For all those curious to understand the strategy behind solairedirect’s lowest ever bid for 5MW, in the recent round of Phase 1 Batch 2 bidding, we interviewed Gaurav Sood, MD, Solairedirect Energy India Pvt .Ltd. to bring you the organizations thought process.
NG. Please let us know the strategy behind the pricing or the thoughts on such a bid?
GS. Strategy was to give a clear message that solar power is moving towards grid parity and Solairedirect is a serious contender to deliver competitive solar power at a large scale making solar energy’s entry into the real world of energy.
NG. How do you plan to achieve such a challenging price?
GS. Solairedirect was able to offer this competitive pricing as a result of its vertically-integrated business model, from module manufacturing to EPC and O&M and long term equity investing that allows for significant capex and cost reduction while trimming risks as well. Solairedirect through its operational track record of building and maintaining more than 120MWp power plants have learnt how to produce the most competitive kWh by optimizing capex, operational and financial costs.
NG. How quickly do you expect the project to be on the ground?
GS. Once land and other clearances are put in place, we intend to start the construction at the earliest and surely commission the plant in the next calendar year itself.
NG. Are the financials tied up already or are you looking to initiate it after the PPA?
GS. We have been in discussions with leading lenders in the solar market in India. With Solairedirect’s operational track record (Solairedirect SA is the second largest French solar power producer which specialises in the development, design, engineering, financing, construction, ownership and operation of solar photovoltaic (“PV”) power generation plants, including the manufacture of PV modules. The company has about 120 MWp Solar PV projects (as solar parks and rooftops) under operation and an estimated annual turnover of €210 million in 2011. The company has raised about €500m in project and equity financing for our projects in France) and its bankable EPC offering we are confident of having the financial closure at the earliest.
NG. Are you looking at Internal equity sources? If no, Will it be a mix of both equity and debt and if so what would be the proportion?
GS. The project will be financed with a mix of debt and equity, in line with the required covenants.
NG. Is it feasible to be doing projects of 5 MW at these prices?
GS. Ideally we would have liked to get at least 50MW project allocation but the Bank Guarantees required to apply and get a PPA act as a disincentive to increase project size and further lower kWh cost. But offering solar power at this competitive price opens the market to a new level where Solairedirect would like to sign PPA’s directly with various bankable off-takers like DISCOM’s, Generators, Private companies etc. and supply power at large competitive scale.
NG. You are France’s 2nd largest solar organization. What are your plans for India & your India strategy?
GS. India is a very key market for us as it offers the right ingredients – power deficit country, increasing power requirement, abundant sunshine and political & regulatory framework to promote solar. In India we would like to offer solar power in 100’s of MWs to various bankable off-takers and become a leading Solar PV IPP working in partnership with local governments, local partners and local management. We would also be offering our bankable EPC offering which will surely not be the cheapest one but would definitely result in the cheapest kWh over the life of the project.
NG. What is your take on the current state of the India market? Both grid and off grid.
GS. The solar market in India is just taking-off and at these prices, in the next couple of years, it will easily become more than a GW market every year. The off-grid segment actually has a large potential since solar energy is the perfect answer for distributed energy. Here the right model without government subsidies needs to be worked-out to expand the market.
NG. How soon do you expect Solar to achieve grid parity or PPA rates of around Rs. 4.50 in India which would put it on par with Wind & Biomass?
GS. Solar achieved grid parity in comparison to diesel long-time back and now we are in grid parity with industrial tariffs. In couple of years with wind and biomass at INR 4.50.
NG. What would be your advice to the guys that didn’t make it?
GS. The results of this historic NSM tender have opened the solar market beyond the tendered project allocations. So, everybody needs to welcome this development and get geared-up for a larger solar market in future with very large opportunities of project development and deployment.
NG. Will you be looking at the REC model and your thoughts on that business model?
GS. We are evaluating the REC model and are in engaging in discussions with bankers to understand the bankability of REC based projects. CERC has done a commendable job in giving a 5 year window for REC pricing, 10year surely would have been great, but the bigger issue is enforceability of purchase of these RE certificates. Till there is no guarantee on this aspect, it will be difficult for bankers to fund these projects.
NG. Anything else you would like to share?
GS. This 5MW project is the beginning of Solairedirect’s journey in India. Solairedirect India would be participating across other state programmes on its own and in partnership with other companies, and will provide its technical expertise towards building best quality & high performing solar PV plants. We are looking forward to forging stronger ties with companies and other developers over the next months to increase our PPA pipeline and EPC business. We are exhibiting at Intersolar and would be to happy to meet partners and customers.
NG wishes Solairedirect all the best for their journey into making Solar power a grid reality.