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Beuth University of Applied Sciences
Department of Business Administration and Social Sciences
Program: MBA Renewables
Solar power for IT office buildings in India:
Evaluating cost benefits and ancillary
advantages
Master's Thesis
In order to earn the Master of Business Administration degree
Submitted by: Sakthi Ganesh Jayakumar
Matriculation Number: 804748
Submitted on: 27 January 2016
Supervisor: Prof. Heinrich Lüthi-Struder
Evaluator: Prof. Dr.-Ing. Sven Tschirley
I
Executive Summary
In human history the 21st century will be described as the
era of Information technology (IT). The innovations in Information
technology has benefited other areas such as Medicine, Education,
Transportation and many more. India has been one of the biggest
beneficiaries of the IT wave. However the growth of the ICT sector
in India is pulled back because of external circumstances like
problems in Power Sector. Unreliable power supply is a major
problem for the ICT sector. The main goal of this thesis is to
determine if renewable energy could solve this problem and if
renewable energy is financially feasible for the IT industry.
The results of this study shows that Solar PV is a good fit
when compared to other technologies and if the incentives and tax
concessions extended by the government are appropriately utilized
then it is financially viable for the IT companies to implement Solar
PV for captive generation. The study also shows that there are
substantial cost benefits associated with replacement of Diesel
generated electricity with the Solar PV generated electricity. The
financial analysis carried out as part of this study shows that the
Levelized Cost of Energy (LCOE) of Solar PV electricity can be as low
as INR 5-7 and the payback period of Solar PV project could be as
low as 2 years under certain conditions. The diesel replacement
scenario results show that merely by reducing the diesel generated
electricity by Solar PV, a company can save substantial amount of
money. Apart from the direct economic benefits for the company, it
is also shown that if all the existing IT companies generate 100% of
their consumption, then at least 2 million other people will be
benefited from Grid electricity.
II
List of Figures
FIGURE 1 CONTRIBUTION OF SECTORS TO THE INDIAN GDP SOURCE: PLANNING COMMISSION ....................... 5 FIGURE 2 MARKET SIZE OF IT INDUSTRY IN INDIA. SOURCE: NASSCOM, TECHSCIRESEARCH ............................ 6 FIGURE 3 GROWTH OF ELECTRICITY SECTOR IN INDIA FROM 1947-2015 SOURCE: PIE CHART: 9, CEA, INDIA . . 7 FIGURE 4 DEMAND SUPPLY GAP IN TAMIL NADU, INDIA. SOURCE: BUSINESS TODAY, JULY 22 2012 ............. 10 FIGURE 5 INDIA IT/ITES REVENUE AND EMPLOYMENT GROWTH. SOURCE: DATA COLLECTED FROM MULTIPLE
SOURCES .............................................................................................................................. 12 FIGURE 6 ELECTRICITY DEMAND GROWTH OF THE ICT SECTOR SOURCE: GREENPEACE, MAY 2015 ................ 14 FIGURE 7 RENEWABLE ENERGY INVESTMENTS BY TOP IT COMPANIES SOURCE: GREENPEACE INTERNATIONAL,
MAY 2015 .......................................................................................................................... 15 FIGURE 8 RENEWABLE ENERGY BY INSTALLED CAPACITY IN INDIA SOURCE: “CREATIVE COMMONS RENEWABLE
ENERGY SHARE INDIA 2013” BY SKYDOC28 IS LICENSED UNDER CC BY 2.0 ...................................... 16 FIGURE 9 COLOCATION DATA CENTER STATISTICS, INDIA. SOURCE: DATA CENTER MAP ............................... 19 FIGURE 10 INFORMATION TECHNOLOGY COMPANY LOCATIONS IN SOUTH INDIA. SOURCE: GOOGLE MAPS ..... 19 FIGURE 11 POWER TARIFF HIKE IN TAMIL NADU SOURCE: RECONNECT ENERGY ........................................ 22 FIGURE 12 2014 THUS FAR: THE FALL OF OIL AND ITS EFFECTS ON INDIAN FUEL PRICES, SOURCE: CAPITAL
MIND ................................................................................................................................. 23 FIGURE 13 POWER GRID TRANSMISSION SYSTEM. SOURCE: GREEN CLEAN GUIDE , AUTHOR: SHAILESH ......... 25 FIGURE 14 TYPICAL BREAKDOWN OF THE DATA CENTER ENERGY CONSUMPTION, SOURCE: ELECTRONICS COOLING
, ISSUE: DECEMBER 2010 ....................................................................................................... 29 FIGURE 15 SOLAR ASSISTED COOLING USING ARUN DISH, SOURCE: CLIQUESOLAR .................................... 30 FIGURE 16 ADVANCED SOLAR AIR CONDITIONING TECHNOLOGY IN ARAB EMIRATES, SOURCE: RAC MAGAZINE
.......................................................................................................................................... 31 FIGURE 17 SOLAR PV ROOFTOP SYSTEM IMPLEMENTED AT MURUGAN TEXTILES. SOURCE: TATA POWER SOLAR
.......................................................................................................................................... 34 FIGURE 18 SOLAR PV CAPACITY IMPLEMENTED BY INFOSYS IN DIFFERENT CITIES. SOURCE: INFOSYS ............... 36 FIGURE 19 COMPARISON OF SOLAR PV SYSTEM PERFORMANCE WITH E-W FACING PANELS WITH A SYSTEM WITH
SOUTH FACING PANELS SOURCE: ENERGETICA INDIA .................................................................... 37 FIGURE 20 RID TIED ROOF TOP SOLAR PV SYSTEM WITH FULL LOAD DG BACKUP SYSTEM SOURCE: FIRSTGREEN
CONSULTING ........................................................................................................................ 42 FIGURE 21 CONDENSED LIST OF SOLAR POLICIES IN SOUTH INDIAN STATES. SOURCE: MARCH 2015 SUMMARY
SHEET PUBLISHED BY IREEED .................................................................................................. 43 FIGURE 22 RECOMMENDED FLOW OF IMPLEMENTING SOLAR PV SYSTEM ................................................. 45 FIGURE 23 TOP VIEW OF THE INFOSYS POCHARAM CAMPUS. SOURCE: GOOGLE MAPS ............................... 48 FIGURE 24 FRONT VIEW OF INFOSYS POCHARAM CAMPUS. SOURCE: THATSOKDUDE.COM ........................... 48 FIGURE 25 SOLAR IRRADIATION DATA FOR HYDERABAD. SOURCE: GAISMA ............................................... 49 FIGURE 26 SUN RISE AND SUN SET TIMES FOR 6 MONTHS FROM THE DATE OF ACCESS SOURCE: GAISMA ........ 49 FIGURE 27 SUN RISE AND SUN SET TIMES FOR PREVIOUS 6 MONTHS FROM THE DATE OF ACCESS SOURCE:
GAISMA .............................................................................................................................. 49 FIGURE 28CONSOLIDATED LCOE VALUES FOR 4KWH PER KWP PER DAY YIELD .......................................... 55 FIGURE 29 FIGURE: 2-26 CONSOLIDATED LCOE VALUES FOR 5KWH PER KWP PER DAY YIELD ...................... 56 FIGURE 30 CONSOLIDATED SOLAR PV FINANCIAL PARAMETERS FOR 4 KWH PER KWP PER DAY YIELD ............ 57 FIGURE 31CONSOLIDATED SOLAR PV FINANCIAL PARAMETERS FOR 5 KWH PER KWP PER DAY YIELD .............. 58 FIGURE 32 TYPICAL AC AND DC POWER SYSTEMS IN DATA CENTERS. SOURCE: NTT FACILITIES, INC. TOKYO
