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th
Batch
By
Abhishek
Chaudhary
R no: 97
D
EVELOPMENT OF
F
INANCIAL
M
ODEL AND
B
ANKABLE
F
EASIBILITY
A
NALYSIS OF A
1
M
W
R
OOFTOP
S
OLAR
PV
P
ROJECT
I
N
I
NDIA
Under the guidance of Mr. Sadasib Mohapatra,General Manager (Project Finance)
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I, Abhishek Chaudhary, Roll no. 97, 11 th Batch, student of MBA (POWER
MANAGEMENT) at National Power Training Institute, Faridabad hereby declare that the
Summer Training Report entitled “Development of Financial Model and Bankable
Feasibility analysis of a 1MW Rooftop Solar PV Project in India” is an original work and
the same has not been submitted to any other institute for award of any other degree.
A Seminar Presentation report was made on ___________________ and the suggestions
made by the faculty were duly incorporated.
Presentation in Charge Signature of Candidate
Countersigned
Director, NPTI
Declaration
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I wish to express my sincere and grateful thanks to the people who helped and extended
their support in this endeavour.
I am grateful to LAHMEYER INTERNATIONAL (INDIA) PRIVATE LIMITED for
allowing me to avail the opportunity of summer internship with the company.
I would like to thank Mr. Bhupendra Singh, Head (HR), Mr. A.P. Singh, Manager (HR), Mr
S.Mazumder (Senior Vice President) Lahmeyer International (India) Pvt. Ltd., for giving me
the opportunity to do the summer internship project in the company.
I express my deepest thanks and gratitude to my project guide MR. SADASIB
MOHAPATRA, General Manager (Project Finance), Lahmeyer International (India) Pvt.
Ltd. , for his guidance and support along with his great insights into the world of Finance.
I extend my thanks to Ms. Deepika Moharana, Senior Engineer (PFP - LE), Lahmeyer
International (India) Pvt. Ltd., who were always ready to provide help whenever required and
without whose help and support it would have been impossible to complete my project.
I also thank Ms. Manju Mam (Director, NPTI) for arranging my summer internship program
with Lahmeyer International (India) Pvt. Ltd and providing assistance and support whenever
required.
Finally, I am highly obliged to My Internal Project incharge Ms Sreelata Neelash (CAMPS),
Faculty MBA NPTI, for her constant support and guidance during my internship program.
Acknowledgement
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Lahmeyer International (India) Pvt. Ltd. (LII), the Indian subsidiary of Lahmeyer
International, GmbH Germany, was founded in 1993 to provide world-class engineering
services in the Indian and International power and infrastructure sectors. Lahmeyer is
reorganized as an independent consulting firm by all major international institutions such as
World Bank, Asian Development Bank, other Regional Development Banks, European
Banks, United Nations (FAO, WHO, UNDP etc.) and by National Development Funds.
Lahmeyer-India has emerged as a leading Independent Consulting Engineering Company
active in the Energy, Water Resources & Management and other Infrastructure projects in
India and Overseas. Lahmeyer-India offers an extensive range of advisory, planning and
consultancy services covering the below mentioned activities for various types of Power and
Infrastructure Projects which are under various stages of development, construction and
operation:
Surveys, investigations and reconnaissance studies,
Risk assessment, due diligence and project appraisal,
Feasibility studies and detailed project reports,
Basic and detailed design and engineering,
Preparation of specifications, evaluation of bids and procurement assistance,
Contract & construction management and site supervision and workshop inspections,
Overseeing of performance guarantee tests and
O&M audit.
Lahmeyer provides solutions that are optimized technically, economically and ecologically;
Projects are implemented – from conception to commissioning, efficiently and successfully.
About the Comapany
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Lahmeyer-India operates from its engineering offices at Gurgaon in the National Capital
Region of New Delhi and Kolkata, West Bengal.
Vision:
To be a globally recognized engineering consultant, bringing value to our clients through
innovative & optimal solutions.
Quality Policy:
Since the establishment of the company in 1993, LII has gained an outstanding reputation as
independent technical consultants. This image motivates us to improve continually. We strive
to offer our clients the best policy at the fair price and to assure our employees an attractive
and secure employment with potential for development and progress.
We act according to the following quality principles:
Continual improvement of the LII‟s quality management system according to ISO
9001-2008.
Integration of employees in a continual improvement process.
Observance of the compliance management system lay down by the company.
Support of our business Processes through up-to-date equipment and practices.
Selection of competent employees and qualifying them by regular training and further
education.
Selection of free-lance staff and subcontractors taking consideration of the quality
objectives and previous monitoring and appraisals.
Observation of the market participants in our target markets, paying particular
attention to changes in clients‟ interest and needs.
Qual i ty Objectives:
Highly professional consulting services to our clients.
To conduct our business with integrity and honesty.
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Cooperation with our business partners based on mutual trust.
Sectors of Expertise:
The planning and implementation of large infrastructure projects is a complex and
challenging task. Lahmeyer contributes significantly to the success of a project by combining
comprehensive knowledge base, expertise of our personnel and well-coordinated inter-
disciplinary approach.
Lahmeyer offer technically and commercially optimal solutions to our clients so that projects
are implemented from concept through commissioning on time and within budget. Lahmeyer
combine the expertise and experience gained from our Indian and overseas projects with the
expertise and know how available globally within the Lahmeyer Group to provide world-
class engineering and project management services.
Lahmeyer offers services in the following sectors:
Energy
Water Resources & Management
Transportation
Owners Engineers – services to Owners/Developers
Choosing a feasible project, that offer good return on investment is a very critical decision for
the Developer seeking to be the Plant Owner. Selecting suitable technology, optimization of
plant and facilities and timely implementation will make the project a profitable venture.
Lenders Engineers - Services for Financial Institutions and Banks as Lender’s
Independent Engineer
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Lahmeyer provides expert services to financial Institutions/ Banks/ Lenders / Private Equity
Firms & Hedge Funds during Pre-financial closure phase, Implementation phase,
Performance guarantee testing and Project completion phase and Operation phase of the
projects in evaluating and developing projects and by virtue of an extensive knowledge of the
marketplace, can introduce investors to suitable likely projects.
Architect Engineer - Services as Architect Engineer (Detailed Engineering)
During the execution of the project, Lahmeyer provides both Basic as well as Detailed
Engineering Services to EPC / Turnkey Contractors in all disciplines such as Mechanical,
Electrical, Civil and Control & Instrumentation.
Technical advisor - Services as Technical Advisor
There is a worldwide trend for Governments to encourage private participation in power
generation, transmission and distribution projects. Lahmeyer has expertise in providing
services in privatization transactions.
