Technical Manual for Banks & FIs onGrid-Connected Rooftop Solar PV Developed by: The Energy and Resources Institute (TERI) How to read and use this manual This manual was prepared with the intent to sensitize banks and FIs to the relevant technology and project-related aspects of grid-connected rooftop solar power projects in order to provide guidance in the evaluation of project loan applications. The content of the manual discusses, among other topics, the working and components of a grid-connected rooftop solar power system; the relevant quality standards and benchmarks for projects; an overview of the fiscal and financial incentives for market growth; the typical energy generation patterns and performance monitoring norms; recommended system design guidelines; the prevailing business models; and the salient technologyand project-related risks for lenders. .......... 24 Low credit profile of borrowers ........................................................................................................................................................................................... 13 Performance monitoring. 24 Theft and vandalism.......................... 18 4.................. 27 ................................................................................................................ 20 i......... 23 Policy & regulatory uncertainty .................................... 13 Maintenance ............ 19 5....................................................................................... 8 iii........ 20 iii.......................................... 14 System operation and performance .................................. Central and State policies ................................ What is the standard project life of a grid-connected rooftop solar PV system? .......... 2 Contents .......................................... 1..................................................................................... What is meant by a grid-connected rooftop solar PV system? .......................... 25 Annexure 2: List of State Nodal Agencies (SNAs) ............................................................................ 23 Power off-taker risk ............................................................................................................................................................................................... 22 Technology risks ....... Financial and economic analysis .............................................. What are the risks involved in lending to a grid-connected rooftop solar PV project? ........................................... What are the project lifecycle costs of a grid-connected rooftop solar PV system?.................................................................................................................................................... 24 Developer/Promoter risk .......................................................................................................................................................................................... Context ...... 24 Annexure 1: General project development process for grid-connected rooftop solar PV projects in India . 22 iv........................................Contents How to read and use this manual ............................................. What is the typical payback period for grid-connected rooftop solar PV projects?............................................................................................................................................ What are the guidelines for designing a grid-connected rooftop solar PV system? .................................... What are the relevant quality standards and benchmarks? ............. 5 i........................... 24 Security coverage ............................................................................................................................ 20 ii............ 11 iv.. What are the O&M aspects of a grid-connected rooftop solar PV system?............................................................... 22 Solar resource data risk........................................................... Explaining grid-connected rooftop solar PV systems . Business models ................. 5 ii................................................................................................................................................................ Error! Bookmark not defined.............. 4 2.................................................................................................................................. 14 v................................................................................................... On-going schemes and programs ........................................................................ 17 3... state agencies. the concerns of banks in lending to grid-connected rooftop solar PV projects need to be addressed. 2015 . 40 GW has been targeted through grid-connected rooftop solar PV (full 100 GW break-up shown in Figure 1). supporting policy framework. etc. a host of challenges exist in the way of achieving maximum participation from these stakeholders. The market potential of rooftop solar power in India has been estimated at 124 GW in a recent study by TERI1. TERI. Context In January 2010. and approaches to estimate the power generation and the various cash flows. Under the 100 GW solar power target. 1 “Reaching the sun with rooftop solar”. Participation of the banking sector is key to any forward progress. banks. and it is essential to address their individual and shared issues to achieve the common goal. It is meant to aid in the evaluation of loan applications for grid-connected rooftop solar PV projects. on-going government schemes & programs. However. it is attainable through concerted efforts of the diverse stakeholder segments involved. Issues expressed by banks particularly include lack of clarity and understanding of the system as well as the associated risks. This manual is designed as an informative guide for banks & FIs to impart a working knowledge of grid-connected rooftop solar PV systems and the associated project risks. The structure of this manual covers a general description of the system. This target was revised to 100 GW by 2022 in late 2014. system integrators. project developers. To that end. its components. the Government of India launched the Jawaharlal Nehru National Solar Mission (JNNSM) as a part of its National Action Plan on Climate Change (NAPCC).1. its working. While 40 GW is a highly ambitious target. viz. and set out a target to achieve 20 GW of grid-connected solar power by 2022. such as USA. which are most commonly manufactured using silicon. Generally. site location and application. China. PV modules are made from PV cells. etc. using a phenomenon called the photovoltaic effect. The general working of