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How much beneficial are tracker-equipped solar PV projects?

Analyst Note | 12 July 2012
How beneficial are solar PV
How much beneficial are tracker-equipped solar PV projects?


Comparison of Performance of Six Solar PV Projects
How much beneficial are tracker-equipped solar PV projects?
Can surplus power be sold in the open market?

The average cap...
How much beneficial are tracker-equipped solar PV projects?
Draft CERC (Terms and Conditions for Tariff determ...
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  1. 1. How much beneficial are tracker-equipped solar PV projects? Analyst Note | 12 July 2012 How beneficial are solar PV projects equipped with tracking equipped over conventional solar PV projects? CONTENTS • Introduction • Additional Revenue Generation • Case Study: 5 MW solar PV project by Reliance Industries • Surplus Power Generation • Carbon Revenue • Additional Capital Cost • Conclusion - Payback period Are the additional capital expenditure, operation and maintenance costs related to tracking equipment justified by the increased power generation? Solar power project developers in India face these questions as they grapple with issues like falling feed-in tariffs and credit supply crunch from the lenders. This analyst note attempts to analyze the additional benefits of projects equipped with single-axis trackers and compares them to the added investment. INTRODUCTION METHODOLOGY With increasing competition and significant fall in feed-in tariffs of solar PV projects, developers under constant pressure to secure investment for their projects and, eventually, earn substantial profits from the power projects. Due to the evolution in the solar PV technology the solar tracking equipment have emerged as a viable option to increase power generation at combatively low capital investment while earning significantly more revenue than projects without any tracking equipment (conventional solar PV projects). For comparison between conventional and single-axis tracker equipped PV projects, parameters determined by the CERC and the expected operational parameters assessed by the seven subsidiaries of Lanco Infratech Limited for their respective power plants have been utilized. The actual on-field operational parameters and final output may vary from the values determined in this note. Additionally, sector experts expect the actual benefits about 30% lower than benefits expected under ideal operating conditions. At the end May 2012, India had an installed solar PV power generation capacity of over 970 MW and almost none of these projects use any tracking equipment. The operational parameters for these seven projects have been accessed through publicly available documents furnished by these companies. According to the draft regulations released by the Central Electricity Regulatory Commission (CERC) for determination of preferential tariffs for renewable energy technologies till FY2016-17, the plant load factor (PLF) of conventional solar PV technology has been taken as 19%. Comparison of capital cost, operation and maintenance cost is based on the parameters announced by CERC, for conventional project, and the higher limit of average industry parameters for single-axis tracker equipped projects. A solar PV project using single-axis tracking equipment similar to that being used in Lanco Infratech’s projects could earn 34.3 percent additional revenue compared to a project using conventional solar PV technology over 25 years through the sale of electricity The PLF of a project equipped with single-axis tracking equipment, one of the simplest tracking technologies available, is around 23-25%. Seven project using this technology have been set up subsidiaries of Lanco Infratech Limited. This note will compare the benefits and added costs between a conventional solar PV project and a project equipped with single-axis tracking technology, similar to the one used in the projects by Lanco Infratech’s subsidiaries. Solar PV projects by Lanco Infratech subsidiaries allocated under JNNSM Phase I (Batch I) Tariff Bids (Rs/kWh) Claimed Annual Generation (MWh) Plant Load Factor (%) Finehope Allied Energy 11.65 11,803 26.95 Saidham Overseas 11.75 11,797 26.93 Vasvi Solar Power 11.65 11,788 26.91 Khaya Solar Projects 11.50 11,790 26.92 Electromech Maritech 11.60 10,346 23.62 DDE Renewable Energy 11.55 10,239 23.58 Newton Solar 11.70 10,395 23.78 Developer Source: Climate Connect TERMINAL © Climate Connect Limited, 2012 1 London | New Delhi | San Francisco
  2. 2. How much beneficial are tracker-equipped solar PV projects? ANALYSIS Comparison of Performance of Six Solar PV Projects Assessed by Ministry of New & Renewable Energy A 5 MW conventional solar PV project with an assumed average PLF of 19% would generate 8.32 million kWh every year. Over a period of 25 years such a project is likely to generate about 194.66 million kWh or 7.78 million kWh every year on average (assuming degradation in power generated at 0.7% for the first year and 0.5% from second year onwards). The average preferential tariff of the seven projects owned by Lanco’s subsidiaries is Rs 11.63 per kWh. A PV project based on conventional solar PV technology would thus generate revenue of Rs 226.4 crore over 25 years or Rs 9.05 crore every year on average through sales of electricity only. The Ministry of New & Renewable Energy had assessed the operation of six solar PV projects. These six projects are among the very first solar PV projects to be commissioned