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CERC: Central Electricity Regulatory Commission
CEA: Central Electricity Authority
DPR: Detailed Project Report
MOU: Memorandum Of Understanding
PV: Photo Voltaic
MU: Million Units
KWh: Kilo Watt hour
MWh: Mega Watt hour
GWh: Giga Watt hour
IDC: Interest during construction
IRR: Internal Rate of return
DSCR: Debt Service Coverage ratio
NAV: Net Asset Value
EBT: Earnings before tax
EBDIT: Earnings before Depreciation, Interest and tax
EBIT: Earnings before Interest and tax
CUF: Capacity utilization factor
PLF: Plant Load factor ( Same as CUF)
DCF: Discounted Cash Flow
REC: Renewable Energy Certificate
EA: Electricity Act (2003)
EPC: Engineering Procurement Contract
COD: Commercial Operations Date
GBI: Generation Based Incentives
MNRE: Ministry of New and Renewable Energy Sources
MOP: Ministry of Power
NPV: Net present value
SBI: State Bank of IndiaRoE: Return on Equity
Abbreviations
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O & M: Operation and Maintenance
RoI: Return on investment
SEB: State Electricity Board
PPA: Power Purchase Agreement
Wp: Watt peak
GoI: Government of India
IPP: Independent Power Producer
CGU: Central Generating Unit
LII : Lahmeyer International (India) Pvt Ltd
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The summer internship is an essential part of the curriculum of an M.B.A. program as it is
included to impart a hand on exposure of the industry in which the student is supposed to
work in the future in his career.
The theoretical studies in the MBA course are having importance only when a student knows
how to implement it in the real situation of the organization.
The significance of the internship can be judged by assessing the value addition in the studentso the report made during the internship is reviewed and questioned from different aspect to
incorporate the necessary changes and appraise the performance during the training.
The Basic objective of the training was to:
Gain firsthand experience of the power sector.
Understand the current practices, work culture, significance of an organisational
entity.
To learn from the very best professionals the best conduct to run a business.
To strive to become an asset to the company during the internship program.
Understanding the business practices from a managerial perspective.
Objective of Internship
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Introduction 11
Executive Summary 13
Definitions 15
Solar Energy Scenario in India 18
Technical Considerations 23
Financial Considerations 39
Regulatory Considerations 46
Project Layout 51
Challenges Faced by Solar sector 65
Conclusion 67
Bibliography 68
Table of Contents
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In the history of the Indian Electricity Sector, the year 2003-04 would undoubtedly be
remembered as the year in which the new Electricity Act was enacted by the Parliament.
The act has created an enabling environment to promote investment and also to protect the
consumer interest. It emphasizes the role of competition and market development,
obviously because no amount of cost plus regulation can achieve what competition can, in
reducing the price of electricity and ensuring good quality power.
Indian Electricity Sector originally was a Vertically Integrated Utility and thus had the
advantage of natural monopolies. Tariff setting was in the hands of utility and the respective
State Governments resorted to giving subsidies to various consumer categories and cross
subsidizing the Industrial Consumers. However in due course of time these Vertically
Integrated Utilities became inefficient and Indian Power Sector was almost on the stage of
bankruptcy, when various states initiated reforms in their respective states and the reforms
process started. Although this gave a temporary relief to the stakeholders, Industrial
Consumers were still paying higher tariff than other categories of consumers, thus
hampering their profitability, efficiency, productivity and also competitiveness. And even
after paying higher tariff. These Industrial Consumers were not getting uninterrupted and
quality power supply. This lead to the concept of Captive Power Plants but could only be
adopted by those organizations that have a large working capital and can invest in setting up
their own power plants. However Electricity Act 2003 which came in to force on 10th June2003 gave special provision for Captive Power Plants.
This concept will help these small scale industries and also many other organizations that
need economical, quality and uninterrupted power supply. Group Captive can also be
helpful in capacity addition as the excess power can be either traded or can be transferred
to grid and thus will help in maintaining the frequency.
Introduction
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However, be it an IPP, a CGU or a captive plant, finance becomes an integral part of the
project. Most of the investment in power projects is through Banks and financial Institutions
due to a huge base capital requirement, and since the Indian Power Scenario is gloomy to
say the least, scrutiny and careful study of power projects becomes a must from the
Lender’s perspective. This project is based on consultation and bankable feasibility of a
small rooftop power project with an esteemed organisation. Due to the confidentiality
clause no name or hint as to either of the party’s identity shall be revealed in this project.
My role in the project is to prepare a financial model detailing the expected return to thedeveloper of the plant, and primarily to our client viz. the lender. The model also gives an
estimate of the tariff the developer could charge. The entire model has been prepared at
par with the latest CERC guidelines (Renewables).
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To Avail the unique opportunity to work with Lahmeyer International (India) Pvt. Ltd.
was a great experience, especially with my guide Mr. Sadasib Mohapatra who had given
me a great job to do with lots of support for making it a success. At the inception of the
training itself I was brought up to speed with the work structure and working environment
of the company and was attached to “Development of Financial modelling and Bankable
Feasibility analysis of 1 MW Rooftop Solar PV Project in India”.
The main objective of this project is to enable oneself to prepare a Financial Model and
inspect the financial feasibility of the project from both Owner‟s and Lender‟s perspective
with our prime responsibility being towards the Lender. As any project related to power
sector requires huge amount of investment, it is extremely necessary to make financial
model and do thorough analysis for the financial viability of the proposed project prior
taking any decision regarding the initiation and further proceedings related to the proposed
project.
In this project the necessary inputs are taken from various sources, some are taken as per
CERC Guidelines and some of them are assumed rationally in order to proceed further in
the Financial Modelling process. After compiling the input data various dependent
variables such as Depreciation, Working Capital , Interest on Working Capital, ROE, O &
M cost, Interest on Loan etc. are calculated which are further used to calculate the Tariff. In
order to keep in mind the time value of money the levelised tariff is calculated to denote the
nominal tariffs of different years by a single value. Then the next step is to prepare sheets
of Profit & Loss account, Cash flow statement, Balance Sheet and Debt service coverage
ratio which are main determinants for the analysis of financial viability of any upcoming
power generation project. Once the relationships between various indicators of the financial
aspects of the project are developed (in excel sheet) with the help of financial tools, we
interpolate the different values of the changeable inputs such as Interest on loan, PLF,
O&M expenses etc to find out the different outcomes and the way the changes in these
Executive Summary
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inputs impacts the Levelised Tariff. This is done to know the degree and direction of
impact of inputs on the outputs in order to select the best suited set of inputs.
The financial plan and tariff calculation for the Project has been done in light of
regulatory, technical and financial clauses under the CERC RE Tariff Regulations
2012. In Profit & Loss account, the taxation has been done in accordance with IT Act.
Financial modelling tool has been designed to calculate Levelised tariff for 25 years at
15.97% discount rate. The financial model also offers the flexibility to change andadapt different inputs and assumptions for different projects.
The Model aims at answering few key questions
How much would be the actual return on equity (after tax) to the owner?
At what Tariff r ate under CERC‟s guidelines can the project engage in a long term
PPA with a distribution licensee assuming Grid connectivity?
What would be the return if the owner chooses to opt for APPC rate rather than
preferential Tariff structure?
What would be the total income and savings if the owner‟s opts for Captive
generation?
What would be the Debt Service Coverage Ratio over the tariff period?
Impact of various financial factors on tariff
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Levelised tariff
Levelised tariff in the power sector is basically the Sum of the Present value of all the tariff
calculated over the tariff period w.r.t. inception of the project upon the sum of the discount
factors.
CUF/ PLF:
It is the ratio of actual energy generated, to the energy the plant would have generated if it
was operating at its maximum capacity. It is given as percentage and is usually calculated for
a period of one year .