the system can be summarized below. mostly because of the high costs of these components. The major components of a solar PV system are: PV Modules – The PV modules are the devices that actually convert solar energy to electricity. etc. It is important to assess the quality of PV modules for use in projects. Solar PV is a very reliable and clean source of electricity that can suit a wide range of power generation applications such as residential.). cables. agricultural. junction box. Japan.10%). These are described later in this section. In the Indian context. Explaining grid-connected rooftop solar PV systems i. There exist a number of quality standards developed by international and national organisations for the testing and certification of PV modules and their performance. although the performance steadily degrades by about 20% over life time. copper indium gallium selenide/sulfide (CIGS). A grid-connected rooftop solar PV system refers to a solar PV system that is located on the roof of a building and is connected to the local distribution grid. whereas thin film cells are cheaper but less efficient (5% . etc. What is meant by a grid-connected rooftop solar PV system? A solar photovoltaic (PV) system is a renewable energy power generation technology that uses photovoltaic modules to generate electricity directly from solar radiation. The electricity generated can be stored. It is a form of distributed power generation. industrial. .2. no single type is preferable for all projects. other materials used include cadmium telluride (CdTe). used directly. inverter and BOS (meters. cost. degradation rate). Good quality PV modules generally have a useful life of 25 to 30 years. Batteries and tracking mechanisms are usually not seen in grid-connected rooftop solar PV systems in India. mounting structures. silicon-based solar cells provide higher efficiency (15% 20%) but are relatively costly to manufacture. A grid-connected rooftop solar PV system includes different components that are selected depending on the system type. or fed back into grid. Germany. performance in low irradiation levels. Since different types of PV modules have different characteristics (in terms of efficiency. system components generally comprise of the following components: PV modules. The technology has seen significant success for power generation in recent years across the world. and have a stable structural support. usage. etc. or racking system. inverters come in standard sizes ranging from a few hundred watts to a few hundred kilowatts. wind loading. for grid-connected rooftop solar applications. cost. Mounting structure – The mounting structure. Mounting structures designs are highly specific to site and application. size. Electricity meters record the amount of electricity consumed and/or produced (in kWh and kVAh) by a customer within a premises. Top-of-the-line inverters offer efficiencies in the range of 95% .98%. Due to these reasons. Fixed tilt mounting systems are simpler. From the technology perspective. Cost reduction is mostly achieved through designs that use less material (mostly steel). Mounting structures for rooftop solar PV installations also require compliance with regulations or guidelines associated with the structural aspects of the roof. etc. fixed tilt mounting structures are the norm in India. depending on system size. . selection of an inverter for a project depends on a number of factors. Balance of System – These consist of cables. etc. increase generation. most regulations in India on metering also stipulate the location of an energy meter for measuring the generation of the PV array. Product standards for inverters are discussed later in this manual. switchboards. There are many different types of inverters in the market. Some inverters also perform energy monitoring functions. meters. is the support structure that holds the PV panels. Mounting structures can be either fixed or tracking. In the Indian market. Inverter – Because the PV modules produce DC power and electrical appliances (and the distribution grid) predominantly require AC power. and have over time have seen improved durability and reduced costs. such as load-bearing capacity. function. there is a deficit of availability of indigenous inverters. including application. the inverter in the system converts the DC power into AC power. In addition to the metering of the net energy consumption/production of a grid-connected rooftop solar PV system. Inverters for solar PV power projects come in various sizes and specifications. with the market being captured by foreign inverter manufacturers. inverters have matured to a large degree and opportunities of cost reduction through technology innovation are not expected in the market. PV modules are generally mounted on support structures in order to more efficiently capture solar insolation. junction boxes. low-maintenance and cheaper than tracking systems. 28. Payback in 4-10 years considering a 15% rebate on initial cost. The solar output can be supplied to the grid and earn revenue if the SPV system produces in excess of electricity requirement or when the building is vacant.200 PV panels occupying 2000 m2 (50m x 40m) roof space. .03. Consist of 800 – 1. However. year and is also dependent on geographical location.600 kWh in a year and at 8 Rs/kWh grid electricity cost. the solar energy can potentially offset Rs 24. Grid-connected rooftop solar PV systems are generally characterized by: Electricity generation in daytime Low maintenance requirement Simple installation Easy scalability Robustness High upfront investment WHAT DOES GRID-CONNECTED ROOFTOP SOLAR PV OFFER? Due to the nature of the technology. As thumb rule the area requirement for SPV system is 10 m2/kW.A schematic of the general working of a grid-connected rooftop solar PV system is given in Figure 1. the electricity generated varies by day. Typically.800 annually in utility bills. Generates 3.300 units of electricity in a month (average). season. the system will last for over 20 years. a small 200 kWp grid-connected rooftop solar PV system will: Generate ~25. Part 1: Transportation and shipping of module Yes (As per site condition like dairies. other certifications are in use in the market when BIS certification is not available. such as those of IEC (International Electrotechnical Commission). There exist a number of standards. IEC TS 62804-1: Part 1: Crystalline silicon IEC 62759-1 Photovoltaic (PV) modules – Transportation testing. Part 2: Requirements for Testing IEC 62804 (Draft Specifications) Photovoltaic (PV) modules .Table 1 lists the different standards and product certifications for various PV system components (further standards applicable as developed from time to time).ii. etc. and power rating Yes IEC 62716 Photovoltaic (PV) Modules – Ammonia (NH3) Corrosion