JAPAN ................................................................................................................................. 70
III
Table Of Contents
Executive Summary ______________________________________________ 1
1. Introduction to thesis task and scientific methods __________________ 1
2. Implementation of the thesis tasks ______________________________ 3
2.1 Understanding Interdependence of Indian Economy, Power Sector and
the IT Sector ______________________________________________________ 3 2.1.1 Overview of Power Sector in India_____________________________________ 6
2.1.1.1 Existing Challenges in Indian Power sector: _________________________ 8 2.1.2 Overview of Indian IT Market: _______________________________________ 10
2.1.2.1 Effect of Growth of ICT sector on Power Sector: ____________________ 13
2.2 Overview of Renewable energy focus of India ____________________ 15
2.3 South Indian ICT Sector and Power challenges faced: _______________ 18 2.3.1 Clustered model of IT Company locations ______________________________ 18 2.3.2 Existing power supply scenario and challenges faced by IT companies: ______ 20
2.3.2.1 Impact of unreliable Power supply: ______________________________ 21 2.3.2.2 Impact of rising Electricity costs: ________________________________ 21 2.3.2.3 Impact of rising fossil fuel prices: ________________________________ 23 2.3.2.4 Impact on community: ________________________________________ 24
2.3.3 Options available for IT Companies to meet power supply requirements_____ 24 2.3.3.1 Using Grid as Primary and Diesel as secondary source _______________ 24 2.3.3.2 Purchasing power through Open Access Mechanism (OA): ___________ 25
2.3.3.2.1 Downsides associated with Open Access mechanism: _____________ 26 2.3.3.3 Investing in Renewable energy power generation ___________________ 26
2.3.3.3.1 Possible benefits in adopting renewable energy: _________________ 27
2.4 Selection of suitable renewable energy source for IT companies: _____ 27 2.4.1 Review of Solar thermal energy based models __________________________ 29
2.4.1.1 Solar Thermal Air conditioning options: ___________________________ 29 2.4.1.1.1 Solar Assisted Cooling using VAM and Arun Dish: ________________ 30 2.4.1.1.2 Solar Cooling using Micro-Concentrators and Absorption Chillers: ___ 31
2.4.2 Recommended Solar Technology suitable for ICT companies: ______________ 32
2.5 Overview of existing Solar PV implementations in India ____________ 33 2.5.1 Notable Solar PV projects in South India: ______________________________ 33
2.5.1.1 Solar PV Project Case Study 1 - Murugan Textiles:___________________ 34 2.5.1.2 Solar PV Project Case Study 2 - Infosys: ___________________________ 35
2.5.1.2.1 Special feature of Solar PV system installation at Chennai campus: __ 37
2.6 Solar PV implementation models available for IT companies: ________ 38 2.6.1 Arrangement as a captive generating plant for the roof owners ____________ 39 2.6.2 Solar Lease Model with Sale of electricity to Grid ________________________ 39
2.7 Selection of Solar PV System type suitable for IT Companies _________ 40 2.7.1 Type of Solar PV Systems, their Pros and Cons: _________________________ 40
2.7.1.1 Grid Tied Solar PV System: _____________________________________ 41 2.7.1.2 Off grid Solar PV System: _______________________________________ 41 2.7.1.3 Grid Interactive Solar PV System: ________________________________ 41
2.7.2 Suitable Solar PV System type for IT Companies _________________________ 42
2.8 Policies and Incentives available for Solar PV: _____________________ 43 2.8.1 Accelerated Depreciation Benefit: ____________________________________ 44
IV
2.9 Recommended flow for implementing Solar PV System: ____________ 44
2.10 Typical electricity consuming devices in Information Technology
companies: ______________________________________________________ 45
2.11 Analysis of financial viability of Solar PV Roof top Systems for IT
Companies: ______________________________________________________ 47 2.11.1 Method followed to select project location of example Solar PV System: __ 47 2.11.2 Selected building and Solar Potential in that location:__________________ 48 2.11.3 Overview of selected financial parameters: __________________________ 50
2.11.3.1 Levelized Cost of Energy – (LCOE) ________________________________ 50 2.11.3.2 Payback period: ______________________________________________ 51 2.11.3.3 Internal rate of return – (IRR): __________________________________ 51 2.11.3.4 Cost Benefit Analysis of Diesel Replacement: ______________________ 52
2.11.4 Assumptions made for financial analysis: ____________________________ 52 2.11.5 Detailed explanation of the Excel file layout: _________________________ 54 2.11.6 Interpretation of the financial analysis results: _______________________ 55
2.11.6.1 LCOE Analysis results: _________________________________________ 55 2.11.6.2 Payback period Calculation results: ______________________________ 56 2.11.6.3 Internal Rate of return calculations: ______________________________ 56 2.11.6.4 Cost benefit analysis of Diesel Replacement scenario results: _________ 57
2.11.7 Consolidated results and conclusions: ______________________________ 57
2.12 Analysis of Ancillary benefits of implementing Solar PV System: ______ 58 2.12.1 Ancillary benefits for the company implementing Solar PV: _____________ 58 2.12.2 Impact of Captive generation by the IT Company on the Grid: ___________ 59 2.12.3 Impact of Captive generation by the IT Company on the community: _____ 60
2.13 Risk Analysis of Solar PV System implementation Project: ___________ 61
3. Solar PV Financial viability calculation results and conclusions: ______ 67
4. Future prospects and emerging technologies relevant to ICT sector: __ 69
1 | P a g e
1. Introduction to thesis task and scientific methods
The Master’s Thesis will evaluate the financial feasibility of
integrating Renewable Energy in Information Technology (IT)
companies located in India, the advantages of implementing
renewable energy from the company’s perspective and also from
the perspective of the community. Information Technology (ICT)
sector has grown tremendously in the past 25 years in India and is
continuing to grow1. The increasing power consumption due to the
increasing population and growing industrial sectors including IT
Sector, is not matched by the increase in power generation. This
has resulted in erratic power supply even in big cities. Companies in
the ICT sector are largely dependent on two important resources:
1. Human resource 2. Computer hardware & Network equipment.
These computers and Network equipment require uninterrupted
power supply for working. The frequent power cuts prevailing in
most part of the country is detrimental to the growth of the IT
Industry which is one of the fastest growing sectors in India today.
Southern Indian states of Tamil Nadu, Karnataka, Kerala, and
Andhra Pradesh (Recently bifurcated in to Telangana and Andhra
Pradesh) have nearly half of all the existing IT companies in India2.
Rest of the IT companies are spread across other parts of India.
Southern India is taken as the example region for this study. The
discussions related to current energy costs, energy demand gap,
existing policy structures etc are limited to the Southern States due
to the varied nature and the vastness of the country. However the
results from this study can be applied to other parts of India after
considering changes pertaining to those areas.
1 See Federation Of Indian Chambers of Commerce and Industry, Sector Profile: Information Technology (IT), www.ficci.com/sector/21/project_docs/ficci_website_content_-it.pdf , (25.12.2015) 2 See Wikipedia, Economy Of South India, https://en.wikipedia.org/wiki/Economy_of_South_India , (25.12.2015)
2 | P a g e
The goals of the thesis will be achieved through the following the
logical sequence:
Understanding the interdependence of Power Sector, IT
Sector and Economy
Understanding the Indian Power Sector, existing power
sector setup and the current challenges
Analysis of various renewable energy sources available for
the IT companies and selection of suitable option
Review of existing state policies with respect to renewable
energy
Evaluate the financial viability of integrating renewable
energy for a typical IT Company
Analyze the advantages of implementing the renewable
energy from company’s perspective
Analyze the positive effects on the state DISCOMs because
of the self-generation by IT companies
Analyze the impact on the community due to the reduced
burden on the Grid
With regards to the scientific methods applied, the thesis will
undertake Documentary analysis using Secondary data relevant to
integrating renewable energy to the energy mix of the IT companies
and also Cost Benefit analysis of an example project. The research
undertaken and methods applied are to provide a comprehensive
answer to the following questions:
1. Is it financially viable to implement renewable energy in
Indian IT Companies?
2. What are the ancillary benefits for the company
implementing renewable energy for their own consumption?
3. What other advantages to the society can be expected by
self-generation of electricity by IT companies?
3 | P a g e
The results of this thesis is expected to shed light on the suitable
renewable energy technology for IT companies, key requirements
for the financial viability of integrating renewable energy in IT
companies and the expected benefits from the companies
perspective and from the community’s perspective.
2. Implementation of the thesis tasks
2.1 Understanding Interdependence of Indian Economy,
Power Sector and the IT Sector
India is one of the largest democracies in the world today.
With over 1.3 billion people, it is already home to approximately
17.5% of all humans in this world. The population is growing at a
rate of 1.2% and is expected to become the most populous country
in the world by 20223. This growth in population also means that
the demand for any consumable goods and services will also
increase. The country has to grow more food, build more houses,
improve infrastructure etc. It is then no surprise that the
requirement for electricity will also increase many fold. In fact,
many states in India are already struggling to meet the electricity
demand. It has been calculated that India’s GDP is constrained by
up to 2% per annum just because of the power shortages prevalent
in many parts of the country. When we consider that the GDP is at
approximately $8 Trillion (By Purchasing Power Parity basis as of
2015), the 2% drop is a whopping $160 billion4. The projection is
that the total power demand would grow at a rate of approximately
10-12% per annum up to 2017 and this is set to widen the loss of
GDP due to power shortages unless the country finds a way to
bridge the gap between the power demand and power generation.
3 See Wikipedia, Demographics of India, https://en.wikipedia.org/wiki/Demographics_of_India , (13.10.2015) 4 See Wikipedia, Indian Power Sector Snapshot, http://www.indianpowermarket.com/2011/05/indian-power-sector-snapshot.html , (13.10.2015)
4 | P a g e
Rapid developments in the world of science and technology
has resulted in humans relying more and more on electrically
powered machines and gadgets. In the developed countries of the
world power cuts are very rare and even if it happens, it lasts only
for a short amount of time. On the other hand, developing countries
like India are caught between the economic growth and the lack of
sufficient energy required to meet the economic growth. Barely 25
years ago, only a very small percentage Indian households had a
telephone line. Today one can see that even a remote village house
has one or more mobile phones. The electricity demand of these
small gadgets is mounting more and more pressure on the grid. The
government is trying to modernize the existing grids and increase
generation to meet the demands. One of the other major areas of
concern is the transmission and distribution losses which is pegged
at approximately 23%. A recent study indicates that the losses are
as high as 50% in some parts of the country5. Some parts of the
country does not even have access to grid electricity. Nearly 300
million Indian citizens have no access to grid electricity6. This means
that every watt of grid electricity that is not drawn by the existing
grid consumer would save more than one watt for the grid and will
enable someone else to get access to that saved energy.
