What are captive solar power plants?
A captive solar power plant refers to a solar power plant that has been implemented by a company for its own captive consumption. That is, the power generated by the solar power plant is consumed entirely by the developing company itself.
Now, you might easily recognise one type of captive solar power plant, and that is the rooftop solar power plant. Most times, the power generated from a rooftop solar power plant is consumed by the owner of the rooftop, whether it is a residence or an industrial or commercial consumer.
So, are all captive solar power plants just rooftop solar power plants?
Now, there is also a misconception that all captive solar power plants are of the rooftop variety.
This is not correct.
You can actually install a solar power plant outside your premises, and sometimes even a few hundred Kms away from your premises, and still consume all the power generated from your power plant for captive use.
You might wonder: Why will someone want to do this? If they can have the solar power plant on their own rooftop, why will they want to put it up elsewhere.
The answer, as some of you might have already figured out, has to do with the extent of rooftop area available.
In many cases, especially for commercial and industrial consumers, the amount of power they consume (currently, from the grid) is much higher than what a solar power plant on their rooftops can generate.
If such companies wish to have most or all of their power consumed to come from solar, they either need to procure the extra solar power from some one who is generating it outside their company, or instal a power plant themselves outside their company premises, in a location where they can find enough land to set up a solar power plant of the capacity that their power consumption requires.
Business Case for Captive Solar Power Plants
While in the last five years, most of the development for solar power plants has come about from power plants put up for sale of electricity to the government utility, slowly but steadily, a number of solar power plants are coming up to cater to captive power consumption.
What is the business case that is driving this movement towards captive solar power?
- The cost of solar power is decreasing all the time. As of Oct 2015, cost of generation of solar power is only slightly above Rs 6/kWh. In fact, if you are putting up a MW scale, ground mounted solar power plant, your LCOE can be as low as Rs 5.5/kWh without accelerated depreciation benefit and as low as Rs 5 or even less if you can avail of AD benefits.
- Whereas cost of grid power for corporates in many parts of India is more than Rs 8 per unit, and expected to increase even further
- This makes it attractive for companies that are large consumers of electricity to explore captive solar power plant options
- If your company consumes about 1 lac units or more of electricity every month, and paying Rs.7/kWh or more, a captive solar power plant could be a good option for you to save costs and secure your electricity price for 25 years.
Steps Involved in Captive Solar Power Plant Implementation
- Analyse your current power consumption and compare it to the cost of solar power
- Estimate future cost trends for your grid power and compare it to the lifetime cost of solar power. This step will establish the financial feasibility of a captive solar power plant for your business. If feasibility exists, analyse your state solar policy and regulations to identify incentives and constraints for captive solar power generation.
- If the above are favourable, estimate the total solar power plant capacity required for your captive solar power plant Identify land for putting up solar power plant
- Identify the EPC for putting the solar power plant Design and implement the solar power plant in the most optimal manner
Related Aspects You Need to Work on
- Estimate the optimal capacity you need for your captive solar power plant – this will be based on your existing power consumption and the costs associated with it.
- Get your finance team to develop a robust financial model that will provide a precise idea of the business case you have for captive solar power plants.
- Update yourself on the solar policies of your state, and analyse how these policies affect captive solar power generation. Use these to determine the extent of incentives and costs attached to captive solar power plants. This stage will determine the actual landed cost of solar power for your company.
- If you need to install solar power plant outside your premises, identify land in a location suitable for the same.
- One of the critical acts is to identify the correct EPC for installing the solar power plant. Selecting the right EPC can make a tremendous difference to the success of your business.
- Coordinate with the EPC for key component selection in order to arrive at the best design and components that maximize power generation over the next 25 years
Captive solar power plants are not very prevalent in India as of 2015. But with the cost of solar power declining fast, cost of solar power from captive solar power plants is already cheaper than the price many industrial and commercial sector companies are paying to the grid. As a result, a number of them are considering implementing captive solar power plants, and this trend should accelerate even further starting 2016.