Businesses & Industries should go for solar power for multiple reasons including
To cut energy costs
To reduce the carbon footprint
To fulfil regulatory obligations
To accomplish CSR objectives.
Financial models available for moving to solar
For Industrial and Business clients two major financial models are available to go for Solar Energy:
Where client does the investment and purchases the solar power system.
BOOT model or RESCO model:
Where client does not do any initial investment but agrees to purchase solar power at agreed tariff (PPA rate).
We shall now discuss the two models in detail.
In Capex model, the business or Industry client going for solar, also invests in Solar power system buying the complete plant from a Solar Energy EPC company.
The features of this model include:
Client owns the complete solar power plant and can claim additional accelerated depreciation benefits.
The system has medium term payback period of around 6 years
The Solar Panels are guaranteed for 25 years of production life but the inverters are guaranteed only for 5 years.
As there are no running parts, so operation costs of solar plant is very low.
To minimize, maintenance cost, clients can go for Annual Maintenance Contracts (AMC) to dedicated Solar Energy Service providing companies.
The main advantage is there is direct & significant reduction in electricity costs.
BOOT or RESCO Model:
In Build-Own-Operate-Transfer (BOOT) or RESCO model, client does zero initial investment and entire cost of solar power plant is borne by Solar Energy providing company. The client signs a Power Purchase agreement (PPA) with the company and buys solar power generated by company at agreed tariff rates. The features of this model are:
Company Power Company sets up on-site solar power plants (on rooftops, as carports, on grounds and/or on superstructures).
The solar plants are set up entirely on our own cost and are also maintained by us throughout the project term.
Client enters into a long term (15-25 years) Power Purchase Agreement (PPA). At the end of the PPA term, the plant is transferred free of cost (usually INR 1) to the client.
The electricity price for solar power is agreed for the entire PPA period at the beginning of the agreement. This price is always lower than the client’s existing grid tariff, ensuring continuous savings to the client throughout the PPA term.
The client is billed every month on the basis of actual energy generated by the solar plant. This ensures that the entire performance risk is borne by us as we only get paid for what we generate.
There is also a provision for performance targets and compensation to the client if such targets are not met.