Lockdown effect: Industries adopt captive solar power to cut costs

By: |
September 22, 2020 8:34 AM

Many companies have virtually managed to reduce their electricity cost to as low as the fixed cost, and see the payback on their investments in three-four years, these sources claim.

Union power minister RK Singh in August said India must become self-reliant in manufacturing of solar equipment in the next 18 months to reduce its depence on Chinese imports.

Falling revenues and increasing electricity costs during the lockdown have forced a lot of companies across industries to shift to captive solar power generation to cut down on the recurring cost of energy, according to major solar end-to-end services players. Many companies have virtually managed to reduce their electricity cost to as low as the fixed cost, and see the payback on their investments in three-four years, these sources claim.

For consumption of 1 MW of electricity, companies pay around rS 27 lakh as electricity bill that gets reduced to Rs 2 lakh or so in one year as they just pay the fixed cost component on thermal power, since the factories are still connected to the Grid.

Rahul Gupta, MD & CEO of Rays Experts, a major solar park developer in India, told FE their order book increased by over 50% year-on-year in the April-June quarter of 2020, as companies realised the importance of captive solar power plants in saving a major recurring cost. “Captive solar plants have turned out to be a really good business model. Given the incentives offered by the government in states like Rajasthan and Gujarat, people are making a 20-25% IRR. The commercial tariff is around rS 9/kWh, while industrial tariff is around rS 7-7.5/kWh, which is very high and can be essentially saved by the companies,” Gupta said.

According to industry experts, the cost of installing a 1 MW solar power plant along with transmission cost is Rs 4 crore that can be recovered in 3-4 years time frame. Since the companies do not have the luxury of space on the roofs, solar parks can help to build capacity and meet the entire requirement for companies. A lot of companies are using the rooftops as well as utilising resources from the solar park.

Puneet Goyal, founder & director of SunAlpha Energy, a major rooftop solar EPC player, that won around 10-12 large clients during the April-June quarter of 2020, also said lockdown has compelled industries to look into their recurring expenses. Companies which used to focus on saving on revenue operations have now realised electricity cost could be saved. The falling interest rates for rooftop projects have also helped companies to get bank funding for captives solar power.

“A client of ours who invested close to Rs 3.6 crore on a rooftop solar plant in Rajasthan has already saved Rs 1.2 crore in one year which is reflecting in his balance sheet. If the roof was bigger he would have got a bigger plant and saved even more. Any industry that sees a payback in three years that becomes a natural investment,” Goyal said.

Imaan Javan, director of operations at US-based EPC player, Suntuity REI, said: “We have done a 103 kilo watt (KW) power plant for a school at Marine Lines in Mumbai where the clients invested Rs 50 lakh and their electricity bill reduced from Rs 24 lakh per year to Rs 2 lakh. We have customised the plant in such a way that around 99% of their demand is on solar. The payback period in this case is less than three years,” Javan said.

Get live Stock Prices from BSE, NSE, US Market and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Financial Express is now on Telegram. Click here to join our channel and stay updated with the latest Biz news and updates.

Next Stories
1Apple had a record September quarter in India; iPhone 12 getting tremendously positive response, says Tim Cook
2Apple sees record quarterly growth in India despite falling iPhone sales across the globe
3PUBG Mobile, PUBG Mobile Lite will not be available for Indian users anymore starting today