Thursday, 18 February 2016

Solar Energy : Why the sudden interest?

Solar Energy : Why the sudden interest?

India has been witnessing a steady rise in the installation of Solar Energy projects in the last few years. Focus has been primarily on Photo Voltaic (PV) Solar Power projects rather than on Solar Thermal. Utility scale projects have dominated the Indian Solar scenario with very few rooftop Solar projects up till now.


Fig. 1 Solar Rooftop Target India (State-wise)

While everyone agrees that a Solar-rich developing Country like India should consider Solar Power generation as a serious competitor to grid power., it is only recently that the Solar boom can actually be seen on the ground.

The net installed Solar power capacity in the Country is at 5000 MW (Jan 2016) which is 1/4th the erstwhile target of National Solar mission by 2022.  With the new target of 100 GW (1,00,000 MW) by 2022 these are certainly interesting times for Solar Power in India. What with a huge target of 40,000 MW for rooftop Solar with each State being given a target to achieve the same as seen above).

Major factors that are contributing towards the sudden interest in Solar Energy Power Projects in India are as follows :

  1. Reduced cost of project execution : The EPC cost for Solar project was in the range of INR 8 Crores per MW till a few years back. Recently the EPC cost for the projects have come down to about INR 5.5 Crores per MW. This could be further brought down using imported equipment or even major equipment linked with credit. In this the major factor has been the price of PV modules which has witnessed a significant downtrend globally as can be seen in Fig. 1 below. Moreover the price of PV modules is expected to come down further towards the end of 2016 - primarily attributed to Chinese oversupply. Also with increasing competition the price of Inverters has also come down. With the introduction of innovative business models such as reduced pricing EPC model the EPC costs could be brought down further.

    (
    Contact us today to know more about reduced pricing EPC model)
    Fig. 2 Global Price Trend in PV Cell prices
  2. Ease of Financing + Various Financing Options : There were limited financing options for Solar Projects. Recent spike in demand is also backed by the fact that several investors are looking at India as a Country for long-term Solar asset development. In addition to 100% BOO financing there are various other options including Leased model, reduced percentage (in the range of 5% to 8%) debt financing etc.

    There are certain Government bodies which offer reduced interest rate loans for Solar Power Projects with holiday period and extended loan period for better returns. As Solar Projects are now covered under PSL i.e. Priority Sector lending there are relaxed norms for getting project loans for Solar for kW (household level) upto MW (commercial level).

                                                                                                                                        
  3. Increase in grid power prices : Grid power prices have been on the steady rise across India mainly for Industrial plants and Commercial facilities (see fig below). This has led to increased viability of Solar projects. Earlier Solar projects were viable for captive consumption for grid prices above INR 6.0 per kWh. However now the viability of Solar projects for captive consumption comes in for grid prices as low as INR 5.0 per kWh.

    Going by the past trend and considering other major factors such as economic growth in the Country and the financial health of the DISCOMs the grid prices will continue to rise significantly in the foreseeable future., thereby consistently improving the commercial viability of Solar projects.                                                                                                                   
    Power Tariff in India by States
    Fig. 3 Power Tariff in Major States of India
  4. Government supportThe Government support for Solar Power Projects has increased in recent times owing to the revised ambitious targets. For eg. the 80% Accelerated Depreciation is a sought after benefit by businesses who set off their taxes in existing businesses by investing in Solar Projects. In fact many of the companies which were planning for Solar Projects on 3rd party funding are now looking at investing in these project themselves., primarily driven by the fact that equity is paid back in 2 years merely by considering 80% Accelerated Depreciation.

    In addition to the same there are various tax benefits including 10-year tax holiday on revenues from Solar, Electricity Duty waiver, Discount on wheeling charges etc.


     
    [Others are reading : Solar Energy Job and Business Opportunities]                   

                                                                                                                                          
  5. Renewable Purchase Obligation : The Solar RPO or the Renewable Purchase Obligation was introduced quite a while back but was not being taken seriously up until now. However with the new regime and the revised Solar target it is very much likely that the Renewable Purchase Obligation (RPO) would be strictly enforced with heavy penalties for non-compliance. Several reputed Companies, who were not earlier taking RPO seriously, are now looking to fulfill the same as can be seen in the REC market.

    Sooner or later many of the Obligated Entities have realized that investing in a Solar Power Project is a better business decision than to buy RECs which are merely certificates to fulfill an obligation. If the Renewable Energy Bill becomes an Act then a non-complying entity could be penalized upto INR 1 Crore and also INR 1 Lakh per day for continued violation.

