Solar PV Rooftop Training Entrepreneurship Development SPVRT Business Model

1. Partnership To Advance Clean Energy-Deployment (PACE-D)
Technical Assistance Program
Presented by
USAID PACE-D TA Program
Apr-18
Solar PV Rooftop Training Program For Entrepreneurs
Session:
SPVRT Business Models

2. Contents
Solar PV Rooftop implementation models across the globe
Advantages of SPVRT deployment
SPVRT Business Model design parameters
Key policy and regulatory parameters defining SPVRT
business models

3. Contents
Gross metering and Net metering
Different business models
Key challenges

4. Importance of Business Model Design for SPVRT
A business model
 is a plan, implemented by a company or an organization
 to deliver a value-based proposition (product or a service or a combination of
the two)
 to a customer with the objective of earning revenues and profit
A business model
 formulates and communicates the logic behind the value created and delivered
to consumers
 is a conceptual, rather than financial, model of a business
 Design of appropriate business models assumes significance due to their
relatively high cost of energy generation/high upfront investments

5. Building Blocks for an SPVRT Business Model
Ownership & OperationDownstream Supply Chain
Up-stream
Supply
Chain
Distributor/
Integrator
System
Installer/
EPC
System
Owner
Energy End
User
• System ownership
• Self Owned Systems
• Third Party Owned
Systems
• Revenue Stream
• Feed in Tariffs
• Net Metering/ Self
Consumption

6. Globally, grid-connected solar project development has followed 2 broad routes:
 Utility Driven Solar Project Development: Large MW-scale centralized solar projects
developed to meet renewable purchase obligations (RPO) of the utilities – either
developed by utilities themselves or by third parties for their procurement
 Customer Driven Solar Project Development: Small-scale decentralized projects
developed by electricity consumers on their own premises. Interest fuelled by the
declining cost of solar energy, fiscal incentives like feed in tariffs (FiT’s), net metering
and tax rebates, coupled with the increase in the cost of grid based conventional energy
Several hybrids of the above routes have emerged in specific markets, depending on the
regulations, market opportunities and role of intermediaries
Grid Connected PV Power – Global Scenario

7. Solar Power Program Implementation Models
These business models are strongly
influenced by existing policies and
regulations promulgated in national /
regional markets

8. Solar PV Rooftop Business Models Design
Parameters
Variable
1
 Utility based
 Third party
owned
 Customer owned
Ownership
Structure
Variable
2
 Solar lease
 Sale of power
(FiT’s/Bilateral PPAs)
 Self consumption
(replacing more
expensive power)
Revenue
Structure
Variable
3
 Accelerated
depreciation
 Production income
tax credits
 Low-interest loans
& other fiscal
benefits
Fiscal
Drivers

9. Evolution of Decentralized SPVRT Models
with Time & Ownership
1st Gen
End User Owned
System Supply
2nd Gen
3rd Party Owned &
Operated
3rd Gen
Fully Integrated with
USBM
 Pioneering business model
 Focus on direct ownership by
building / rooftop owners
 End user of energy either user
or utility through FiT
 Institutions limited to financing,
designing, deploying and
maintaining systems
 Utility role limited and passive –
providing net metering, FiT
payments and interconnection
 E.g. Germany, Japan, USA,
WBREDA Pilot in Kolkata
Key Characteristics
 Business model addresses
(through third parties) market
barriers – scale, technical
expertise, optimization
 Third parties install system on
rooftop, earn a lease payment /
tariff for use of energy generated
 Utility role still limited
 Incentives range from variations
in tax rebates to lease
payments, net metering feed in
tariffs, ToU metering, capital
subsidy etc.
 Hybridized business model/s
emerging with greater
variations in ownership, control
and operation
 Utilities are driving these
models to actively become a
part of the value chain and earn
returns
 Power fed into grid – becomes
a part of utilities supply