Testing IEC 61730-1. concerning product quality.Test methods for the detection of potential-induced degradation. performance. with respect to the development of indigenous standards. power quality. CPRI (Central Power Research Institute). Mandatory Advisory Solar PV Modules/Panels IEC 61215/ IS 14286 Design Qualification and Type Approval for Crystalline Silicon Terrestrial Photovoltaic (PV) Modules Yes IEC 61646/ IS 16077 Design Qualification and Type Approval for Thin-Film Terrestrial Photovoltaic (PV) Modules Yes IEC 62108 Design Qualification and Type Approval for Concentrator Photovoltaic (CPV) Modules and Assemblies Yes IEC 61701 Salt Mist Corrosion Testing of Photovoltaic (PV) Modules Yes IEC 61853. TERI.2 Photovoltaic (PV) Module Safety Qualification – Part 1: Requirements for Construction. It is also essential to the fast growth of the sector. there will be a lack of confidence in the technology and consequently. the Government of India has pushed the identification and use of product standards (international standards. durability. QCI (Quality Council of India) and others.Part 1/ IS 16170 : Part 1 Photovoltaic (PV) module performance testing and energy rating –: Irradiance and temperature performance measurements. In recognition of this. there is an on-going effort involving the Government of India. toilets) Yes Yes (PIDresistant modules) Yes . surge protection. grid interconnection. PTB (Physikalisch-Technische Bundesanstalt Braunschweig und Berlin). safety. a higher risk perception among project debt financiers in the market. efficiency. since without product certification and standardization. Since BIS standards have not yet been developed for all PV system components. What are the relevant quality standards and benchmarks? Certification and standardization of PV system components is an on-going process in India. harmonics. if Indian standards not available). Yes IEC 62116/ UL 1741/ IEEE 1547 Utility-interconnected Photovoltaic Inverters .64) Environmental Testing of PV System – Power Conditioners and Inverters a) IEC 60068-2-1: Environmental testing .Mandatory package units Solar PV String Inverters/PCUs IEC 62109-1. 50%.Part 2-14: Tests Test N: Change of temperature d) IEC 60068-2-27: Environmental testing .Part 1: General requirements. IEC 62109-2 Safety of power converters for use in photovoltaic power systems .Part 2-1: Tests Test A: Cold b) IEC 60068-2-2: Environmental testing . 75% & 90100% Loading Conditions) Yes BS EN 50530 Overall efficiency of grid-connected photovoltaic inverters: This European Standard provides a procedure for the measurement of the accuracy of the maximum power point tracking (MPPT) of inverters.Test Procedure of Islanding Prevention Measures Yes IEC 60255-27 Measuring relays and protection equipment . Both the static and dynamic MPPT efficiency is considered. Safety compliance (Protection degree IP 65 for outdoor mounting. 2. cyclic (12 h + 12 h cycle) f) IEC 60068-2-64: Yes (Will become IEC 62891) (For Grid-connected System) Advisory .Part 27: Product safety requirements Yes IEC 60068-2 (1. 30 & 64) (Already present except 27.Part 2-2: Tests Test B: Dry heat c) IEC 60068-2-14: Environmental testing . 14. In that case the inverter energizes a low voltage grid of stable AC voltage and constant frequency.Part 2-30: Tests Test Db: Damp heat. 27. which are used in grid-connected photovoltaic systems. and Safety of power converters for use in photovoltaic power systems .Part 2: Particular requirements for inverters. 25%.Part 2-27: Tests Test Ea and guidance: Shock e) IEC 60068-2-30: Environmental testing . IP 54 for indoor mounting) Yes IEC/IS 61683 (For Standalone System) Photovoltaic Systems – Power conditioners: Procedure for Measuring Efficiency (10%. switch-disconnectors and fusecombination units d) EN 50521: Connectors for photovoltaic systems – Safety requirements and tests Yes IEC 60269-6 Low-voltage fuses . IEC 60502/IS 1554 (Part 1 & 2) General test and measuring method for PVC (Polyvinyl chloride) insulated cables (for working voltages up to and including 1100 V. EN 50521 (Already present) General safety requirements for connectors.Part 2: Requirements for conductors and earth electrodes IEC 62561-7 Lightning protection system components (LPSC) .Part 1: Requirements for connection components IEC 62561-2 Lightning protection system components (LPSC) .Part 6: Supplementary requirements for fuselinks for the protection of solar photovoltaic energy systems Yes Surge Arrestors IEC 60364-5-53/ IS 15086-5 (SPD) Electrical installations of buildings . circuit breakers (AC/DC): a) Low-voltage Switchgear and Controlgear. broadband random and guidance IEC 61000 Series Electromagnetic Interference (EMI). Part 2: Circuit Breakers c) Low-voltage switchgear and Controlgear. 2 & 3). switching and control Yes Cables IEC 60227/IS 694. mainly for DC cables Yes Yes Earthing /Lightning IEC 62561 Series (Chemical earthing) IEC 62561-1 Lightning protection system components (LPSC) . disconnectors.Part 5-53: Selection and erection of electrical equipment .Mandatory Environmental testing .Part 7: Requirements for earthing enhancing compounds Yes Advisory . Part 1: General rules b) Low-Voltage Switchgear and Controlgear. and Electromagnetic Compatibility (EMC) testing of PV Inverters (as applicable) Yes Fuses IS/IEC 60947 (Part 1. Part 3: Switches.Part 2-64: Tests Test Fh: Vibration. switches.Isolation. and UV resistant for outdoor installation) BS EN 50618 Electric cables for photovoltaic systems (BT(DE/NOT)258). Mandatory Advisory Junction Boxes IEC 529 Junction boxes and solar panel terminal boxes shall be of the thermo plastic type with IP 65 protection for outdoor use. benefits / drawbacks of technology type. performance in low light. system availability. reliability.c. compliance with grid code and other applicable regulations.Part 1: Photovoltaic off-grid application IS 13369 Stationary lead acid batteries (with tubular positive plates) in mono-bloc containers IEC 61427-2 Secondary cells and batteries for renewable energy storage . and IP 54 protection for indoor use Yes Energy Meter IS 16444 or as specified by the DISCOMs a. serviceability.Part 2: On-grid applications Yes Solar PV Roof Mounting Structure IS 2062/IS 4759 Material for the structure mounting DIN EN 1991-1-4 Actions on structures. spectral response. quality and cost. selection of suitable technologies/products. the following aspects are important: Choosing row spacing to reduce inter-row shading and associated shading losses Choosing the layout to minimise cable runs and associated electrical losses Allowing sufficient distance between rows to allow access for maintenance purposes Choosing a tilt angle that optimises the annual energy yield according to the latitude of the site and the annual distribution of solar resource .General