Solar Power Plants
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 we
thought it would be a great idea to put together a bunch of questions and answer
the same. So, here are the most Frequently Asked Questions and our answers for the
General Frequently Asked Questions on 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:
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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:
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Plant Location
Usage of Solar Tracking systems
Quality of equipment used
Workmanship of the EPC contractor
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O&M activities
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:
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Off-Grid Captive Consumption for domestic premises
Off-Grid Captive Consumption for commercial premises
Grid Connected (Net Metered) Captive Consumption for domestic premises
Grid Connected (Net Metered) Captive Consumption for commercial premises
Sale of Power generated to local Distribution Company (DISCOM)
Sale of Power generated to 3rd Party consumer (Industry or Commercial
entity)
Solar Power Plant’s Permissions and Bank Loans
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-tostate, 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:
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Industrial Clearance
Land conversion (Agricultural to Non-Agricultural)
Environmental Clearance Certificate from APPCB, Hyderabad
Contract labour license from AP Labour Department
Fire Safety certificate from AP Fire Department
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:
10. Land purchase
11. Power Evacuation arrangement permission letter from DISCOM
12. Confirmation of Metering Arrangement and location
13. ABT meter type, Manufacture, Model, Serial No. details for Energy
Metering.
14. Copy of PPA (important as Preferential PPA projects are not eligible for
REC mechanism)
15. Proposed Model and make of plant equipment
16. Undertaking for compliance with the usage of fossil fuel criteria as
specified by MNRE
17. Details of Connectivity with DISCOM
18. Connectivity Diagram and Single Line Diagram of Plant
19. Details of pending court cases with APERC, Supreme Court of India,
High Court of A.P. or any other courts
20. 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.
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. NonRecourse 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.
Setup Costs and Power Sale Tariff
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 Cores
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:
http://www.cercind.gov.in/2013/orders/SO242.pdf
The table below indicates CERC determined benchmark cost for Financial Year 201314.
What would be the O & M cost?
Central Electricity Regulatory Commission (CERC) benchmark costs for O&M is
Rs.11.63 lakhs/year/MW for 2013-14 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.
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In the case of sale of power to DISCOM, the prevailing Average Pooled Power
Purchase Cost (APPC) will be applicable.
In the case of sale of power to 3rd Party consumer, a mutually agreed price can
be agreed upon and accordingly a PPA can be signed.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.
RECs and Carbon Credits (CERs)
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 modes are eligible for REC benefits:
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Captive Power plants
Sale of power to Govt. at APPC
Sale of power to 3rd party at mutually agreed price
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.
Is there a minimum size for Solar Power plants to be eligible for RECs?
As per the Second Amendment of REC Principal Regulations – 2013, there is no
lower limit for Solar Power plants to be eligible for RECs. Though it previously stated
that 250 KW is the minimum size for Solar Power plants to be eligible for RECs, the
same has been removed as part of the above stated amendment.
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).
Benefits for Solar Power plants
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 OffGrid plants. The usual Govt. support available for an Off-Grid plant is a Capital
Subsidy of 30% on the project cost up to 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 http://mnre.gov.in/filemanager/UserFiles/list_channelpartners_sp_jnnsm.pdf
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:
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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.
Can Accelerated Depreciation benefits be claimed by Solar Power Developers?
Yes. Accelerated Depreciation benefits can be claimed by Off-Grid and GridConnected 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. 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.
Setting up Solar Power plant in Andhra Pradesh
We would like to setup a solar power plant in Andhra Pradesh but we have not
participated in AP solar bidding. What are the other options?
Since you have not participated in AP Solar Bidding, one other way would be the REC
route. You can sell the generated power to APTRANSCO or third party consumer.
Through this route, you sell power to APTRANSCO/third party and also claim RECs for
the same. This way, you will be able to get a base tariff (APPC) from APTRANSCO and
then additional revenue can be generated through sale of Solar RECs. However, it is
to be kept in mind that the following additional benefits may be availed for a Solar
PV Project commissioned before June 2014 subject to the condition that REC
benefits are not availed (in case of Captive Generating Plants and Plants setup under
Preferential Tariff basis):
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Exemption from Electricity Duty
Exemption of Wheeling Charges, Transmission Charges and Cross-subsidy
Charges
Refund of VAT
Refund of Stamp Duty and Registration Charges for purchase of land
However, it has to be kept in mind that REC revenue is market driven and can
fluctuate as both demand and supply are pretty low on Solar front right now. Kindly
refer to our monthly newsletter– for more and up-to-date information on the REC
market.
Download documents relevant to Andhra Pradesh Solar Policy here –
http://nedcap.gov.in/PDFs/2012ENY_MS39.pdf
http://nedcap.gov.in/PDFs/Amendment_to_AP_Solar_power_policy.pdf