Levelised Tariff:
Sum of P.V. of Tariff over the life of the plant/PPA
---------------------------------------------------------------
Sum of Discount Factors
Definitions
CUF/PLF:
100* Energy Generated in a year
---------------------------------------------------------------
Maximum energy generated in a Year
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Discount factor:
The discount factor is the factor by which a future cash flow must be multiplied in order to
obtain the present value.
Debt Service Coverage Ratio:
In corporate finance, it is the amount of cash flow available to meet annual interest and
principal payments on debt, including sinking fund payments.
In general, it is calculated by:
Debt-Equity Ratio:
It is the ratio of debt and equity employed in any business. It is a measure of a company's
financial leverage calculated by dividing its total liabilities by stockholders' equity. It
indicates what proportion of equity and debt the company is using to finance its assets.
DSCR:
Net Operating Income
---------------------------------------------------------------
Total Debt Service
D/E Ratio:
Total Long Term Loan
---------------------------------------------------------------
Owner‟s equity
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Net Present Value
The difference between the present value of cash inflows and the present value of cash
outflows. NPV is used in capital budgeting to analyze the profitability of an investment or
project.
NPV analysis is sensitive to the reliability of future cash inflows that an investment or project
will yield.
Internal Rate of Return:
The discount rate often used in capital budgeting that makes the net present value of all cash
flows from a particular project equal to zero. Generally speaking, the higher a project's
internal rate of return, the more desirable it is to undertake the project .
Return on Equity:
The amount of net income returned as a percentage of shareholders equity. Return on equity
measures a corporation's profitability by revealing how much profit a company generates
with the money shareholders have invested.
ROE is expressed as a percentage of the total equity invested in the project.
RoE:
Net Income
---------------------------------------------------------------
Share-holder‟s Equity
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Introduction
Solar energy is a here to stay. The biggest advantage of solar energy is its abundant
availability and the fact that it doesn‟t require any fuel for operation. While the latter situation
can be said to be consistent with time, the availability may be a problem in a post apocalyptic
world where the sun may be blocked out due to excessive pollution. This energy can be made
use of in two ways the Thermal route i.e. using heat for drying, heating, cooking or
generation of electricity or through the Photovoltaic route which converts solar energy in to
electricity that can be used for a myriad purposes such as lighting, pumping and generation of
electricity. With its pollution free nature, virtually inexhaustible supply and global
distribution- solar energy is very attractive energy resource.
Why Solar?
Solar Energy can be utilized for varied applications. So the answer to “Why Solar” question
can be sought from two different perspectives: utilizing solar energy for grid-interactive and
off-grid (including captive) power generation.
Solar for grid connected electricity:
1. Grid interactive solar energy is derived from solar photovoltaic cells and CSP Plants
on a large scale. The grid connection is chosen due to following reasons:
2. Solar Energy is available throughout the day which is the peak load demand time.
3. Solar energy conversion equipments have longer life and need lesser maintenance and
hence provide higher energy infrastructure security.
4. Low running costs & grid tie-up capital returns (Net Metering).
5. Unlike conventional thermal power generation from coal, they do not cause pollution
and generate clean power.
Solar Energy Scenario in India
http://www.eai.in/ref/global/ae/sol/csp/csp.htmlhttp://www.eai.in/ref/global/ae/sol/csp/csp.html
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Abundance of free solar energy throughout all parts of world (although gradually
decreasing from equatorial, tropical, sub-tropical and polar regions). Can be utilized
almost everywhere.
Solar for off-grid solutions:
While, the areas with easier grid access are utilizing grid connectivity, the places where
utility power is scant or too expensive to bring, have no choice but to opt for their own
generation. They generate power from a diverse range of small local generators using both
fossil fuels (diesel, gas) and locally available renewable energy technologies (solar PV, wind,small hydro, biomass, etc.) with or without its own storage (batteries). This is known as off-
grid electricity. Remote power systems are installed for the following reasons:
Desire to use renewable - environmentally safe, pollution free
Combining various generating options available- hybrid power generation
Desire for independence from the unreliable, fault prone and interrupted grid
connection
Available storage and back-up options
No overhead wires- no transmission loss
Varied applications and products: Lighting, Communication Systems, Cooking,
Heating, Pumping, Small scale industry utilization etc.
Captive power generation is done mainly considering the replacement of diesel with
solar. Comparison of diesel vs captive power generation is available here. Our tailor-
made report on Captive Solar Power Generation can be downloaded here.
Technology:
Solar Photovoltaic
Solar photovoltaic (SPV) cells convert solar radiation (sunlight) into electricity. A solar cell
is a semi-conducting device made of silicon and/or other materials, which, when exposed to
http://www.eai.in/ref/ae/sol/cs/sd/solar_power_vs_diesel_generator.htmlhttp://www.eai.in/ref/reports/captive_power.htmlhttp://www.eai.in/ref/global/ae/sol/celltech/cell_tech.htmlhttp://www.eai.in/ref/global/ae/sol/celltech/cell_tech.htmlhttp://www.eai.in/ref/reports/captive_power.htmlhttp://www.eai.in/ref/ae/sol/cs/sd/solar_power_vs_diesel_generator.html
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sunlight, generates electricity. Solar cells are connected in series and parallel combinations to
form modules that provide the required power.
Crystalline Silicon solar cells (C-Si): Monocrystalline and Polycrystalline
Thin-film solar cells: Amorphous Silicon Solar cells (A-Si), CIGS, CdTe
PV modules are manufactured by assembling the solar cells after stringing,
tabbing and providing other interconnections.
Solar Thermal
Solar Thermal Power systems, also known as Concentrating Solar Power systems,
use concentrated solar radiation as a high temperature energy source to produce
electricity using thermal route. High temperature solar energy collectors are
basically of three types:
Parabolic trough system: at the receiver can reach 400° C and produce steam for
generating electricity.
Power tower system: The reflected rays of the sun are always aimed at the
receiver, where temperatures well above 1000° C can be reached.
Parabolic dish systems: Parabolic dish systems can reach 1000° C at the receiver,
and achieve the highest efficiencies for converting solar energy to electricity.
India's Unique Proposition
Economic Value: The generation of solar electricity coincides with the normal peak
demand during daylight hours in most places, thus mitigating peak energy costs, brings
total energy bills down, and obviates the need to build as much additional generation and
transmission capacity as would be the case without PV.
Geographical Location: India being a tropical country receives adequate solar radiation
for 300 days, amounting to 3,000 hours of sunshine equivalent to over 5,000 trillion kWh.
Almost all the regions receive 4-7 kWh of solar radiation per sq mtrs with about 2,300 –
3,200 sunshine hours/year, depending upon the location. Potential areas for setting up
http://www.eai.in/ref/global/ae/sol/soltherm/solar_thermal.htmlhttp://www.eai.in/ref/global/ae/sol/csp/csp.htmlhttp://www.eai.in/ref/global/ae/sol/csp/csp.htmlhttp://www.eai.in/ref/global/ae/sol/soltherm/solar_thermal.html
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solar power plant can be analyzed using Solar irradiation map of India. Our Statewise
analysis of Solar resource, Business Opportunities and Latest trends in the states are
discussed:
Power Shortage: Electricity losses in India during transmission and distribution have been
extremely high over the years and this reached a worst proportion of about 24.7% during
2010-11. India is in a pressing need to tide over a peak power shortfall of 13% by
reducing losses due to theft. Theft of electricity, common in most parts of urban India,
amounts to 1.5% of India‟s GDP. Due to shortage of electricity, power cuts are commonthroughout India and this has adversely affected the country‟s economic growth.
