Thursday, 13 February 2020

Solar Energy Projects - Observations about Installed Projects (and Remedies)


Several rooftop and ground mount Solar Projects have been installed in India in the last few years. While utility scale projects have scored higher in terms of installed capacity (which is quite obvious given their size) the captive Solar segment is now gathering pace. Momentum in the captive space is expected from Industrial Plants and Commercial facilities. As per Government of India targets, the rooftop or captive segment will account for 40% of the total installed capacity i.e. 40 GW (40,000 MW) of the total target of 100 GW by 2022. It is therefore important to learn from the issues outlined in installed Solar Projects to avoid similar potential issues that could impact your project in the long run.

In the installed Solar projects in India, majority of them i.e. more than 70% are facing performance issues i.e. output lesser than designed or projected output. In some cases the PR (Performance Ratio) is less than 75% which is extremely low by any standards either due to bad design or selection of wrong technology or configuration mismatch.

Nearly 60% of the projects are facing non-performance issues related to Contractual or Financing of the project or in terms of Safety and Reliability. Many of these issues could have been avoided if certain simple measures were undertaken before project execution. Post-project corrections can be done but are typically expensive and time consuming. These issues can be corrected but better avoided.

This does not trivialize the potential of Solar Project audit (of installed projects) which throws open several options to improve project performance, reliability and safety.

This short write-up highlights the observations made from some of the installed Solar Projects in India – through study as well as interview of the stakeholders involved. A list of possible remedial measures - although not comprehensive – follows the observations and could be used as a guideline.

Key Points observed during study of Installed Solar Projects in India:

1.    Technical issues with engineering and design aspects leading to performance issues.

2.    Lack of technical due-diligence resulting in performance issues (including vendor selection,  technology suitability, factory visits, material handling etc.).

3.    Site related issues primarily with respect to shadow analysis, weather conditions, roof strength etc.

4.    Limited information on availability of various financial models available leading to re-financing or off-taker dissatisfaction and even re-negotiation.

5.    OPEX / RESCO PPAs not properly framed considering all possible future scenarios including (but not limited to) technology upgradations.

6.    Operation and Maintenance not effectively carried out resulting in lesser than possible generation.

7.    Lack of Safety measures which may not directly impact output but can

challenge project durability and longevity.

So how does one avoid such issues? Continue reading about the remedial measures (continued below)

Remedial Measures :

1.    Carrying out Pre-project Techno-Commercial due-diligence by an expert to ensure all the parameters impacting the project – not just in present but also in future are considered including –

a.    Site conditions

b.    Location

c.     Government Policy

d.    Financial model evaluation

e.    DISCOM tariff and future projections

f.      Technology selection

g.    Vendor selection Etc. Etc.

(To know more about Solar TEFR check out our services section)

2.    Understanding the pros and cons of each financial model (yes, there are several financial models possible other than CAPEX and BOOT) before finalizing the model., especially in case of 3rd party financing. There is no one-size-fits-all approach for the financial model and the modeling should be done based on Company’s strategic goals.

3.    Stringent EPC contracts to ensure project quality and desired generation., especially in case of CAPEX / Self-financed projects.

4.    Vetting of design and engineering by a 3rd party before project execution to ensure all technical parameters have been given due considerations.

5.    Review of a PPA by a domain expert for RESCO / BOOT / OPEX projects to ensure PPA is legally sound and does not leave loopholes or gray areas which could be misconstrued at a later stage. This is important as the PPA duration could be 10 / 15 / 20+ years.

6.    Ensuring all safety parameters as per International Safety standards to avoid potential hazards.

7.    Regular audit of installed Solar Project to ensure performance is upto the mark and to ensure that project longevity is not compromised. This is also known as PRS (Performance, Reliability and Safety) Audit and more information can be seen on our website section - Solar Energy PRS Audit.

Know more about emerging trends in Solar Energy by downloading the White paper - Solar Power : Emerging Trends in Technology & Financing