Owing to the above reasons it is believed that the Solar Power Projects in India would continue to see a significant uptrend in the coming times. Going forward Solar rooftop projects are expected to dominate the scene while the number of Utility scale projects continue to rise steadily backed by Government schemes such as VGF (Viability Gap Funding).

Do let us know your comments or feedback in the comments section below.

Updates of 05th April 2016

All along the articles have been focusing the green-energy aspect of a Solar Power Plant. Which is undoubtedly the best reason for going Solar. Additionally there is another important aspect which requires attention.

Water, another scarce natural resource is depleting much faster than one could imagine. While there is enough water on the planet, majority of it is not potable. Most of the conventional power plants use water from natural sources such as rivers and springs which are potable water. Due to this a vast majority of population across the Globe does not have access to clean water.
Water used by Power Plants
Fig. 4 Water used by various types of Power Plants

As one can see Solar PV is a clear winner in terms of water required to generate power -  way ahead of conventional power plants. This is a significant differentiating factor considering the water conditions today. Minimal quantity (less than 1/2 litre per MWh) maybe required in case of some Solar Projects for cleaning of panels., however no water is required for operation of PV Solar power projects.

Enerco Energy Solutions LLP has been a pioneer in the field of Solar Energy especially for manufacturing plants across India including highly reputed Companies in manufacturing sector. We offer end-to-end Techno-Commercial Solution including :

1. Techno-Commercial Project Evaluation and Site Study.
2. Execution of PV Solar Projects on EPC basis (reduced pricing model).
3. Financing of Solar Power Projects on BOO / BOOT / RESCO basis.
4. Debt Financing of Solar Power Projects at reduced interest rates (%).
5. Optimizing output of Solar Power Projects.
6. Trading of Solar PPAs and Renewable Energy Projects (including Wind).
7. Solar Park Development (Land Acquisition, Govt. Liaison, Clearances etc.).
8. Strategic Investment and Diversification Advisory Services.

To know more - simply visit us on www.econserve.in or write into us on solar@econserve.in . 

11 comments:

  1. Mr. S. Dhanashetti23 February 2016 at 04:53

    Interesting article indeed. Could you please advise how do you see Solar prices shaping up in the near future?

    ReplyDelete
    Replies
    1. Dear Sir,

      Thank you for your comment.

      The Solar prices have come down significantly in the recent past and are now expected to cool-off at these levels. In fact as per an International Journal there could be a rise in cost of Solar Power project execution - mainly attributed to high demand. FOREX is another factor which decides the price of the major components in a PV Solar project.

      Hence it is extremely difficult to predict the prices as of now but as it appears the price is not likely to slide significantly from these levels in the near future.

      Regards,
      EESL

      Delete
  2. Very interesting Article. To make more meaningful It is better to show some comparison costing sheet for various available sources at present & future scenario for Large scale Industries.
    Thanks & Regards

    ReplyDelete
  3. Dear Sir,

    What are the financing options do you offer?

    Thanks.

    ReplyDelete
    Replies
    1. Dear Sir,

      Thank you for your comment.

      We provide the following :
      1. 100% investment in project.
      2. Partial investment in project.
      3. Debt financing in project (low interest rates of 5% to 8%).
      4. Leased financing model.

      Also there are other models we could work on as we have several investors who are looking to invest in Solar / Wind and other types of projects.

      Thanks again.

      Delete
  4. The new point regarding water requirement is fantastic. Always enjoy reading your posts.

    Cheers,
    Raghavan

    ReplyDelete
  5. Dear Sir,

    With falling PV prices - where do you see the cost for PV installation in the months to come?

    Regards

    ReplyDelete
    Replies
    1. Sir,

      PV prices in India have seen a fall in 2016 and is expected to see fall slightly more till December 2016. This would be primarily attributed to Chinese modules flooding the Indian market. However with the increased requirement of Domestic Content in Government projects the prices will stabilize in 2017 as per the recent data.

      It is a good time now to enter into a Solar project.

      Regards,
      Rahul

      Delete
  6. Dear Sir,

    What is the implication of Demonetization on Solar Sector in India?

    Thanks,
    T. Ganesh

    ReplyDelete
    Replies
    1. Dear Sir,

      We are still studying the impact of the same.

      Prima-facie the sector could suffer a bit in the short-term for self-invested projects. But medium to long-term prospects look very good.

      We are publishing a Report on the same very soon. To express your interest simply send a mail to solar@econserve.in with the subject "Report on Solar Trends in India 2016-17"

      Thanks,
      Rahul

      Delete