Getting a Power Purchase Agreement (PPA) for Solar Power Plants in India

Ask anyone who is looking at putting up a MW-scale solar power plant as to what the most important part of a solar power plant is, and he will tell you that it is that of getting the PPA.

So, what indeed is a PPA and why is it such an important aspect of solar power plants?

What is a PPA?

Power Purchase Agreement is a legal contract between an electricity generator and a power purchaser. In India, Central and State utility PPA contractual terms last for 25 years, whereas nascent Private PPAs are around 5-10 years . It is during this time the power purchaser buys energy.

Solar Developers are able to competitively price solar power for both public as well as private customers under the terms of the PPA.

PPAs usually include terms of agreement i.e. details on interfacing and evacuation facilities, operation and maintenance, metering arrangements, scheduling of solar power, rate of energy including escalation rates, dispute settlement, billing and payment.

Pros of PPAs include:

  1. No/low up-front cost.
  2. A predictable cost of electricity over 15–25 years.
  3. No need to deal with complex system design and permitting process.
  4. No operating and maintenance responsibilities.
  5. Customer enjoys marketing benefits of their green energy
  6. Price of electricity is indexed to inflation and therefore is increasingly cost effective as fossil fuel based electricity gets increasingly expensive.

Importance of the PPA

Well, unless you are putting up a captive solar power plant for which the consumer of the entire power generated will be yourself/your company, a PPA is a must-have for you to invest in a solar power plant.

Imagine you are starting a business but you have no idea who your customer or you do not have a plan of how to sell your product. Under such circumstances, how will your business make money? It cannot!

Similarly, the ppA is the contract that essentially gets you a customer for your solar power plant. As solar power plants are long term investments, you cannot put up a power plant and then search for a customer. What happens if you are not able to get one? Such a huge investment goes for a waste. It is hence imperative that you first identify a customer who agrees to offtake the power generated by your solar power plant for a specified number of years (preferably 10+ years), and then, once you are sure that you would be able to get your money back within the ppA period, invest in the power plant.

Procedure to Get a PPA

So, now we know that the PPA is the most important pre-requisite for a MW-scale power plant. What are the steps for you get such as PPA?

  • Identify potential locations

Identify approximate area available for PV installation including any potential shading. The areas may be either on rooftops or on the ground. A general guideline for solar installations is 5–10 watts (W) per square foot of usable rooftop or other space.

  • Identify potential solar policies applicable for the land

State policies differ from region to region. The tariff rates at which PPAs are signed differ region to region. Hence zero in on a policy that can bag you a PPA that ensures profitable returns.

  • Respond to the Request for Proposal (RfP) or win bids issued by the Power Purchaser

The developer may have to respond to RfPs or win bids issued by the Third Party Power Purchaser or the Utility

  • Contract Development

After a winning bid is selected, the contracts must be negotiated—this is a time-sensitive process. In addition to the PPA between the government agency and the system owner, there will be a lease or easement specifying terms for access to the property (both for construction and maintenance). REC(Renewable Energy Certificate) sales may be included in the PPA or as an annex to it.

  • Permitting and Rebate Processing

The system owner (developer) will usually be responsible for filing permits and rebates in a timely manner. However, the government agency should note filing deadlines for state-level incentives because there may be limited windows or auction processes.

  • Project Implementation and Commissioning

The developer should complete a detailed design based on the term sheet and more precise measurements; it will then procure, install, and commission the solar PV equipment. The commissioning step certifies interconnection with the utility and permits system startup. Once again, this needs to be done within the timing determined by the state incentives. Failure to meet the deadlines may result in forfeiture of benefits, which will likely change the electricity price to the government agency in the contract. The PPAs usually establish realistic developer responsibilities along with a process for determining monetary damages for failure to perform.

Challenges associated with Government/Utility PPAs

  • Tariffs may be overturned by SERC
  • Poor financial health of DISCOM might lead to delay in payments to developer
  • Generally speaking, government PPAs are regarded as low(er) risk as they are backed by the government and are usually signed for the duration of plant life (25 years)

Challenges associated with 3rd Party PPAs

  • 3rd Party’s financial health may be better than DISCOM’s, but long-term business prospects need to be evaluated
  • Credit rating of the 3rd party should be considered as they are not backed by a government
  • PPAs need not be signed for 25 years. Some are signed for as short as 3 years, leaving future revenue generation of the plant in doubt

In India, both central and state governments have come up with solar allotments for which PPAs are being issues. Some examples of state and central government PPAs are provided below.

Examples of Projects executed under Government PPAs

Karnataka

Karnataka’s solar policy was released in 2014, operative till 2021, and targets 1,600 MW of ground mounted plants.

For Grid Feeding Plants

This includes 2 categories

  1. 300 MW of 1-3 MW capacity plants for land-owning farmers
  2. The rest through competitive bidding for plants greater than 3 MW

An RfP was released in June 2014 for 500 MW under the 2ndcategory.

