Solar Power industry in India is gaining more and more prominence with each passing day. The domestic/off-grid industry is picking up speed too. Owing to the queries we are receiving regarding the various issues pertaining to Solar Power Plant setup, we thought it would be a great idea to put together a bunch of questions and answer the same. We shall keeping adding to the list as we keep receiving more queries. So, here are the most Frequently Asked Questions and our answers for the same. Do let us know in case you would like us to answer any more questions. Also, kindly point out any inaccuracies/mistakes that you may find here so that we can correct the same for the benefit of everyone. We have tried our best to provide the best and most accurate information. However, inputs or responses to questions from other industry experts are encouraged and extremely appreciated.
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:
The output also depends on the following internal factors all of which are within the control of a Solar Developer:
What are the various modes under which we can setup a Solar Power plant?
The various modes under which a Solar Power plant can be setup depends on the specific requirement. All the following are valid modes and the costs for each kind of system varies based on various factors:
Sale of Power generated to 3rd Party consumer (Industry or Commercial entity)
What size Solar Power plant is required for domestic or commercial use?
Identifying the Solar Power plant size for your domestic or commercial premises depends on the following factors:
Based on these factors, the power plant sizing can be accordingly done at your end.
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, the following are the statutory clearances and environmental clearances to be furnished:
Also, all necessary approvals/agreements before start of Solar PV project construction are to be furnished as and when necessary. These include the following:
These are typically the clearances/documents required in general for a Solar PV project.
Can Solar Power developers avail loans from banks for Solar Power plant setup? What is the loan % and what criteria does a bank/lending institution look for?
There are 2 kinds of Financing mechanisms that are usually discussed – Recourse Financing and Non-Recourse Financing. Recourse Financing requires collaterals and other extensive guarantees from the Solar developer who wishes to avail loan. Non-Recourse Financing, on the other hand, does not require any additional collateral as the Asset or Power Plant itself is the collateral in this case. Recourse Financing is the prevalent mechanism in India currently owing to lack of confidence of banks in the Power and Solar Power sector. The typical Debt-Equity Ratio (Loan to Investment Ratio) for Solar Power plants is 70:30. And the typical collaterals required for a 70% project cost loan could be in the range of 40-60% project cost. This, however, varies from bank to bank as each bank has its own risk perception/mitigation strategy, exposure targets to various sectors and Non-Performing Asset (NPA) limits.
What would be the total project cost excluding the cost of land?
Total project cost per MW would be in the range of Rs.6.00 Crores-Rs.6.75 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.
What would be the O & M cost?
Central Electricity Regulatory Commission (CERC) benchmark costs for O&M is Rs.12.3 lakhs/year/MW for 2014-15 with a 5.72% increase every year. This varies from project to project based on the number of people you employ for maintenance, frequency of cleaning of panels, onsite-engineer availability etc.
What would be the per unit expected sale price?
This depends on the mode of sale of power and the consumer of power.
It is to be kept in mind that several additional charges such as Wheeling Charges, Distribution Charges, Open-Access Charges, Cross-Subsidy Charges are applicable in the case of sale of power to 3rd party. These charges vary from State-to-State and DISCOM-to-DISCOM and even based on voltage levels.
Which kinds of Solar Power plants are eligible for REC benefits?
Solar Power Plants need to be Grid-Connected on order to avail REC benefits. Though there have been recommendations on multiple occasions that Off-Grid Solar Power plants be made eligible for RECs, the proposal is still under discussion. Solar Power plants setup under the following 3 models are eligible for REC benefits:
Captive Power Plants are eligible for RECs subject to the condition that Concessional/Promotional Transmission or Wheeling Tariffs and/or banking facility benefit are not availed. Also, Solar Power plants setup under Preferential Tariff schemes are not eligible for RECs.
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. Subsidy is not available for Grid Connected plants that engage in sale of power either to the local DISCOM or a 3rd party. Following are the benefits a Solar Power Developer involved in Sale of Power Generated can avail:
Other State specific exemptions which vary from state to state.
Can Accelerated Depreciation benefits be claimed by Solar Power Developers?
Yes. Accelerated Depreciation benefits can be claimed by Off-Grid and Grid-Connected Solar Power Developers in order to offset taxes on profits from their connected businesses. Typically, 90% depreciation is allowed with 80% allowed in the first year.
Can Capital Subsidy be claimed for a 1 MW Solar Power plant (or greater size)?
No. Capital Subsidy cannot be claimed for plants beyond 500 KW size. Also, capital subsidy is made available only to Off-Grid and Decentralized Solar Power applications and not Grid Connected Plants that are in the business of selling the generated power.
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. Subsidy will not be applicable in case of sale of power.