The Covid crisis will delay but not derail the energy transition

Irrespective of the shape of the recovery, bigger bets on sustainable energy now will act as a stimulus for the wider economy, writes Arsalan Ali Farooque

Driving Foreign Investment to Renewable Energy in India: A Payment Security Mechanism to Address Off-Taker Risk

India’s ambitious renewable energy targets of 175 GW by 2022 will require significant foreign investment. A major issue facing foreign investment in India is offtaker risk or the risk of the public sector distribution companies (DISCOMs) being unable to make payments on time for the procurement of power. Ultimately, this will require long-term financial structural fixes for DISCOMs, some of which are currently under consideration. However, in the short-term, one solution is a government-supported payment security mechanism to build investor confidence. In this paper, we develop a framework, in order to enable assessment of an existing payment security mechanism. We built our framework using elements of credit and financial guarantees – probability of default, exposure at default, and recovery after default. We applied the framework to estimate the size of payment security mechanism involving a central aggregator during JNNSM Phase 2, Batch1. We estimated this size to be INR 4160 million or INR 5.55 million/MW, or less than 10% of capital costs, but more than 2.5 times the size of a previously proposed facility. In other words, the existing facility did not provide adequate coverage of off-taker risk

Reaching India’s Renewable Energy Targets Cost-Effectively: A Foreign Exchange Hedging Facility

In India, a significant barrier to market-competitiveness of renewable energy is a shortage of attractive debt. Domestic debt has high cost, short tenors, and variable interest rates, adding 30% to the cost of renewable energy compared to renewable energy projects elsewhere. Foreign debt is as expensive as domestic debt because it requires costly market-based currency hedging solutions. We investigate a government-sponsored foreign exchange facility as an alternative to reducing hedging costs. Using the geometric Brownian motion (GBM) as a representative stochastic model of the INR–USD foreign exchange rate, we find that the expected cost of providing a currency hedge via this facility is 3.5 percentage points, 50% lower than market. This leads to an up to 9% reduction in the per unit cost of renewable energy. However, this requires the government to manage the risks related to unexpected currency movements appropriately. One option to manage these risks is via a capital buffer; for the facility to obtain India's sovereign rating, the capital buffer would need to be almost 30% of the underlying loan. Our findings have significant policy implications given that the Indian government can use this facility to make renewable energy more competitive and, therefore, hasten its deployment

Reaching India’s Renewable Energy Targets Cost-Effectively: A Foreign Exchange Hedging Facility

In India, a significant barrier to market-competitiveness of renewable energy is a shortage of attractive debt. Domestic debt has high cost, short tenors, and variable interest rates, adding 30% to the cost of renewable energy compared to renewable energy projects elsewhere. Foreign debt is as expensive as domestic debt because it requires costly market-based currency hedging solutions. We investigate a government-sponsored foreign exchange facility as an alternative to reducing hedging costs. Using the geometric Brownian motion (GBM) as a representative stochastic model of the INR–USD foreign exchange rate, we find that the expected cost of providing a currency hedge via this facility is 3.5 percentage points, 50% lower than market. This leads to an up to 9% reduction in the per unit cost of renewable energy. However, this requires the government to manage the risks related to unexpected currency movements appropriately. One option to manage these risks is via a capital buffer; for the facility to obtain India's sovereign rating, the capital buffer would need to be almost 30% of the underlying loan. Our findings have significant policy implications given that the Indian government can use this facility to make renewable energy more competitive and, therefore, hasten its deployment

Reaching India’s Renewable Energy Targets:Effective Project Allocation Mechanisms

Auctions for renewable energy are gaining popularity around the world. In this context, we examined 20 renewable energy auctions in India and elsewhere to answer two questions: first, have auctions been effective; and second, how can they be designed to achieve India’s renewable energy targets? We found that auctions are almost always cost-effective, with savings up to 58% from baseline feed-in tariffs. However, auctions have not resulted in adequate deployment, with only 17% of the auctions with greater than 75% deployment. We then examined how to best design auctions by assessing seven major risks, and found the following: first, for every 1% increase in total risk, deployment effectiveness decreased by 2 percentage points; second, project specific risks have 60% greater impact than auction specific risks; and third, deployment effectiveness is most affected by auction design, completion, and financial risks. We also found that right policy design can lower these risks to improve both deployment and cost effectiveness

Morphology and physiology of the epiphyseal growth plate.

The epiphyseal growth plate develops from the cartilaginous-orientated mesenchymal cells that express SOX family genes. This multilayer structure is formed by the proliferation and hypertrophy of cells that synthesize the extracellular matrix composed of collagen (mainly type II, IX, X, XI) and proteoglycans (aggrecan, decorin, annexin II, V and VI). The resting zone is responsible for protein synthesis and maintaining a germinal structure. In the proliferative zone, cells rapidly duplicate. The subsequent morphological changes take place in the transformation zone, divided into the upper and lower hypertrophic layers. In the degenerative zone, the mineralization process becomes intensive due to increased release of alkaline phosphate, calcium and matrix vesicles by terminally differentiated chondrocytes and some other factors e.g., metaphyseal ingrowth vessels. At this level, as well as in the primary and secondary spongiosa zones, chondrocytes undergo apoptosis and are physiologically eliminated. Unlike adult cartilage, in fetal and early formed growth plates, unusual forms such as authophagal bodies, paralysis and dark chondrocytes were also observed. Their ultrastructure differs greatly from apoptotic and normal cartilage cells. Chondrocyte proliferation and differentiation are regulated by various endocrine, paracrine, and autocrine agents such as growth, thyroid and sex hormones, beta-catenin, bone morphogenetic proteins, insulin-like growth factor, iodothyronine deiodinase, leptin, nitric oxide, transforming growth factor beta and vitamin D metabolites. However, the most significant factor is parathyroid hormone-related protein (PTHrP) which is synthesized in the perichondrium by terminally differentiated chondrocytes. Secondary to activation of PTH/PTHrP receptors, PTHrP stimulates cell proliferation by G protein activation and delays their transformation into prehypertrophic and hypertrophic chondrocytes. When proliferation is completed, chondrocytes release Indian hedgehog (Ihh), which stimulates PTHrP synthesis via a feedback loop. Any disturbances of the epiphyseal development and its physiology result in various skeletal abnormalities known as dysplasia

Policy Implementation and Impact Review: A Case of MGNREGA in India

Amid rising concerns of fiscal deficit and defying the advocates of rural-urban migration, the Union government of India has remained committed to its flagship social program known as Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS). Launched in the year 2006, it is the largest social scheme of its kind anywhere in the world. In the financial year 2012-13 alone, more than 48 million people were provided employment under the scheme. While the scheme has shown positive results in many districts of the country, it is also facing its share of challenges on economic, managerial and political fronts. Qualitative measure gives a better insight into the success of social schemes like MGNREGA. However we should also have a comprehensive quantitative measure for the same. In this paper, we develop a methodology to measure the success of implementation of Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) in different states of India and also look at some of the factors correlated to the comparative success of states. We also discuss some of the key features of the scheme from the point of view of policy making decisions