in India. These projects are owned by Moser Baer, West Bengal Green Energy Development Corporation, Azure Power, Maharashtra Power Generation Corporation, Sri Power and Reliance Industries. Some of these projects were later included in the Phase I Jawaharlal Nehru National Solar Mission through the migration policy. Based on the data available for these seven projects, a 5 MW solar PV project based on single-axis tracking equipment similar to the one being used in these projects will have an average PLF of 25.52%. Such a project is likely to generate over 216.4 million kWh over a period of 25 years or over 10.4 million kWh every year on average. A PV project based on single-axis tracking equipment similar to the one being used in these seven projects would thus generate revenue of over Rs 304 crore over 25 years or Rs 12.16 crore every year on average through sales of electricity only. Thus a trackingbased project would generate 21.74 million kWh additional electricity over 25 years and earn 34.2% more revenue than a conventional PV project. Reliance Industries Limited has installed a 5 MW solar PV project at Khimsar, Rajasthan. The project is one-of-a-kind in India as it uses five different solar PV technologies. The project uses fixed structure modules, dual-axis tracking modules, single-axis tracking modules and concentrated solar PV modules. The project uses mono-crystalline, multicrystalline and thin-film solar modules. According to the data released by MNRE, the RIL project generated over 7.47 million kWh between July 2010 and June 2011. The data released also states that the annual average PLF of the project during this period was 18.08% which was 18.1% to 34.6% higher than the average PLF of three other projects for which data was available. The highest PLF in any month for the project by RIL was 23.63% which was highest among six projects. Policy & Options for Sale of Surplus Power A project using tracking equipment would be able to generate more power compared to a project based on conventional PV technology and can thus sell any surplus power through other schemes. A number of states in their solar power policies have specified that the entities which will procure power from the solar PV projects shall purchase electricity up to a set maximum limit. Thus solar PV projects which generate more electricity than the stipulated limit shall have surplus electricity. A project with PLF of 25.52% (average PLF of the seven projects owned by Lanco Infratech’s subsidiaries) would be able to generate over 2.82 million kWh every year more than a project with PLF of 19%. The recent reverse-auction of 25 MW solar PV project in Orissa had such a clause. The project was aimed at fulfillment of the solar Renewable Purchase Obligation (RPO) and according to the regulations, the Orissa distribution company had to purchase a set maximum power generated from the project which was calculated at a PLF of 19%. A project developer would have several options to use or sell this additional power. The developer may utilize this surplus power for captive use, sell power to a third-party consumer/distribution company/power exchange and earn Renewable Energy Certificates (RECs) as well. The power generation capacity of projects equipped with singleaxis tracking technology is about a third more than the conventional solar PV projects. While the capital cost of projects with tracking systems is comparatively higher than the conventional solar PV projects, the power output is substantially higher. © Climate Connect Limited, 2012 The project developer would be able to sell surplus power at Rs 3.6 per kWh (average power trading price in CY2011 at Indian Energy Exchange). 2 London | New Delhi | San Francisco
  3. 3. How much beneficial are tracker-equipped solar PV projects? Can surplus power be sold in the open market? The average capital cost of conventional solar PV projects is Rs 10 crore (US$ 1.83 million) per MW. Due to the simple technical and mechanical requirement for single-axis tracking projects, the additional capital cost is Rs 1.38 crore (US$ 0.25 million) per MW. Since a single motor can control the movement of several hundred modules, the operation and maintenance (O&M) cost of tracking equipment is only 10 percent of the total O&M cost of the entire project. If the project developers are able to sell the surplus power through third-party or power exchange route, they would be able to generate significant additional revenue. Sale of power in the open market also opens up the possibility to avail benefits under the Renewable Energy Certificate (REC) scheme. However, no clear regulatory guidelines for such power sale arrangement is currently in place. Cost comparison (in Rs crore) of conventional & single-axis tracking project and share of cost of tracking equipment in entire project cost According to the Renewable Energy Certificate (REC) Regulations, any power generation capacity committed to a power purchase agreement at preferential tariff is not be eligible under the REC scheme. Some captive power projects from Uttar Pradesh registered under the REC scheme are facing similar regulatory issues. A final decision on this issue would possibly remove some regulatory hurdles for solar power projects looking to take advantage of multiple revenue sources. O&M Cost (25 Years) @ Rs 11.35/kWh Rs 32 crore/year Carbon Revenue These seven projects owned by Lanco Infratech subsidiaries are currently at the validation stage of the Clean Development Mechanism (CDM). If these projects are registered by 31 December 2012, the CERs generated would be eligible for trading in the EU ETS. These projects may also be eligible to sell carbon offset instruments in the Australian carbon market from July 2015. 