Capacity Installed
SOURCECUMULATIVE CAPACITY
(numbers)
Rural / Semi Urban Biogas
Plants 42,77,000
SPV Street Lighting System 1,21,634
SPV Home Lighting System 6,19,428
SPV Lanterns 8,13,380
SPV Pumps 7,495
Solar Cookers 6,64,000
Current Projects (includes both- installed and under installation projects)1
S.No State
Photovoltaic
Capacity (MW)
Solar Thermal
Capacity (MW)
1. Rajasthan 43 400
2. Gujarat 722 45
1Source: (Eai)
http://www.mnre.gov.in/images/spv-map.jpghttp://www.mnre.gov.in/images/spv-map.jpg
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3. Maharashtra 133 -
4. Karnataka 10 -
5. Andhra Pradesh 20.5 -
6. Uttarakhand 4 -
7. Punjab 5 -
8. Haryana 7.8 -
9. Uttar Pradesh 11 -
10. Jharkhand 16 -
11. Chhattisgarh 4 -
12. Madhya Pradesh 7.25 -
13. Odisha 11 -
14. Tamil Nadu 12 -
TOTAL 1006.55 445
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Solar energy is more flexible and versatile than other forms of renewables such as wind or
hydro. Where wind and hydro are available, they are good sources of energy, but only select
places get good wind, and hydro can have many impacts.
The Sun provides about 100000 TW to the Earth, which is approximately 10 000 times
g reater than the world's present rate of energy consumption (13 TW). Photovoltaic (PV) cells
are being used increasingly to tap into this huge resource and will play key role in future
sustainable energy systems. Our present needs could be met by covering 0 .1% of the
Earth's surface with PV installations that achieve a conversion efficiency of 10%.
Brief Explanation of Solar Technology
This portion of the report entails very basic operations and entities involved in production of
electricity by the means of solar technology.
Photovoltaic cells
A photovoltaic cell is an electrical device that converts the energy of light directly
into electricity by the photovoltaic effect.
Technical considerations
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2
One silicon cell produces about 0.5 volt
Cells are too small to do much work. A typical module has 36 cells connected in
series, plus - minus, to increase the voltage.
With connected cells and a tough front glass, a protective back surface and a frame,
the module is now a useful building block for real-world systems.
2 Source: (CMU)
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PV Module
The PV module is the smallest package that produces useful power. The process involved in
manufacturing these modules requires high precision and quality control in order to produce a
reliable product. It is very difficult, and therefore not practical, to make homemade modules.
PV is very modular. You can install as small or as large a PV system as you need.
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Example: One can install a PV module on each classroom for lighting, put PV power at a gate
to run the motorized gate-opener, put PV power on a light pole for street lighting, or put a PV
system on a house or building and supply as much energy as wanted.
You can start with a small budget this year, and add more modules and batteries later when
you are more comfortable with solar, or when loads increase. New PV modules can be added
at any time.
The element Silicon is the second most abundant element on the earth‟s surface, next to
Oxygen. Silicon and Oxygen together make sand (Silicon Oxide, SiO2). The Oxygen is
removed at high temperatures, and leaves behind the Silicon. So the basic material of solar
cells is abundant and safe Emphasize that the cells are converters, not original sources of
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energy. They need the sunlight as their fuel just like conventional motor generators need fuel
to work. But solar cell fuel is delivered for free all over the world.
3
This is intended to be a quick explanation of the basics of direct solar conversion (“the
photovoltaic effect”). This picture looks at a cross-section of a PV cell. Light actually
penetrates into the cell, it doesn‟t just bounce off the surface. Particles of light called
“photons” bounce into negatively charged electrons around the silicon atoms of the cell, and
knock these electrons free from their silicon atoms. The energy of the photon is transferred to
the electron. There are over a billion photons falling on the cells every second, to there are
lots of electrons knocked loose! Each electron is pushed by an internal electric field that has
been created in the factory in each cell. The flow of electrons pushed out of the cell by this
internal field is what we call the “electric current”.
3 Source: (MIT)
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PV Panel and Arrays
PV Panel: A PV panel is a set of solar photovoltaic modules electrically connected and
mounted on a supporting structure.
PV Array: is a linked collection of solar panels. The power that one module can produce is
seldom enough to meet requirements of a home or a business, so the modules are linked
together to form an array. Most PV arrays use an inverter to convert the DC power produced
by the modules into alternating current that can power lights, motors, and other loads.
Key considerations for developing Solar Rooftop projects
Choosing a project Area
Technical considerations
Grid connectivity
Design options
Financial feasibility of project
Structural considerations
Array Design
Maintenance & Operation
Project Management
Most commonly used types of solar cells
Crystalline
1. Monocrystalline
2. Poly Crystalline
3. Ribbon silicon
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Thin Film Silicon
1. Cadmium telluride solar cell (CdTe)
2. Copper indium gallium selenide solar cell (CuInGaSe)
3. Amorphous Silicon
Types of Solar Instalments
Roof Mount
1. Flat roof Mount
2. Slate Roof Mount
3. Integrated Mount
Pole Mounts
Ground Mounts
A-Frame Mounts
SOLAR RADIATION MAP
Location of Project is a factor which determines the capability of a solar power plant.
However Inconsistency in weather conditions may be there, which may cause deviations
from the initial power projections. Nevertheless study of Solar Radiation Maps is a
prerequisite before deciding on the location of the plant.
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4
4 Source : (MNRE)
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Technology Options for a solar Power Project
Stand alone systems
Grid connected PV systems with Battery
Grid connected PV systems without Battery
Hybrid PV systems
1. Stand alone systems
Poor quality of grid supply (low voltage, fluctuating frequency and frequent interruptions),
high tariffs (much higher than actual cost of supply), unfair impositions (peak hour
restrictions and unplanned load shedding) and unresponsive attitude of State Electricity
Boards have forced many industries to isolate themselves totally from the state grid and be on
their own. For a reliable operation of the industry, they necessarily have to employ captive
generation with a redundancy.
Stand-alone PV systems are designed to operate independent of the electric utility grid, and
are generally designed and sized to supply certain DC and/or AC electrical loads. Worldwide,
stand alone solar installations are very popular while in India almost all captive power plants
are of the grid-tie. It is often a good idea to start with small and very simple stand alone solar
PV system first and then progress from there.
WorkingThe simplest type of stand-alone PV system is a “Direct-coupled system”, where the DC
output of a PV module or array is directly connected to a DC load. Since there is no electrical
energy storage (batteries) in direct-coupled systems, the load only operates during sunlight
hours, making these designs suitable for common applications such as ventilation fans, water
pumps, and small circulation pumps.
