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					</table>India is on the cusp of a renewable revolution, with the government and the industry complementing each other in facilitating the wider adoption of renewable energy in the country.
With an ambitious target of 280 GW of solar by 2030, the country must install nearly 26 GW of solar every year. For this to happen, India needs to project itself as an attractive destination for investors.
While the annual project installations surpassed the 10 GW mark in 2021, investments of about $10 billion (~₹748 billion) flowed into the Indian solar sector. Even though installations were higher in 2021, the investments were lesser than in 2017 due to lower project costs (₹40.1 million/MW in 2021 against ₹42.3 million/MW in 2017).
Last year was a landmark year for renewable energy-oriented corporate mergers and acquisitions (M&amp;A) in India. Domestic manufacturers brought in large portfolios and leading solar manufacturing technologies.
In the recently concluded <a href="https://mercomindia.com/event/solar-summit-2022/" target="_blank" rel="noopener">&#8216;Mercom India Solar Summit 2022</a>,&#8217; held in New Delhi on July 28-29, there was a session titled &#8216;Financing, M&amp;A, and Deal-Making – Trends Going Forward.&#8216; The panelists discussed the implications of financing and M&amp;A as India expands into solar manufacturing and large-scale projects continue to grow.
The panelists were P K Sinha, Executive Director (Projects), Power Finance Corporation (<a href="https://www.pfcindia.com/" target="_blank" rel="noopener">PFC</a>); Sreekumar Chatra, Sr. EVP, <a href="https://www.edelweissalternatives.com/" target="_blank" rel="noopener">Edelweiss Alternative Asset Advisors</a>; Hitesh Paliwal, Sr. VP &amp; Zonal Head, North Zone, Corporate Banking Group, <a href="https://www.onlinesbi.com/" target="_blank" rel="noopener">SBI;</a> Vikash Garg, Director of Business Development, <a href="https://www.statkraft.in/" target="_blank" rel="noopener">Statkraft India</a>; and Ashwini Kumar, Chief Risk Officer, <a href="https://www.tatacapital.com/tccl.html" target="_blank" rel="noopener">Tata Cleantech Capital</a>.
Raj Prabhu, CEO and Co-Founder of <a href="https://mercomcapital.com/" target="_blank" rel="noopener">Mercom Capital Group</a>, moderated the session.
Need for more investments as the solar sector grows
Speaking on the current financial scenario, Sinha revealed that PFC had disbursed ₹320 billion (~$4.03 billion) in the renewable sector, with ₹220 billion (~$2.77 billion) going to solar. &#8220;Around ₹17 trillion (~$214.26 billion) will be required to meet the 2030 goals. Out of that, we will disburse ₹750 billion (~$9.45 billion) in the next seven to eight years. The market has stabilized, and things are looking good. Even global pension funds are also investing in the sector.&#8221;
Hitesh Paliwal said SBI was the biggest bank in the country. &#8220;We command about 30% of the market share in the energy and power sector. We have financed nearly 20 GW of solar projects and command 30% of the market share in the renewable sector. Our focus is to lend on the solar side.&#8221;
Ashwini Kumar said, &#8220;We are into wind, solar, C&amp;I, and rooftop. Now we are also moving to other sectors. If developers make money, then only we can spend. In the future, we may enter into the residential rooftop segment. We lend to projects in the range of ₹800 million (~$10.08 million) and ₹4 billion (~$50.41 million).&#8221;
Quality assets in demand
Sreekumar Chatra said the most critical thing in any transaction is the asset quality and the counterparty. Also, the recurring legacy issues affect the overall assessment of the projects.
Chatra said, &#8220;We did an internal study and found that bigger players hold 50% of all projects, and nearly 20 GW of projects is held by fragmented players (subscale players). It&#8217;s not easy to find good assets in the solar space. Only 15-20% of good quality assets are in the country, making it challenging to acquire projects.&#8221;
He claimed that quality assets with fewer legacy issues are in demand. This kind of industrial discipline will help everyone coming into the market. And also, more indigenous players will come to the market.
