Economics of setting up a MW scale solar power plant in India

[deep]

1 MW plant

Hello CPS,

Thank you for sharing such a valuable information. I agree with your observation.I would like to discuss with about the collateral's and contours of Solar plant if you please. Please connect with me.

I too am planning for a 1 MW plant but even after a week of study of economics I am not convinced of the tariffs and the returns. Any thing concrete?

[Sunking]

If it is of any financial value you need to take the value into account.

There is no value, it is a SCAM to bilk money out of the public and uninformed. Maffia calls its Skim or Piece of the Action. It is lik ea tax that serves no purpose. It goes right into a brokers bank account and then retires at an early age trading nothing but thin air that is free.

[Sunking]

Carbon credits are traded on Indian commodity exchange for you information.

Yes I know and it is the same SCAM here in the USA. Only ones making money are the brokers, while at the same time raising the price of everything you need or want.

[SAK]

I want to set up a solar power plant in India

Hello,

I am planning to set up a grid connected crystalline solar module MW scale solar power project in India and wanted to share my experience with the group and also invite any input.

The cost per MW is ~ Indian Rupee (INR) 7 – 8 Crores (~ US $ 1.5 Million). A 1 MW plant in a suitable location will generate ~ 1.5 million – 1.7 million units of power a year.

I am planning to set up the project under the Renewable energy credit (REC) scheme. Under this scheme the government gives you a renewable energy credit - solar that is traded on the Indian Energy Exchange. The government has set a floor price of INR 9.30/unit and cap of INR 13.40/unit. This floor and cap is in place till March 2017. The buyers of the REC are power distribution companies (DISCOMS) and industrial users of power. These companies have renewable purchase obligations - solar (RPO - solar) that have been set by the various state governments. These RPOs increase every year.

In addition to this you get ~ INR 2.50/unit - INR 5.00/unit by selling the power.

The risk factor as I see them are -

1. Over capacity - Just because there is a floor and cap it doesn’t guarantee that you will get a customer for your REC. If the government doesn't enforce the RPO stringently with harsh penalties the buyers will not buy them.
2. What will the REC floor/cap be for the remaining 21 years of your plant. If the REC price drops rapidly in 2017 the economics are impacted.
3. The base power charge will be paid to you by (DISCOMS). Most of them are in very bad financial health. So there is default risk.

In regards to point 2 – A majority of your money will be recovered till 2017 so even if the REC drops to Rs. 0 the business case makes sense. Also the base power charge will probably go up 2017 so you gain some there.

In regards to point 3 – If you can find an end customer for the power then you will get a higher tariff and you also don’t need to deal with power companies. Another way to mitigate this risk is to set up the power plant in states where the DISCOMS are relatively in good health such as Gujarat, Andhra Pradesh, Maharashtra, etc.

I haven’t figured out if there is a way to mitigate the oversupply risk though so that’s one I'll have to live with.

I also evaluated the various state policies but it looks like the majority of the companies participating in the reverse bidding are doing so to take advantage of the 80% accelerated depreciation (AD) benefit. If you take the AD out of the picture it is not feasible to sell solar power at INR 6/unit or INR 7/unit. Since the AD is not of benefit to me I decided that the REC mechanism offers me the best return.

I'm also looking at KW scale rooftop projects. They are smaller in size but give good returns if you can scale up to decent volumes.

That's my experience so far!

CPS

Hello CPS,

Thank you for sharing such a valuable information. I agree with your observation.I would like to discuss with about the collateral's and contours of Solar plant if you please. Please connect with me.

[deep]

tariff for India

Dear CPS,


. If you browse through the online data for purchase of power it varies between Rs2.00 to Rs.3.40 for various regions of India, except Punjab, which is in troubled waters and buying power at Rs.8/50 per unit. So these figures are also frustrating for the solar plant to be viable!

Regards

Deep

[globalsolar]

grid connected

what about energy efficiency of crystalline solar module?
Does the government support the development of solar energy?

[deep]

feasibility of 1 MW plant

For the latest tariff you should visit the website of the Discom. As far as cost of plant you need to talk to an EPC or consultant. With the recent devaluation of the Rupee It should be ~ Rs. 7.5 - 8 crore/MW depending on the equipment you use.

Dear CPS, I have gone through your posts and data posted since last 4 months.

1. I am too interested in setting up a plant of 1 MW in Haryana or Punjab.

2. As far as economics presented by you seems ok, but the trend of REC in exchange has seen a downfall. No doubt there is a floor price of 9300 but the market is flooded with excessive REC and nobody to buy them.

3. There is no set mechanism for DISCOM to buy electricity form private players unless they have a MOU signed before hand at the rates mutually agreed upon. This kind of MOU is being implemented atleast in Haryana & Punjab, but after floating the tenders for it and asking for the lowest rates!

4. The prices for buyback by Punjab in recently held tendering has been a Rs.7.50 as the lowest and Rs. 8.59 as the highest, but as i said it all went through tendering. Secondly I am not sure whether the producer can avail REC after it as this seems to be a preferential tariff and producers being paid preferential tariffs can not avail the REC benefit.

5. Although you have not included carbon credits in the revenues, I wonder how helpful they can be.

I would be glad if you can share my views and come out with some optimistic figures so that the feasibility of the project can be seen.