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Matching the impedance of the electrical load to the maximum power output of the PV array
is a critical part of designing well-performing direct-coupled system. For certain loads such
as positive-displacement water pumps; a type of electronic DC-DC converter, called a
maximum power point tracker (MPPT) is used between the array and load to help better
utilize the available array maximum power output.
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DC loads can also be connected directly to the battery bank. A more common type of the
standalone system is where the PV system with a battery bank powers the AC loads.
The “Small stand-alone" system is an excellent system for providing electricity
economically. These systems are used primarily for RV power, lighting, cabins, backup and
portable power systems. The size of the photovoltaic array (number of solar panels) and
battery will depend upon individual power requirements. The solar panels charge the battery
during daylight hours and the battery supplies power to the inverter as needed. The inverter
changes the 12 volt batteries DC power into 230V volt AC power, which is the most useful
type of current for most applications. The charge controller terminates the charging when the
battery reaches full charge, to keep the batteries from "gassing-out", which prolongs battery
longevity.
2. Grid Connected Captive Solar Plants (without Battery)
Typical System Components
Grid-tied system without battery backup consists of just two main components, a PV array
and a grid-tied inverter.
In addition, the array frames can be installed as:
Fixed, where the frame is fixed at the optimum angle.
Adjustable, where the frame can be adjusted manually during the year (often not
carried out as years progress)
Tracking, where the frames automatically move to receive optimal sunlight during
the day and throughout the year.
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5
While trackers are most efficient, they are more expensive and require maintenance.
The most common PV module that is 5-to-25 square feet in size and weighs about 3-4 lbs./sq
ft. Often sets of four or more smaller modules are framed or attached together by struts in
what is called a panel. This panel is typically around 20-35 square feet in area for ease of
handling on a roof.
This allows some assembly and wiring functions to be done on the ground if called for by the
installation instructions.
Balance of system equipment (BOS): BOS includes mounting systems and wiring systems
used to integrate the solar modules into the structural and electrical systems of the home. The
wiring systems include disconnects for the DC and AC sides of the inverter, ground-fault
protection, and over-current protection for the solar modules.
Most systems include a combiner board of some kind since most modules require fusing foreach module source circuit. Some inverters include this fusing and combining function within
the inverter enclosure.
DC-AC inverter: This is the device that takes the dc power from the PV array and converts it
into standard ac power used by the house appliances.
Metering: This includes meters to provide indication of system performance. Some meters
can indicate home energy usage.
5 Source: (Eai)
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Other components: utility switch (depending on local utility)
The advantages and disadvantages of a grid-tied system without battery include the
following:
Cost-effective for net metering
Does not provide back-up in case of grid failure
Simple to install
No power management opportunities
Highest efficiency
3. Grid Connected Captive Solar Plants (with Battery)
Grid-tie with power backup combines a grid tie installations with a bank of batteries. Unlike a
standard grid-tie system, however, a battery bank provides contingency for power cuts – so
that one can continue to use power from solar.
Need for Battery
Batteries are a key component in a grid-tie with back-up or a stand-alone renewable energy
system that all of the other components rely on for operation. Without proper maintenance,
batteries can fail prematurely and shut the whole system down. The "Best" battery for a
particular system is not always the most expensive, but it is seldom the cheapest either.
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This type of system incorporates energy storage in the form of a battery to keep “critical
load” circuits in the house operating during a utility outage.
When an outage occurs the unit disconnects from the utility and powers specific circuits in
the home. These critical load circuits are wired from a subpanel that is separate from the rest
of the electrical circuits.
If the outage occurs during daylight hours, the PV array is able to assist the battery in
supplying the house loads. If the outage occurs at night, the battery supplies the load.
The amount of time critical loads can operate depends on the amount of power they consume
and the energy stored in the battery system.
A typical backup battery system may provide about 8kWh of energy storage at an 8-hour discharge rate, which means that the battery will operate a 1-kW load for 8 hours. A 1-
kW load is the average usage for a home when not running an air conditioner.
Typical System Components:
In addition to components, a battery backup system may include some or all of the following:
Batteries and battery enclosures
Battery charge controller
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Separate sub-panel(s) for critical load circuits
The advantages and disadvantages of a battery based grid-tied system include the following:
Provides interruptible back-up power
Batteries are an additional cost.
Reduces energy cost for utility time of use (TOU) metering.
Efficiency loss in charging batteries
Offers power management opportunities
More component to install
4. Hybrid PV system
Among the three options that are available, the grid tied captive systems are the most
prevalent in India. These are available up to a capacity of 100 kW, and typically do not use
batteries.
At the same time, stand alone/captive based power plants in India are evolving fast. Globally,
most people do not run their entire load solely off their PV system. The majority of systems
use a hybrid approach by integrating another power source. The most common form of
hybrid system incorporates a gas or diesel powered engine generator, which can greatly
reduce the initial cost. Meeting the full load with a PV system means the array and batteries
need to support the load under worst-case weather conditions. This also means the battery
bank must be large enough to power large loads. These requirements will make the system
unviable owing to the high costs of battery storage. Hence, a diesel-solar PV generator
provides the optimal power supply source for India as well, as the generator provides the
extra energy needed during cloudy weather and during periods of heavier than normal
electricity use, and can also be charging the batteries at the same time. A hybrid system
provides increased reliability because there are two independent charging systems at work.
Another hybrid approach is a PV system integrated with a wind turbine. Adding wind turbine
makes sense in the locations where the wind blows when the sun does not shine. In this case,
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consecutive days of cloudy weather are not a problem, so long as the wind turbine is
spinning. While in theory this combination appears good, in practice this combination has not
delivered the benefits expected out of it, primarily owing to the less-than-optimal efficiencies
of micro wind turbines.
For even greater reliability and flexibility while using wind and solar, there are
experimentations where a third source – diesel generator – has been included in a PV/Wind
system. A generator system will act as a third charging source for the batteries. This three-
source hybrid is in its nascent stages in India.
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Project Finance:
Project Finance is long term financing of infrastructure and industrial projects based on
projected cash flows of the project rather than balance sheet of the project sponser.
Usually, a project financing structure involves a number of equity investors, known as
sponsors or promoters, as well as a syndicate of banks or other lending institutions that
provide loans to the operation.
The loans are most commonly non-recourse loans, which are secured by the project
assets and paid entirely from project cash flow, rather than from the general assets or
creditworthiness of the project sponsors, a decision in part supported by financial
modeling.
The financing is typically secured by all of the project assets, including the revenue-
producing contracts.
Project lenders are given a lien on all of these assets, and are able to assume control of a
project if the project company has difficulties complying with the loan terms.
Generally, a special purpose entity is created for each project, thereby shielding other
assets owned by a project sponsor from the detrimental effects of a project failure.
As a special purpose entity, the project company has no assets other than the project.
Capital contribution commitments by the owners of the project company are sometimes
necessary to ensure that the project is financially sound, or to assure the lenders of the
sponsors‟ commitment.
Project finance is often more complicated than alternative financing methods.
Traditionally, project financing has been most commonly used in the extractive (mining),
transportation, telecommunications and energy industries.