requirements and methods of test . inverter-based layout. In designing the site layout. degradation rate and warranty terms. modularity. Static direct connected watt-hour Smart Meter Class 1 and 2 — Specification (with Import & Export/Net energy measurements) Yes Battery/Electrical Storage IEC 61427-1 Secondary cells and batteries for renewable energy storage . power output. sizing of system. inverter locations. Part 1-4: General actions – Wind actions iii. telemetry requirements.General requirements and methods of test . It comprises identification of load. Selection of inverter includes assessment of compatibility with module technology. nominal power tolerance levels. quality. which requires assessment cost. Yes What are the guidelines for designing a grid-connected rooftop solar PV system? The design of a PV plant aims at achieving the lowest possible levelized cost of electricity. For system design. financial viability. Table 1 lists some of the various PV system design software prevalent in the sector. In the design phase. industry. Now licensed to HOMER Energy Use: Design of distributed energy systems. both in India and abroad. risk Developed by: Originally developed by NREL. for particular use in shading analysis. Orientating the modules to face a direction that yields the maximum annual revenue from power production. LCOE. academia Use: Evaluation of energy production. the modules will usually be southfacing. It allows comparison of actual generation with design calculations during the system operation. as India is in the northern hemisphere. costs. and helps in identification and analysis of faults. savings. Table 1: Commonly used software for PV system design Software RETScreen HOMER NREL Solar Advisor Model (SAM) SolarGIS – pvPlanner Description Developed by: Canadian government. one of the most commonly used software in India is the PVSYST. including technical and economic feasibility analysis Developed by: NREL (National Renewable Energy Laboratory) Use: Estimation of energy production. peak and annual system efficiency. emission reductions. it is also important to give due consideration to the surrounding structures. capital cost. which has become the industry standard. The DC system comprises the following: Array(s) of PV modules Disconnects/switches DC cabling (module. although sometimes they are kept facing west in order to sync generation with evening peak demand The electrical design of a PV project can be split into the DC and AC systems. O&M costs (used with TRNSYS) Developed by: SolarGIS . string and main cable) Protection devices DC connectors (plugs and sockets) Earthing Junction boxes/combiners The AC system includes: Inverter Transformers (only for large size systems) AC cabling Substation (only for large size systems) Switchgear Earthing and surge protection Automatic data acquisition and monitoring is important in the design of any grid-connected rooftop solar system. yield assessment Developed by: F-Chart Software Use: Estimation of energy generation. life cycle costs. bird dropping and other debris can cause 5-10% decrease in power generation) Checking module connection integrity Checking junction / string combiner boxes Thermographic detection of faults using Thermographic camera Inverter servicing Inspecting mechanical integrity of mounting structures Vegetation control Routine balance of plant servicing / inspection Common unscheduled maintenance requirements include: Tightening cable connections that have loosened Replacing blown fuses Repairing lightning damage Repairing equipment damaged by intruders or during module cleaning Rectifying supervisory control and data acquisition (SCADA) faults Repairing mounting structure faults Manufacturers and developers generally have set practices for PV system maintenance. the IEC 62548 “PV arrays – Design requirements”. Scheduled maintenance typically includes: Module cleaning (dust.PV F-Chart PVSYST SolarPro Use: Site prospecting. sizing. also including DC array wiring. simulation and data analysis Developed by: LaPlace Systems Use: Estimation of power production. IEC has released a standard. which does not have an equivalent BIS standard at present. This standard sets the design requirements for PV arrays. suitable maintenance of a PV plant is essential to optimise energy yield and maximise the life of the system. switching and earthing provisions. efficiency. solar PV systems have very low maintenance and servicing requirements. AMCs are mandatory for developers and . equipment costs Developed by: PVSYST Photovoltaic Software Use: Study. iv. load. electrical protection devices. life cycle analysis With regard to PV design. economics. with many offering multi-year AMCs (Annual Maintenance Contracts). However. What are the O&M aspects of a grid-connected rooftop solar PV system? Maintenance Compared to most other power generating technologies. prefeasibility and predesign assessment. In the preliminary project phase. The generic estimations are . more sophisticated data acquisition systems (e. PV module configuration (angle. including weather data measurements. For more accurate calculations. the data includes the data logged in inverters. losses. basic solar resource data. Energy generation of a solar PV system can be estimated using the system size (kW p or MWp). to ensure generation adherence to design estimates. cell temperatures. without any cost to the customer. This is essential in the successful operation and maintenance of the system. SCADA) are required in order to procure and assimilate data from a number of monitoring devices. since it provides the relevant data for fault detection and performance analysis. An example of a generation curve for a day under clear-sky conditions is shown in Figure 2. software products are available that use locationspecific weather data records. general insurance covering fire. inverters. and system losses (Figure 3 shows a Sankey diagram depicting typical PV system energy losses).system integrators that are empanelled with MNRE as Channel Partners under the Ministry’s gridconnected rooftop solar PV scheme. switches and meters. generic estimations can be made using just these parameters. etc. orientation.) Performance monitoring An important aspect of a complete grid-connected rooftop solar PV system is performance monitoring. In these systems. At minimum. timely detection of faults and deliver optimal performance. array design. and follows a bell curve as solar radiation increases and decreases from morning to evening.). In MW-scale PV systems.g. efficiency. Figure 1: Typical energy generation curve in a day under clear-sky System operation and performance conditions The actual generation is very closely related to the instantaneous solar irradiance on the surface of the solar module. etc. the system operator/owner (as per