Traditionally India has been an Agricultural society. Even
today Agriculture is the largest employment sector in India. In
terms of GDP however, the share of Agriculture sector has been
steadily declining while the contribution from Industrial and Services
sector is steadily increasing even though in absolute numbers it has
grown in the past 65 years.
5 See The Energy and Resources Institute (TERI), Transmission and Distribution Losses (Power), www.teriin.org/upfiles/pub/papers/ft33.pdf , (8.09.2015) 6 See Wikipedia, Electricity Sector In India, https://en.wikipedia.org/wiki/Electricity_sector_in_India , (8.09.2015)
5 | P a g e
The graph below7 shows that the contribution towards GDP from
Services sector has outgrown Agricultural and Industrial sectors.
Figure 1 Contribution of sectors to the Indian GDP Source: Planning commission8
The Services sector covers a wide variety of activities such as trade,
transportation, financing, Hotels and restaurants etc. IT/ITES
sectors otherwise known as ICT sector also comes under the
services sector. ICT Sector in India is one of the fastest growing
services sectors as shown in the figure below9. ICT sector has a
huge dependency on Human resources and Electricity consuming
components such as Computers, Network devices, HVAC equipment
etc.
7 See National Informatics Center, Year-wise and Sector-wise Contribution of GDP,
https://community.data.gov.in/year-wise-and-sector-wise-contribution-of-gdp/ ,
(08.09.2015) 8 See National Informatics Center, Year-wise and Sector-wise Contribution of GDP, https://community.data.gov.in/year-wise-and-sector-wise-contribution-of-gdp/ , (08.09.2015) 9 See India Brand Equity Foundation, Service Sector In India, http://www.ibef.org/industry/services.aspx , (12.09.2015)
6 | P a g e
Figure 2 Market Size of IT industry in India. Source: Nasscom, TechsciResearch10
With the projected growth of ICT sector, it is clear that the need for
more human resource and electrical energy by the ICT sector will
continue to increase. Considering that the country does not have
enough electrical energy generation capacity to meet the current
demand, it is clear that all other possible energy generation options
should be explored to address the current needs and also to plan for
the future requirements.
2.1.1 Overview of Power Sector in India
India’s power generation largely depends on fossil fuel based
power plants. 60% of the total power generation is based on Coal.
India also produces energy through gas, Diesel, Nuclear, Hydro,
Biomass, Wind and Solar etc. This dependence on fossil fuel also
has a big economic impact in the country’s finances as major
portions of the required Oil and Coal are imported.
10 See India Brand Equity Foundation, IT & ITeS Industry in India, http://www.ibef.org/industry/information-technology-india.aspx , (26.1.2016)
7 | P a g e
Figure 3 Growth of Electricity Sector in India from 1947-2015 Source: Pie Chart: 9, CEA, India11 .
Even though the country has natural coal reserves, the gross
calorific value of the Indian coal is pretty low compared to the coal
found in other parts of the world. So more coal is required to
generate equivalent amount of electricity. For example the Indian
power plants use 0.7 kg of Indian coal to generate 1 kWh whereas
the US based power plants consume 0.45kg of coal locally mined in
the USA. The higher ash content of Indian coal also results in bigger
impact to the environment12. In terms of consumption of specific
sectors, as of 2015, the Industrial sector consumes around 42% of
the generated electricity. Domestic consumption stands around 24%
followed by the Agriculture sector at 18%13.
11 See India Environment Portal, Growth of Electricity Sector in India from 1947-2015, http://indiaenvironmentportal.org.in/content/413926/growth-of-electricity-sector-in-india-from-1947-2015/ (20.12.2015) 12 See Wikipedia, Electricity Sector In India – Coal Supply Constraints, https://en.wikipedia.org/wiki/Electricity_sector_in_India , (8.09.2015) 13 See Wikipedia, Electricity Sector In India – Demand Trends, https://en.wikipedia.org/wiki/Electricity_sector_in_India , (8.09.2015)
Coal/Lignite (164636 MW)
61%Gas (23062 MW)
8%
Hydro (41267 MW)15%
RES (35777 MW)13%
Nuclear (5780 MW)2%
Diesel (1200 MW)1%
Installed Generating Capacity as on 31.03.2015
(Total = 271722 MW)
8 | P a g e
Many Indian states extend free electricity or heavily subsidized
electricity to the Agricultural sector. Even though the original intent
was to support farmers and the agricultural sector, this scheme has
largely led to pilferage and wastage of electricity. The electricity
supply is also very unreliable due to poor infrastructure and lack of
required capacity to meet the demand. Bringing electricity to
remote villages of India is a slow process in this vast country. After
more than 60 years after independence, only recently was the
southern Indian grid got connected to the central grid. According to
the data from the World Bank, more than 20% of Indian population
does not have electricity which is approximately 1.4 billion people14.
The Government of India is taking various initiatives to
improve the supply demand gap. But considering that nearly 20% of
Indian citizens are yet to receive any grid power, Government will
have to strike a balance between improving the energy availability
for the industry vs connecting the off grid population. So the
benefits from Governmental efforts may not bring in relief for the IT
sector in the short term and may not match the pace at which the
IT sector is growing. It is in the interest of the companies
themselves to take necessary steps to secure their own energy
requirements.
2.1.1.1 Existing Challenges in Indian Power sector:
One of the major challenges in effectively utilizing the
generated electricity is the Transmission and Line losses (T & L).
