Thomas Fuhrmann | Chief Executive Officer and Managing Director, TUV Rheinland India.
Tell us about your journey in India. How has the market evolved?
With relatively younger time of 20 years in India, but a global experience of 140 years, we are one of the leading technical inspection companies in the country. Having grown consistently to meet the future business requirements, we have two major aspects of our business. One aspect deals with the export market wherein we provide passport to enable Indian manufacturers to export their goods and products. The other aspect deals with the domestic players where we help them manage the complexity in the market and meet the growing domestic demand. Perception towards renewable energy (RE) has changed over the years. Advancement in expertise and the rapid deployment of renewable energy technologies has created a paradigm shift in the entire industry which depicts a huge potential. RE investments have its own advantages economically by reducing our dependence on fossil fuels and improving the quality and safety of the environment.
This has led to a significant rise in the number of manufacturers in the field of solar PV and wind industries.
What is the role of certification agencies in India´s RE space?
GoI has a very ambitious RE target of 175 GW by 2022, including 100 GW from solar energy by 2022. According to recent reports India´s solar capacity has already doubled to almost 7 GW in 18 months which signifies that the industry is going in the right direction. Experts say these targets are no longer a financial challenge but definitely a technical one. Certification agencies like us act as a bridge to overcome this technical barrier and support the government along with stakeholders in the renewable value chain to achieve this aspiring target.
We have been promoting the development of PV for more than 30 years. This extensive experience in laboratory tests and PV certification allows us to understand the inherent weaknesses in the production process and failure mechanisms such as safety issues, technology risk, environmental concerns and degradation are part of our DNA. Apart from solar, in the wind segment too, GoI is is attracting foreign investors, public and private players to assist them in achieving their target of 60 GW by 2022. TUV Rheinland as a technical inspection company plays a significant role in providing tailor-made as well as comprehensive services for the stakeholders in wind sector as well.
What are the major challenges you face in the India market?
With the booming demand for PV products all over the world, the trading and installation of PV modules has become a popular and profitable business. Major challenges focus in securing return on investment both for the lenders and the developers. Fluctuating tariff rates and tight deadlines eventually result in compromising the quality of the panels as well as raises questions on the design of the power plants. Whether it is safety issues, technical problems, logistic hurdles or legal matters, all of them can result in financial risks. Effective technical risk management and independent engineering oversight decrease project-related risks and assure on-plan performance. In the wind market, we have gaps and challenges like regulatory differences among states, payment hiccups, territorial evacuation issues, gaps in necessary standards e.g. some states are not even signing PPAs and at last but not the least utilities who are asking wind generators to shut down their plants because of grid curtailment, etc. Moreover some states have only one year as control period which itself is very less for a wind project development. Other issue which industry will face is removal of generation based incentive and accelerate depreciation from FY18 onwards. This might hamper the viability of wind projects at current project costs and fees in tariffs.
How then do you ensure financial returns for such projects?
Even though the solar energy is an intermittent source, the financial returns are considered a significant factor. This hugely depends on cost and efficiency of the technology, which is improving continuously and eventually reduces cost per kWh. Additionally this electricity is also generated without giving rise to any carbon dioxide emissions, thereby indicating a return in carbon credits too. Shrinking margins and reduction in feed-in-tariffs builds a huge pressure among suppliers and manufactures and they may tend to change the materials and key components. The nature and intention of project partners, who are engaged in the planning and implementation of large PV plants varies extensively. Quality is an essential factor to not just fulfil India´s vision but also to ensure the longevity of the technical infrastructure. We can estimate the yield expectation and design errors in the planning phase itself, but in the end, the quality, safety and long term yield of a PV system highly depends on how hundreds of workers, contractors, sub-contractors etc. interact and engage with each other during the system set up. Only comprehensive quality assurance, from site evaluation and system inspection to system monitoring can reliably minimise these risks.
Banks are vary of investing, do your solutions overcome financier doubts?
Most lenders offer repayment period of 10-12 years, as such they are keen to understand performance and potential of the plant during the repayment period and are more interested in prospective downside of the transaction and payback. Being the lender´s independent engineer we carry out the energy yield estimation for entire lifetime of the project. We also provide degradation percentage of the module and effected generation down the line due to such degradation; conduct contract review and ensure that all provisions are made in the contract such that any risk, if any, can be bearable by the contractor which safeguards the project of any major impacts. Review and assessment of project design also ensures that selected technology is suitable and gives the estimated results. Our assessment of project cost provided by the borrower helps lenders decide on the allocation of funds and understand all the technical aspects, potential and associated risks.