Sharing his views on the criteria followed while backing a project, Sinha said, &#8220;When a promoter comes to us, we look at the tariff (optimal tariff), which is accepted by the market. We see how the equity is going to come. We analyze the promoter to see the flow of equity. We also examine the promoter&#8217;s financial track record and analyze the project. We analyze land acquisition aspects, clearances, EPC contracts, and other aspects of the project. We ensure that there is a proper contract, a proper bank guarantee in place, and how much the project is going to earn once the project becomes operational. We also have an internal rating process, which evaluates the various aspects of the projects.&#8221;
Paliwal said, &#8220;We look for the availability of offtakers, long-term PPAs, and the quality of modules. There are inclement weather conditions across the country, and we look at the insurance of the modules in these kinds of weather conditions. The ratings of distribution licensees is also essential.&#8221;
&#8220;We cater to small as well as big players. We have earmarked nearly 55% of funds for the solar sector, which comes to around $6 billion (~₹474.55 billion), which is a big number. The ecosystem has evolved, and we have installed around 38 GW in the last five years. Some of the other things we look at are the pedigree, guaranteed offtake, and plant load factor. The secondary market is also mature in the acquisition of these projects.&#8221;
Vikas Garg agreed. &#8220;Currently, we have 30 MW of hydro and 76 MW of solar. We are slightly different from others. We come to our decision based on the balance sheets. It helps us to take more risks on projects. We do try to predict the future. The quality of assets is paramount, and the regulatory framework is also essential.&#8221;
&#8220;Along with this, we also look at the business ethics of the companies. India is a very attractive market for us and perhaps the largest growth market for us. Another thing that is of utmost importance is how the projects are getting implemented on the ground. This affects everything, including lending,&#8221; he added.
Funding challenges
Outlining the process and the challenges while financing a project, Ashwini Kumar said, &#8220;We look for the quality of projects and the ability to pay regularly, clauses in PPA and termination clauses, and the lock-in period. These are some of the factors that have to be reviewed for each project. You need to balance out everything and make a realistic assessment of the future. We also need to understand the challenges in funding. Some key challenges are the quality of the offtaker, quality of the counterparty, and payment delay issues. Risk assessment and the identity of the EPC contractor are also critical, along with other factors.&#8221;
Sinha explained that the health of DISCOMs was critical as they are the ones who will pay the money. &#8220;To improve the health of DISCOMs, the revamped reforms-based result-linked power distribution sector program was <a href="https://mercomindia.com/finance-minister-announces-%e2%82%b93-03-trillion-upgrading-discoms/" target="_blank" rel="noopener">introduced</a>. It was also aimed at reducing AT&amp;C  losses. The AT&amp;C losses have to be reduced to 12-15%. The DISCOM dues have been mounting, and for transparency, we introduced the PRAAPTI portal, where you get all the details of the dues and other aspects related to DISCOMs. We also introduced the liquidity infusion program to clear the dues of the DISCOMs. Also, all the state departments need to clear their dues on time, and the subsidy that has to come from the state should come on time.&#8221;

Quality Assets are in Demand as Investments Flow into the Indian Solar Market

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					</table>There is a growing need for energy storage systems to supply round-the-clock power, given the intermittent nature of wind and solar energy.
India&#8217;s energy storage capacity stands at 27.2 MWh. A total of 7,700 MWh of energy storage projects have been tendered, along with 1000 mWh of pumped storage hydro currently under development.
Energy storage tender activity increased by 41% year-over-year in the calendar year 2021.
The tenders floated by the Solar Energy Corporation of India (SECI) and NTPC amount to 7,600 MWh, indicating a robust pipeline for energy storage projects.
The energy storage segment is expected to achieve more traction during the second half of the decade as battery manufacturing capacities ramp up, bringing the overall cost of production down.
