There are three main categories of solar power plant developers in India:
- Super duper companies such as Sun Edison, Welspun Energy etc that are both large and financially well-heeled, as well have real professional expertise in putting up solar power plants, both large and small
- Small-medium companies that are existing business keen on solar power, but not well versed with putting up MW solar power plants
- Individuals (usually high net worth) who are perhaps experts in some other profession (doctors, software professionals…) but know next to nothing about solar power plants.
This post is not for the first category, though who knows, anyone can improve!
This post is for categories 2 & 3 – folks who are keen, and can afford, to invest in MW solar power plants, but know little about these.
For many of them in this category, it is important that they understand the Dos and Donts of putting up MW scale solar power plants. Such an understanding can make a big difference between making a few additional crores of rupees – or LOSING THOSE FEW ADDITIONAL CRORES!
This post is for them.
I’m not going to give you the do-s and dont-s by the busloads. Just 3 of them in each!
- Do not invest on anything tangible without a PPA. This must be obvious, but we find that a number of prospective developers start keenly investing in land especially without a PPA in hand. Don’t. Focus your energies on getting a PPA.
- Do not go for an EPC based on your friends’ or relatives recommendations. How many of your friends or relatives could really be experts in solar? I would bet very few or hardly any. So why would you go with a non-expert’s recommendation on such a vital selection as an EPC? Don’t. Do your research or talk to industry experts before deciding on an EPC.
- Do not skimp on costs and end up with lousy panels, inverters or other BoS. This is an old warning, and one presumes that every solar developer worth his salt would be knowing this. But surprise, surprise, we still find some developers’ first question being “is this the cheapest product?” instead of “is this the best product?”
- Ensure you are bidding at a tariff that will provide you a decent financial return. The country has seen some ridiculously low bids from companies that most likely are not in a position to bid those prices – we are not talking about Sun Edison or Softbank who probably can bid at low prices and still make money because of their scale and access to competitive financing. Unless you have the AD (accelerated depreciation) benefit, make sure that your bid tariffs will give you project IRRs of at least 12% – see this post for guidance on tariffs for solar power plants in the scale 1-5 MW.
- Get an expert to be with you from beginning until the first unit of power is generated. All right, we definitely are doing a bit of self-promotion here!, but seriously you don’t have to necessarily appoint a consultant like us, at least make sure that there is someone in your friends or close business contacts someone who can handhold you throughout the process. Don’t try to avoid getting professional help because of the few lakhs you could be spending on this.
- Consult with more than one bank, and include consultations with IREDA as part of your financing. We have seen that most banks start negotiating tough, but we have also seen they had come down on their rates once the clients were able to prove they can bring good collateral security and also show that other banks or financial organizations such as IREDA are able to fund at much lower rates. Spend enough time researching other banks and bargaining for the best deal.
Hope I made some sense, and hope these 3 dos and don’t are indeed useful to you. I look forward to your questions and comments.
And all the best to your solar power plant efforts!