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

[russ]

It is better to know some basics about country's energy sector situation,

We Indians consume around 800 units per capita annually.

carbon foot print. (One MW coal power plant will produce 1650 MT of carbon dioxide per year ) Indian govt cannot alone make decision to withdraw REC unilaterally. You want to bet?

1) Whether the panel prices keep on falling still more as it did in past three years ? (steep).Market related issue. Nope - they will soon start to go up in price

2)Whether development in technology will also bring down the power production cost by producing more power per investment ? thus making solar energy business a viable status on its own. There is no basis for that statement what so ever

3)Whether the solar power concentration in India/world wide will cross all targets. What?

India has got 185000 mw installed capacity. Critical here is coal power plants contribute to 60% of installed capacity. Replacing them 100% over next three years is unimaginable. and to do so an investment of 120000X7 cr= Rs 8400 billions will be required.some thing huge and need to be compared with GDP like figures Replacing them? More are being built!

so it can be concluded that reducing carbon foot print or satisfying international community is tough target for india. thus making the REC nil after 2017 is also not an simple issue for India as well world community. The carbon footprint is bogus anyway

But point 2) has left me confusing. I request you to type absolute black solar panel (GOOGLE search)and study the development. this is a technology to improve production by coating black on panel. if it could bring down the effective power production cost then whom so ever investing with old technology will not be cost effective compared to new technology. Just raises the panel temperature and efficiency - not at all a good idea - you want PV not heat

Also i request you to study 3D technology in solar power panels..it is said that these panels would produce as much as 20 times greater energy with the similar panels cost what currently is been invested. then cost of power may go down by at least 15 times..imagine what would be fate of one who has invested with old technology. You must be in a MBA program - that is another bogus idea

Both the research are under final stages and may hit market any time..In the next millenium?

India in to globalization era and biggest market will attract new technology faster than else where.Pardon? I am working there - save the BS for others

So under any situation investing in solar with longer recovery period would be quite risky. Agreed but not for the reasons you have listed

However current economics is highly lucrative..If the things do not happen as assumed with technology then this investment is the best option..

So i have opted for wait and watch for a period of 6 months..

You have to be a bean counter (money man - MBA )

[bonaire]

Of course you cannot replace coal plants with renewables, including solar + wind. Not only are they intermittent but you would need vast multi-GW plants to replace existing coal plants.

What may work with the small load you currently have... (you say units per capita - I imagine this is something near kWh per household per year as I have no idea what a unit is there). Every house or apartment could have a solar array on top and some sort of better-technology battery storage to hold the charge for evening hours. Doing grid-scale solar only can power areas of the grid during the daytime and cannot serve at night. The remote villages have solar programs allowing for charging of lighting for tents. This solves a few problems. Women have work to do and don't have to continue to have babies. People can study at night and read. Solar work is in fact is helping India's population growth slow a little bit. There are videos on Youtube about such programs.

The best way to keep from needing power is to not grow the lifestyle into a more western lifestyle. And if you do, you need nuclear power plants. No doubt about that. India could show strength in developing a solid nuclear energy power plant growth environment. We need that here in the USA as well - we need more nuclear plants especially in California. Cost to produce one kWh of power from nuclear is far less than through distributed solar energy. Solar would be "nice" as a supplement but will by no means be a world solution for decades until better batteries (higher density, low maintenance, cheaper) are developed.

[govindrao]

Better watch for a while...

Ah. Thank Russ. I made some assumptions on road to site but you are right. 50L is too small. Will have to spend some time calculating the infrastructure costs.

Hello all,

I am a new member here.I am also a potential investor as you all and equally scared with subject.I studied the discussion matter.what msr has put forth are correct to my knowledge.

It is better to know some basics about country's energy sector situation,

We Indians consume around 800 units per capita annually. World average stands at 2600 units per capita. Europe consumes at an average of 14000 units and US consumes an average of 14600 units per capita. We have got peak supply shortfall of around 12%.
We have to make good short fall first and then we have to increase our production to three folds to match to world average.Forget attaining a level of US and Europe.So enormous is potential for energy sector...

Now coming to point, it is better to go REC way as we are not in to black and white business and we are not big business hancos. REC mechanism is not only in India but adopted world wide.Basically the REC are issued by CERC(govt) to offset the cost of polluting the environment had the same energy produced using coal,diesel etc..(fossil energy sources).Alternatively REC can be treated as viability gap filling mechanism to make the solar energy viable business which other wise would be nonviable.Maintaining REC mechanism is world community obligation to reduce carbon foot print. (One MW coal power plant will produce 1650 MT of carbon dioxide per year ) Indian govt cannot alone make decision to withdraw REC unilaterally.

As all you discussed it is presumed as REC will go down to zero.fallowing points are to be taken in to consideration before coming to conclusion.

1) Whether the panel prices keep on falling still more as it did in past three years ? (steep).Market related issue.

2)Whether development in technology will also bring down the power production cost by producing more power per investment ? thus making solar energy business a viable status on its own.

3)Whether the solar power concentration in India/world wide will cross all targets.

India has got 185000 mw installed capacity. Critical here is coal power plants contribute to 60% of installed capacity. Replacing them 100% over next three years is unimaginable. and to do so an investment of 120000X7 cr= Rs 8400 billions will be required.some thing huge and need to be compared with GDP like figures.

so it can be concluded that reducing carbon foot print or satisfying international community is tough target for india. thus making the REC nil after 2017 is also not an simple issue for India as well world community.

But point 2) has left me confusing. I request you to type absolute black solar panel (GOOGLE search)and study the development. this is a technology to improve production by coating black on panel. if it could bring down the effective power production cost then whom so ever investing with old technology will not be cost effective compared to new technology.