business model) should monitor the performance once a day. A typical AMC for a grid-connected rooftop solar PV system would include: Pre-decided maintenance schedule Supply of spare parts as required Replacement of defective modules. earthquake. inverter characteristics and so on. AMCs mandate that the contractor shall carry out the required maintenance activity (including replacement of equipment) inside the guarantee period of the AMC (usually 2-5 years). This is the case in small-size PV systems. Maintenance of log sheets for operational detail Complaint logging and its attending Insurance (machine breakdown insurance. etc. Generally. these are discarded for more accurate estimations using specialized software products in the design phase of the project. of effective sunshine days in year (days/year): This refers to the number of days in a year for a location that can be assumed to have full solar radiation (1000 W/m2) for the peak sun hours duration . electrical impedance/resistance.useful in preliminary project feasibility assessments. the following parameters are considered: System size (in kWp or MWp) Deration (%): Deration refers to various factors in PV systems which cause power losses. However. dust and other environmental conditions. this amounts to an equivalent of the amount of solar radiation actually received over the year No. they cannot be used for monthly/daily/hourly generation estimates. day-wise and hour-wise generation. including month-wise. Peak sun hours (hours/day): Peak sun hours refers to the average hours of full solar radiation (1000 W/m2) received in a day at a location. but they provide very detailed generation estimates as well. These estimations provide year-wise generation data in the project life. These can be made more realistic by accommodating more parameters into the calculation. including inverter loss. There are also different means of calculation. using different input parameters. and are useful since they provide quick and easy estimations. Energy generation calculation examples of both generic estimations and software-based simulations are provided in this section for reference by lenders. temperature. aging and maintenance issues. These detailed estimations require a lot more data for obtaining the desired generation estimates. Generic estimation Generic estimations use a small number of parameters to give a crude approximation of the generation performance of a PV system. slight manufacturing inconsistencies in modules. 200 1. etc.2-0. such as payback. over the product life. of sunshine days in year Deration Project life Unit kW % hrs/day days/yr % years Value 50 0. daily and monthly generation. NPV. after the initial phases of feasibility assessment. for the financial feasibility assessment of projects. Figure 5 shows a typical PVSYST report showing the estimate of normalized energy generation (in kWh/kW/day) of a PV system for every month of a year.400 1. Module degradation rate (%): PV modules suffer from degradation. NPV. site selection.5% These estimates can also be used for project economic and financial analysis. revenue. Such energy generation estimates are produced during the design phase of the project.000 800 600 400 200 - Energy generation 2015201720192021202320252027202920312033203520372039 Year Figure 2: Typical energy generation of PV system over project life Software-based generation estimation There are a number of software products (listed in Table 2) available in the market that are used for PV project planning and design. payback. which causes the generation capacity per module to decrease over time. due to a variety of reasons. usually about 0. this decrease in generation is captured in an annual degradation rate. using large amounts of input data. including hourly. have been carried out. . 1. etc. Table 2: Input parameters for energy generation estimation Parameter System size Degradation rate Peak sun hours No. Nearly all of them include detailed estimations of energy generation over the life cycle of the system.50% 5 300 20% 25 A short calculation using the above parameters is illustrated below (Table 3 & Figure 4): Yearly generation (kWh/yr) Such methods of generic energy generation estimation are typically used in project pre-feasibility assessments to evaluate the rough energy generation. etc. such as roof owner priorities. Both business models have their merits and demerits. O&M is responsibility of project developer Can be converted into CAPEX at a pre-decided date (option to buy back) Power can be sold to roof owner. etc. desirable operating conditions. surplus power can be sold to distribution utility OPEX* Project owned by project developer/supplier Roof owner/consumer not responsible for O&M. Table 4 lists some of the key features of both business models. choice of business model for a particular project depends upon a number of factors. Business models There are primarily two business models for grid-connected rooftop solar PV projects: CAPEX and OPEX. Power can be sold to third party** *project developer is usually a Renewable Energy Service Company (RESCO) **some state regulations do not permit this mode of operation. Table 3: Key features of CAPEX and OPEX business models CAPEX Project owned by roof owner/consumer Roof owner/consumer responsible for O&M of system after initial 1-2 year period Can’t be converted to OPEX model at a later date Power to be used for captive consumption. should be checked at the time of project conception/planning .Figure 3: Illustrative PVSYST report for normalised energy generation for a PV system v. Power can be sold to distribution utility. profitability. To achieve the planned ramp-up of solar capacity from the existing 3 GW to 100 GW by 2022. Central and State policies In late 2014. Under Section 80-IA of the Income Tax Act. 1961.5% by 2022 for all state utilities and other obligated entities. The projects are taxed using the Minimum Alternate Tax (MAT) rate. The central government is actively supporting the development of solar projects by developing attractive schemes for developers and power consumers installing solar PV projects. an increase in Solar Renewable Purchase Obligation (Solar RPO) compliance has been prescribed from a minimum of 0. Various other direct and indirect incentives currently offered by the government to promote solar energy include: Policy Measure 100% foreign investment in equity Beneficiary - 10-year tax holiday System Owner / Power Generator Income tax benefits through accelerated depreciation System Owner / Power Generator Concessional custom duty on imports Project Developer Central Financial Assistance (CFA) as a capital subsidy on solar PV projects System Owner / Power Generator (Residential / Institutional / Social consumer) Brief Description 100% foreign investment as equity in solar power projects is allowed.3. the Government of India expanded the initial 20 GW target to 100 GW of gridconnected solar capacity by 2022. The incentives offered by the central government are segment specific and aim to attract investment by providing suitable policies. 