Wednesday, 12 February 2014

About Solar Power

Agency for Non-Conventional Energy and Rural Technology (Anert) has already introduced rooftop solar power plant programme. Anert to provide solar energy to 25,000 more houses. 
Cost of producing 1 KW of solar energy comes to around `2 lakh. Of this, `92,262 will be provided as subsidy from the Union and State governments.
The solar energy policy will be extended to other industrial consumers in a phased manner. The policy is to mandate 100 litres solar water heater and 500 W solar photovoltaic systems for domestic building with floor area of between 2,000 sq ft to 3,000 sq ft.

All buildings above 3,000 sq ft will have to install a 100-litre solar water heater and at least 1,000 W solar photovoltaic system. In case of residential flats and apartments, 5 per cent of the energy usage for common amenities should be from solar power

How much land is required to setup a 1MW solar power generation Unit?
The land required for a 1 MW power plant setup is around 4.5-5 acres for Crystalline technology and around 6.5-7.5 acres for Thin-Film technology. This is only a rough benchmark and may vary based on technology and efficiency of panels.
What is the life-time of a typical Solar Power plant?
The useful life of a typical Solar Power plant is considered to be 25 years. This is the duration for which long-term PPAs are signed and financial models are built. However, Solar Power plants can run beyond 25 years while producing a lower output. Many Solar Panel manufacturers guarantee an output of 90% at the end of 10 years and 80% at the end of 25 years.
What is the annual energy generated from a 1 MW Solar Power plant?
The usual benchmark for energy generated from a 1 MW Solar Power plant is considered as 1.5 Million units. This is only a benchmark and should not be considered as the actual output for a given location. The amount of actual energy generated from a Solar Power Plant in an year depends on both internal and external factors. External factors which are beyond the control of a Solar developer can include the following:
  • Number of sunny days
  • Solar Irradiation
  • Day Temperatures
  • Air Mass
The output also depends on the following internal factors all of which are within the control of a Solar Developer:
  • Plant Location
  • Usage of Solar Tracking systems
  • Quality of equipment used
  • Workmanship of the EPC contractor
  • O&M activities
 What is the cost of setting up a Rooftop Solar Power plant for domestic or commercial use?
Rooftop Solar Power plants can be broadly categorized into Battery-based and Non-Battery based systems. The benchmark cost set by MNRE for the year 2013-14 for these systems are Rs.90-100 per W for Non-Battery based systems and Rs.170-210 per W for Battery-based systems. More details can be accessed on the following MNRE webpage:
 What permissions/clearances are required to setup a Solar PV Plant?
A certain set of permissions need to be obtained and documents need to be submitted in order to setup a Solar PV plant. While these may vary from state-to-state, in order to get a Solar PV Project Accredited by AP State Load Dispatch Center (AP SLDC) for REC mechanism, the following are the statutory clearances and environmental clearances to be furnished:
    1. Industrial Clearance
    2. Land conversion (Agricultural to Non-Agricultural)
    3. Environmental Clearance Certificate from APPCB, Hyderabad
    4. Contract labour license from AP Labour Department
    5. Fire Safety certificate from AP Fire Department
    6. Latest tax receipt from the Municipal/Gram Panchayat for the factory land.
    7. Auditor compliance certificate regarding fossil fuel utilization
    8. Approval from Chief Electrical Inspector
    9. Clearance from Forest department
Also, all necessary approvals/agreements before start of Solar PV project construction are to be furnished as and when necessary. These include the following:
    1. Land purchase
    2. Power Evacuation arrangement permission letter from DISCOM
    3. Confirmation of Metering Arrangement and location
    4. ABT meter type, Manufacture, Model, Serial No. details for Energy Metering.
    5. Copy of PPA (important as Preferential PPA projects are not eligible for REC mechanism)
    6. Proposed Model and make of plant equipment
    7. Undertaking for compliance with the usage of fossil fuel criteria as specified by MNRE
    8. Details of Connectivity with DISCOM
    9. Connectivity Diagram and Single Line Diagram of Plant
    10. Details of pending court cases with APERC, Supreme Court of India, High Court of A.P. or any other courts
    11. Any other documents requested by AP SLDC
While these are the documents that AP SLDC requires for REC project accreditation, these are typically the clearances/documents required in general for a Solar PV project.

