A comprehensive guide from

Energy Alternatives India

Replacing Diesel with Solar

Preview of September 2013 report

Energy Alternatives India (EAI) prepared the Replacing Diesel with Solar report based on our extensive interaction with clients who require an objective assessment of what solar energy can do for them in their quest to reduce diesel consumption. The report has several objectives

For Energy Consumers

A clear conceptual overview that allows your strategy team to decide on including captive solar power in your energy mix by analysing

The business case – price movement in diesel power vs. solar The benefits of, and challenges in, integrating solar power in your

operations Detailed financial analysis of returns from replacing diesel with solar under

different scenarios Favourable policies that incentivise your adoption of solar energy Case studies – others’ experience in using solar energy

For solution providers

A study of the market for diesel-to-solar solutions, including Current installed captive power capacity Demand for diesel power Attractive market segments Economics of captive solar PV industry status and trends

Objectives

Why replace Diesel with Solar ?Because not only is it clean energy, it is also much cheaper

Captive solar power costs just Rs. 7-8.5/kWh

Power from Diesel generators costs Rs. 16/kWh • The cost goes even higher once losses from pilferage, evaporation, etc.,

are taken into account.• In some applications, such as rural telecom towers, diesel power can cost

as much as Rs. 40/kWh!

The cost of diesel fuel keeps on increasing• The price has increased 300% since 2002

and 46% since 2010• If the price increases by 10% a year

(which has been the trend), diesel would cost about Rs. 68/litre in 2015 and the cost of power from diesel would be close to Rs. 20/kWh!

Bottom line: Captive solar power is much cheaper than diesel, and once the plant is installed the cost of power is fixed for the next 25 years, unlike diesel where the cost keeps increasing

What are the issues to be considered when substituting Diesel with Solar?

While solar energy can replace diesel, there are several critical aspects of using solar power in India that need to be examined carefully when framing your solar strategy, such as

Will solar energy generate power during power cuts? Can I replace my entire diesel consumption with solar power? Are there any issues in using solar power that I should be aware of? What incentives are available for setting up captive solar PV plants? What are the costs involved and financial returns that I can expect

from replacing diesel with solar? Who are the key vendors providing captive solar PV plants in India? Do I need to have my own PV plant? Can I just buy solar power the

way I buy power from my utility?

Each of these, and many other such questions, are discussed in the Replacing Diesel with Solar report

Will solar energy generate power during power cuts?

Not all solar PV plants generate power during power cuts – a fact that comes as a surprise to many of our clients. There are three kinds of PV plants

Grid-tied Grid-interactive Off-grid

The Replacing Diesel With Solar report discusses each type of plant with respect to how they function and the applications they are best suited to, including providing power during power cuts. We also examine the use of batteries to provide backup power when solar power isn’t available

Can I replace my entire diesel consumption with solar power?

Whether your entire diesel consumption or only a part of it can be replaced with solar power depends on several factors, such as The extent of rooftop space available The nature and schedule of the load The timing of power cuts

The Replacing Diesel With Solar report examines the impact of each of these factors on substituting diesel with solar, and critically analyses integration of solar power with diesel generators where sufficient solar power cannot be generated to support the entire load.

We also discuss the timing of power cuts and the financial impact of using solar power partially to offset utility power and partially offset diesel consumption.

Are there any issues in using solar power that I should be aware of?

Solar power is an intermittent source of power as the sun isn’t always shining to the same extent on the panels. These may create issues, particularly when integrating solar power with diesel, such as

Frequency synchronisation Reverse current flows Efficiency losses in the DG set

The Replacing Diesel With Solar report discusses these and other issues experienced when implementing a solar solution. The solutions and workarounds to these issues are also presented, as well as our recommendations for integrating solar with diesel

What incentives are available for setting up captive solar PV plants?

There are several incentives available to those setting up captive solar PV systems, including

Accelerated depreciation Subsidies Renewable Energy Certificates

The Replacing Diesel With Solar report discusses these in detail, including eligibility criteria and amount of subsidy for different categories of consumers and different kinds of installations. We also illustrate other policy initiatives such as group captive provisions that allow several consumers to come together and setup a common power plant

What are the costs and financial returns

that I can expect from replacing diesel with solar?

Item

Cost range

(Rs. Lakhs)PV modules 31.5 - 33.8Inverters (grid tie) 7.7 - 8.3Balance of System (transformers, cables and wires, tracking devices, etc.) 23.8 - 25.5

Installation (civil & general works) 6.3 - 6.8

Total 70.0 – 75.0

Cost break up of a 100 kW solar captive system – without batteries

The Replacing Diesel With Solar report gives detailed breakup of cost involved in setting up a solar PV plant, such as

The report also analyses financial parameters such as IRR and payback when replacing diesel with solar under 3 scenarios (pessimistic, likely, and optimistic) that vary the capital cost of the system, the escalation in price of diesel, and the extent of diesel substitution.