6.38 10% • Increased power generation • Surplus power generated may be used bring in additional revenues • Increased investor confidence • Increased power generation per unit area of land, less land area is thus required compared to a conventional project of equal capacity A solar PV project with single-axis tracking and having an average PLF of 25.5 percent would be able to generate about 10,052 CERs, based on the India’s emissions intensity for FY2011-12. At a CER price of €4 per tonne, the project can earn over Rs 27 lakh (US $50,270) every year. If the project developers are able to sell the CERs in the Australian market they could earn even higher revenues as the Australian emissions trading scheme, to launch in 2015, will have a floor price of A$15 to A$17.05 per tonne till June 2018. Comparison in net profit (in Rs crore) from 1 MW conventional PV and tracker-equipped PV project over 25 years through sale of electricity* Conventional PV Tracker-equipped PV# Total Cost 15.80 17. 76 Revenue 45.28 60.82 Profit 29.48 43.06 Parameter Additional Capital Cost Tracker-equipped projects earn 46% more revenue than conventional PV projects The additional capital cost of single-axis tracking equipment represents only about 12 percent the total capital cost of the entire power plant. A solar panel array comprising of several modules is connected with a single driving mechanism which is controlled by a single AC motor of considerably low rating. This enables the motion of up to 250 kW of solar modules at the same time and using a single motor. *Electricity sale assumed at Rs 11.63/kWh # Rs 41.87 crore/year additional revenue from sale of power & RECs between FY2013 and FY2017 Comparison of payback periods for various PLF, loan interest rates Interest Rate PLF 19% PLF 23.5% PLF 25.5% 5% 4.15 years 3 years 2 years 13% The rotational motion of the AC motor is converted into very slow linear motion by the driving mechanism which includes the screw jack. © Climate Connect Limited, 2012 13.8 Clearly, the advantages of having tracking equipment in a solar power project overwhelmingly mitigate the additional capital and O&M costs. The Indian solar sector has ballooned from about 20 MW to almost 1,000 MW within a couple of years. The number of companies looking to enter the solar power sector have also increased tremendously resulting in steep fall in the feed-in tariffs. Project developers should take advantage of the rapid evolution in the solar power generation technology as it has technical and commercial advantages, some of which are listed below: Additional power every year = 2.82 million kWh Rs 9.87 crore/year 11.38 CONCLUSION REC Sale Revenue @ Rs 3.5/kWh Increased Cost of Tracker 5.80 Capital Cost Single-axis Tracking Project 10 Parameter Expected revenue generation from sale of surplus power and sale of solar renewable energy certificates (RECs) between FY2013 & FY2017 Power Sale Revenue Conventional Project 7.5 years 4.5 years 3.5 years 3 London | New Delhi | San Francisco
  4. 4. How much beneficial are tracker-equipped solar PV projects? References: Draft CERC (Terms and Conditions for Tariff determination from Renewable Energy Sources) Regulations, 2012. Central Electricity Regulatory Commission. 11 November 2011, New Delhi Achievement till 31 May 2012, Ministry of New & Renewable Energy, Government of India, last accessed on 04 July 2012 Database of Indian solar power projects, Climate Connect TERMINAL, Climate Connect Limited, last accessed on 04 July 2012 http:// Reliance Industries Limited 2011, ‘An overview & performance analysis of 5 MWp solar PV plant at Khimsar, Rajasthan’, Powerpoint presentation. Utility Scale Solar Power Plants – A guide for developers and investors, International Finance Corporation Shingleton, J., 2008. One-Axis Trackers – Improved Reliability, Durability, Performance, and Cost Reduction. National Renewable Energy Laboratory (NREL). New York, February 2008 Disclaimer Climate Connect Ltd has taken due care and caution in compilation and reporting of data as has been obtained from various sources including which it considers reliable and first hand. However, Climate Connect Ltd does not guarantee the accuracy, adequacy or completeness of any information and it not responsible for errors or omissions or for the results obtained from the use of such information and especially states that it has no financial liability whatsoever to the users of this report. This research and information does not constitute recommendation or advice for trading or investment purposes and therefore Climate Connect Ltd will not be liable for any loss accrued as a result of a trading/investment activity that is undertaken on the basis of information contained in this report. Climate Connect Ltd does not consider itself to undertake Regulated Activities as defined in Section 22 of the Financial Services and Markets Act 2000 and it is not registered with the Financial Services Authority of the UK. Climate Connect TERMINAL India’s largest database of solar power projects Featuring extensive information of over 300 solar projects Search across various parameters – Policy, PPA signed with, Location, Capacity, Developer, Technology © Climate Connect Limited, 2012 For demo or subscription contact: Call: +91 11 4505 6713 4 London | New Delhi | San Francisco