India’s T&L losses stand around 23% which is one of the highest in
the world. In fact the World’s average T&L loss is only pegged at
8.9%.
14 See The World Bank, Access to Electricity (% of Population), http://data.worldbank.org/indicator/EG.ELC.ACCS.ZS , (08.09.2015)
9 | P a g e
Sample studies carried out by independent agencies such as
TERI even indicate that the losses are as high as 50% in some
states15. The T&L losses mainly stems from poor infrastructure, poor
quality of equipment, theft and pilferage. Even though the problem
is clear, there is no easy solution for this problem due to various
different aspects such as the huge investment that is required, lack
of political will to take certain hard decisions etc. Because of this
huge T&L losses, every watt of electricity that is not consumed by a
consumer is worth more than a watt.
Investment from state governments to augment the
generation capacity to meet the increasing demand is also not
adequate in general. The political class resorts to short term
measures rather than taking a long term view due to the political
reasons. The state electricity boards incur heavy financial losses due
to the political decisions made. For example, increasing consumer
electricity tariff is not done in accordance with the actual cost
incurred, as such a decision will alienate the voters from the political
party that is taking the decision. These political considerations result
in mounting losses for the State Electricity Boards (SEBs) which are
already in poor financial conditions.
Even though various Power reforms are being carried out, it will
take a while for any tangible results to be visible on the ground. All
these financial problems mean less investment for expansion by the
SEBs. For example, the figure below shows the gap between the
generation and the demand widening over a period of time in the
state of Tamil Nadu.
15 See The Energy and Resources Institute (TERI), Transmission and Distribution Losses (Power), www.teriin.org/upfiles/pub/papers/ft33.pdf , (8.09.2015)
10 | P a g e
Figure 4 Demand Supply gap in Tamil Nadu, India. Source: Business Today, July 22 201216
The supply vs demand gap in Tamil Nadu is also true for
many of the other states in India. So it is apparent that irrespective
of what the government is doing or planning to do, there is always a
scope and necessity for the private companies, individuals etc. to do
their part by reducing their consumption or generating at least
portion of their consumption locally, thereby reducing the burden on
the grid.
2.1.2 Overview of Indian IT Market:
India’s Information Technology (IT) story started at least a
decade earlier than the Globalization efforts and the associated
economic reforms that opened up the Indian market in the early
90s. The IT has grown tremendously in the past 25 years in India.
16 See Business Today, Low Voltage Story, http://www.businesstoday.in/magazine/features/tamil-nadu-electricity-board-measures-to-revive/story/185965.html , (15.09.2015)
11 | P a g e
The push to the Indian economy during the 90’s through
Globalization, coupled with the IT revolution has been the primary
drivers of India’s economic growth. This combined effect has
increased the per capita income (nominal) from US $329 in the
early 90’s to approx. US $2110 in 2016 (estimated)17 The IT
industry by 2012 contributed nearly 8% of the overall GDP18 and
continues to grow at a faster pace.
The Indian Information Technology industry is the preferred
sourcing destination for global IT companies due to the availability
of quality human resource at approximately 3-4 times cheaper cost
compared to say Europe or American market standards. The Indian
IT market is expected to triple the current annual revenue reaching
US$350 billion by FY 202519. Gartner report on public cloud predicts
that the Public Cloud market of India is set to reach US $1.9 billion
by 201920. E-commerce in India has grown many fold in the past
10 years. Home grown E-commerce companies like Flipkart,
Snapdeal etc have brought in a revolution of sorts in the retail
segment. Global companies like Amazon are not far behind ramping
up their presence in India.
IT industry is the largest private sector employer in India. IT
sector has created jobs for approximately 3 Million people through
direct employment and employs close to 9 million people in indirect
employment (2014-2015). According to projections from NASSCOM,
by the year 2020 the IT/BPO industry would have reached a total
revenue of US $360-$375 billion (Approximately 10% of GDP) and
would have provided employment for close to 30 million people (5
Million direct jobs and 25 million indirect jobs).
17 See Wikipedia, India, https://en.wikipedia.org/wiki/India (08.09.2015) 18 See Statista The Statistic Portal, Contribution of Indian IT industry to India’s GDP 2013, http://www.statista.com/statistics/320776/contribution-of-indian-it-industry-to-india-s-gdp/ , (12.10.2015) 19 See India Brand Equity Foundation IBEF, IT & ITES Industry in India, http://www.ibef.org/industry/information-technology-india.aspx , (12.10.2015) 20 See Gartner, Gartner Says Indian Public Cloud Services Market Will Reach $731 Million in 2015, http://www.gartner.com/newsroom/id/3156617 , (12.10.2015)
12 | P a g e
Figure 5 India IT/ITES revenue and Employment growth. Source: Data collected from multiple sources21
The IT industry can be divided in to four major segments –
Computer Hardware companies, IT Services, Business Process
Management (BPM), Software Products & Engineering Services
companies. At the start of last decade the Indian IT industry was
majorly dependent on the foreign markets. While the Foreign clients
still make up most of the revenue, the domestic industry has grown
as well. The growth of mobile phones and the increasing number of
Internet connected consumers are driving all the different segments
to go digital. Sectors like Education, Hospitality, FMCG,
Transportation, Automotive etc are all moving to setup their shops
on the Internet.