10. Key Policy & Regulatory Parameters Defining SPVRT
Models

11. Key Incentive Mechanisms Used by Policy Makers &
Regulators
Gross Metering
A framework where all the energy
generated is exported to the grid with
no internal consumption at the rooftop
owners facility
Net Metering
A framework wherein the energy
generated by the rooftop system is
first used internally (by the rooftop
owners facility) and the excess is
exported to the grid only to be netted
against imports at later times
FiT
A Feed in Tariff (FiT) is used to
denote the price paid by a utility for
power under the gross metered
regime
Solar Tariff
This is the tariff paid for excess power
exported to the grid by the Net
Metered consumer under the Net
Metering Regulations in any
jurisdiction

12. Interconnection Options for SPVRT System
ElectricityInternal Grid
Distribution
Utility Grid
Solar PV Rooftop Plant
Captive
Plant
Net
Metering
Gross
Metering

13. Captive Plant – Off Grid & Hybrid
ElectricityInternal Grid
Distribution
Utility Grid
Solar PV Rooftop Plant
Captive
Plant
 Entire generation should be consumed
simultaneously (or)
 Surplus can be stored in Batteries (but
expensive)
 Capability to consume energy immediately or
store energy limits the capacity of solar
rooftop systems
 Consumers without steady daytime load
throughout the year cannot go for captive
plants. E.g., schools, households, offices

14. Grid Connected SPVRT Systems
Internal Grid
Distribution
Utility Grid
Solar PV Rooftop Plant
Net
Metering
Gross
Metering
 Grid connected systems allow surplus to be generated without
storing
 Size of systems is not limited by capacity to consume energy
immediately or store energy
Distribution Utility is a regulated entity. It is important to
understand Regulatory Framework for Grid Connected Systems

15. Net Metering Arrangement
Solar PV Rooftop Plant
Uni-directional Energy Meter
Meter 2:
Solar
electricity
generation
Grid
Meter 1: Bi-directional Net Meter Measuring Electricity Consumption &

16. Working of Net Metering – Case 1
2 KW
1 KW3 KW
Utility Bills for 1 kW Net Consumption to the consumer
16

17. Working of Net Metering – Case 2
5 KW
2 KW3 KW
Utility pays for 2 kW Net Generation by the consumer
17
Allows surplus generation to be consumed at
a later time/ date within settlement period.
E.g.,
 Households can generate during the day
and consume during the night
 Offices can generate on weekends and
consume during weekdays
 Schools can generate during vacations and
consume during working days
Under Net Metering, system size limited by total
consumption of the solar power annually
End users gain from savings on electricity bill

18. Gross Metering Arrangement
Uni-directional Electricity
Solar PV Rooftop Plant
Meter 2: Solar
Electricity
Generation

19. Concept: Gross Metered
5 KW
5 KW
3 KW
Utility pays for 5 kW Gross Generation by the
 Rooftop capacity is not limited by the
consumption of solar generation
 Allows end users with low energy
demand but large roof spaces e.g., large
schools, warehouses, assembly units etc.
to optimally use roof for solar
Distribution Utility pays for the solar generation at
fixed tariff for 25 years

20. Summary of Net & Gross Metering
Net Metering Gross Metering
Solar
Energy
Utilization
 Consumed by the end user.
 Surplus generated (when demand is low) is
banked with the grid
 Banked energy utilized during high demand
periods
 Unutilized banked energy may be compensated
at the end of settlement period
 Entire generation is injected to DISCOM grid
Effect on
end user
 End user saves on their electricity bill for the solar
solar energy generated and consumed
 Increasing end user tariff increases the savings
 Most suitable for high tariff paying consumers
like Industrial and commercial consumers
 Entire energy injected compensated at a
constant feed-in-tariff for 25 years
 No consumption required by rooftop owner
 Most suitable for low tariff paying consumers
like residential consumers
Effect on
DISCOM
 Can be used for meeting solar RPO
 Loses revenue due to reduced sales of electricity
 Increase in tariffs leads to increased adoption of
solar rooftop leading to higher reduction of
revenue
 Can be used for meeting solar RPO
 Cost of energy procurement increases over
the short term
 With increase in cost of conventional power,
DISCOMs can gain over long term
Revenue for the project

21. Sub-models within the SPVRT Segment
21

22. Self Owned Business Models
 Promotes investment in SPVRT systems by end users of solar energy themselves
 Generated electricity is either used onsite or exported to the grid
22
3 Possible
Routes
Net
Metered
Gross
Metered
Captive
(Off Grid
Mode)