1961 the Central Government provides a 10-year tax holiday. many opportunities for investment have been created through a variety of schemes launched by the Government. Under the revised target. with an aim to attract foreign investors and developers and build up solar power generation capacity. These schemes include provisions to expedite the existing mechanism of project development. Solar power generation projects have the option of profiting from Accelerated Depreciation benefit by the Central Government. . up to 100% of the project cost (80% accelerated depreciation and 20% additional depreciation). In 2011 by the amendment in the National Tariff Policy 2006. The Central Government has mandated concessions and exemptions on specific materials imported for manufacture of solar power generation products as well as for use in solar power generation projects. by reducing the amount of clearances required and providing land to developers on a plug-and-play basis. Companies can use this to substantially reduce tax burden in the first few years of the project. the solar RPO compliance has increased to 10. comprising 40 GW through grid-connected rooftop solar and 60 GW through ground mounted installations. Both Central and State Governments frequently provide subsidies on capital costs of solar power projects through various schemes and programmes. which is significantly lower than the corporate tax rate.25% in 2012 to 3% in 2022. as per Section 32 of the Income Tax Act. in which the beneficiary has the freedom to choose a 10-year continuous period in the first fifteen years of the project life to avail the tax benefit. Under the programme. a number of State Governments have also come out with policies and regulations concerning grid-connected rooftop solar PV power. project size may also vary between 1 kW to 10 kW. Financing Institutions/Financial Integrators etc. etc. Army. MNRE issued guidelines for implementation of " Grid Connected rooftop and Small Solar power plants programme" in the year 2014. a grant of 30% of the project cost is provided by MNRE as CFA. Public Sector Undertaking (PSUs). 143. Central Financial . comprising of SNAs. 2. The MGAs would consist of Government Institutions. State Government Organizations and some private companies which have huge vacant roof space and vacant land in/ around the warehouses. 4.20 crores (USD 23 million) for the 52 MW of aggregate capacity addition in various states across the country. For residential/small office sector. On-going schemes and programs The Govt. Central Financial Assistance would total to Rs. and other government organizations such as PSUs/State Departments/Local Governments/Municipal Corporations/ NHB/ IREDA/Metro Rail Corporations of different States. Installation of Grid-connected Rooftop Solar PV Power plant with aggregate 54 MW capacity through State Nodal Agencies (SNAs) through National Clean Energy Fund (NCEF): The project size will range from 10 kW to 500 kW. The scheme is for projects size in between 1kWp to 500 kWp. Central Financial Assistance would total to Rs. DISCOMs. Off-Grid & Decentralized Solar Applications: In continuation of "Off-grid & Decentralized Solar Applications" during the 12th Period under JNNSM. It is being implemented by multiple agencies. 3. SECI. project size may also vary between 1 kW to 10 kW. So far. Railways. 4. 15 states have released relevant policies and 21 states have released regulations on grid-connected rooftop solar PV power. 1. Commercial Banks. Installation of Grid-connected Rooftop Solar PV Power plant with aggregate 73 MW capacity in Warehouses in various states across the country through National Clean Energy Fund (NCEF): The project size will range from 500 kW to 5 MW size.85 crores (USD 24 million) for the 54 MW of aggregate capacity addition in various states across the country. National Housing Bank. The projects will be implemented in the warehouses owned by various organizations like Warehousing Corporation of India.In addition to the policy push by the Central Government. Installation of Grid-connected Rooftop Solar PV power plants with aggregate 52 MW through Multi Government Agencies (MGAs) through National Clean Energy Fund (NCEF): The project size will range from 10 kW to 500 kW. SECI will be the nodal agency for MNRE for the implementation of the scheme. of India has provided a range of measures for implementing rooftop solar PV installations in the country for the successful implementation of the National Solar Mission. The project will be implemented by MNRE in Government/ commercial/ Institutional/ residential buildings through Multi Governmental Agencies (MGAs). Food Corporation of India. DMRC. 149. For residential/small office sector. The key features of different state policies are compiled in Annexure 2. The project will be implemented by MNRE in Government/ commercial/ Institutional/ residential buildings through State Nodal Agencies (SNAs) in every state and Union Territories (UTs) under the control of State Governments/ UT administration. ). down to an average capital cost of Rs. inverter replacement. annual operational costs are assumed to be ~ 2% of the capital cost in most financial analyses. junction box. The average capital cost for gridconnected rooftop solar PV systems is ~ Rs. Generally. 80/Wp.17 million) for the 73 MW of aggregate capacity addition in various states across the country. Table 5: General assumptions used in financial analysis of grid-connected rooftop solar PV projects Parameter Installed capacity Operating days Average Capacity Utilization Factor (CUF) Average Capital Cost Equity investment Unit kW days/yr Value 1 365 % 20. operational costs are very low. ii. What are the project lifecycle costs of a grid-connected rooftop solar PV system? Solar PV systems have a high upfront cost and low operational costs.) %age of Capital Cost 45-55% 20-30% 15-20% 5-10% Table 6 shows the general breakup of the capital cost for a small-medium sized grid-connected rooftop solar PV project. Table 7 gives the general assumptions used for the financial analysis of a grid-connected rooftop solar PV system. cables. etc. which is why solar PV projects are also generally considered to have a 25-year project life. Also assumed in CERC (Terms and conditions for tariff determination from Renewable Energy Sources) .000 % 30% Comments Industry norm As per MNRE data on solar PV power plant energy generation for Phase-I of JNNSM (available on MNRE website) CERC guidelines Assumption. For grid-connected rooftop solar PV systems. What is the standard project life of a grid-connected rooftop solar PV system? PV modules generally have a product life of about 25 years. Table 4: Typcial Capital Cost breakdown for a grid-connected rooftop solar PV system PV system component PV modules Inverter Mounting structure Other BOS (Junction box./kW 80. also assumes a 25-year useful life in the calculations for solar PV projects. 