Regards

Deep

[russ]

Another wonderful fraud trading business. At least Al Bore is making millions off the carbon trading scam. For that I give him credit as pretty smart like a fox.

It works best where an official signature can be obtained for a few bucks.

[Sunking]

Has anyone included the revenues generated from selling the carbon credit generated from the solar energy.

Another wonderful fraud trading business. At least Al Bore is making millions off the carbon trading scam. For that I give him credit as pretty smart like a fox.

[nishant25]

Hi CPS,
I am also thinking about setting up a 1MW solar plant in Andhra Pradesh. Based on my research so far, I have come to similar conclusions as you did. One major difference is break even point if RECs complete expire after June 2017.

You mentioned that majority of investment will be recovered by June 2017. Here are rough numbers I came up with. Assuming total investment is 8Cr and you take a loan of 5Cr, EMI would be around 10L per month.

Total Investment : 8 Cr
Loan : 5 Cr
EMI : 10 Lakhs per month = 1.2 Cr per year (based on 14% interest rate)
Maintenance costs: 1L per month = 12 L per year.

Total per year costs = 1.3 Cr

Fixed panel installation can generate around 15L units per year

Assuming REC floor price 9.3 and power price at 5. we can get Rs.14.3 per unit

So total income per year = 2.1 Cr

Profits per year = 0.8 Cr

Assuming 3 years for REC total profits = 2.4 Cr.

After June, 2017, If power price is 6 rupees per unit and REC drops to zero,
Annual income: 15L X 6 = 90 Lakhs
Annual expenses: 1.3 Cr.
Deficit = 40L

I don't see how this whole project is feasible based on these numbers. Are there special interest rates for solar? Or am I missing something here? Thanks for your help.

--msr

suppose if REC drops to 0 in year 2017
but in three years u can pay upto 3.6 cr of ur loan and still have a profit of 2.4 cr so if u also utilise your profit in paying the loan than after three years all of your loan will be paid off than you dont have to pay 1.2 cr per year u only have to pay 12 lakhs per year for maintenance and you are earning 90 L per year so i guess project is feasible
please correct me if i am wrong somewhere
sorry for poor english

[Naptown]

This is really a site for homeowners not industrial as you are going.
Please remove your email and phone number for personal security issues
This is a job for a PE licensed in your country we can't help here

[debes]

Plane to Start One 15 Mw Solar Power Plant

Dear Sir
I Am Debes Pattanayak From Bhubaneswar Orissa India.
I Have Plane to Start One 15 Mw Solar Power Plant In City Of Bhubaneswar Orissa India.
I Have 40 Acers 17.42.400” Sq.Ft’ Of Flat Land and 10.000” sq.ft of Industrial Said Suitable For Solar Power Plant.
If You R Interested Work With Me Then Please Help Me.
1. Project Cost.
2. How to Start.
3. How Many Time Need For Project Complete.
4. Selling Cost Per MW.
5. Project Report If Available Please Send.
I Wait Your Reply Sir

Thanks & Best regards,

DP

[CPS]

Hi CSP ,
IM VENKI FROM ANDHRA PRADESH, I WANT TO ESTABLISH A 1 MW SOLAR PLANT,
CAN I GET DETAILS OF LATEST DISCOMS RATES, PLANT ESTIMATION COST,
THANKS IN ADVANCE

--VENKI

For the latest tariff you should visit the website of the Discom. As far as cost of plant you need to talk to an EPC or consultant. With the recent devaluation of the Rupee It should be ~ Rs. 7.5 - 8 crore/MW depending on the equipment you use.

[bonaire]

Over in the USA, the Solar SREC market is entirely saturated. We know what it is like to endure a steep decline and basically "death" of the SREC market. Two years ago, my state of Pennsylvania had seen SRECs as high as 300-325 USD each. Now they are just under 9 USD each. Wholesale electricity is about 30-40USD per MWh (1k units there?). Given that SRECs trade below the current grid pays for wholesale electricity shows you that it is highly saturated and I'm sure India and other places that rely on SRECs as incentives to grow installs - will be oversaturated beyond the allottments of the SREC markets.

I always say: "Any economy that requires continued growth in order to survive will eventually do neither."

The saying goes for the SREC marketplace. And pretty much for the worldwide economy once the population growth stops.

There will be a lot of draw by investors to build systems (like this thread implies). When all is said and done, everyone will be standing there stunned to see no value to the SRECs to pay back their investors and personal investments.

[CPS]

Solar RECs over supply

Looks like the month of May saw an oversupply of Solar RECs for the first time. Will be interesting to see what happens in the months to come when even more projects under the REC mechanism come online. As of May, 2013 ~ 100 MW of solar projects under the REC mechanism were up and running. The expectation was that ~ 200 MW of solar projects will get commissioned between June - December of this year. I think several of the projects will now adopt a wait and watch policy to see if the government starts enforcing the renewable purchase obligations.

http://economictimes.indiatimes.com/news/news-by-industry/energy/power/clean-energy-woes-21-lakh-renewable-energy-certificates-lie-unsold-with-project-developers/articleshow/20436046.cms

Edit: As of May, 2013 a total of 21,063 Solar RECs have been issued and 17,933 have been redeemed. That means 3,130 are outstanding. As of April 2013 only 860 were outstanding.