Bidding for power projects so far has been technology-neutral. There is no filter put in terms of the experience of the bidder. One, though, needs to have a strong balance sheet
By Uma Gupta
Friday, January 03 2013: With abundant sunlight 300 days in a year, cost advantage in the production of solar cells and modules, and the impetus provided by the rolling out of Jawaharlal Nehru National Solar Mission (JNNSM) by the central government and followed upon by many state governments, India today has a huge opportunity to become a solar super power. Attractive tariffs being offered by the Central Electricity Regulatory Commission (CERC) for grid-connected solar projects are the prime attraction for setting up solar photovoltaic (PV) farms. Well-defined government policies are in place. Also, one has access to technically proven and commercially viable technologies, well versed suppliers and engineering procurement and construction contractors, and expert consultants.
Many states have identified certain areas for setting up solar power projects. Hot destinations are Rajasthan, Gujarat, Maharashtra, Madhya Pradesh, Andhra Pradesh, Karnataka and Tamil Nadu as far as solar radiation is concerned. Presently, only Rajasthan and Gujarat have a clear policy and guidelines on the procedures for setting up solar power projects. Other states may also initiate the policy and procedures soon now that JNNSM has been launched by the government of India.
Payback period for a solar farm
The payback is dependent upon many finanial parameters like the cost of debt, depreciation, the capacity utilisation factor, which, in turn, is dependent on the solar resource at the site and the technology adopted (c-Si or thin-film solar), tariff, etc. Using standard numbers and assuming the technology used will be crystalline silicon, under the National Solar Mission incentive structure, the payback period for a solar PV power plant is approximately six years. That is, the cash flows will recover the equity capital in six years though the loans could take longer to clear. Return on equity pretax will be about 20 per cent. Project’s internal rate of return is about 15.5 per cent.
Eligibility
“Bidding for power projects so far has been technology-neutral. There is no filterput in terms of the experience of the bidder. One, though, needs to have a strong balance sheet, given the banks are reluctant to fund projects. Putting a technical filter will help getting only the experienced and competent companies to get into the business. The government has increased the project size to 5-50 MW for corporates willing to set up the plant. It’s a welcome step as it will evoke the interest amongst big, independent power companies like Jindal, Adani and Tata Power,” says Semiconductor Equipment and Materials International (SEMI) president Debasish Paul Choudhury.
| Technical requirements for PV modules used in grid solar power plants | |
| PV module qualification. PV modules used in grid solar power projects must qualify to the latest edition of any of the following IEC PV module qualification tests or equivalent BIS standards: 1. Crystalline silicon solar cell modules—IEC 61215 2. Thin-film modules—IEC 61646 3. Concentrator PV modules—IEC 62108 In addition, PV modules must qualify to IEC 61730 for safety qualification testing. For PV modules to be used in a highly corrosive atmosphere throughout their lifetime, they must qualify to IEC 61701. Authorised test centres. PV modules must be tested and approved by one of the IEC authorised test centres. In addition, a PV module qualification test certificate as per IEC standard, issued by Electronics Test & Development Centre (ETDC), Bengaluru or Solar Energy Centre will also be valid. The ministry will review the list of authorised testing laboratories/centres from time to time. Warranty. Mechanical structures, electrical works and overall workmanship of grid solar power plants must be warranted for a minimum of five years. PV modules used in grid solar power plants must be warranted for output wattage, which should not be less than 90 per cent at the end of ten years and 80 per cent at the end of 25 years. Identification and traceability. Each PV module used in any solar power project must use an RF identification tag. The following information must be mentioned in the RFID used on each module (this can be inside or outside the laminate, but must be able to withstand harsh environmental conditions): All grid solar PV power plants must install necessary equipment to continuously measure solar radiation, ambient temperature, wind speed and other weather parameters and simultaneously measure DC power generation as well as AC power generated from the plant. They are required to submit this data to NVVN and Ministry of New and Renewable Energy or any other designated agency on line and/or through a report on regular basis every month for the entire duration of the PPA. Land. The project can be located in a state-designated area (given the advantage of sharing the common infrastructure that is available or will be made available) or a private land, provided the land meets the required criteria for setting up solar power projects. In addition, developers need to do prospecting using geographical information systems covering parameters like annual average solar radiation levels, protected areas like forests, water bodies, land use, highways and proximity to transmission lines. Based on this prospecting, physical survey can be done for site selection. Thereafter, detailed solar resource assessment studies have to be done through satellite data and computer models to obtain the hourly solar radiation data to simulate the estimated generation. This process is a must for megawatts-size power projects (even if a state has selected some area for solar farms) as otherwise the power projects’ generation cannot be assured. If the estimated power generation calculations are not accurate, there could be problems for the project approval by the power purchasers (NVVN) besides problems with bankers for sanction of the loan, or even