More recently project financing principles have been applied to other types of public
infrastructure under public – private partnerships (PPP)
Project finance models are usually built as Excel spreadsheets and typically consist of the
following interlinked sheets:
Financial Analysis and Considerations
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Data input and assumptions
Capital Expenditure
Debt Schedule
Revenue Sheet
Cost Sheet
Accounting Statements
Analysis for Debt repayment and return on Equity
Terminologies:
Capital Cost
Capital expenditure or CAPEX is the amount of money spent on a project before it gets
operational. All expenses incurred for the project like design, engineering, procurement,
construction, installation, commissioning, duties and taxes etc. contributes to capital
expenditure.It composes a Debt and an equity component.
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Debt:
It is the total amount of Long term fixed liabilities. Generally a bank or a Financial institute
Issues debentures to the developing party for fixed period of time ( maturity period) at a fixed
rate of interest.
Equity:
Equity is the amount of owner‟s share capital put up in the total capital cost.
Discount Rate:The interest rate used in discounted cash flow analysis to determine the present value of
future cash flows. The discount rate takes into account the time value of money.
Balance Sheet:
An accounting statement, classifying all the financial entities into assets or liabilities. The
basic checking point is the value of all the assets should be equal to all the liabilities
Income Statement:
An accounting sheet that displays the flow from total earnings to earnings after tax or the
actual earnings of the company
Working Capital:
A measure of both a company's efficiency and its short-term financial health. The working
capital ratio is calculated as:
Also known as "net working capital", or the "working capital ratio".
Current Assets- Current Liabilities
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O&M Expenses:
Annual fixed cost incurred for maintenance, repairs and operation of plant. A Normative
O&M Expense is taken with a certain escalation price. Escalation price is an assumed per
annum percentage increase in the O&M costs.
Financial Modeling (Def):
The process by which a firm constructs a financial representation of some, or all, aspects of
the firm or given security. The model is usually characterized by performing calculations, and
makes recommendations based on that information. The model may also summarize
particular events for the end user and provide direction regarding possible actions or
alternatives.
Financial Indicators Used in the Model:
1. Debt Service Coverage ratio
2. Internal Rate of Return
The Purpose of Financial Models
Financial models serve five purposes:
1. to demonstrate the size of the market opportunity
2. to explain the business model
3. to show the path to profitability
4. to quantify the investment requirement
5. to facilitate valuation of the business
The Basic Idea behind Building a financial Model is to answer these questions that may pop
in the mind of the developer or the lender.
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From a Power Sector Perspective we can add determination of tariff for Power Purchase
agreements to that list. Also we would like to know the volatility of the project viz. what
changes would occur in the tariff, in earnings, in Cash flow if we certain variables factors
change. In case of solar this is all the more plausible as Solar power is dependent on the
intensity of Sun‟s radiation in the project area, which is a factor we have no control over,
atleast not yet.
The Components for calculation of tariff in a solar project has been taken as per the CERC
guidelines.These are based on Single part Tariff and compose only of the fixed components due to lack
of fuel costs. These are
O & M expenses
Depreciation
Interest on Loan
Interest on Working Capital
Return on Equity
All the above except Return on equity are costs incurred by the developer and thus are
included in the tariff. RoE gives a picture of the profit margin of the developer.
As per the IT act, a tax holiday of 10 years is taken into the model.
Assumptions and Input Data
Below is the assumptions taken into consideration while building the model. Most of theassumptions have been taken as per the CERC Guidelines
Select The tariff Structure Preferential
Power Generation
Capacity
Installed Power Generation
Capacity MW 1
Capacity utilization factor % 19.02%
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Commercial Operations Date
Useful life Years 25 Deration factor % 0.70%
Project Cost
Capital cost Rs lacs 680.00
Normative Capital Cost Rs lacs/MW 680.00
Capital Subsidy (if any) Rs lacs 0.00
Net Capital cost Rs lacs 680.00
Financial Assumptions
Debt:Equity Tariff period Years 25
Debt % 70.00%
Equity % 30.00%
Total Debt Amt Rs Lacs 476.00
Total Equity Amt Rs Lacs 204.00
Debt Component
Loan Amount Rs Lacs 476.00
Moratorium period 0
Repayment period (excluding
moratorium) Years 12
No of payments in a year 4
Total no. of payments (excluding
moratorium) 48
Total no. of payments (including
moratorium) 48
Interest rate % 13.25%
Date of Start of loan
Equity Component
Equity Amount Rs Lacs 204.00
Return on equity first 10 years % 19.38%
Return on equity 11th year
onwards % 24.00%
Discount Rate % 15.97%
Depreciation & Incentives
Depreciation Rate for Loan
Tenure % 5.83%
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Depreciation rate Post Loan
Tenure % 1.54% Generation Based Incentives (if
any) Rs lacs p.a.
Period for GBI Years
Operation and Maintainence
Normative O&M Expenses Rs Lakhs/MW 3.63
O&M Expenses per annum Rs Lakhs 3.63
Escalation factor for O&M
Expenses % 5.72%
Working Capital
O&M Expenses Months 1
Maintenance Spares (% of O&M
Expenses) % 15.00%
Receivables Months 2
Interest on working capital % 13.00%
Tax assumption
Income tax % 32.45%
MAT Rate (first 10 years) % 20.01%
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Terminologies:
Solar PV power: means the Solar Photo Voltaic power project that uses sunlight for direct
conversion into electricity through Photo Voltaic technology.
Tariff Period: the period for which tariff is to be determined by the Commission on the basis
of norms specified under these Regulations.
Control Period or Review Period: the period during which the norms for determination of
tariff specified in these Regulations shall remain valid;
Hybrid Solar Thermal Power Plant: the solar thermal power plant that uses other forms of
energy input sources along with solar thermal energy for electricity generation, and wherein
not less than 75% of electricity is generated from solar energy component.
Installed capacity: the summation of the name plate capacities of all the units of the
generating station or the capacity of the generating station (reckoned at the generator
terminals), approved by the Commission from time to time
Petition and Proceedings for determination of tariff
The Commission shall determine the generic tariff on the basis of suomotu petition at least
six months in advance at the beginning of each year of the Control period for renewable
energy technologies for which norms have been specified under the Regulations.
Notwithstanding anything contained in these regulations, the generic tariff determined for
Solar PV projects based on the capital cost and other norms applicable for any year of the
control period shall also apply for such projects during the next year
Regulatory Scenario (Solar PV)
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Provided the Power Purchase Agreements in respect of the Solar PV projects and
Solar thermal projects as mentioned in this clause are signed on or before last day of
the year for which generic tariff is determined and
The entire capacity covered by the Power Purchase Agreements is commissioned on
or before 31st March of the next year in respect of Solar PV projects.
Tariff Structure
The tariff for Solar PV Technologies shall be single part tariff consisting of the following
fixed cost components:
(a) Return on equity;
(b) Interest on loan capital;
(c) Depreciation;
(d) Interest on working capital;
(e) Operation and maintenance expenses;
Despatch principles
Solar generating plants with capacity of 5 MW and above and connected at the connection
point of 33 KV level and above shall be subjected to scheduling and despatch code as
specified under Indian Electricity Grid Code (IEGC) -2010, as amended from time to time.
