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Rooftop solar economics of TEDA's proposed scheme

SolarDae had recently opined that regulators should permit the installation of rooftop solar capacity above 1 MW at a site. Currently, most state regulators permit installation only up to 1 MW. Due to this, many energy-intensive consumers with a load above 1 MW find only marginal savings from investment in rooftop solar (Read). Tamil Nadu is taking a step to permit rooftop solar capacities above 1 MW and up to 5 MW on its educational institutions. The capacities under this scheme won’t come under the purview of Open Access. Net-meter, as well as gross-meter regulations, will apply to them. Tamil Nadu Energy Development Agency (TEDA) is promoting the scheme and has invited the comments from stakeholders (Read).

The educational institutions will include schools, colleges and universities. Also, if an educational institution has more than one electrical service connection, it can credit the surplus solar energy unit of one connection to another.

 

TEDA’s rooftop solar scheme comes with power purchase guarantees

 

In the rooftop solar scheme, the educational institutions will have to estimate the cost of solar energy from their rooftops. TEDA will be buying the green energy and then sell it to the target groups such as TANGEDCO, Educational Institutions which cannot install rooftop solar on their premises, the government departments of TN and to electricity consumers who want to get green electrical energy tariff.

After a careful examination of the proposal, TEDA will file a petition before Tamil Nadu Electricity Regulatory Commission (TNERC) to finalise the solar energy tariff. The rooftop solar tariff will be based on the levelised cost of energy.

(Learn: How solar energy tariff is calculated?) 

Being smaller in size, the levellised tariffs for rooftop solar plants will be higher than the ground-mounted solar plants. But since the proposal invites the solar rooftop plants of sizes between 1-5 MW,  the capacities will have an advantage of the economy of scale. Therefore, tariffs can be expected to be lesser.

 

Rooftop solar economics for educational institutions in Tamil Nadu

 

Private educational institutions & their hostels pay energy charges of INR 7.88 per unit including taxes. Government aided educational institutions pay INR 6.04 per unit. A unit of energy from rooftop solar plants is lesser by 9%-43%. Reduction in their electricity bill will depend on the capital structure for raising fund for the plants. A ground-mounted solar power plant costs between INR 3.5 Cr.-4 Cr. A rooftop solar plant of the same capacity costs in the range of INR 4 Cr.-4.5 Cr.

Economics of Gross feed-in mechanism: SolarDae Analysis

Educational institutions that set up a rooftop solar plant with gross meter connection will sell the entire energy to TEDA. TEDA, in turn, will sell the energy to TANGEDCO. DISCOMs procure solar energy at lowest rates possible-even within the limits of their APPC which is INR 3.73 per unit for TANGEDCO. Such rates are possible only from the ground-mounted solar power plants whose capital cost is around INR 3.5 Cr. In case of rooftop solar plants, APPC rates are not feasible for their economics.

Still, to keep the tariffs lower TEDA should cap it to an upper limit and invite competitive bidding for installation of the plants. Last year TEDA had issued a rate contract tender for 100 MW for government buildings of which 40 MW was reserved for RESCO model. Tariff for RESCO was capped at INR 6 per unit. Of the ten empanelled installers, four quoted the tariff of 4.79, one quoted 4.90 and remaining others, 6 (Result Detail). Currently, India hardly has any rooftop solar capacity between 1-5 MW connected through a gross-feed mechanism. Inviting competitive bidding will keep the tariffs lower.

Our analysis shows that the rooftop solar projects under the scheme will be feasible for tariffs between INR 4.29-4.79 per unit. An average ROE based on net-income will be over 14%. However, the results will hold true or even better if loan tenure is more than 12 years.

Rooftop solar economics of TEDA's proposed scheme
Source: SolarDae Financial Model

 

Economics of net feed-in mechanism: SolarDae Analysis

In case an educational institution goes for net feed-in mechanism, rooftop solar economics will be more or less the same. Instead of competitive bidding, institution and project developer will mutually fix a feasible tariff. The institution will be consuming most of the energy. Any surplus unit of solar energy will either be offset by TANGEDCO or compensated at APPC rates at financial year-ends. Whatever rates the two parties agree to, will be lesser than the effective energy charges of the educational institutions.


 

Two cents for promoting the rooftop solar growth under the scheme:

  • TEDA should not limit a project capacity to an educational institution’s sanctioned/connected load. Available shadow free space should decide the project capacity even if it exceeds the institution’s connected load but not more than 5 MW.
  • Further, a mix of gross and net feed-in mechanism under the scheme will be a landmark change for promoting rooftop solar. Wherever an institution can accommodate 1 MW  rooftop solar power and has an area sufficient to install 5 MW solar plant, TEDA shall allow such institution to use 1 MW of rooftop power through net feed-in mechanism and the remaining 4 MW under the gross feed-in scheme.

(Featured Image: WRI India)

Post Author: Ankur Kumar Jha

Founder SolarDae || MBA Power Management || B.E (Mechanical)

Ankur analyses mainstream media coverage of renewable energy in general and solar in particular; he tracks the ongoing development of regulations and policies and incorporates them in his opinion. He can be reached at +91-8860726731 for any assistance in rooftop solar and utility-scale projects.

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