The two-day <a href="https://mercomindia.com/event/solar-summit-2022/" target="_blank" rel="noopener">Mercom India Solar Summit 2022</a>, which began on July 28 in New Delhi, discussed issues relating to energy storage in a session titled &#8216;Energy Storage: What Are We Waiting For?&#8216; The panelists were Naveen Khandelwal, COO and CFO, <a href="https://brightnightpower.com/" target="_blank" rel="noopener">BrightNight India</a>; Upma Koul, Vice President, <a href="https://www.shi-fw.com/" target="_blank" rel="noopener">Sumitomo, SHI FW</a>; and Sanskriti Dubey, Market Growth, Lead at <a href="https://fluenceenergy.com/" target="_blank" rel="noopener">Fluence</a>. They shared lessons learned from global markets, the role of short and long-term energy storage, and the technologies that can address the various pain points.
Wendy Prabhu, President-Mercom Communications and Co-founder of Mercom Capital Group, moderated the session.
Regarding the need for energy storage projects, Naveen Khandelwal said, &#8220;Apart from increasing the renewable energy capacity, we need to increase the percentage of renewable energy in the grid. Energy storage is going to be very important in the coming future. We need to ensure that renewables are dispatchable, and we can do this by increasing the storage capacity.&#8221;
Energy storage technologies
Khandelwal suggested that India should pay more attention to various storage technologies, which would help India meet its energy targets.
Upma Koul said, &#8220;Lithium-ion batteries have become synonymous with energy storage. But the thing is that it is not feasible to go with only one technology. There are several technologies to choose from for the long-term and short-term. It is clear that innovation is taking place in the energy storage segment. Long-term storage should be treated as a different asset class. Some of the challenges are perceived risk and the lack of a skilled workforce. Lending institutions should support innovations and remove the perception of risk. The entire energy ecosystem should be integrated, with storage playing an important role.&#8221;
Koul added that most of the technologies have components that can be manufactured in India. Citing the example of the United Kingdom, she said that India could do well in implementing the model in India. She emphasized the importance of long-term planning.
Sanskriti Dubey said, &#8220;Energy storage has a big future in India, and it will get mainstream soon. We should create a level playing field. Having energy storage obligation targets is a good move in this direction. Storage targets will create a mandate. We must focus on the grid&#8217;s requirements and consider what is required to balance the grid. We need to follow the case of Australia and implement it in Indian conditions. We should consider the design requirements, safety parameters, and degradation for any storage project.&#8221;
Roadmap
Khandelwal said there was a need to continue the momentum and increase the number of hybrid tenders. &#8220;The agencies should support multiple technologies. We should look at storage in a multi-dimensional approach. There should be consistency in regulatory policies. Seasonal storage is also one technology that can help provide round-the-clock power. It will be crucial for wind generation projects, which are in operation during the monsoon. Storage can help provide energy during other months of the year.&#8221;
Stressing that India is a cost-conscious market, Khandelwal said that blending storage with other technologies instead of standalone storage projects is the way to go. He pointed out that as electricity is a concurrent subject, states should work in synergy with the center to achieve the energy targets. &#8220;We should combine storage with various renewable energy sources, which would go a long way in making storage dispatchable.&#8221;.
Koul stressed the importance of developing an ancillary market. Right now, we don&#8217;t have any mechanism for ancillary services. The ancillary market can be developed in India. Everyone is going for energy transition, and energy storage will play a big part in this.&#8221;
With rising global demand, battery storage companies have seen copious funding inflows. According to Mercom&#8217;s <a href="https://mercomcapital.com/product/1h-q2-2022-funding-ma-report-for-storage-grid-efficiency/" target="_blank" rel="noopener">1H and Q2 2022 Funding and M&amp;A Report for Storage, Grid &amp; Efficiency</a>, corporate funding for battery storage companies in 1H 2022 globally saw an increase of 64%, with $15.8 billion raised in 57 deals compared to $9.6 billion raised in 43 deals in 1H 2021.
The Mercom India Solar Summit, on its second day on July 29, will devote sessions to discussing topics including manufacturing, technological innovations, solar for C&amp;I, large-scale solar development, and financing of solar projects.
You can register for the event <a href="https://mercomindia.com/event/solar-summit-2022/register/" target="_blank" rel="noopener">here</a>.

Energy Storage Will Drive the Growth of Renewables in Future

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