at post-commissioning stage. About 5 acres of land per MW for solar PV (crystalline) is required. It is assumed at 4-5 acres for crystalline silicon (c-Si) technology and 7-8 acres per MW for thin-film solar (a-Si or CdTe) technology. In reality, it depends on other parameters like the cost of land, ground coverage ratio and choice of sun tracking systems (with sun trackers, the land required is only about 6 acres per MW for crystalline solar modules). To avoid inter-array shading, ground coverage ratio can be 0.45 to 0.65. Power generation will vary based on it. It is preferable to have a plain landscape. If the terrain is uneven, topographical survey is mandatory to take decision as to how the layout is to be done. It is preferable to have a rectangular or square land configuration. Investment. With the present-day prices, the investment hovers around Rs 100-120 million/MWp depending upon the technology chosen. Technology. There are several types of semiconductor technologies currently in use for PV solar panels. Crystalline silicon and thin-film are the most widely adopted. Crystalline silicon. Crystalline silicon panels are constructed by first putting a single slice of silicon through a series of processing steps, creating one solar cell. These cells are then assembled together in multiples to make a solar panel. Crystalline silicon, also called wafer silicon, is the oldest and the most widely used material in commercial solar panels. There are two main types of crystalline silicon panels: Mono-crystalline silicon. Mono-crystalline (also called single-crystal) panels use solar cells that are cut from a piece of silicon grown from a single, uniform crystal. Mono-crystalline panels are among the most efficient, yet most expensive on the market. These require the highest-purity silicon and have the most involved manufacturing process. Multi-crystalline silicon. Multi-crystalline (also called polycrystalline) panels use solar cells that are cut from multifaceted silicon crystals. These are less uniform in appearance than mono-crystalline cells, resembling pieces of shattered glass. They are the most common solar panels on the market, being less expensive than mono-crystalline silicon. They are also less efficient, though the performance gap has begun to close in recent years. Thin-film. Thin-film solar panels are made by placing thin layers of semiconductor material onto various surfaces, usually on glass. The term thin-film refers to the amount of semiconductor material used. It is applied in a thin film to a surface structure, such as a sheet of glass. Contrary to popular belief, most thin-film panels are not flexible. Overall, thin-film solar panels offer the lowest manufacturing costs, and are becoming more prevalent in the industry. There are three main types of thin films used: cadmium telluride (CdTe), amorphous silicon, and copper, indium, gallium, selenide (CIGS). CdTe. CdTe is a semiconductor compound formed from cadmium and tellurium. CdTe solar panels are manufactured on glass. These are the most common type of thin-film solar panel on the market and the most cost-effective to manufacture. CdTe panels perform significantly better in high temperatures and low-light conditions. Amorphous silicon. Amorphous silicon is the non-crystalline form of silicon and was the first thin-film material to yield a commercial product, first used in consumer items such as calculators. It can be deposited in thin layers onto a variety of surfaces and offers lower costs than traditional crystalline silicon, though it is less efficient at converting sunlight into electricity. CIGS. CIGS is a compound semiconductor that can be deposited onto many different materials. It has only recently become available for small commercial applications, and is considered a developing PV technology. |
Under NTPC’s Vidyut Vyapar Nigam Ltd (NVVN) scheme, there has to be a minimum capital investment of about Rs 750 million, at least 30 per cent of which has to come from the promoters’ equity contribution. Thus most small entrepreneurs will not be able to take part in this scheme. However, outside of NVVN scheme, it is possible for the small entrepreneurs to get incentivised for putting up under-5MW solar PV power plants through generation-based incentives provided by Ministry of New and Renewable Energy.
How to go about?
“Upfront requirement for investment into a solar grid plant is possession of land suited for solar application, clear power purchase agreement with the local or state electrical authority and required finance,” informs K. Subramanya, chief executive officer, Tata BP Solar.
The key building blocks of a grid-connected solar power plant include solar module (the power generating device), solar inverters (which convert the power produced into AC power) and power evacuation (which steps up the voltage to the specified kilovoltlevel and injects into the grid). Power evacuation structure is mostly a state power utility subject and requires minimal investment.
| Why it makes sense | |
| 1. Annual solar radiation in India is 5.2-6.5 kWh/m2/day, and thus there is an abundant stock to trap 2. Ample land available for solar parks 3. Availability of government policies both at the national level (Jawaharlal Nehru National Solar Mission) and state level (Solar Power Policy in Gujarat, Karnataka and Rajasthan) 4. Attractive tariff rates, in the range of Rs 11-18 per kWh 5. Financial assistance from financial institutions and banks 6. Reduced customs duty followed by exempted excise duty on solar PV panels 7. Carbon credit benefits 8. Payback period of six to eight years 9. Project life of 25 years —Deepak Zade, senior vice president (energy and carbon services), |
“The project investor should choose the right engineering, procurement and construction (EPC) contractor who can skillfully design the solar power plant, supply the required components and also execute the project with good workmanship—ensuring useful life of 25 years, and undertaking operation and maintenance for at least 10 to 12 years if not 25 years,” says Subramanya.