What would be the total project cost excluding the cost of land?
Total project cost per MW would be in the range of Rs.6.5 Crores-Rs.8 Crores depending on the kind of technology you are using, whether or not you are using tracking systems, the kind of EPC Contractor you choose for power plant system etc. CERC recently announced the benchmark tariff for setup of Solar PV and Thermal Plants in India. Here’s the link to the document containing more details:
The table below indicates CERC determined benchmark cost for Financial Year 2013-14.
CERC benchmark Cost Solar PV - 2013-14
 Can CDM benefits (Carbon Credits) be availed for a Solar Power plant?
Yes. REC Mechanism and CDM are mutually exclusive and hence a power developer can claim CDM benefits (Carbon Credits) also. However, it is to be noted that the current trading prices of Carbon Credits or Certified Emission Reductions (CERs) at the European ETS system is less than 0.7 Euro which are pretty low compared to the 15-20 Euro trading prices a few years back. At these prices, getting a Solar project registered under CDM mechanism does not make any sense as the payback for the expenses in the process itself takes several years. Unless the Solar Power Plant is of size 10 MW or more it does not make financial sense to go for Carbon Credits (CERs).
What kind of Central/State benefits are available for Solar Power plant setup?
Solar plants can be categorized into 2 broad categories – Grid Connected and Off-Grid plants. The usual Govt. support available for an Off-Grid plant is a Capital Subsidy of 30% on the project cost upto a maximum size of 500 KW. This can be claimed by the Manufacturer/Supplier/EPC Contractor (should be an MNRE accredited supplier) on behalf of the customer. The list of MNRE accredited suppliers (all across India) can be downloaded from
Subsidy is not available for Grid Connected plants that engage in sale of power either to the local DISCOM or a 3rdparty. Following are the benefits a Solar Power Developer involved in Sale of Power Generated can avail:
  • Accelerated Depreciation – Upto 90% of asset value with 80% depreciation allowed in the first year.
  • 10 years Tax Holiday – Tax holiday can be availed for 10 years during which time Minimum Alternate Tax is still applicable (19.9305%) which can be offset against tax payable later.
  • Other State specific exemptions which vary from state to state.
 Is there any subsidy available for Solar Power plant setup?
Capital Subsidy of 30% is applicable only for captive power plants up to 100 KW. This is expected to be increased to 500 KW for FY 2103-14 but an official confirmation regarding the same is still awaited. Subsidy will not be applicable in case of sale of power.
 I have land and some company posted that they are looking for people having land and ready to invest about Rs.10 lakhs. Can I go ahead with this investment?
It is difficult to comment much without more information about the company. However, it is advised to check the company’s track record to understand the company’s previous projects and the revenues/returns from such projects. A couple of things that you might have already understood from the info on this FAQs page is that a typical good quality Solar PV Power plant required Rs.6.5-8 Crores for setup. In line with this, the investment of Rs.10 lakhs you have been asked to make comes to around 1.5% of total project cost which is not much. If your land also has certain value, that can be factored into your equity contribution to the project. While we am not sure about the promise made by the company to you in terms of returns, kindly make sure that your investment has been duly considered in project equity and the associated returns. Also, it is possible that there are several other investors such as you who might be investing in the project. You might ask the company details regarding the same. Following are a few more things you can ask the company to provide:
  • Is the entire project equity funded from investors such as you? If ‘Yes’, who are the other investors? If ‘No’, what is the debt portion, where is it coming from and what is the interest rate?
  • Where is the project going to be setup?
  • Who is the power sold to and at what price is it being sold?
  • What are the yearly estimated revenues and returns?
  • When would you as an investor start making money (important as payback period is reasonably high for Solar Projects)?
As an investor, you have every right to know the answers to these questions. Kindly evaluate all scenarios and clarify all you queries before making such an investment.

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