Report Lahmeyer Intern Abhi

8/20/2019 Report Lahmeyer Intern Abhi

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Development of Financial Model and Bankable Feasibility analysis of 1 MW Rooftop Solar PV Project in India

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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Bibliography

CERC. (n.d.). Retrieved from http://www.cercind.gov.in/

CMU. (n.d.). Retrieved from

http://www.cmu.edu/architecture/udbs/Homewood/Process/design/conceptual-design.html

Eai. (n.d.). Retrieved from eai.in

Enfinity. (n.d.). Retrieved from http://enfinity.ca/

Feedback Infra. (n.d.). Retrieved from http://www.feedinfra.com/archives/5012

Grätzel, M. (n.d.). Retrieved from

http://rsta.royalsocietypublishing.org/content/365/1853/993.full

Investopedia. (n.d.). Retrieved from

http://www.investopedia.com/terms/f/financialmodeling.asp

Ministry, P. (n.d.). Retrieved from www.powermin.nic.in

MIT. (n.d.). PV Tutorial. 19.

MNRE. (n.d.). Retrieved from http://mnre.gov.in/sec/solar-assmnt.htm

Wikipedia. (n.d.). Retrieved from http://en.wikipedia.org/wiki/Solar_panel

Bibliography

Report Lahmeyer Intern Abhi

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