Chandigarh Renewable Energy and Science & Technology (CREST) will soon float a solar tender for the installation of rooftop solar plants through Renewable Energy Service Company (RESCO) model. Under this model a solar developer finances and installs the system and is the owner of the rooftop solar plant for a fixed period and then transfers the ownership to the consumer. In return, a consumer on whose premise the rooftop power plant has been set pays a fixed tariff per unit of energy generated from the plant.
CREST has fixed the tariff of INR 3.44 per unit for this model. The ownership of rooftop solar plant with the solar developer will be 15 years. Thereafter it will be transferred to the building owner. The life of a rooftop solar plant is 25 years. These plants will be connected to the grid through a net-meter.
The rooftop solar plants will most likely come on the terraces of low-tension and high-tension residential consumers. The electricity tariff for residential consumers in India is telescopic by nature. There are multiple energy consumption slabs and energy charges assigned to each of the slabs. Energy charges increase with the increasing slab. The energy charges of LT residential consumers of Chandigarh vary from INR 2.75 to INR 5.20. For high tension residential consumers, the energy charge is INR 4.80 per unit which is a flat rate.
Assuming that the connected load of these consumers is 6 KW, here is how their tariff levels look like when compared to the proposed solar tariff of INR 3.44 per unit. We have considered 6 KW as the connected load in Chandigarh up to 5 KW are single phase. Capacity above 5 KW are three phase.
If CREST executes the tender, most of the residential consumers will benefit from installing rooftop solar on their premises but the economics of installing rooftop solar at INR 3.44 may not work out for the developers. The generic solar tariff determined by the regulatory commission is INR 5.10 for 1 MW solar power projects in Chandigarh. For rooftop solar plants, the generic tariff is higher than ground-mounted solar power plants. Owing to their smaller size, these plants do not give a volumetric cost reduction advantage to the developers. To achieve a tariff of INR 3.44 solar developers will have to rely on the government’s subsidy. This will also ensure a double-digit Internal Rate of Returns (IRRs)- between 10% to 11%. On the downside, solar developers shy away from executing the projects due to delays in subsidy disbursement by the government.
If the tender has a provision of escalation in tariff the economics can work without a subsidy. As per our analysis, a minimum escalation of 2.5% for the entire tariff period is desirable to achieve the same levels of IRR as in a subsidy project. Compare the solar tariff escalation with the grid prices the solar tariff in will still be lower than the grid prices. On average the grid price in India escalates at 5% to 6%.
But these are early speculations. At the moment CREST needs to bring in more clarity on the tender. The tender size and scope of work will be key considerations for solar developers to quote a lower tariff. As per the Net-Metering Regulations by Joint Electricity Regulatory Commission of Goa and the Union Territories, the minimum rooftop solar project size should be 5 KW. For the RESCO model, a tender size of minimum 1 MW will provide the developers with an economy of scale. The tender provision should also allow a developer to bid on the entire capacity. Role of CREST can be to identify the buildings fit for installation of rooftop solar plants. It will not only mitigate the risk of project-time overrun but also help the solar developers to aggregate the demand.
Chandigarh authority’s multiple circulars in the past for mandatory rooftop solar installation has failed due to due to lack of clarity on the process among consumers. It’s time a coordinated effort among various stakeholders is in place to pull off this tender.
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