Who are the key vendors providing captive solar PV plants in India?

Due to the complexities in designing and installing a captive solar PV plant, we recommend utilising the services of a qualified vendor who can provide you with turnkey solutions that are best suited to your needs

The Replacing Diesel With Solar report provides you with a list of 35 vendors in India with details on solutions offered. We have included both Companies that manufacture the solar power

system and also provide turnkey solutions in integrating the system for the developers and

Companies/consultancies that merely provide integration services

Do I need to have my own PV plant? Can I just buy solar power the way I

buy power from my utility?

To avoid the initial investment required by solar PV plants some organisations prefer to buy only the power generated from a captive PV plant, just like they buy power from a utility. This is known as the Build Own Operate (Transfer) – BOO(T) model

The Replacing Diesel With Solar report discusses the characteristics, features, and challenges in implementing a BOO(T) solution, as well as a list of 10 vendors offering this solution in India.

How will the Replacing Diesel with Solar report help me ?

This report answers the most critical questions that EAI has come across in advising our clients Why should I go for solar based captive power? How much solar PV capacity do I need? How much will it cost to install a solar PV captive system? How much maintenance does a solar PV system require? What are the key things I should look out for before installing a solar PV

system? What are the mistakes I should avoid? How much space will I need for the captive PV installation? Should I use solar as a backup power or as a mainstream power source? Will I be able to depend completely on solar energy for my day time

operations? If I operate night shifts, will I need a storage system (battery) for my energy

needs? Can I sell my excess energy to the grid? What are the components of the solar PV system? What is the lifetime of the system? Am I eligible for availing government incentives? Can I install a hybrid captive system (mix of solar and wind OR solar and

diesel)? When should I consider using a generator with my solar PV system?

Summary of BenefitsIf you are looking to save on diesel by moving to captive solar

power, EAI’s Replacing Diesel with Solar report is a one-stop resource for all the information you will need to assess, implement, and profit from substituting diesel with solar

Captive solar PV technology and components Constraints in replacing diesel with solar Government incentives and regulations Inputs on capital and operational costs and financial

scenario analysis Case studies of businesses that already use solar for

captive power Financing options Vendors, component suppliers, and system integrators List of solar PV captive power plant systems all over India

Within this report you will find 186 pages that discuss

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Replacing Diesel with Solar report

Why EAI?

Focus Expertise

Network Team

We do ONLY Renewable Energy and Cleantech, nothing else

Intersection of domain knowledge and marketing expertise

Professionals from IIT and IIM; biotechnology, energy engineering, economics, and finance specialists

Deep relationships across the Renewable Energy value chain, particularly in Solar and Wind

Our Clients – Domestic

Reliance Industries Limited, India Indian Railways Accenture, India

Sterlite Technologies (Vedanta Group)

Minda Group Low Carbon Expert Committee Planning Commission Government of India

Agrawal Group Bhavik India Group Bosch, India

GE, IndiaSchneider Electric, India

Our Clients – InternationalExxon Mobil,

USATotal, France Saudi Aramco

Shell, Netherlands

Mitsubishi, Japan Marubeni, Japan

US Army Ministry of Foreign Affairs of Denmark

National Renewable Energy Laboratory, USA

Boston Consulting Group, Germany

A.T. Kearney, Germany Mott MacDonald

Bill & Melinda Gates Foundation, USA

World Bank Procter & Gamble

Energy Alternatives IndiaA5C Anugraha Apartments41, Nungambakkam High RoadChennai – 600034 Tamil Nadu India

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Appendix

Report Contentsby Chapter

List of Contents – Chapter 1Captive Power in India

1.1 Introduction1.2 Captive Power Plants in India1.3 Diesel in India1.4 Why Solar for Captive Power1.4.1 The Business Case for Captive Power Plant (CPP) Using Solar PV (SPV)1.5 Attractive Market Segments1.5.1 Large Industrial Facilities1.5.2 Large Commercial Buildings/Facilities1.5.3 Communication Sector1.5.4 Water Pumping1.5.5 On-shore and Off-shore Oil & Gas1.5.6 Desalination1.5.7 Remote Monitoring Stations1.5.8 Warning Signals1.5.9 Lighting1.5.10 Refrigeration1.6 Solar Power vs. Diesel Generator1.7 Key Bottlenecks