148. cables. etc.92 crores (USD 24.Assistance would total to Rs. Financial and economic analysis i. in its renewable energy tariff determination orders. meters. operational costs for grid-connected rooftop solar PV systems include general up-keep and maintenance. CERC. economies of scale may allow cost reduction. due to there being no fuel requirement or usage. Generally. 5. as there is no need for battery replacement. 70-75/Wp. With increase in system size. and replacement of other BOS components (meters.5% Rs. 1% 90% 15% Accelerated Depreciation rate – WDV % 80% Income Tax (regular) Minimum Alternate Tax (MAT) % % 33. there might be a need for purchase of a transformer as well. Inverter c.72% Module output degradation rate per year % 0. 1961 for Income Tax benefit Acc. 2012 Assumption Typical As per CERC (Terms and conditions for tariff determination from Renewable Energy Sources) Regulations.81 the discount rate equivalent to PostDiscount rate Tax Weighted Average Cost of Capital is used for the purpose of levelized tariff determination Major lifecycle costs in a grid-connected rooftop solar PV project generally comprise the following: Tax Holiday yrs 10 1. site assessment and development costs are not significant. 2012. Initial Capital Cost a. an interest rate of 12. to Section 80-IA of Income Tax Act.5 Insurance charges on cost Book depreciation rate limit Depreciation as per IT Act – WDV % % % 0. Other BOS (Junction box. e.5 years As per CERC (Terms and conditions for tariff determination from Renewable Energy Sources) Regulations.99% 20. 2012 0.) In large-sized projects. Mounting structure d. 2012 Typical. sometimes site .3% Loan tenure yrs 12 Moratorium yrs 0-0. etc. May vary for different manufacturers In CERC (Terms and conditions for tariff determination from Renewable Energy Sources) Regulations.5% Interest on loan term % 12. Site assessment and development cost For small-medium sized projects.3% is assumed As per CERC (Terms and conditions for tariff determination from Renewable Energy Sources) Regulations. 2012. % 10. cables.Debt investment O&M expenses % % 70% 2% Escalation in O&M expenses % 5.01% Regulations. for large-sized projects. 2012 Assumption Of book value As per Income Tax Act. meters. placed and fixed at the selected positions as per design. which can add to the cost. However. 1961 As per Income Tax Act. PV modules b. 1961 In the CERC (Terms and conditions for tariff determination from Renewable Energy Sources) Regulations. since the PV system only needs to be procured. like in any industry. etc. including the lifecycle performance of PV modules and other system components with respect to module failure. states in India have their own policies and regulations for grid-connected rooftop solar PV projects. O&M cost Annual O&M costs are generally assumed to be ~ 2% of the initial capital cost. there might be a need to procure licenses for start of commercial operation that has a standard cost. Since there is not a lot of variation in the cost structure of well-designed and implemented grid-connected rooftop solar PV projects. What are the risks involved in lending to a grid-connected rooftop solar PV project? There are various risks involved in lending project debt to a grid-connected rooftop solar PV project. 2. For instance. other business models such as those based on Power Purchase Agreements (PPAs) or roof leasing can have widely different mechanisms for determining the financial viability.72% as per CERC after the first year of operation. which may hold . Inverter replacement Solar inverters generally have a life of ~ 10 years. performance degradation. After this period. etc. f. this is highly dependent on the business model of the project. 3. Technology risks Since the grid-connected rooftop solar PV industry and the solar PV power industry itself. Also. However. The FiT as well as the tariff structure can vary as decided by the State Electricity Regulatory Commission (SERC). there is some risk in the selection of PV system components. with an escalation rate of ~ 5. Scheduled replacement costs a. iv. state. is relatively new and yet to mature. the revenue model becomes very important in ascertaining the project’s financial health.assessment and development can become a significant cost component. iii. but the industry itself does not have that much experience with 25 years operating life of PV systems. such as in the case when roof extension or other civil work is desired. inverters need to be replaced. Also. there are a number of low-quality products available in the market. which can lead to big differences in the financial viability of grid-connected rooftop solar PV projects in different states. these risks have been briefly explained and possible risk mitigation options explored. This contributes to some uncertainty in the project’s financial viability over the project life. In this section. What is the typical payback period for grid-connected rooftop solar PV projects? A grid-connected rooftop solar PV system generally has a payback period of 6-8 years. It may be noted that most grid-connected rooftop solar PV project financing in India relies on the financial health of the balance sheet of the project developer as this reduces the risk exposure of the lending institutions. although some high quality products may continue to function well for a few more years. Licensing In some projects. such as Feed-in Tariff (FiT) and Net Metering. PV modules have a product life of 25 years. These can vary depending upon the size of the project. with the establishment of 115 solar resource measurement stations across the country. but the accuracy of that data is not very reliable. although full-year data is difficult to obtain this way. . if required. such as: Poor financial health of distribution utilities Poor record of enforcement of regulations in some states Delay in payments by distribution utilities In projects based on PPAs also. In the absence of site-specific reliable solar resource data. solar resource data is not easily available. Solar resource data risk Availability of good-quality solar resource data is essential to the estimation of energy generation by the PV system.or Net Metering. but site-specific solar resource data for rooftop solar projects is difficult to get. Ideally. the specific terms and conditions of the contract are also very important. These can be: Careful screening of project experience of developer/promoter Usage of