Session_6_Project_risks_identification_and_mitigation_techniques.pptx

risk identification of solar projects and mitigation of those risks. good to know about the solar market and how to set up a solar plant in india.

1. The World Bank – SBI Grid Connected Rooftop Solar PV TA Program Session 6: Project Risks identification and mitigation techniques Presented by The World Bank SBI GRPV TA Program 1

2. 2 Content Key risks faced by solar PV rooftop projects across the project lifecycle Mitigation Techniques Preventive maintenance plan

3. 3 Risks and Challenges including Mitigation Measures for Scale up of Solar Rooftop Lending

4. 7/5/2018 4 Context Financing remains one of the significant challenges for the sector to scale up of solar rooftop Other challenges include Limited awareness Emerging business models Lack of trained manpower Higher perceived risks associated with the sector Understanding of risks and challenges involved required for structuring adequate mitigation mechanism

5. 7/5/2018 5 Key challenges confronting the financing of the solar rooftop sector in India Evolution of policy framework Interconnection process and charges Infrastructure up gradation requirement Site related risks Grid availability risks Contract sanctity & host credit-quality Policy & Implementation Role of utility/ electrical inspector – timelines Standards & Certifications Empanelment of inverter/ meter manufacturers Lack of clarity on business models Rooftop leasing Utility based business models

6. Stakeholders need to understand and work towards large scale deployment Policy Regulatory Implementation Department of Power & Renewable Energy, State Government (No Role in Implementation) State Electricity Regulatory Commission (SERC) (Minimal Role in Implementation) State Distribution Company/ Consumers/ System Providers/ Channel Partners (Key Role in Implementation) Cost Benefit Analysis and Investment Application/ Identification of system provider Consumer System design Meeting technical standards and utility requirements System Provider Process design & integration with utility business practices Formats and Forms Utility

7. 7/5/2018 FOOTER GOES HERE 7 Risks and Challenges for Scale up of Solar Rooftop Lending Key Risks Impact Mitigation Measures Different economics, business models and appraisal cost for Customer segment High cost of evaluating projects Customize the appraisal process as per the customers segments – documentation, level of risk check, appraisal timeline, processing centres etc. Customized training programs for bank personnel at different level High transaction cost for lower ticket sizes High financing cost Create high volumes Aggregation models Programmatic approach (e.g., solarizing railway stations ) Lack of data Difficult to assess projects in absence of organized data like PLFs, Grid Availability etc Collaborate with Govt agencies and FIs Promote open & centralized databases, standardized formats and processes Multiple Incentive structure Lack of awareness on regulatory implications Cost benefit analysis for each incentive structure Readiness of Bankers Assess promoter profile rather than project profile – inadequate assessment of loan Capacity building for banks

8. 7/5/2018 8 Risks Involved at different stages of Projects Pre Loan Sanction Post Loan Sanction Roof related risks Transport and Installation risks Interconnection issues Roof related risks Operational risks Contractual risks Loan Sanction Lenders not required to take risks for pre-application stages

9. 7/5/2018 9 Risks and Challenges – Installation & Commissioning Key Project Risks Impact Mitigation Measures Structural Integrity of roof Material damage to roof Adequate checking of load bearing capacity of roof especially for non asbestos or metallic roof Certification from structural engineer Procure insurance. Physical access to the roof Difficult loading equipment & material on roof Difficult for manpower movement Pick rooftops with permanent access to roof Check for adequate provisions for building temporary access Project delays Deferred payments leading to the Loss of revenue/ deferred repayment of loans Realistic project implementation timelines and commitment of the stakeholders Timeline for Tariff payment Damage during transportation Delay project and increase cost of project Procure transit insurance Damage during installation Delay project and increase cost of project Procure construction insurance

10. 7/5/2018 10 Risks and Challenges – Installation & Commissioning Key Project Risks Impact Mitigation Measures Inadequate utility infrastructure Delay in project implementation Assessment of the supporting grid infrastructure like transformers availability to feed in the power Lack of competent utility professional Delay in project implementation Concentrate on states/DSICOMs with well defined policies, regulations and interconnection procedures Complex procedures to implement Net Metering Delayed approvals Delay in project implementation Plan adequate time for approvals Evaluate experience from past projects

11. 7/5/2018 11 Risks and Challenges - Operations Key Project Risks Impact Mitigation Measures Grid Availability Shuts down solar plant Check for grid availability and power quality stats of the feeder Deemed Generation clause in PPA Grid Reliability Substantial grid voltage/ frequency variations trips off inverters Shadowing effect Loss of generation Assessment of the master plan on civil construction in the nearby area. Roof profile-– orientation and inclination Loss of generation if the orientation of the roof is not receiving the maximum solar irradiation Roof profile to be adequately considered to estimate performance of solar plant. Poor quality of components Underperformance of plant Frequent failure of components High cost of maintenance Diligently follow MNRE standards Performance Warranties Minimum performance guarantees clause in the PPA

12. 7/5/2018 12 Risks and Challenges - Operations Key Project Risks Impact Mitigation Measures Structural Integrity of Roof Collapse of roof can lead to material damage to solar plant and cease operations Time to time testing roof for load bearing capacity especially in case of non asbestos or metallic roof Certification from structural engineer and insurance. Physical access to the roof Inadequate O&M Mandate for p roviding adequate provisions for access to roof as part of loan agreement

13. 7/5/2018 13 Risks and Challenges - Contractual Key Project Risks Impact Mitigation Measures Default on payment Loss of revenue Payment security mechanisms- Letter of Credit and Escrow Agreement Due diligence of power off-taker Early termination of roof Lease agreement Non repayment of loan L oan tenure to be limited to lease tenure Early termination of PPA Non repayment of loan Provision for penalty for early termination of PPA Tripartite agreements, buy-back clauses Renovation of roof Loss of generation during renovation period Deemed Generation clause in PPA Damage to roof Material damage to plant Loss of revenue Provision for penalty due to damaged roof Deemed generation

14. 7/5/2018 14 Risk Mitigation Mechanism A mitigation mechanism shall be adopted, typically through the following steps: Identification of risks and challenges as per the project category; Identify the stakeholder who will bear the risks Rating of the risks to allocate costs on the mitigation measures; Structure the mitigation measure Decision to go ahead with the project considering the risk and cost of mitigation measure;

15. Preventive Maintenance Plan Maintenance Frequency Ensure security of Power plant Day-to-Day Cleaning solar panels to remove dust and other dirt like bird droppings etc. with water, wet and dry mops Weekly / Fortnightly Monitor power generation & export Daily (remotely) Keep the inverters clean to minimise possibility of dust ingress Quarterly Ensure all electrical connections are kept clean & tight Half-yearly Check mechanical integrity of the array structure Annually Check all cabling for mechanical damage Annually Check output voltage and current of each string of the array and compare with the expected output under existing conditions Annually Check operation of PV array DC isolator Annually

16. 16 Dr Amit Jain Renewable Energy Specialist Email: [email protected] Acknowledgment and Disclaimer: This training material is made possible by the support of the American People through the United States Agency for International Development (USAID). The contents of this material are the sole responsibility of Nexant Inc. and do not necessarily reflect the views of USAID or the United States Government. This material was prepared under Contract Number AID-386-C-12-00001. The images shown here are taken from the Internet for education purpose only. Further the training material has been modified and updated as necessary by The World Bank – SBI GRPV TA Program