21 See Indian IT-ITes Industry – Slide 6, Indian IT-BPO industry - FY2011-performance & future trends by NASSCOM – Slide 6, NASSCOM Delegation to Africa 2012 – Slide 11, India IT-BPM revenues: USD 118 billion in FY 2014, http://www.slideshare.net/mitul1129/indian-itites-industry , http://www.slideshare.net/nasscom-emerge/indian-itbpo-industry-fy2011performance-future-trends-by-nasscom , http://www.slideshare.net/KuzaBiashara/nasscom-delegation-to-africa-2012 , http://www.cliffcreations.com/images/poster1.jpg , (7.10.2015)
0
50
100
150
200
250
300
350
400
FY03 FY04 FY05 FY06 FY07 FY08 FY11 FY2014
FY20*
(Projectio
n)
Total Revenue (Billion USD) 16.1 21.6 3.5 4.5 47.8 64 59 118 360
Direct Employment (Millionpersons)
0.67 0.83 1.05 1.25 1.63 2.2 2.54 3.1 5
Indian IT/ITESIndustry Revenue and Employment Growth
Total Revenue (Billion USD) Direct Employment (Million persons)
13 | P a g e
This is driving growth on the IT infrastructure services and to cater
for this domestic demand, the number of data centers in India are
starting to increase. The data from Data Center Map shows that
there are 105 Co-location data centers in India22. .The recent push
to “Digital India” to provide digital services and “Start-up India” to
encourage home grown startups etc are expected to further
increase the pace of development. NASSCOM predicts that India will
have 11,500 tech start-ups by 2020 up from 3100+ startups today.
2.1.2.1 Effect of Growth of ICT sector on Power Sector:
In 2012, close to 4.7 percent of the world’s electrical energy was
consumed by ICT sector23. Considering that India is one of the top
outsourcing destinations for the global IT companies, it can be
safely assumed that the trend of ICT company electricity
consumption would be similar if not more than the global trend.
Projected growth of IT sector in India depends on maintaining the
current success and also be able to capitalize on the new
opportunities.
This means more head count and expansion of campuses which
automatically translates to more electricity consumption. Apart from
the direct consumption of power by the IT sector, it also contributes
to increase in consumption of electricity by way of improved
standard of living of IT employees. So it is evident that the growth
in ICT sector is increasing the burden on the electricity grid which is
already not able to meet the demand. The fact that the Internet has
become main stream and has entered all aspects of life means that
there is an increased use of IT hardware around the globe.
22 See Data Center Map, Colocation India, http://www.datacentermap.com/india/ , (17.10.2015) 23 Lannoo, Bart et al. (2013): Network of Excellence in Internet Science: Overview of ICT energy consumption, The EINS Consoritum, Internet-science.eu, JRA8 Internet for sustainability, WP 8, D8.1
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There is also a growing awareness among IT companies regarding
their own power consumption resulting in a broad consensus
regarding the remedial measures that should be taken to reduce
and Offset the overall consumption through renewable energy. The
“Clicking Clean” report by Green Peace indicates that the
Information and Communications Technology (ICT) Sector could be
consuming up to 12% of Global electricity by 2017.
Figure 6 Electricity demand growth of the ICT Sector Source: Greenpeace, May 201524
Renowned IT companies such as Apple, Google, Microsoft,
Amazon etc are recognizing the need for clean energy and have
varying degree of plans. Some of these companies even have a goal
of 100% renewable energy consumption. The table below highlights
the renewable energy deals made by ICT companies in the past
couple of years (2014 and 2015)
24 See Greenpeace International, Clicking Clean: A guide to building the green Internet, http://www.greenpeace.org/usa/wp-content/uploads/legacy/Global/usa/planet3/PDFs/2015ClickingClean.pdf , (13.10.2015)
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Figure 7 Renewable energy investments by Top IT companies Source: Greenpeace International, May 201525
It is clear that most of these power purchase agreements are
for data center operations and as Internet is largely run from data
centers, it can be expected that more such initiatives would follow.
Some of the data centers also offer their customers a renewable
option.
2.2 Overview of Renewable energy focus of India
With a total installed capacity of 250+ GW of electricity, India
is one of the top 5 power generators in the world. However still over
80% of the rural population (and close to 20% of total population)
have no access to grid electricity.
So there is a necessity for increasing the energy production to cater
for those who are living outside of the grid. Nearly 70% of the
current capacity comes from Fossil fuels. However the scenario is
changing. The recent advances in renewable energy technologies
and the falling costs have brought forward the advantages of India’s
renewable energy potential. Being a tropical country, India is
blessed with over 300 days of solar radiation.
25 See Greenpeace International, Clicking Clean: A guide to building the green Internet, http://www.greenpeace.org/usa/wp-content/uploads/legacy/Global/usa/planet3/PDFs/2015ClickingClean.pdf , (13.10.2015)
Company Name Location Renewable Source Deal Description (Year)
Google Finland/Sweden Wind energyContract for 59 MW for 10 years to Power Finland data center
(2014)
Google Netherlands Wind energy Purchased 62MW to power E600m data center (2014)
Apple United States Hydro Energy Purchased Micro-hydro project to power data center (2014)
Apple United States Solar New data center to be 100% powered by 70MW Solar (2015)
Apple United States SolarPPA worth $850M for 130MW of Solar energy to power HQ and
CA data centers.(2015)
British Telecom United Kingdom Wind energy Signed PPA worth £440 million for Wind energy (2014)
Microsoft United States Wind energySigned PPA for 175 MW od Wind energy to power the Chicago
data center for next 20 years (2014)
Yahoo United States Wind energySigned PPA for half of 48MW wind project to power Nebraska
data center. (2014)
NTT Communication India Wind energySigned PPA for powering India data center. Power is 11 - 13%
cheaper than grid power (2014)
Amazon United States Wind energy Signed PPA for 150 MW for next 13 years (2015)
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It is estimated that the solar irradiance received by India can
generate approximately 5000 Trillion kwh per year26. Recent studies
have suggested that the country has a potential to generate 2000 –
3000 GW of Wind energy27. Wind energy is already one of the
biggest contributor when compared to other renewable energy
sectors. However it can been seen that only a small percentage of
the available Solar and Wind potential has been realized so far.
Figure 8 Renewable Energy by Installed Capacity in India Source: “Creative Commons Renewable energy share India 2013” by Skydoc28 is licensed under CC BY 2.0
The government has taken cognizance of these facts and is
taking lots of initiatives to improve the contribution of alternative
energy sources. The policy initiatives by the Government of India in
the past few years have been supportive of the renewable energy
technologies. In the year 2006 Government of India re-christened
the Ministry of Non-Conventional energy sources that was setup in
1992, to Ministry of New and Renewable Energy (MNRE) to give fillip
to the country’s energy security initiatives28.