Key Sections

List of Contents – Chapter 2Technology Options

2.1 Introduction2.2 Stand Alone PV Systems2.3 Grid-tied Captive Power Plant2.3.1 Grid-tied Systems With No Battery Backup2.3.2 Grid-Interactive With Battery Backup2.4 Hybrid Systems2.4.1 Solar Photovoltaic-Diesel Generator Hybrid System2.4.2 Solar Photovoltaic-Wind Hybrid System2.5 Summary of Solar PV Technology Options

Key Sections

List of Contents – Chapter 3Setting up Solar CPP in India

3.1 Steps Involved in Setting Up a Captive PV Power Plant3.2 Steps Involved in Setting up a Hybrid System3.3 Key Requirements to Set Up a Captive Power Plant (CPP)3.3.1 Essential Components3.3.2 Optional Components3.4 Setting up PV Captive Power Plants - Key Factors to Consider3.5 Indian Companies and Entities Involved in Setting up of a Captive Power

Plant

Key Sections

List of Contents – Chapter 4Policies, Regulations & Incentives

4.1 Introduction4.2 Government Incentives and Policies4.2.1 Captive SPV and the NSM

• Guidelines for Off-grid and Decentralized Solar Applications • Central Financial Assistance & Eligibility • How to ApplyCommissioning of the Projects

4.2.2 Electricity Act4.3 Frequently Asked Questions

Key Sections

List of Contents – Chapter 5Economics of Captive Power Plants

5.1 Introduction• Solar PV and Grid Parity• Solar PV’s Diesel Parity

5.2 Capital Costs and Breakups5.2.1 Inputs Used in the Financial Model5.2.2 Performance of Solar PV System5.3 Results of the Financial Model

• Pessimistic Scenario• Likely Scenario• Optimistic Scenario

5.4 The BOO(T) Model

Key Sections

List of Contents – Chapter 6Financing of Solar CPPs

6.1 Introduction6.2 Project Finance Characteristics6.3 Asset Finance Characteristics6.4 Corporate Finance6.5 Most Likely Routes for Financing of Solar PV CPP6.6 Nodal Agencies that Support Renewable Energy Financing in India6.6.1 IREDA6.6.2 Power Finance Corporation Ltd6.7 Financial Institutions that Fund RE Projects in India

Key Sections

List of Contents – Chapter 7Next Steps to be taken by a Solar PV Captive Power Developer

7.1 Introduction7.2 Preparing Prefeasibility and Detailed Project Reports7.3 Meeting Government Departments7.3.1 List and Contact Details of State Nodal Agencies (SNA) in Various States7.3.2 Central Government Relevant Department Details and Contacts7.4 List of System Integrators of Solar PV Captive Power System

Key Sections

List of Contents – Chapter 8Solar PV in India – Industry Status and Trends

8.1 Introduction8.1.1 Introduction to Alternative Energy Sources8.2 Solar PV Technology8.2.1 Solar PV – Crystalline Solar Cells8.2.2 Solar PV – Thin Film Solar Cells8.2.3 Solar PV - Concentrating Photovoltaic8.2.4 Photo-electrochemical, Polymer, Nano-crystal and Hybrid cells8.3 Solar PV Market Status and Trends8.3.1 Market Share of Thin Film Photovoltaics8.3.2 Solar Photovoltaic in India – A Snapshot8.4 Solar Energy Potential in India8.4.1 Regional Potential for Solar Power8.4.2 Current Solar PV Scenario in India8.4.3 Future Solar PV Scenario8.4.4 Solar PV Future Contribution in Indian Electricity Supply8.5 Status of Solar PV Technology in India8.5.1 Solar Cells and Solar PV Production8.5.2 Foreign Trade of Solar PV8.6 Prominent Solar PV Power Projects & Companies in India8.6.1 Solar PV Power Projects Installed8.6.2 Solar PV Power Projects Approved by the Central Government under Phase I of JNNSM Scheme8.6.3 Solar PV State Projects8.7 Key challenges to growth of Solar PV in India

Key Sections

List of Contents – Chapter 9Case studies of Indian Use of Captive Solar PV

9.1 Captive Solar PV Systems – Experience of L&T, Chennai9.2 Captive Solar PV Systems – Experience of SSN Research Center, Chennai9.3 1 MW Hybrid Energy Supply for a Cotton Mill, Tirupur, TN, India9.4 Captive Solar PV Systems – Experience of Omax Auto Ltd, Gurgaon, Haryana9.5 Captive Solar PV Systems at Daimler India, Chennai9.6 Solar PV Captive Power Installations in India

Key Sections