Solar Rooftop Plants: A viable business opportunity

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For organisations that plan to shift from the use of conventional energy to solar power, a rooftop solar PV power plant is not only a saving factor but can also generate money by supplying excess power to the utilities (into the grid). While the Ministry of New and Renewable Energy (MNRE) is still in the process of laying down specifications for incentives, experts feel that with the right policies and the right execution, solar rooftop installations can be the hot green technology trend of the future, as this concept holds profitable business prospects, and hence, is a good viable investment option.

By Richa Chakravarty

Monday, Decemeber 12, 2011: When solar photovoltaic (PV) modules are installed on rooftops of buildings to generate solar power, it is called rooftop power plants. Rooftop PV installations fall under two categories—for standalone use and to feed into the grid.

Installation and its requirements

Some of the factors to consider before installing a solar power plant on the rooftop of your building include the electrical load, current rate, roof size, load capacity and the geographic location of the building. The subsidy given by the Central and state governments, local utility, and local community regulations and incentives are also key determinants in evaluation.

Rooftop solar arrays are best installed on a large, flat roof where direct sunlight is available without shadows from the surrounding structures. If there is shadow on a part of the terrace during the day, PV solar panels will not be able to harvest the sun’s energy for that period of time. Let’s look at the key considerations in evaluating solar rooftop options.

It is important to have a basic understanding of the components of a solar power system and how it generates electricity. PV solar power systems are very simple electric power generating plants comprising the following basic component systems:

  • A set of PV panels that transform sunlight (photons) into DC electricity
  • A racking system that firmly holds the panels to the roof, and exposes the panels to the sun at an advantageous angle
  • Inverters that transform DC electricity into AC electricity
  • Wiring that connects everything
  • A storage battery (in the case of a grid-fed power plant, a large sized battery is not necessary to store and use that power after sunset)
  • A variety of means to tilt the panels toward the sun to generate more electricity
  • Energy meters to record the energy that is supplied to the grid
  • Junction boxes
  • Earthing kits
PS Deodhar, former chairman, Electronics Commission, Government of India

Currently, commercially available silicon based solar panels (called PV solar panels) are made from solar cells encased in a special type of toughened glass. Silicon solar modules have been in the field for more than 50 years and perform quite predictably. These are guaranteed for 25 years of field life but the power yield drops about 0.6 per cent per year. One can use monocrystalline (made from a single crystal) or polycrystalline (made from multiple crystals) panels. Monocrystalline panels are a little more efficient but the cost per watt is almost the same.

Copper indium gallium diselenide (CIGS) panels may become the preferred type for commercial rooftop projects in another five years. These have the potential to deliver reasonable efficiencies at a lower cost than traditional crystalline panels. However, the cost per watt may not necessarily go down, only the panel size per watt will drop. Today, solar panels (depending on the brand) are bankable, that is, banks will loan businesses the capital for their purchases.

The energy, thus generated, can be used both for captive consumption of the power or to be exported to the grid. The electrical energy or the solar power generated by the solar PV modules (DC) is fed into a solar inverter, which converts it into AC. The energy is then stored in the batteries during the sunshine hours, which can be utilised as and when required. The energy stored into the batteries is then converted to mains compatible energy, using inverters. This energy automatically synchronises with the grid and injects power into it.

Installation by integrators

K Subramanya, CEO, Tata BP Solar India Ltd

Many solar system installers and owners have had good experiences while anchoring the panel structures. This has to be done scientifically and with care. It is possible to have non-anchored installation systems but these need to be very carefully designed to withstand heavy winds. Such systems are designed to connect the solar power system to a roof using weights, rather than fasteners that must be anchored in the roof. Solar installation companies, often called integrators, can complete a small rooftop project within a few weeks. Before signing a contract with an integrator, do consider the following issues.

Roof condition: If you have an old roof that needs significant maintenance or replacement, you may want to complete that task first before installing the solar array.

Space availability: Solar power projects work best on flat roofs without obstructions.

Weight load: Some roofs are not designed to hold much additional weight. Ascertain the acceptable weight you can add to your roof before signing a contract.