high-quality system components from well-established manufacturers Statement of generation guarantee by the project developer It may be helpful to develop a list of preferred suppliers for reference in evaluation of loan applications. This is caused by a number of reasons.based projects is one of the biggest concerns in a number of states. as per market experience. Power off-taker risk Power off-taker risk in FiT. In India. This includes risk associated with roof owners. There have been some efforts toward the development of a nation-wide network of solar resource measurement stations. lenders can avoid this risk by focussing lending operations in states with a proven track record of payment by distribution utilities. the credit profile of the roof owner should also be carefully assessed. apart from an in-depth evaluation of the power purchaser’s credibility. the credibility of the power purchaser should be carefully assessed before signing of the PPA. The solar resource data used can be substantiated with site-specific solar resource risk assessment study by a consultancy organization.the attraction of initial cost reduction opportunities. Use of such components adds to the technology risk in a project. Technology risks can be mitigated to a large extent with a few measures early on in a project. it is generally best to get the required data from different sources and conduct separate analysis of energy generation. Satellite-based solar resource data is available. The only way to get reliable data is through on-site measurement. Poor financial health of distribution utilities and poor enforcement of regulations put the financial viability of the project at risk. In PPA-based projects. Developer/Promoter risk The grid-connected rooftop solar PV market in India is still in its nascent phase. it is of utmost importance to do an in-depth evaluation of the technical and financial capability of the developer and/or promoter of the project. Low credit profile of borrowers The grid-connected rooftop solar PV technology is a decentralised and distributed power generation technology which targets individual consumers.Policy & regulatory uncertainty The Indian solar PV market has seen a number of different policies and schemes so far. many of these consumers have little experience with long-term financing. so. with a majority having working capital relationships. there has been a notable lack of consistency in policy. apart from the capital subsidy disbursement on 30% of project cost till late last year due to deficit of funds. Theft and vandalism Although not much observed in rooftop solar installations. that issue stands resolved and the terms for disbursal of subsidy have been clarified by MNRE. Currently. Ideally. . Thus. there is no standard facility in grid-connected rooftop solar PV installations that guards against this risk. The experience of the developer also matters in obtaining the requisite clearances and approvals for the project to move forward. whether commercial/ industrial/ residential/ institutional etc. there are a large number of developers and promoters without sufficient experience. Despite the major focus given to the solar PV power sector by the Government of India. Security coverage Grid-connected rooftop solar PV systems by themselves have low and untested resale value in the market. In addition to that. However. In India. Also. inadequacy of KYC (Know Your Customer) details of the potential borrowers increase the risk assessment of lenders. which makes it difficult to use the PV system as security for the project debt. which can otherwise cause unnecessary delays in project development. the consumer base is characterized by a large pool size with small investment sizes. it is found that a majority have insufficient free business cash flows with which to service their debt schedule. there has been comparatively greater policy stability and consistency. There is also the uncertainty regarding continued availability of the roof space over the 25-year project life with no security interest. a developer should have prior full project development experience from start to finish for multiple projects as well as a team of sufficient experienced manpower to carry out the tasks of the project. maybe due to the limited number of systems installed till date. By definition. many potential borrowers will have inadequate business assets for holding as collateral on the loan. This poses an issue in lending long-tenure project debt to these borrowers. in the grid-connected rooftop solar PV segment. Currently. theft and vandalism are causes for concern for lenders. Lastly. and may differ from state-to-state. This set of steps has been illustrated to show the common aspects of grid-connected rooftop solar PV project development in India. (ii) System Design. It is to be noted that the project development process described here is for the purpose of understanding only. and (iv) Operation & Maintenance. .Annexure 1: General project development process for grid-connected rooftop solar PV projects in India The project development process for grid-connected rooftop solar PV projects in India does not follow any established protocols/procedures. (iii) Implementation. which includes (i) Project Planning/Preparation. However. since the market is yet to mature so not enough project development has taken place. there is a general set of stages that most project development processes follow. and there are a number of government schemes/programs and implementation models which have different modes of implementation. . in/ Mizoram https://zeda.in/ Madhya Pradesh http://www.gov.Annexure 2: List of State Nodal Agencies (SNAs) Andhra Pradesh http://nedcap.gov.in/abour_us.in/ Arunachal Pradesh http://www.gov.in/ Jammu & Kashmir http://jakeda.com/Home/Index.nic.in/wps/wcm/connect/doit_eerem/EEREM/Home/ Goa http://geda.aspx Andaman & Nicobar Islands http://electricity.org.nic.mpnred.uk.in/Home.rrecl.goa.lakpower.nic.apeda.gov.aspx Maharashtra http://www.in/ Tamil Nadu http://teda.nic.nic.gov.mizoram.gov.jreda.creda.up.mahaurja.gov.in/ Tripura http://treda.in/ West Bengal http://www.in/ Nagaland http://www.org/ .in/ Haryana http://hareda.oredaodisha.gov.org/ Bihar http://breda.in/ Kerala http://anert.gov.org/ Jharkhand http://www.in/ Uttarakhand http://ureda.nic.gov.in/ Telangana http://tg.html Chhattisgarh http://www.nedcap.in/ Delhi http://delhi.com/ Manipur http://manireda.in/ Himachal Pradesh http://himurja.in/ http://ladakhenergy.gov.in/ Gujarat http://geda.nrengl.com/Index.gujarat.in/ Odisha http://www.in/ Assam http://www.in/ Uttar Pradesh http://neda.and.com/ Meghalaya http://mnreda.in/main/ Rajasthan http://www.nic.gov.in/ Lakshadweep Islands http://www.wbreda.com/ Karnataka http://kredlinfo.assamrenewable.aspx Sikkim http://sreda.com/ Punjab http://peda.