1. Financial viability of Solar
power plant in Tamil Nadu
Ishan Rohit
PGDM Finance 2009-11
IMT Ghaziabad

2. Agenda
 Introduction : Solar power
 Potential for Solar power
 Tamil Nadu as a destination
 Capacity Utilization Factor
 CERC Initiatives
 Elements for cash flows projection
 Capital costs – Solar PV
 Capital costs – Solar thermal
 Assumptions
 Results
 Future scope

3. Introduction : Solar power
Types :
 Photovoltaic : Converting solar radiation
into direct current electricity using
semiconductors that exhibit the
photovoltaic effect
 Thermal : Solar heat is used to generate
electricity by heating water to produce
steam which drives a turbine connected to
an electrical generator.

4. Potential for solar power
 India receives solar energy equivalent to
nearly 5,000 trillion kWh/year
 600 GW- far more than the country’s total
energy consumption today
 Solar applications can be broadly divided
into grid-connected and off-grid
 India receives solar radiation of 4.6 to 6.4
kWh/m²/day for 300 to 330 days in a year

5. Tamil Nadu as a destination
 Average annual global solar radiant exposure
in Chennai is 5.37 kWh/m2 / day
 Tamil Nadu is blessed with conducive natural
meteorological and topographical setting.
 Some of the experimental units:
o 15 KW unit setup by TEDA,
o 100 KW unit setup by M/s NEPC
o 2x25 KW unit setup by M/s Udaya Semi conductors
 TEDA has initiated moves for the
establishment of Grid Interactive Solar
Photovoltaic Power Plants of 1MW to 10MW
capacity in Tamil Nadu under Build Own
Operate basis.

6. Capacity Utilization Factor
 Ratio of actual energy generated by the
Solar PV / Thermal project over the year
to the equivalent energy output at its
rated capacity over the yearly period.
 CERC recommends 19% for solar PV
 23% for solar thermal PP in Tamil Nadu.

7. Central Electricity Regulatory
Commission Initiatives
 Specified capital cost norms
 Fixed tariff upfront for the whole tariff
period
 Tariff period kept as 25 years
 In Tamil Nadu :
 Levelised tariff for Solar PV = Rs. 17.10 /KWh
 Levelised tariff for Solar thermal = Rs. 14.38
/KWh

8. Elements for cash flow projection
 Capital Cost
 Capacity Utilization Factor
 Debt-equity ratio
 Levelised tariff
 Term of the loan
 Interest rate on loan
 Interest on working capital
 Return on equity
 Life of plant and machinery
 Depreciation of plant and machinery
 Operation and maintenance expenditure

9. Capital costs – Solar PV
 Cost of :
 Land
 Civil and general works
 PV modules @ US $2/Watt
 Module structures
 Power conditioning units
 Cables and transformers
 Preliminary and pre-operative expenses

10. Capital costs – Solar thermal
Cost of :
Land
Civil and General works
Solar collection system ($/m^2)
Support structure ($/m^2)
Heat collection unit ($/unit)
Mirrors ($/m^2)
Power block ($/KWe)
Thermal storage ($/KWe)

11. Assumptions
Photovoltaic Thermal
CUF 19% 23%
Life of the plant 25 years 25
Project capital
cost/MW
16.9 Crores 15.3 Crores
Debt Equity ratio 70:30 70:30
Interest on loan 12% 12%
Return on equity 19.85% 19.85%
Loan repayment
period
10 years with 1 yr
moratorium
10 years with 1 yr
moratorium
O & M charges Rs.9.515 Lakhs per
MW
with 5.72%
escalation per
annum
Rs.13.74 Lakhs per
MW
with 5.72%
escalation per
annum

12. Assumptions
Photovoltaic Thermal
Depreciation 7% for the initial 10
years
and 1.33% for the
remaining years
7% for the initial 10
years
and 1.33% for the
remaining years
Residual Value 10% 10%
Interest on
working capital
(i)Operation and
Maintenance expenses
for one month;
(ii) Maintenance spares
1% of the O&M
expenses,
(iii)Receivables
equivalent to 1 month
of energy charges
with 12% interest.
(i)Operation and
Maintenance expenses
for one month;
(ii)Maintenance spares @
15% of the O&M
expenses,
(iii)Receivables
equivalent to 1 month of
energy charges
with 12% interest.
Levelised tariff Rs. 17.10 / kWh Rs. 14.38 / kWh

13. Results
1 MW plant Photovoltaic Thermal
NPV 22294370 43603182
IRR 12.93% 15.46%
Benefit cost ratio .13 .285
3 MW plant Photovoltaic Thermal
NPV 71668402 137809029
IRR 13.07% 15.67%
Benefit cost ratio .14 0.3

14. Future scope
 Cost of photovoltaic cells expected to decrease to around
$1/Watt
 Solar PV plant requires lower auxiliary power
consumption as compared to Solar Thermal plant
 Scalability reduces total project cost/MW for Solar PV as
compared to Solar thermal plant
 So Solar PV plant may be an attractive proposition in
future