Investments involved

Rajesh Jain, assistant general manager, Central Electronics Ltd

Of all the components, the solar module accounts for the biggest cost, which can be 70 per cent of the total project cost. Cost per watt is currently about Rs 130-150 ex-factory. The investment primarily depends upon the size of the power plants, which varies from a small kilowatt plant to multi-megawatt plants. At present, good quality off-grid rooftop solar power plants can be installed at a cost of Rs 0.25 million per kW.

Under the National Solar Misssion policy, the benchmark price for an off grid system is Rs 0.27 lakh million per watt and in case of a grid connected system, it is Rs 0.19 million watt peak. The government also provides a 30 per cent subsidy on the benchmark price. Installation costs would differ in case of remote installations and bad site conditions.

Economic advantages

Many would not know that the total investment in a small power plant, for example, 100 x 50 kW, will be the same, if not less, than in a large 5 MW plant. Therefore, it is viable to go for small grid-fed or standalone plants. A buying rate of Rs 17 or 18 per unit of electricity from such plants will attract thousands of small investors like a magnet. In most areas in India, solar power can then be a fiscally sound investment that reduces electricity payments immediately, as well as acting as a hedge against local utility price increases.

If solar power is fed into a small city grid like Miraj, Ratnagiri or Ratlam, all consumers in that area will get cleaner uninterrupted power from the local copper grid. The high impedance of the local grid helps power to remain local and, thus, instantly helps improve local power quality. That’s why all other countries in the world allow solar plant owners to feed power into the local grid at the low voltage end.

It, therefore, makes sense to invest in a solar rooftop plant at a place that has a severe power shortage or no power at all. Today, the cost of generating power using diesel generation (DG) sets is in the range of Rs 20-22 per unit, whereas the cost of generating power using sunlight is between Rs 13-15 per unit. Based on the current prices and assuming that one takes advantage of the 80 per cent depreciation permitted on such investments, in the first year, the cost of power per unit, kWh, from a well maintained solar plant will be less than Rs 8 per watt for a plant of any capacity between 5 kW and 1 MW.

Thus, a solar rooftop installation is a good investment option if both tangible and intangible benefits are considered. The government is also encouraging the use of rooftop power plants as a substitute for DG sets that are consuming fossil fuels and polluting the environment. Most commercial buildings are dependent on diesel generators owing to power cuts or an unreliable grid supply. Investing in a solar power plant on the rooftop can offset diesel consumption and make the returns attractive. Added to this, the 30 per cent CFA (capital subsidy) would encourage investors since it ensures a faster return. With a rooftop installation, one can recover the projects’ costs within 5-6 years, while it also has to be noted that a solar power plant has a typical life of 25 years with proper maintenance. Hence, it is a viable investment option.

The return on investment completely depends on the power purchase agreement (PPA) entered into by the project proponent. While earlier, the buying rate for power was Rs 17 per unit, today companies are ready to sell it at Rs 11 per unit, thus making only a marginal profit. Considering the current trend, the buying power can be estimated anywhere between Rs 13-14, so one can expect to earn a ROI in 6-7 years.

More benefits for commercial units

Commercial establishments will benefit more from this system as compared to installations at a residential complex. This is because business houses can utilise the power in the day during peak hours of work, thus saving the money required to set up battery banks. If these battery banks are already installed, they can be used during the night when energy consumption is the least (may be 10 per cent as compared to the day).

Moreover, for small business establishments or small and medium enterprises (SMEs), a rooftop installation for grid connection is far more profitable than installing multi-megawatt plants, for which it is necessary to install six to eight transformers, which are 98 per cent efficient. Thus, while generating costly solar power, 12-16 per cent of energy is lost due to the inefficiency of these transformers. Thus, it is profitable to install smaller power plants where 100 per cent power is generated, which can then be transferred to the local utility.

Change in government policies will ensure rapid growth in the solar power sector in our country via rooftop and other low power solar plants. MNRE should quickly clarify when the power utilities will be instructed to buy solar power from 5 kW to 100k W solar plants at the same rate as +1 MW plants. As more and more rooftop solar power plants feed power into the grid, local power utility companies should be happy to buy power at a higher price since this will enable them to own the carbon credits.

MNRE needs to remove all the remaining roadblocks to encourage rooftop and backyard solar power plants of 5 to 500 kW capacity to feed their solar power into the grid and augment shortage of supply from utility companies. Every other country in the world pays a high rate for such solar power fed into the grid and this makes such an investment very rewarding. The available metering technology is secure enough for the government not to worry about misuse.

