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Financial viability of solar power plant in Tamil Nadu
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Financial viability of solar power plant in Tamil Nadu

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  • 1. Financial viability of Solar power plant in Tamil Nadu Ishan Rohit PGDM Finance 2009-11 IMT Ghaziabad
  • 2. Agenda  Introduction : Solar power  Potential for Solar power  Tamil Nadu as a destination  Capacity Utilization Factor  CERC Initiatives  Elements for cash flows projection  Capital costs – Solar PV  Capital costs – Solar thermal  Assumptions  Results  Future scope
  • 3. Introduction : Solar power Types :  Photovoltaic : Converting solar radiation into direct current electricity using semiconductors that exhibit the photovoltaic effect  Thermal : Solar heat is used to generate electricity by heating water to produce steam which drives a turbine connected to an electrical generator.
  • 4. Potential for solar power  India receives solar energy equivalent to nearly 5,000 trillion kWh/year  600 GW- far more than the country’s total energy consumption today  Solar applications can be broadly divided into grid-connected and off-grid  India receives solar radiation of 4.6 to 6.4 kWh/m²/day for 300 to 330 days in a year
  • 5. Tamil Nadu as a destination  Average annual global solar radiant exposure in Chennai is 5.37 kWh/m2 / day  Tamil Nadu is blessed with conducive natural meteorological and topographical setting.  Some of the experimental units: o 15 KW unit setup by TEDA, o 100 KW unit setup by M/s NEPC o 2x25 KW unit setup by M/s Udaya Semi conductors  TEDA has initiated moves for the establishment of Grid Interactive Solar Photovoltaic Power Plants of 1MW to 10MW capacity in Tamil Nadu under Build Own Operate basis.
  • 6. Capacity Utilization Factor  Ratio of actual energy generated by the Solar PV / Thermal project over the year to the equivalent energy output at its rated capacity over the yearly period.  CERC recommends 19% for solar PV  23% for solar thermal PP in Tamil Nadu.
  • 7. Central Electricity Regulatory Commission Initiatives  Specified capital cost norms  Fixed tariff upfront for the whole tariff period  Tariff period kept as 25 years  In Tamil Nadu :  Levelised tariff for Solar PV = Rs. 17.10 /KWh  Levelised tariff for Solar thermal = Rs. 14.38 /KWh
  • 8. Elements for cash flow projection  Capital Cost  Capacity Utilization Factor  Debt-equity ratio  Levelised tariff  Term of the loan  Interest rate on loan  Interest on working capital  Return on equity  Life of plant and machinery  Depreciation of plant and machinery  Operation and maintenance expenditure
  • 9. Capital costs – Solar PV  Cost of :  Land  Civil and general works  PV modules @ US $2/Watt  Module structures  Power conditioning units  Cables and transformers  Preliminary and pre-operative expenses
  • 10. Capital costs – Solar thermal Cost of : Land Civil and General works Solar collection system ($/m^2) Support structure ($/m^2) Heat collection unit ($/unit) Mirrors ($/m^2) Power block ($/KWe) Thermal storage ($/KWe)
  • 11. Assumptions Photovoltaic Thermal CUF 19% 23% Life of the plant 25 years 25 Project capital cost/MW 16.9 Crores 15.3 Crores Debt Equity ratio 70:30 70:30 Interest on loan 12% 12% Return on equity 19.85% 19.85% Loan repayment period 10 years with 1 yr moratorium 10 years with 1 yr moratorium O & M charges Rs.9.515 Lakhs per MW with 5.72% escalation per annum Rs.13.74 Lakhs per MW with 5.72% escalation per annum
  • 12. Assumptions Photovoltaic Thermal Depreciation 7% for the initial 10 years and 1.33% for the remaining years 7% for the initial 10 years and 1.33% for the remaining years Residual Value 10% 10% Interest on working capital (i)Operation and Maintenance expenses for one month; (ii) Maintenance spares 1% of the O&M expenses, (iii)Receivables equivalent to 1 month of energy charges with 12% interest. (i)Operation and Maintenance expenses for one month; (ii)Maintenance spares @ 15% of the O&M expenses, (iii)Receivables equivalent to 1 month of energy charges with 12% interest. Levelised tariff Rs. 17.10 / kWh Rs. 14.38 / kWh
  • 13. Results 1 MW plant Photovoltaic Thermal NPV 22294370 43603182 IRR 12.93% 15.46% Benefit cost ratio .13 .285 3 MW plant Photovoltaic Thermal NPV 71668402 137809029 IRR 13.07% 15.67% Benefit cost ratio .14 0.3
  • 14. Future scope  Cost of photovoltaic cells expected to decrease to around $1/Watt  Solar PV plant requires lower auxiliary power consumption as compared to Solar Thermal plant  Scalability reduces total project cost/MW for Solar PV as compared to Solar thermal plant  So Solar PV plant may be an attractive proposition in future

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