Financial Principles
Capital Cost
The norms for the Capital cost as specified in the subsequent technology specific chapters
shall be inclusive of all capital work including plant and machinery, civil work, erection and
commissioning, financing and interest during construction, and evacuation infrastructure up
to inter-connection point.
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Debt Equity Ratio For generic tariff to be determined based on suo-motu petition, the debt equity ratio
shall be 70:30.
For Project specific tariff, the following provisions shall apply:- If the equity actually
deployed is more than 30% of the capital cost, equity in excess of 30% shall be
treated as normative loan. Provided that where equity actually deployed is less than
30% of the capital cost, the actual equity shall be considered for determination of
tariff, provided further that the equity invested in foreign currency shall be designated
in Indian rupees on the date of each investment.
Interest Rate
The normative loan outstanding as on April 1st of every year shall be worked out by
deducting the cumulative repayment up to March 31st of previous year from the gross
normative loan.
For the purpose of computation of tariff, the normative interest rate shall be
considered as average State Bank of India (SBI) Base rate prevalent during the first
six months of the previous year plus 300 basis points.
Notwithstanding any moratorium period availed by the generating company, the
repayment of loan shall be considered from the first year of commercial operation of
the project and shall be equal to the annual depreciation allowed .
Depreciation
The value base for the purpose of depreciation shall be the Capital Cost of the asset
admitted by the Commission. The Salvage value of the asset shall be considered as
10% and depreciation shall be allowed up to maximum of 90% of the Capital Cost of
the asset.
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Depreciation per annum shall be based on „Differential Depreciation Approach' over
loan period beyond loan tenure over useful life computed on CERC (Terms and
Conditions for Tariff determination from Renewable Energy Sources) Regulations,
2012
Depreciation shall be chargeable from the first year of commercial operation,
provided that in case of commercial operation of the asset for part of the year,
depreciation shall be charged on pro rata basis.
Return on Equity
The value base for the equity shall be 30% of the capital cost or actual equity (in case of
project specific tariff determination)
Interest on Working Capital
Operation & Maintenance expenses for one month.
Receivables equivalent to 2 (Two) months of energy charges for sale of electricity
calculated on the normative CUF.
Maintenance spare @ 15% of operation and maintenance expenses
Operation and Maintenance Expenses
Operation and Maintenance or O&M expenses‟ shall comprise repair and
maintenance (R&M), establishment including employee expenses and administrative
& general expenses.
Operation and maintenance expenses shall be determined for the Tariff Period based
on normative O&M expenses specified by the Commission subsequently in these
Regulations for the first Year of Control Period.
Normative O&M expenses allowed during first year of the Control Period (i.e. FY
2012-13) under these Regulations shall be escalated at the rate of 5.72% per annum
over the Tariff Period.
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CERC Regulatory values for various Modeling Parameters and
Assumptions for the FY 2013-14
S.no Financial Aspect Unit As per regulations
1 Capital Cost Rs Lakh/Mw 800
2 Tariff Period Years 25
3 Useful Life Years 25
4 Debt Equity Ratio 70:30
5 Interest on loan % 13
6 Tax (MAT rate) % 20.01
7 Tax % 32.445
8 CUF % 19
9 O&M cost for 1st year Rs Lakh/Mw 11.63
10 O&M escalation rate % 5.24
11 Return on equity (first 10 years) % 20
12 Return on equity (11t year onwards) % 24
13 Discount Rate % 10.95
14 Loan Tenure Years 12
15 Interest on working capital % 13.50
16 Depreciation (over loan tenure) % 5.83
17 Depreciation ( beyond loan tenure) % 1.54
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Below is a Layout of the Financial model prepared. Modeling was done on Excel worksheet
utilizing various tools and formulas of excel. Most of the data is soft coded and hard coding is
limited to bare minimum. The first sheet is the Input sheet, where the green coded cells
denote the variable input cells, changing which would change the model‟s result provided the
change is within the boundary limits of the coding.
The Sheets included in the Model are
1. Assumptions and Inputs
2. Balance sheet
3. Captive generation
4. Cash flow analysis
5. Debt Repayment
6. Depreciation
7. Internal rate of Return
8. Profit and loss account
9. Renewable Energy Certificate
10. Sensitivity Analysis
11. Tariff
12. Tariff breakdown
13. Working Capital
Model Layout
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CASH FLOW SHEET
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P&L ACCOUNT
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BALANCE SHEET
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TARIFF CALCULATION
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CAPTIVE GENERATION (IF OPTED)
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Year Generation No of REC
certificates
Cost of each REC
Certificate
Total income
generated fromRECS
Pooled
Purchase Price
Income from
PooledPower
Total Income
Generated
Lakh Kwh Rs Rs lacs Rs Rs lacs Rs lacs
1 16.66 1666.15 9300 154.95 3 49.98 204.94
2 16.54 1654.49 9300 153.87 3.05 50.38 204.25
3 16.43 1642.91 9300 152.79 3.09 50.78 203.57
4 16.31 1631.41 9300 151.72 3.14 51.18 202.9
5 16.2 1619.99 6000 97.2 3.18 51.58 148.78
6 16.09 1608.65 6000 96.52 3.23 51.99 148.51
7 15.97 1597.39 6000 95.84 3.28 52.4 148.24
8 15.86 1586.21 6000 95.17 3.33 52.81 147.99
9 15.75 1575.1 6000 94.51 3.38 53.23 147.7410 15.64 1564.08 6000 93.84 3.43 53.65 147.5
11 15.53 1553.13 6000 93.19 3.48 54.07 147.26
12 15.42 1542.26 6000 92.54 3.53 54.5 147.04
13 15.31 1531.46 6000 91.89 3.59 54.93 146.82
14 15.21 1520.74 6000 91.24 3.64 55.36 146.61
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15 15.1 1510.09 6000 90.61 3.7 55.8 146.41
16 15 1499.52 6000 89.97 3.75 56.24 146.21
17 14.89 1489.03 6000 89.34 3.81 56.69 146.03
18 14.79 1478.6 6000 88.72 3.86 57.13 145.85
19 14.68 1468.25 6000 88.1 3.92 57.59 145.68
2014.58 1457.98 6000 87.48 3.98 58.04 145.52
21 14.48 1447.77 6000 86.87 4.04 58.5 145.36
22 14.38 1437.64 6000 86.26 4.1 58.96 145.22
23 14.28 1427.57 6000 85.65 4.16 59.43 145.08
24 14.18 1417.58 6000 85.05 4.23 59.89 144.95
25 14.08 1407.66 6000 84.46 4.29 60.37 144.83
REC (IF OPTED)
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Year Yearly interest
Yearly Cummalative
Interest
Yearly Principal
Payment
Yearly Cummalative
Principal
Yearly Total