“Solar module is the key building block, both technically (as it solely contributes to the energy production of the plant) and commercially (as it constitutes over 70 per cent of the project cost). So if the EPC contractor is an established solar panel manufacturer in the country with a good financial track record and credibility that suggests dependability over next 25 years, considerable de-risking is done from the point of view of the investor in terms of securing the returns,” he adds.
S.R.C. Sathyanarayan, head-PV power plants, TÜV Rheinland, lists out the financial, technical and other requirements as below:
Financial criteria. The net worth of the company should be equal to or greater than the value calculated at the rate of Rs 30 million or equivalent US$ per MW of the project capacity up to 20 MW. For every MW additional capacity, beyond 20 MW, additional net worth of Rs 20 million needs to be demonstrated. The net worth is computed on the basis of unconsolidated audited annual accounts of the company.
The company is required to submit annual audited accounts for the last four financial years (or starting from the year of incorporation if the period of existence of the company is less than four years), indicating the year which should be considered for evaluation, along with a net worth certificate fro a chartered accountant to demonstrate fulfillment of the criteria. However, fo new as well as existing companies, the net worth criteria can also be met as on date not more than seven days prior to the date of submission of request for selection (RfS) by the company.
For the purpose of meeting finacial requirements, only unconsolidated audited annual accounts of the company are used. However, consolidated accounts may be used provided the project developer has at least 26 per cent equity in each company whose accounts are merged in the audited consolidated account and the finanial capability of these companies is not considered again for the purpose of evaluation of the bid.
Technical criteria. Under Phase I of the JNNSM, it is proposed to promote only commercially established and operational technologies to minimise the technology risk and to achieve the commissioning of the projects. The detailed technical parameters for solar PV projects are shown in the box.
Connectivity with the grid. The plant should be designed for interconnection with the transmission network of the state transmission utility, central transmission utility or any other transmission utility at a voltage level of 33 kV or above. The project developer should indicate to the transmission-licencee the location (tehsil, village and district, as applicable) of the proposed project. In this regard, he needs to submit a letter from the transmission utility along with RfS confirming technical feasibility of the connectivity of the plant to the substation.
The responsibility of getting connectivity and open access to the transmission system owned by the transmission utility, as may be required, lies with the project developer. The transmission of power up to the point of interconnection where the metering is done is the responsibility of the solar power developer at his own cost. Interconnection with the Discom network may be accepted in exceptional cases where the Discom is the ultimate buyer of the entire quantity of power from that project; and NVVN has signed power sale agreement with that Discom and the Discom agrees to an agreed interconnection point and at an agreed voltage. This arrangement is subject to the arrangement of energy accounting with the state load dispatch centre.
The arrangement of connectivity can be made by the solar power developer through a dedicated transmission line which he may construct himself or get constructed by the state transmission utility, Discom or any other agency. The entire cost of transmission including the cost of construction of line, wheeling charges, losses, etc from the project up to the interconnection point are to be borne by the project developer and not reimbursed by NVVN or met by the state transmission utility or Discom. This connectivity can also be achieved through a shared line with any agency or any existing line of Discom or state transmission utility, provided the energy accounts are bifurcated and clearly demarcated for the power generated at the solar project and are issued by the state transmission utility or state load dispatch centre concerned.
| Requirements in a nutshell | |
| 1. Sound financial status of the Investor 2. Land suited for solar application (4 to 5 acres per MW) 3. Power purchase agreement (PPA) with the local/state electrical authority 4. Selection of technically proven and commercially viable technologies 5. Compliance with all formalities 6. Close supervision of project implementation and maintenance |
The project developer may, however, shift the interconnection point closer to his project if 33kV substation comes closer to the project during the tenure of the PPA, provided that: (a) the interconnection is maintained at 33 kV or above and energy at the solar project is clearly demarcated for the power generated at the solar project and (b) energy accounts are issued by the state transmission utility or state load dispatch centre concerned. The costs associated with this arrangement, including the wheeling charges and losses up to the interconnect point, are also to be borne by the project developer.
Domestic content. One of the important objectives of the National Solar Mission is to promote domestic manufacturing. In view of this, the developers are expected to procure their project components from domestic manufacturers as much as possible. However, in the case of solar PV projects selected in the first batch during FY 2010-11, it was mandatory for projects based on crystalline silicon technology to use only the modules manufactured in India.
For solar PV projects to be selected in the second batch during FY 2011-12 too, it will be mandatory for all the projects to use cells and modules manufactured in India. PV modules made from thin-film technologies or concentrator PV cells may be sourced from any country, provided the technical qualification criterion is fully met.
Key to success
Effective planning, management and execution are the keys to success. Getting the project financed at a reasonable rate of 3-4 per cent is another step towards the project’s success.
The author is an executive editor at EFY