Also i request you to study 3D technology in solar power panels..it is said that these panels would produce as much as 20 times greater energy with the similar panels cost what currently is been invested. then cost of power may go down by at least 15 times..imagine what would be fate of one who has invested with old technology.

Both the research are under final stages and may hit market any time..

India in to globalization era and biggest market will attract new technology faster than else where.

So under any situation investing in solar with longer recovery period would be quite risky.

However current economics is highly lucrative..If the things do not happen as assumed with technology then this investment is the best option..

So i have opted for wait and watch for a period of 6 months..

[KKKR]

1 MW solar power plant

Thanks all for their valuable insight

Hi PVC,

We as a group in AP are planning to install a 1MW to 5MW solar power plant, we are currently working on the project report with feasibility study, can you shed some light with your observations and experiences on this please.

Thanks,

[PVC]

Thanks all for their valuable insight

[msr]

Infrastructure - road to the site - HT connection to the site - transformers as required - water line to the site - staffed security office - a PPA from the state utility

None of the above are normally supplied for free in India - labor may be cheap but that is the only thing.

50 lakh won't get you far on the other necessary stuff.

Ah. Thank Russ. I made some assumptions on road to site but you are right. 50L is too small. Will have to spend some time calculating the infrastructure costs.

[russ]

I see. As far as cost per MW, I have contacted a company in India and they quoted 7.5 Cr to setup the plant. Apart from that I would have to pay for the land, fencing, building any necessary infrastructure (couple of rooms to hold the equipment) etc... So I thought 8Cr is probably a good estimate. Do you know anyone who can build for cheaper?

Thanks,
MSR

Infrastructure - road to the site - HT connection to the site - transformers as required - water line to the site - staffed security office - a PPA from the state utility

None of the above are normally supplied for free in India - labor may be cheap but that is the only thing.

50 lakh won't get you far on the other necessary stuff.

[msr]

A little hint about Sunking
He has forgotten more than a lot of us know.
He will smack you upside the head with a sledge hammer (metaphorically speaking of course) to get your attention.
However once you pay attention he is a most helpful person and has probably saved more people from huge mistakes than the rest of us combined.
Listen Grasshopper wisdom will be passed if you are smart enough to listen.

Advice taken. I am completely new to this field so I probably deserved the smack anyway.

[msr]

I can't recommend any one specific but contact a few people and get a good understanding of the cost structure. You can find them via the internet or visiting RE exhibitions. Sometimes paying a little more for known components and a reputed EPC will give you better returns in the future. The costs will change significantly depending on the brand of panels, inverter, transformer, cables, etc.

Good luck!

Thanks.

If it wasn't obvious, I am complete noob in this field. I don't need specific models and manufacturers but any pointers to do some research in available panels, inverters etc.. would be of great help to me.

[CPS]

I see. As far as cost per MW, I have contacted a company in India and they quoted 7.5 Cr to setup the plant. Apart from that I would have to pay for the land, fencing, building any necessary infrastructure (couple of rooms to hold the equipment) etc... So I thought 8Cr is probably a good estimate. Do you know anyone who can build for cheaper?

Thanks,
MSR

I can't recommend any one specific but contact a few people and get a good understanding of the cost structure. You can find them via the internet or visiting RE exhibitions. Sometimes paying a little more for known components and a reputed EPC will give you better returns in the future. The costs will change significantly depending on the brand of panels, inverter, transformer, cables, etc.

Good luck!

[msr]

The life of the project is 25 years. You can easily get a loan for a longer term than 84 months depending on your balance sheet, net worth, credit profile, etc. If you take a longer loan term the project becomes viable. You should be able to recover all of your own funds in the first 3 years.

Also your cost per MW should not be more than Rs. 7.5 Crore.

I see. As far as cost per MW, I have contacted a company in India and they quoted 7.5 Cr to setup the plant. Apart from that I would have to pay for the land, fencing, building any necessary infrastructure (couple of rooms to hold the equipment) etc... So I thought 8Cr is probably a good estimate. Do you know anyone who can build for cheaper?

Thanks,
MSR

[CPS]

I did. Based on 14% interest and 72 month loan (typical for commercial loans in India) EMI for 5 Cr loan comes to Rs 1030286.97. 84 month loan would come to 937000.58.

The life of the project is 25 years. You can easily get a loan for a longer term than 84 months depending on your balance sheet, net worth, credit profile, etc. If you take a longer loan term the project becomes viable. You should be able to recover all of your own funds in the first 3 years.

Also your cost per MW should not be more than Rs. 7.5 Crore.

[msr]

Wholesale in India you are competing with cheap coal fired power - and I do mean cheap coal - 30% ash content. I know the prices we pay and it would be tough for commercial solar.

Agree. Only way to compete is through government incentives. Otherwise there is no way.

[msr]

So please tell us why the users or rate payers should be forced into buying artifially inflated energy prices? Pleas answer that.

India is a dirt poor country and most of the residence cannot even afford cheap coal and fossil fuel electricity. The buck does not stop there. It also means everything connected with electric energy will go up and passed onto the citizens. What about manufacturing have to pay higher prices that have to compete globally. You cannot sell your widgets if other countries can sell their widgets at a lower cost. We call it the free market and competition in the USA. Any business has two major objectives:

1. Make money
2. Put your competition out of business so you can make more money.

Agreed but its not just India. Using the same argument, if other countries subsidize their businesses, then their products can be sold cheaply. So unless India also subsidizes, they have no chance to compete.

[msr]

MSR,

Your EMI number is way off. Plug the parameters in to any EMI calculator available online and redo the numbers.

I did. Based on 14% interest and 72 month loan (typical for commercial loans in India) EMI for 5 Cr loan comes to Rs 1030286.97. 84 month loan would come to 937000.58.