Government subsidies

Government subsidy for standalone rooftop PV installations varies from state to state. For standalone use, today, there is a system that comes with a 40 W solar panel, 40 V battery and two LED bulbs available for around Rs 8000, to which the government provides close to a 50 per cent subsidy. By installing this solar system, monthly electricity bills fall by about Rs 60 per month (calculated at the rate of Rs 2 per unit). Conventional electricity bills for residential purposes are currently somewhere between Rs 6-7 per unit and Rs 10-12 for commercial establishments.

The government is yet to announce the final specifications and subsidy (or incentive) on rooftop installations that feed into the grid.

Some challenges

The major challenge faced by the project proponents is to realise the benefits of the policy. Not only do the specifications vary from state to state but so do the buying rates. Some companies are buying power at as low as Rs 11 per unit, thus discouraging players from venturing into this segment as they make only a marginal profit.

Another challenge is that some unscrupulous players, instead of injecting solar power from panels, may connect the mains power (conventional electricity) from their neighbhour’s building to the grid. Thus, such a scenario, it becomes difficult for the energy meter to detect the mode of power. However, this challenge is being overcome by introducing innovative DC energy meters that detect the kind of power being transmitted and reject any other power, except what is generated through solar PV panels. While this concept is yet to take off within the country, there are some specifications laid down by the government with regard to metering.

How to supply solar power to the grid

If the solar power generated from a rooftop installation is to be injected into the grid, one will have to enter into a PPA with the local distribution utility in whose area the solar system is located. Under this agreement, a tariff is determined by the appropriate State Electricity Regulatory Commission (SERC). However, the issues related to grid integration, metering, measurement and energy accounting for projects are under consideration with the government. There is no cost involved in the transmission of energy unless the power is transmitted at high tension (HT) levels (that is, 11 KV or 33 KV), and special monitoring and metering hardware are deployed at HT levels. In the current scenario, metering arrangements for rooftop grid interactive power plants are under active consideration of the government.

While no special arrangements are required to inject power into the grid, there is a safety aspect that needs to be factored in while transmitting energy. There is always a risk involved as when the grid fails, the solar power system automatically stops injecting power into the grid. This is called islanding, where the inverter isolates itself. This is a standard feature built into solar power inverters making them safe for residential and commercial applications. A standalone feature in the inverter would enable captive consumption of the solar power generated in the event of any grid outage.

Eligibility criteria for project proponent

While the government is yet to announce the policy for rooftop grid connected power plants, it has laid down certain guidelines for rooftop PV and other small solar power plants connected at distribution network at voltage levels below 33 kV. Hereinafter, the programme is referred as rooftop PV & small solar power generation programme (RPSSGP).

Technical criteria: The project schemes that propose to deploy PV modules and inverter systems will be considered to be technically qualified and eligible for participation in the RPSSGP scheme only if they comply with relevant IEC/BIS standards and/or applicable standards as specified by the Central Electricity Authority. For solar PV projects to be selected under this scheme, it is mandatory that these be based on crystalline silicon technology and that they should use modules manufactured in India. There will be no mandatory domestic content requirement for projects based on other technologies. For solar thermal technology, it is mandatory that the technology is demonstrated and such projects should be in operation for one year. Project proponents should submit documentary evidence and an undertaking in this regard along with their applications to the competent authority in the state.

Metering arrangements: Metering arrangements should be made by the project proponents in consultation with the distribution utility keeping in view the guidelines/regulations notified by the respective SERCs, if any. Meters should comply with the requirements of CEA regulations on the installation and operation of meters.

Financial criteria: The project proponents should submit their letters of commitment along with board resolution for equity investments in the project, calculated on the basis of Rs 40 million MW on a pro-rata basis.

Infrastructure criteria for land requirement: The project proponent should make arrangements for land required for the project as per conditions outlined by respective state competent authority.

Infrastructure criteria for grid connectivity requirement: The plant should be designed for interconnection with grid at distribution network at the voltage level depending on installed capacity of rooftop PV or small solar system generator.

(This is not the complete requirement list. To get more details, visit www.mnre.gov.in)

Electronics Bazaar, South Asia’s No.1 Electronics B2B magazine

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