What functions within your purview impact the working and output of a power plant?
As third party advisers and as lender´s technical advisers (LTA), we help achieve and maintain the profitability of utility-scale PV systems by ensuring quality, safety and reliability during all project phases. We provide technical due diligence (TDD) reports for banks and investors to make decisions on the financing of investments. This includes independent technical analyses of PV systems in terms of technical design, quality, safety and performance. We are also into quality assurance services which include project-related product testing, installer, operation and maintenance qualification, inspections during installation, commissioning and acceptance tests, operation monitoring feasibility studies and energy yield predictions on the basis of full product characterisation and site influences.
Is India comparible to the global set-up in terms of demand and technology utilisation?
The Indian RE sector has grown significantly over the past decade but if we compare the global figures, we are way behind China, US and Europe. On the positive side, this signifies that we have ample opportunity to grow in the field. Power transmission and grid integration is still a challenge. Lack of coordination between union and state government is also one big drawback. Limited access to financing for RE projects is also a key barrier for the industry. GoI needs to bridge these gaps to encourage investments.
What are your custom offerings for the India market?
We perform Technical Due Diligence and provide clear and independent technical analyses of PV systems in terms of technical design, degradation and performance. An equally large risk comes from possibly defective PV modules that do not have the documented output or whose inferior production quality will not guarantee the desired long-term stability. Representative samples can be taken for determining the performance of the PV parks (Quick Performance Check). Tests on a small random sample for determining the workmanship regarding long-term suitability (Quality Benchmark) also help assess long-term performance and serve as proof of the assured product properties. In the field of Wind Energy, TUV Rheinland provides its services along the full spectrum of wind project development including pre-implementation, implementation and post commissioning stage. During last one year, TUV Rheinland has provided its services to around 4,000 MW of wind assets in India only.
We develop and update our services based on the technology advancements, government policies and regulations as well as our customer needs and requirements. Our services are always as per international standards and quality.
Aside from technology and finance, skilled labour is another mountain to climb. What are the steps that you have taken in regards to this? Kindly elaborate. Apart from the technical barrier we also see that there is an influencing skill gap in the RE industry. We cannot achieve these ambitious targets of 175 GW set up in six years without noticeable crowd of skilled manpower. According to NRDC report, as many as 81,000 highly skilled workers would be needed by 2022 to carry out annual and ongoing performance data monitoring of solar projects totalling 100 GW. An additional 182,400 workers would be needed by 2022 to carry out low-skill operation and maintenance functions for the numerous solar rooftop and utility scale projects. Government is taking various initiatives to close this gap. Suryamitra skill development program is one such initiative which is organised by National Institute of Solar Energy (NISE) an autonomous body under MNRE in collaboration with state nodal agencies and identified training partners.
The duration of this program is 600 hours (approx. 90 days). This is a residential program and it is free for the students including boarding and lodging. Once these students complete the course, they will be well trained solar PV technicians in the industry with technical knowledge about how to operate and maintain solar set up, plan and install solar PV electrical systems, testing and commissioning of solar plant as well as check all equipment´s and parts with regards to safety.
Successful candidates are offered placement assistance to find the right job or become entrepreneurs in the solar industry, in and outside India. These candidates are the needed manpower to assure a sustainable growth in the sector and to achieve the goals for every company who is involved into this ambitious 175 GW future project.
NISE has authorised TUV Rheinland India Pvt. Ltd to set up multiple centres across India. These would be the premium centres to impart GoI´s prestigious Suryamitra program. We have been chosen as one of the three agencies to offer Suryamitra training pan India. It aims to establish 35 centres in the current year and train around 5,000 students. Our Academy and Lifecare division will be responsible for setting up these Suryamitra centres across India.
Furthermore we in TUV train over 9,000 students per annum in different trades pan India, with 1.2 lakh sq. ft of labs and 200,000 sq. ft of training facilities. Amongst the programs related to RE there are two popular programs namely PV installation and maintenance and wind mill operation and maintenance. Both these are three months program dealing with installation, commissioning and maintenance of solar plants and wind turbines respectively. Cairn Centre of Excellence, operated by TUV Rheinland India is one of the biggest centres of training in RE in India.