  • 8 out of 30 bidders won the allocation for 500 MW
    • Lowest winningbid was Rs. 6.71/kWh (20 MW) and highest was Rs. 7.12/kWh (10 MW)
    • 380 MW went to just 3 bidders
    • There is no tariff distinction between AD/Non AD
  • 25-year PPA
Tariff
Year AD/Non AD Lowest Tariff Highest Tariff Escalation (%)
2014 N/A 6.71 7.12 0

No notifications have been issued till date for further capacity addition.

For Sale to 3rd Parties/Captive Consumption

The following incentives were granted under the policy until 2021

  • Tax concessions – For entry tax, stamp duty, and registration charges as per industrial policy
  • Contract demand – Industrial consumers buying solar power will be allowed pro-rata deduction in contract demand
  • Wheeling, Banking, Cross Subsidy charges – Fully exempt for 10 years from commissioning of plant, for plants commissioned between 01.04.2013 and 31.03.2018
    • This exemption does not apply to captive plants availing RECs

solar-internation-investors

 

Other web resources from Solar Mango

IIT Club

Green Expo

RLS

65 thoughts on “Getting a Power Purchase Agreement (PPA) for Solar Power Plants in India

  1. Sankaranandam Murugesan

    I am having land and the basic knowledge of solar power plant . I want to become a sub-contractor as a Vendor for any EPC company . or as a senior manager for EPC company. Pls. gie your advise.

    1. Khushwant

      Hi Sir – i do not have knowledge on jobs, but if you wish to become a sub-contract u should talk to large epcs like L&T and Sterling & Wilson…they always subcontract most of their work

      1. Shivakumar Patil

        I have my client who is looking for 3rd party PPA with equity of 26% in Maharastra for 8Mw. The company should be rated BB or A or A+ and above.

  2. Pingback: Business Models for MW Solar Power Plants in India - Solar Mango – #1 guide for solar

  3. Meganathan

    I do not think third party PPAs will be a strong market – because the third party might as well put up a captive solar power plant, and save on the margins he would have paid to the vendor??

    1. Narasimhan Santhanam Post author

      Meganathan

      Many thanks for your comment

      Your argument is of course valid for many companies, but at the same time, there are companies which might not want to be involved in running a power plant, even a power plant with minimal O&M requirements. They might be willing to pay the extra premium for someone else to supply the power as long it would cost them less than what the conventional grid would cost for the future.

      1. Himanshu Sharma

        Good evening mr. Narasimhan Santhanam….
        Here I want to share some PPA proposal with you –
        We have 15MW PPA in captive solar power plant scheme with avg 4.91rupees/kWh ….all companies are Pvt Ltd with min. AAA and BB+ ratings…..
        Lowest turnover of any company is more than 200 crore rupees…and PPA for 20 years locking period….
        We want Investor for this project….
        Land , and all types permission are cleared and in hand….

        Regards
        Himanshu Sharma
        9509507897
        Project location- Shajapur, Madhya Pradesh. ….

        1. AJ Thomas

          Hi Sir, we can invest in any size in Solar Projects and renewable energy if you have PPA signed then contact me on 9848449000

          1. Rajeev Bhagwat

            Please contact me on cell No 9752363796 & send your Mail Id for further communication.

            Please be informed that we ZLS are an Engineering & Projects business provider with base in India and Gulf Region. .

            We are proposing a Solar project, at Gujrat with the below mentioned details:

            ZLS scope of works for the proposed project:

            A. To provide Technical services – Complete design & feasibility reports
            B. Local Government supports – to ensure that the project is awarded to your company

            For the business services we offer our charges are Nominal of the total project value and a separate commercial offer shall be submitted for the technical services at later stages.

            Let us know your response.

            With Best Regards ,

            ZLS TEAM

  4. Mekala Iyer

    How to find out which states in India are going to give ppas soon?

    There is no place on internet that shows which will be ppas that will be released soon.

      1. Sagar Shende

        Dear sir /madam
        I want information about ,to PPA
        but I have not cleared there procedure please provide me information about to requirement for PPA.
        SAGAR

  5. Victor Anburaj

    A co I know wants to sign a ppa for solar, but only for 5 years. Is it ok?

    How are private solar ppas working in developed countries?

  6. Meghna Reddy

    What is the recourse if the state discom who is the offtaker for many ppas, does not pay up?

    There have been several instances in our own wind farms in Tamil Nadu where the state discom – TANGEDCO – has delayed payments significantly…

    Are courts the only recourse if these happen in solar also?

  7. Richard Johnson

    All Indian ppas go with reverse bidding which is what decreases tariffs. Why cant ppas be given fixed tariffs that are fixed by the govt such that everyone can earn a good return?

