How to maximise returns on Rooftop Solar Power Plants?

The government of India has set up an ambitious target of 40,000 MW of rooftop solar by 2022. This has resulted into a US$ 30 billion opportunity for installation and commissioning of rooftop solar power plants. Over last 2 years several entrepreneurs have got into this field and are offering their services in solar EPC, project financing, operations and maintenance of these plants. With the capacity of 40 GW by 2022, the rooftop O&M industry alone will offer an additional business of Rs. 2000 Crores every year for maintaining these rooftop solar power plants.

This has led to a huge competition that has engaged in a price war to get the share of the pie. However, the consumers need to be aware that due to this unruly competition the quality of power plants might be compromised and the developer might end up offering a substandard solar power plant. This will have an adverse impact on the future of the solar industry, and the customers’ confidence in long-term viability of the plant might be hampered.

So what drives the economics of these solar power plants? We should understand that improving the quality and efficiency of solar power plants will drive the future of solar business and make this 40 GW dream a reality. The concept of “Levelized Cost of Energy (LCOE)” over the life of the project needs to be understood to know the difference between a good quality and a bad quality solar power plant. LCOE is Rupees invested per KWh of energy generated over the life of the project. The lower the LCOE, the better are the return on investments. Low initial investment does not necessarily mean the best LCOE as there are various other parameters that determine it. We need to take the lifetime generation of solar power plants along with the associated costs (capital costs, O&M costs, interest costs, replacement costs, regulatory costs) to determine the LCOE.

We will discuss the concept of improving LCOE with two case studies one under RESCO (OPEX) model at MIT Group of Institutions, Pune and 750 KW project under CAPEX model at Institute of Chemical Technology (ICT, former UDCT), Mumbai. In both the above cases, we ensured that the quality of the plant is not compromised so that we get the best possible generation over the life of the project. To ensure maximum generation, we made sure that all the bidders follow the same technical specifications mandated by us so that the comparison between bids are made on the best quality parameters. Technology selection was the key criteria to ensure that both these organizations work with most reliable technical partners for the term of the project. Our analysis show that higher investment cost with better generation over 25 years brings down LCOE drastically as compared to lower initial costs and poor generation over life of the project. Similarly, a lower solar tariff from one bidder under Power Purchase Agreement (PPA) did not offer more guaranteed savings compared to higher solar tariff at MIT due to a huge difference in generation guarantees.

Selecting the right technology is the key to reduce LCOE. As solar modules account for more than 50% of the project cost, failure of solar modules is detrimental to the economics of the project. We have seen cases in field where solar output has reduced by more than 30% in first three years due to improper selection of solar modules. We insisted various test procedures to be carried out on modules for true linear output over the life of the project. Understanding the module procurement process of various bidders was the key to ensure minimum degradation and maximum generation over the project life. Make of inverter and its field performance was checked as we have found out that make of inverters is compromised to reduce cost of the project. In many cases a cheaper make of inverter has resulted into 10-12% loss in generation. Shadow analysis report of each bidder was checked to see whether the estimated capacity was rightly designed or just done to show maximum savings to management. We also visited the plants installed by various bidders to check the quality of installation and verify whether the bidder was able to demonstrate the guaranteed generation at similar locations.

Care needs to be taken to ensure that during power cuts the system should be properly synchronized with the DG set. For the DG set to work optimally, a smart controller is needed that allows the DG Set to work at its spinning reserve and ensure that the solar output varies as per the load requirements. The controller should also ensure that in case of low loads, the reverse flow of current from solar power system does not trip the DG set. Proper management of solar power will also contribute towards improving LCOE. We compared various controllers in market and recommended the two best controllers that meet the above requirements to be incorporated in the standard bill of supply.

Cleaning of solar modules and scheduled Operations & Maintenance (O&M) to reduce breakdown will improve the generation of solar power plants. Thus, O&M needs to be taken into consideration before arriving at LCOE, as it will have an impact on generation and the overall cost of the project. The operations and O&M cost over the life of the project is difficult to determine as the future cost of labor and water are unknown. However, the EPC partner should be ready to work out on providing PR based generation guarantees and the associated O&M costs to maintain the PR guarantee. The cost of labor and water should be worked as per the market conditions at that particular time. It is advisable to work with an EPC partner who is ready to take the O&M for the life of the project and commit to the PR based generation guarantees.

Furthermore, load analysis becomes an important part to maximize savings as the solar power system needs to be designed after considering the annual load pattern. The system should be designed in a manner in which there is no wastage of electricity and all the generated energy gets consumed by the load. Unfortunately, due to unavailability of consumption data or due to lack of analytical skills of the EPC players, the load analysis is often a neglected area in the solar design process. We have seen cases where the project viability has suffered and savings have been reduced due to improper load analysis. Both MIT and ICT being educational institutes have low load days due to holidays. A substantial investment of time in load analysis helped us to understand the consumption pattern during holidays and helped us design a system that took care of the annual load with minimum wastage of generated energy.

As a takeaway from our experiences , in order to get the best return on investment over the life of the project, generation should be optimized as much as possible. A reliable EPC partner with a good technical understanding of the solar power system will help you to improve LCOE. Also, safety measures should not be compromised to improve LCOE. While selecting technical partners, one should understand low initial cost does not necessarily offer highest return over the life of the project.