Commercial Viability of Solar Power Projects

Abstract

I ,Rhiva Singh, as part of my Summer Internship Program in India completed the research with Indian Renewable Energy Development Agency, Govt of India, at Indian habitat centre, New Delhi , India for duration of 10 weeks. IREDA is a public limited government agency, under the administrative control of Ministry of New and Renewable Energy to promote, develop and extend renewable energy and energy efficiency conservation projects. The assigned project was titled, ‘Commercial Viability of Solar Power Projects’, with the Objective to determine the financial viability of Solar Photovoltaic projects from lenders point of view with the help of project value indicators like net present value, internal rate of return, project payback and debt service coverage ratio and also evaluate the current system of fund allocation in solar photovoltaic industry across the states of India. With the abundant source of solar energy in India, the 11th renewable energy five year plan by the government estimates the solar energy market to reach$ 2.5 billion in 2012. Recognizing the same the Jawahar Lal Nehru National Solar Mission has been introduced targeting 1,100 MW of solar power by 2013. The methodology used to calculate the financial and commercial viability was the System Advisory Model (SAM), which makes performance predictions and cost of energy estimates for grid connected projects based on installation and operating cost and system design parameters which we define as inputs. With a comprehensive study and calculations on commercial viability of 57 locations in India, a disappointing conclusion was observed the more than 70% of the concentration of projects was in state of Rajasthan with huge negligence to the western and central India which are equally viable. With justified reasons of lower operations and management cost were given, negligence of other states cannot be ignored. The recommendation made on my behalf was to replace the current system of reverse bidding mechanism in which the lowest bidder gets the project leaving no opportunity of others, with a differential tariff approach. A table was derived from research on system advisory model which provides the power purchase price of various locations with respect to state of Rajasthan keeping the internal rate of return fixed. The objective was to determine the prices of both viable and non viable zones with respect to Rajasthan suggesting participation of Punjab and Madhya Pradesh. The objective of the recommendation was to throw light upon the concentration of National Solar Mission in few states of India, whereas every state deserves the benefit of the abundant and lucrative solar energy. Also adding a social objective of development and employment, which if quantified can be added to improve the rate of return. With further corrections and improving the above methods, the reach of the Solar Mission can be extended to all states vindicating the word ‘national’ in Jawahar lal Nehru National Solar Mission.