Payment
Yearly Cummalative
Payment
Rs lacs Rs lacs Rs lacs Rs lacs Rs lacs Rs lacs
1 60.44 60.44 39.67 39.67 100.11 100.11
2 55.19 115.63 39.67 79.33 94.85 194.96
3 49.93 165.56 39.67 119.00 89.60 284.56
4 44.67 210.23 39.67 158.67 84.34 368.9
5 39.42 249.65 39.67 198.33 79.09 447.99
6 34.16 283.82 39.67 238.00 73.83 521.82
7 28.91 312.72 39.67 277.67 68.57 590.39
8 23.65 336.37 39.67 317.33 63.32 653.71
9 18.40 354.77 39.67 357.00 58.06 711.77
10 13.14 367.91 39.67 396.67 52.81 764.58
11 7.88 375.79 39.67 436.33 47.55 812.13
12 2.63 378.42 39.67 476.00 42.29 854.42
DEBT REPAYMENT
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(YEARLY SCHEDULE)
Year Base value Depreciation Depreciated value Cumulative Depreciation
1 680.00 39.67 640.33 39.67
2 640.33 39.67 600.67 79.33
3 600.67 39.67 561.00 119.00
4 561.00 39.67 521.33 158.67
5 521.33 39.67 481.67 198.33
6 481.67 39.67 442.00 238.00
7 442.00 39.67 402.33 277.67
8 402.33 39.67 362.67 317.33
9 362.67 39.67 323.00 357.00
10 323.00 39.67 283.33 396.67
11 283.33 39.67 243.67 436.33
12 243.67 39.67 204.00 476.00
13 204.00 10.46 193.54 486.46
14 193.54 10.46 183.08 496.92
15 183.08 10.46 172.62 507.38
16 172.62 10.46 162.15 517.85
17 162.15 10.46 151.69 528.31
18 151.69 10.46 141.23 538.77
19 141.23 10.46 130.77 549.23
20 130.77 10.46 120.31 559.69
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21 120.31 10.46 109.85 570.15
22 109.85 10.46 99.38 580.62
23 99.38 10.46 88.92 591.08
24 88.92 10.46 78.46 601.54
25 78.46 10.46 68.00 612.00
DEPRECIATION
Year Capex Net Cash Flow
(Project_Pre-
Tax)
Net Cash Flow
(Project_Post-Tax)
Present Value(
Pre-Tax)
Present Value
(Post-Tax)
Total Debt
Repayment
Net Cash
Flow
(Equity_Pre-
Tax)
Net Cash
Flow
(Equity_Post-
Tax)
Rs lacs Rs lacs Rs lacs Rs lacs Rs lacs Rs lacs Rs lacs Rs lacs
0 -680.00 -680.00 -680.00 -680.00 -680.00 -204.00 -204.00
1 0.00 139.64 131.73 120.44 115.55 100.11 39.54 31.62
2 0.00 134.39 126.48 99.96 97.32 94.85 39.54 31.623 0.00 129.13 121.22 82.84 81.82 89.60 39.54 31.62
4 0.00 123.88 115.97 68.54 68.65 84.34 39.54 31.62
5 0.00 118.62 110.71 56.60 57.49 79.09 39.54 31.62
6 0.00 113.36 105.45 46.66 48.04 73.83 39.54 31.62
7 0.00 108.11 100.20 38.37 40.04 68.57 39.54 31.62
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8 0.00 102.85 94.94 31.49 33.28 63.32 39.54 31.62
9 0.00 97.60 89.69 25.77 27.57 58.06 39.54 31.62
10 0.00 92.34 84.43 21.03 22.77 52.81 39.54 31.62
11 0.00 96.51 80.62 18.95 19.07 47.55 48.96 33.07
12 0.00 91.25 75.37 15.46 15.64 42.29 48.96 33.07
130.00 59.42 43.53 8.68 7.92 59.42 43.53
14 0.00 59.42 43.53 7.49 6.95 59.42 43.53
15 0.00 59.42 43.53 6.46 6.10 59.42 43.53
16 0.00 59.42 43.53 5.57 5.35 59.42 43.53
17 0.00 59.42 43.53 4.80 4.69 59.42 43.53
18 0.00 59.42 43.53 4.14 4.11 59.42 43.53
19 0.00 59.42 43.53 3.57 3.61 59.42 43.53
20 0.00 59.42 43.53 3.08 3.17 59.42 43.53
21 0.00 59.42 43.53 2.66 2.78 59.42 43.53
22 0.00 59.42 43.53 2.29 2.44 59.42 43.53
23 0.00 59.42 43.53 1.98 2.14 59.42 43.53
24 0.00 59.42 43.53 1.70 1.87 59.42 43.53
25 0.00 59.42 43.53 1.47 1.64 59.42 43.53
Internal rate of return (Project_Pre-Tax) % 15.95%
Internal rate of return (Project_Post-Tax) % 14.00%
Internal Rate of Return(Equity_Pre-Tax) % 20.37%
Internal Rate of Return (Equity_Post-Tax) % 16.00%
IRR
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Key challenges facing the growth and development of PV in India include:
Cost and T&D Losses: Solar PV is some years away from true cost competitiveness and
from being able to compete on the same scale as other energy generation technologies.
Adding to the cost are T&D losses that at approximately 40 percent make generation through
solar energy sources highly unfeasible. However, the government is supporting R&Dactivities by establishing research centres and funding such initiatives. The government has
tied up with world-renowned universities to bring down the installation cost of solar power
sources and is focusing on upgradation of substations and T&D lines to reduce T&D losses.
Land Scarcity: Per capita land availability is very low in India, and land is a scarce resource.
Dedication of land area near substations for exclusive installation of solar cells might have to
compete with other necessities that require land.
Funding of initiatives like National Solar Mission is a constraint given India's inadequate
financing capabilities. The finance ministry has explicitly raised concerns about funding an
ambitious scheme like NSM.
Manufacturers are mostly focused on export markets that buy Solar PV cells and modules at
higher prices thereby increasing their profits. Many new suppliers have tie-ups with foreign
players in Europe and United States thereby prioritizing export demand. This could result in
reduced supplies for the fast-growing local market.
The lack of closer industry-government cooperation for the technology to achieve scale.
The need for focused, collaborative and goals driven R&D to help India attain technology
leadership in PV.
The need for a better financing infrastructure, models and arrangements to spur the PV
industry and consumption of PV products.
Training and development of human resources to drive industry growth and PV adoption
The need for intra-industry cooperation in expanding the PV supply chain, in technical
information sharing through conferences and workshops, in collaborating with BOS (balance
Challenges Faced by Solar Sector
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of systems) manufacturers and in gathering and publishing accurate market data, trends and
projections
The need to build consumer awareness about the technology, its economics and right usage
Complexity of subsidy structure & involvement of too many agencies like MNRE, IREDA,
SNA, electricity board and electricity regulatory commission makes the development of solar
PV projects difficult.
Land allotment & PPA signing is a long procedure under the Generation Based Incentive
scheme
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The project involves study of Electricity Act 2003, National electricity policy, National tariff
policy and Indian electricity rules 2005, Tariff regulations of CERC.
Financial viability of the project has been checked by calculating the Levelised tariff, profit
& loss, cash flow statement, NPV and IRR.
Levelised tariff (under the given assumptions) comes out to be Rs 7.39/kwh
Project IRR (pre-tax) comes out to be 15.95%Equity IRR (pre-tax) comes out to be 20.37%
The project has an average DSCR ratio of 1.63.
It can be concluded that the development of project is beneficial for both the developer,
considering the DSCR and Project IRR is comparable with other projects. Thus investing in
the project would be beneficial for the lender.
Conclusion
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MIT. (n.d.). PV Tutorial. 19.
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