  8. Vikram Reddy

    Im glad that Mr Narasimhan has taken time to include this post. ppA is a very important aspect on which the entire future of the solar power plant relies and so this is a critical post. Thanks sir.

  9. SP

    One company top 50 we got request for 5 MW , but they are ready to give 2 years of BG only also there consumption is not on Saturday and Sunday . So what should be good PPA ?

    can anyone signed Off-Grid private PPA and can tel what kind of benefits can be used like tax holiday .. AD .

    what are the main MINIMUM term and condition of any 3rd Party PPA to cover RISK

  10. Gaurav

    We are a Solar System Integrator company based out of Delhi. Recently, clients have approached us requesting for putting up power plants in RESCO/PPA mode.
    We would like some clarification on the question of on whose account can Accelerated Depreciation benefit be availed – consumer/power producer (us)/jointly.
    Also, if the customer purchases panels, inverters etc by himself and contracts to us only the construction of the solar system, will he be able to completely claim the AD benefit?

    1. Sidharth Dhir

      NO, as AD is on the total bill of the solar plant by the company looking after the commissioning of the solar power plant, which in this case will only be the cost of commissioning as other products have been bought by different vendors such as solar panels from one vendor, solar inverters from another like so on. AD cannot be provided on more than one bill for the same solar power plant.

      I hope you got your answer.

    2. Rajeev Bhagwat

      Please contact me on cell No 9752363796 & send your Mail Id for further communication.

      Please be informed that we ZLS are an Engineering & Projects business provider with base in India and Gulf Region.
      We are proposing a Solar project, at Gujrat with the below mentioned details:

      ZLS scope of works for the proposed project: A. To provide Technical services – Complete design & feasibility reports B. Local Government supports – to ensure that the project is awarded to your company.

      For the business services we offer our charges are Nominal of the total project value and a separate commercial offer shall be submitted for the technical services at later stages. Let us know your response.

      With Best Regards , ZLS TEAM

  11. Vikram

    In India everything running or operating with vested interest – nothing more nothing less. If TATA or Birla or Reliance all the government will sign PPA were even Adani and few newly born billionnaires offering Govt. will think twice. If common business people asking for PPA then PPA is meant that people part away not allowed is the trend of Indian policy. All most all the politicians are directly or indirectly linked with their ministry’s work and it leads only through them — shown the Billionnaires in India more than 60% are politicians which shows that in India politics is business.
    Were common people are not entertained at all.
    I am personally offered some business with MP Urja Vikas Nigam limited now an year always adviced that their is no policy. But entire MP Political tycoons are at its way – it shows business are limited to politicians only like skill development which 6 companies shared each other and implementing through political peoples only and their is no choice of other action which an absolute another kind of syphoning.
    Hope to the best – may be common public may get some accessibility if middle group business people are initiated. Mr. Santhanam is viewing the subject some changes may occur in the industry because solar mango having a platform.
    best wishes to all

  12. Pingback: Super Big Resource on Solar Power Costs & Returns - Solar Mango – #1 guide for solar

  13. Yogesh

    JV-FDI process.
    JV – FDI process: Minimum 25 – 100 M USD / Euros. Duration: 60-90 US / European Banking days.

    1. Client has to provide the following documents for pursuance: (soft-copy & hard-copy)

    Brief company profile | Classified Project report as per banker’s requirements
    2. Upon receiving the above documents from client & with all clarification on process & mutual acceptance of JV process with all queries clarified across emails / Skype. We shall schedule a personal interaction with company directors to sign FPA-NCND followed by site visit & detailed discussion.
    KYC – firms & Directors
    3. We will exchange quality information including the financials and schedule Skype interaction with investors only after FPA-NCND signed with the due permission of client and investor.
    4. Joint Venture – INVESTOR representatives will be inducted as the NED & Director-Joint signatory ( varies from investor & project based) in borrowers Entity depending on the investor’s requirements.
    5. A team of 2 representatives will be inducted in the borrowers company as the directors with a salary of Rs. _________________ for each person and allowances till the period of JV has been completed to ensure smooth & safe transaction for the client and the investor.
    6. Company has to update the every project details to the investor’s directors & their assigned / authorized representative through emails officially to maintain transparency for healthy business terms.
    7. An authorized person on behalf of Investors will play a pivotal role with INVESTOR & Client from the beginning to till the JV tenure end.
    8. Repayment: principal amount + profit sharing or may propose as per the best by discussions.
    9. Once the Investor and the client company sign the JV agreement, the company has to make sure the terms are met as per the agreement.
    10. The investor will make investment through FDI as agreed in the JV as per the requirement in the business plan provided by the client.
    11. Consultancy fee for JV process is 5% (Five percent) which will be included in FPA with all detailed (all consultants’ names & detailed breakup service charges).
    12. Client shall pay Rs.50,000/- per month as a monthly salary to 2 consultants on the day of FPA-NCND signed till the investment is credited (approx 2-3 months).