26 See NREL, UPDATED India Solar Resource Maps , http://www.nrel.gov/international/ra_india.html , (20.12.2015) 27 Phadke, Amol et al., 2011. Reassessing Wind Potential Estimates for India: Economic and Policy Implications , https://ies.lbl.gov/sites/all/files/lbnl-5077e_1.pdf 28 See Ministry of New and Renewable energy (MNRE), Introduction, http://www.mnre.gov.in/mission-and-vision-2/mission-and-vision , (7.12.2015)
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The main goals of this Ministry are to reduce the dependence on the
imported fossil fuel by increasing the contribution of renewable
energy, improve energy availability, and make it more affordable
and also to improve the per capita consumption on par with the
global consumption by 2050.
MNRE is the nodal Ministry of Government of India for all
matters related to the new and Renewable energy. MNRE has
initiatives in various renewable energy fields including Solar, Wind,
Geothermal, Hydro, Tidal, Biomass etc. One of the notable initiative
that is of interest is the Jawaharlal Nehru National Solar Mission
(JNNSM) that was launched in the year 2010. The National Solar
Mission (NSM) targets had a target of 20,000 MWp of Grid
connected Solar power by 2022 at that time29. Recently this target
has been revised from 20,000 MWp to 100,000 MWp of Grid
Connected solar power by the year 2022. To accelerate the progress
and to achieve this revised target, in December 2015, the
Government of India increased the budget for Grid connected
Rooftop systems from 600 Crore INR (approx. US $90 million) to
5000 Crore INR30 (approx. US $750 million). This budget will be
used as a capital subsidy for Residential, Govermental, social and
Institutional sector. It is expected that this budget will bring in
additional capacity of up to 40GW rooftop solar.
Industrial and Commercial sectors do not have access to
government subsidies. However they have a different set of
incentives such as Tax Holidays, Accelerated Depreciation, excise
duty exemptions etc. In addition to the incentive route, the
government is also driving growth of this sector by mandating
Renewable Purchase Obligations for the Distribution Companies,
Open Access Consumers and Captive users.
29 See Ministry of New and Renewable energy (MNRE), JNN Solar Mission Document, http://www.mnre.gov.in/file-manager/UserFiles/mission_document_JNNSM.pdf ,(7.12.2015) 30 See Press Information Bureau Government of India, A Big Boost for Solar Rooftops in India,
http://pib.nic.in/newsite/mbErel.aspx?relid=134026 ,(7.12.2015)
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The RPO regulations are defined by respective state regulatory
commissions and may differ from one state to another31.
2.3 South Indian ICT Sector and Power challenges
faced:
2.3.1 Clustered model of IT Company locations
Most of the IT companies in India are based out of what are
classified as Tier 1 or Tier 2 cities. Tier 1 cities have a population of
above 100,000 and Tier 2 cities have a population of 50,000 to
100,00032. Evidently the Grids/Substations servicing Tier 1 and Tier
2 cities are heavily utilized due to large population. These cities are
also home to other non-IT companies like car manufacturers or
consumer goods manufacturing etc due to the available market size
and easy availability of skilled labor. The presence of human capital
attracts new employers and this in turn increases employment
opportunities attracting more and more people to these Tier 1 and
Tier 2 cities. In many cases the boundaries of these cities had to be
expanded due to growth in what was considered as periphery area
of the city. Figure below shows that out of the total 105 data
centers in India, nearly 40% are located in the South India.
31 See Ministry of New and Renewable Energy (MNRE), Analysis of State-wise RPO Regulations across India, http://mnre.gov.in/file-manager/UserFiles/Solar%20RPO/analysis-of-state-RPO-regulations.pdf , (28.10.2015) 32 See Wikipedia, Classification of Indian Cities, https://en.wikipedia.org/wiki/Classification_of_Indian_cities , (28.10.2015)
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Figure 9 Colocation Data center statistics, India. Source: Data Center Map33
The figure below is a map showing the location of IT companies in
South India. The red dots represent the company locations.
Figure 10 Information Technology company locations in South India. Source: Google Maps34
From the map it can be seen that the Information technology
companies are concentrated on few locations.
33 See Data Center Map, Colocation India, http://www.datacentermap.com/india/ , (20.10.2015) 34 See Google Maps, http://tinyurl.com/SouthIndianITCompanies , (28.10.2015)
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Chennai, Bangalore, Hyderabad, and Trivandrum are the major
cities in which most of the IT companies in South India are situated.
These cities come under Tier 1 cities. There are at least 1500+
software companies present in Software Technology Parks located in
these cities. There are also other IT companies which function from
residential areas and other commercial buildings due to their small
size or lack of offices in the Software Technology Parks. The IT
industry employs at least 3.5 million people (direct employment) as
per Nasscom, the apex body of IT industry in India35. At least half of
these jobs are in South India due to the large number of companies
present in this region.
2.3.2 Existing power supply scenario and challenges faced
by IT companies:
Most of the Information Technology companies are located
within Special Economic Zones (SEZs) setup for IT/ITES
industries36. SEZs have the benefit of tax holidays, good approach
roads, water supply systems, dedicated Electrical substations etc.
So information technology companies have big incentives in locating
their offices within these SEZs37. The state governments give
preferential treatment to SEZs when it comes to Power distribution.
If there is a shortage of grid electricity, SEZs are least likely to be
affected before other consumers. However they do have the
following major operational challenges:
Interruptions in Power supplied from the Grid.
Rising electricity costs
Rising fossil fuel costs
Impact on community due to existing practices
35 See NASSCOM, Robust growth for the Indian IT-BPM Industry , http://www.nasscom.in/robust-growth-indian-itbpm-industry , (28.10.2015) 36 See Special Economic Zones In India, Introduction , http://www.sezindia.nic.in/about-introduction.asp , (28.10.2015) 37 See Business Maps of India, Advantages of SEZ Units in India, http://business.mapsofindia.com/sez/advantages-units-india.html , (28.10.2015)
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2.3.2.1 Impact of unreliable Power supply:
Even with the kind of preferential treatment for SEZs
discussed above, due to poor grid conditions and unavailability of
sufficient power, even these companies undergo scheduled and
unscheduled power cuts. These power cuts, especially the
unscheduled power cuts are a huge problem as most of the
equipment required to run the IT business depends on electricity.