23. Self Owned - Captive

24. Self Owned – Net Metering

25. Self Owned – Gross Metering

26. Third Party Owned Business Models
A third party, separate from
consumer (rooftop owner) and
(utility) owns SPVRT systems
to:
Lease rooftops and generate
power, sold back to utility or
rooftop owner through PPA
Lease entire system to rooftop
owner to utilize solar power to
replace utility based supply
Globally and in India, third
party owned models are a
significant market force due
to:
Ability to access lower cost
financing compared to
individual consumers
Greater ability to take on,
understand, and mitigate
technical risks
Aggregate projects and bring
in economies of scale
Effectively avail tax benefits
and make use of government
incentives
Third party owned SPVRT
systems are have been
developed through the
following 2 main routes:
Solar Leases
Solar PPA

27. Third Party Owned Rooftops with Captive Consumption –
No Grid Feed

28. Third Party Owned Rooftops with Combined Rooftop Lease
–
Grid Feed

29. Gandhinagar Case –
3rd Party Owned Combined Lease Gross Fund

30. Gandhinagar Case –
3rd Party Owned Combined Lease Gross Fund (2)

31. Gandhinagar Case –
3rd Party Owned Combined Lease Gross Fund (3)

32. Comparative Assessment of different SPVRT Models

33. Design of Utility Based Business Models
Utility Ownership Customer ProgramsUtility Financing Energy Purchases
Southern California
Edison (250 MW on
Customer Sites)
Western Massachusetts
Electric Company
(6 MW on public and
private high visibility
sites)
Florida Power and Light
(110 MW on Customer
Sites)
APS (special financing/
refinancing to solar
customers)
PSE&G
(Lend capital to end-
users & solar
developers for 40%-
50% of project cost)
We Energies (Offered a
feed-in tariff for 10
years contract)
Ellensburg Municipal
(WA): 136 kW available
with customers for net
metering
Sacramento Municipal
(CA) : 1 MW -
customers purchase
share
Arizona Public Service
(AZ): Utility owned,
customer sited, host
customers receive fixed
price contract, 2 MW

34. Community Owned Business Model
 Community Share Solar Programmes – Consumers can utilize benefits of solar
generation without installing on-site generation; set up by Community-owned
Utilities or Third Parties in partnership with Investor-owned Utilities
 Customers who participate receive proportional benefits through virtual net metering
or fixed price contracts
 These allow Utilities to develop larger programmes while lowering costs
 Key challenge - ensure a compelling value proposition to Consumers
Community Owned Utility Installation
Community Owned
Utility
3rd Party Developer
Investment Returns
Educational
Consumer
Residential
Consumer
Commercial
Consumer
Industrial
Consumer
Community
Service
Consumer
Virtual Net Metering – solar
energy credits at fixed costs
Monthly lease rental or fixed
Cost of solar power

35. Key Challenges (1/2)
 How appealing is the idea of onsite generation from a system management
perspective?
 What are my energy requirements and how do they vary with time (season/day)?
 What is the availability of land and rooftop area with me?
 What is my investment potential?
 What are the challenges of integrating an intermittent source into my system?
 How appealing is the Third-Party Model?
 Am I willing to sign a 25-year PPA / lease agreement/s?
 Why can’t we invest and get all returns for the ourselves?
 What works best where – field deployments v/s static residential / office
requirements?

36. Key Challenges (2/2)
 Interdependency of Contracts and Financial Closure:
 Lease Agreement and PPA
 Implementation:
 Coordination between Statutory Bodies, Regulator, DISCOM, Developer,
Financer, Project Management, Social

37. 37
Anurag Mishra
Senior Clean Energy Specialist
USAID/India
Email: amishra@usaid.gov
Disclaimer:
This training material is made possible by the support of the American
People through the United States Agency for International
Development (USAID). The contents of this material are the sole
responsibility of Nexant, Inc. and do not necessarily reflect the views of
USAID or the United States Government. This material was prepared
under Contract Number AID-386-C-12-00001.