  14. Jaideep

    Sir

    We donot have space for installing solar power plants on the site. Have 4 sites each with 500 KW Sanctioned load, Can we purchase solar power through open access?

    1. CHETAN MAHAJAN

      I HAVE LOT OF LAND FOR INSTALLING SOLAR P[OWER PLANT.
      IF YOU INTRESTED THEN CALL ME 7588193210
      I ALSO THINK ABUT SOLAR BUSINESS…

  15. Harsh vardhan

    I want to start SOLAR PPA BUSSINESS in Uttar Pradesh how can i start this and Which Persons help us to start

  16. MAHESH NADAGOUDA

    I am having 108acres of land.I formed a company.I have given application for permssion for 20MV solar plant it is in proses
    i am looking for good PPA and finance also.or I am reddy for joint venture. can you help me

  17. MAHESH NADAGOUDA

    I am having 108acres of land.I formed a company.I have given application for permssion for 20MV solar plant it is in proses
    i am looking for good PPA and finance also.or I am reddy for joint venture. can you help me.It is in BAGALKOT KARNATAKA

    1. james britto

      WE ARRANGE SOLAR POWER PROJECT FUNDING WITH 6% P.A. INTEREST RATE SCHEME. SO IF YOU WANT ANY ONE FUNDING CLARIFICATION KINDLY CALL ME OR MAIL ME SIR THANKS.
      A.JAMES BRITTO
      FROM CHENNAI, TAMILNADU.
      Email: financejamesbritto@gmail.com
      9003082188. 8838040089.

  18. alok sapra

    hey i need to do ppa in many cities of mahrashta and mp,cg and i want all details off ppa kindly contact
    7999043547,9630033483(whats app)

  19. Abdul

    Hello all, I want to start a solar plant of 2MW in Karnataka, land and Investment part is clear, can any one guide me on ppa , contact 9066691947

  20. Dhanraj

    We have following lands for solar power plant
    All spots are in Maharashtra state.
    Land for sale , District wise
    Unit : acrs
    Connectivity: 132 kv sub stations within 7 to 12 km
    Price 3.20 to 3.75 lakh/ acr
    1 Akola 500
    2 a) Yavatmal 700
    b) Yavatmal 400
    3 Hingoli 300
    4 Nanded 500
    5 Aurangabad
    a) 300
    b) 350
    6 Jalgaon
    a) 500
    b) 300
    7 Dhule 500
    8) Amravati 500
    9 Buldhana 450

    Pl e-mail me your contact details at
    dltulaskar@gmail.com

  21. Pratipalsinh

    I am interested to setting up solar power plant in gujarat up to 1 MW & ready to sign PPA if any company/buyer interested , also I am looking for investor for above 1 mw so who can join me and together we can produce more energy and less O & M cost, My strength is , I have my own Land which is less fertile,
    Appreciated you in advance if you can help me or guide me such way from begining.

  22. M G Bhadrashetti

    We have a land to set up 1Mw solar power plant. We would like to get the help in getting PPA for 15-25 years
    Kindly arrange to forward the contact details.
    Thanks and regards
    M G Bhadrashetti
    9819851699

    1. Rajeev Bhagwat

      Please contact me on cell No 9752363796 & send your Mail Id for further communication.

      Please be informed that we ZLS are an Engineering & Projects business provider with base in India and Gulf Region.

      We are proposing a Solar project, at Gujrat for different capacity directly from the :
      ZLS scope of works for the proposed project:
      A. To provide Technical services – Complete design & feasibility reports
      B. Local Government supports – to ensure that the project is awarded to your company.

      For the business services we offer our charges are Nominal of the total project value and a separate commercial offer shall be submitted for the technical services at later stages.

      Let us know your response.

      With Best Regards ,
      ZLS TEAM

  23. Kamalanadhan

    We have customer with 650 kW connected load , wants to buy power through captive generating plant with 26 % equity is they are eligible for off site captive power solar plant of 650 kW open access.

  24. Rajeev Bhagwat

    Please contact me on cell No 9752363796 & send your Mail Id for further communication.

    Please be informed that we ZLS are an Engineering & Projects business provider with base in India and Gulf Region.

    We are proposing a Solar project, at Gujrat for different capacity directly from the :

    ZLS scope of works for the proposed project:
    A. To provide Technical services – Complete design & feasibility reports
    B. Local Government supports – to ensure that the project is awarded to your company.

    For the business services we offer our charges are Nominal of the total project value and a separate commercial offer shall be submitted for the technical services at later stages. Let us know your response.

    With Best Regards ,
    ZLS TEAM

Leave a Reply

Your email address will not be published. Required fields are marked *

BRING - Biomass Residues Intelligence