment costs associated with commercial capital raising as well as develop commercially scalable business models that reduce the cost of products for end-users.
FINANCING GAPS AND OPPORTUNITIES
The RTS and OGS markets are small and fragmented, largely reliant on philanthropy or subsidized private funding. There is currently limited interest from private commercial capital. Supported by stronger financial-sector policy and strategic public investment, the public, private, development and philanthropic sectors have a tremendous opportunity to work in coordination to open significant new DRE market opportunities for India.
The potential of distributed renewable energy in India is huge. In this section, we outline the sub-segments that have the highest growth potential for meeting government targets for sustainable energy security in the coming years but have fallen short so far on this front.
ROOFTOP SOLAR Adoption of rooftop solar by several small and medium industries can play a key role in decarbonizing India’s manufacturing supply chain.
SOLAR AGRI-PUMPS India has traditionally been an agricultural economy with over 160 million households dependent on agriculture for livelihood.6 Access to reliable water remains a challenge as only ~50% of the agricultural land in India is currently under irrigation.7 This presents a unique market opportunity to provide solar-based irrigation solutions to around 80 million households in India. The Government of India (GoI), under its KUSUM scheme, has targeted a cumulative installed capacity of 1.75 million solar water pumps (around 6% of the total agricultural pumps in the country) by 2024.8 At the current average price of agricultural pumps of around INR 200,000 (USD 2,700), the estimated annual market size would be INR 10,000 crores (USD 1.5 Billion).
SOLAR COLD STORAGE India’s weak agriculture supply chain results in significant loss in agricultural produce, leading to loss in income for farmers. The government has set itself a target of doubling farm income by 2024, for which having a robust supply cold storage infrastructure is essential.
DISTRIBUTED ENERGY STORAGE Energy storage is a crucial tool for enabling the effective integration of renewable energy and unlocking the benefits of local generation and a clean, resilient energy supply. The technology is valuable to grid operators around the world who must manage the variable generation of solar and wind energy. However, the development of advanced energy storage systems (ESS) has been highly concentrated in select markets, primarily in developed economies.
In India, factors like operational inefficiencies in the state distribution system, crosssubsidization of agricultural and residential customers, and infrastructure development costs to support government schemes (such as rural electrification) have created a huge revenue gap for DISCOMs, leading to an increase in tariffs for commercial and industrial customers.
ELECTRIC VEHICLE CHARGING INFRASTRUCTURE India has over 200 million registered vehicles – with the number of vehicles increasing by over 20% in just the last five years. This number is expected to go up significantly in the coming years as private motor vehicle penetration in India is only 4% as compared to about 80% in the United States and about 55% in the EU. By 2030, it is estimated that India will have 600 million vehicles. In 2017, electric vehicles (EVs) accounted for less than 0.1% of the total automotive sales in India. With technology development and favorable government policies leading to a fall in total cost of ownership, it is estimated that EVs have the potential to account for up to 30% of the total automotive sales in India by 2030.
LOW AGRICULTURAL FARM INCOMES FROM UNSUSTAINABLE FARMING PRACTICES Rural farm incomes in India have traditionally lagged non-farm urban incomes by a considerable portion. This has been a major factor in the recurring cases of agrarian distress in India leading to multiple bouts of farmer suicides. With agriculture becoming increasingly difficult to sustain livelihoods, an increasing number of farmers of newer generations are migrating towards low-paid informal jobs in urban and semi-urban areas. This trend is likely to have an adverse impact on the long-term quality of agriculture in India. With this in mind, the government has created a policy target to double farm incomes by 2022.
WEAK AGRICULTURAL SUPPLY CHAIN India’s weak agriculture supply chain results in a significant loss in agricultural produce, leading to a loss in income for farmers. The government has set itself a target of doubling farm income by 2022, for which having a robust cold storage infrastructure in the supply chain is essential.
DEVELOPING THE RURAL SERVICES ECONOMY Access to a reliable grid-based electricity source remains a challenge for agriculture in India. As a result, mechanization in the farm and non-farm sectors remains low. The total addressable market for equipment such as reaper binders, knapsack sprayers, and rice transplanters has been estimated at around USD 40 billion. A multitude of activities exist in the ancillary (non-farm) agricultural sector that can benefit from reliable clean electricity: milk cooling, flour milling, sewing, weaving, tailoring, pottery, jewelry, poultry, vehicle repair, furniture manufacture, restaurants, retail, etc. The total addressable market for such activities has been estimated at around USD 15 billion.
While India has reached 100% village electrification per government statistics, villages suffer from intermittent power. In addition, several village economic activities are located away from village electrified areas, increasing demand for solar-powered productive use appliances.
MANAGING PEAK DEMAND AND SUPPLY DEFICITS The total household energy consumption was 275 TWh in 2018 and is expected to reach 640 TWh by 2030, a CAGR of 7.5%, due to increasing household electrical appliance use. In addition, commercial energy consumption is expected to increase from 95 TWh in 2018 to 200 TWh by 2022, a CAGR of 6.5%, due to increasing commercial building heating, ventilation, and air conditioning (HVAC) demand.
ROOFTOP SOLAR The GoI’s Phase II grid-connected RTS scheme, which provides a central role to DISCOMs for disbursement of central government subsidy, is a step in the right direction. However, the program only covers the residential segment and links the fiscal incentives for DISCOMs to annual installed capacity, which would be difficult to achieve unless the C&I segment is also considered. A more holistic demand aggregation model, which allows DISCOMs to get both a transaction fee for facilitating the installation as well as monthly fee for Operation & Maintenance (O&M) and billing/collection would better allow them to stay relevant and eliminate the threat of dis-intermediation.