The Tamil Nadu state government for example had to resort to up
to 20% - 40% peak hour power cuts for industrial consumers for
the past 4-6 years38. Apart from the scheduled power cuts as the
one mentioned above, there could be unscheduled power cuts as
well due to other aspects such as failure of transformers, failures in
generation etc. The intermittent nature of the power cuts make it
difficult to plan and budget for backup strategies.
There is no short term solution in sight to improve the
situation. Most of the southern states are dependent on fossil fuel
based power stations. Even though Wind energy in Tamil Nadu and
Hydo electric energy in Karnataka have a big presence in these
states, the demand vs generation gap keeps increasing. The recent
development of Southern Grid getting connected to the central grid
would improve the situation39. However the gap is too huge for the
power cuts to be eliminated altogether.
2.3.2.2 Impact of rising Electricity costs:
The electricity costs for consumers are heavily subsidized in
India. Even when the electricity tariffs are revised the state
governments tend to insulate the poor by additional subsidies due
to political considerations.
38 See Business Standard, Tamil Nadu announces 20% power cut for industrial & commercial users, http://tinyurl.com/TNPowercut , (25.10.2015) 39 See Power Grid Corporation Of India Limited, One Nation-One Grid, http://www.powergridindia.com/_layouts/PowerGrid/User/ContentPage.aspx?PId=78&LangID=english , (25.10.2015)
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However the Industrial sector power prices continue to increase and
won’t be insulated by subsidies. The state electricity boards which
are responsible for the generation and distribution of electricity are
also in poor financial conditions due to the heavy debt they have as
a result of the subsidy regime. So to bridge the gap between the
revenue and the debt, they resort to regular revision of electricity
prices. For example, the table below shows the recent revision by
Tamil Nadu Electricity board. The electricity prices were increased
by 15% across the board.
Figure 11 Power Tariff Hike in Tamil Nadu Source: Reconnect Energy40
It should be noted that this trend of increasing electricity tariffs is
not isolated to one state. Almost all of the Indian states are pretty
much in the same situation. In fact the prices shown above is one of
the lowest tariffs among the various Indian states. Even if we
assume that the cost of fossil fuel does not increase from the
current levels, it is anticipated that the electricity prices will
continue to increase due to the debt situation, inefficiencies etc.
40 See Open-Access: A Blog by Reconnect, TNERC Hikes power tariff in the state , http://reconnectenergy.com/blog/2014/12/tnerc-hikes-power-tariff-in-the-state/ , (25.10.2015)
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2.3.2.3 Impact of rising fossil fuel prices:
The IT companies largely tide over the power cuts through the use
of Diesel generators. This results in increased running costs due to
rising fuel prices and also maintenance costs of generators. In
addition, there is a tendency to cut down on certain electrical loads
when the generator is in use. For example, lifts may not work if
there is no grid electricity. The cost of Petrol and Diesel have been
de-regulated. However the government increases the excise duty
whenever there is a fall in global crude prices and uses this
additional tax to reduce the fiscal deficit. This means that the
consumers are not benefited from the falling crude prices.
Figure 12 2014 Thus Far: The Fall of Oil and Its Effects on Indian Fuel Prices, Source: Capital Mind41
From the Figure 2-10 it can be seen that only a very small
percentage of the falling crude price is passed on to the consumer.
So we can safely assume that the expenses for covering any
shortfall in grid electricity with a diesel generator will not come
down significantly in the future.
41 See Capital Mind, 2014 Thus Far: The Fall of Oil and Its Effects on Indian Fuel Prices, http://capitalmind.in/2014/12/2014-thus-far-the-fall-of-oil-and-its-effects-on-indian-fuel-prices/ , (22.12.2015)
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2.3.2.4 Impact on community:
Apart from the cost impact for the companies, the increased
use of Diesel generator results in increase of air pollution and also
to noise pollution. This affects the whole community where these
companies are located. As a cascading effect, people will suffer due
to health issues, increased expenses for medical treatments etc
which will in turn put more load on the government infrastructure.
Also the diesel is still a subsidized commodity and most of the
required oil is imported. So increase in diesel consumption will
result in an even bigger increase in country’s import bill.
2.3.3 Options available for IT Companies to meet power
supply requirements
Industries that are affected by all the above mentioned
problems have only few options available.
I. Continue the current model of Electricity grid as primary
source and Diesel as backup source.
II. Purchase electricity from 3rd party generators through the
Open Access mechanism (OA)
III. Invest in Local generation through renewable sources.
IV. Of course a combination of these three options is also
feasible.
2.3.3.1 Using Grid as Primary and Diesel as secondary source
We have already discussed the various challenges in
continuing with the current model in the preceding section (2.3.2).
In short, it is expensive in the long term, has adverse impact on the
community and also unreliable.
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2.3.3.2 Purchasing power through Open Access Mechanism
(OA):
The next option is to purchase electricity from 3rd party
electricity generators. The Indian Electricity Act (2003)42 introduced
the Open Access Mechanism for the first time opening up the
competition in electricity generation.
The open Access Mechanism facilitates the use of the transmission
and distribution infrastructure without any limitations provided the
associated charges are paid by the generator or the consumer. In
India the transmission of electricity is controlled by Power Grid
Corporation of India Limited which is a 100% subsidiary of the
Government of India. Distribution of electricity is largely controlled
by the state electricity distribution companies (DISCOMs) barring a
few private distribution companies in North India. So these two
areas are effectively monopolized by the Government agencies.
However in Generation, private players are present. OA mechanism
acts as a bridge between the private generators and the consumers.
OA mechanism helps to increase competition in power generation
and also gives the consumers a choice.
Figure 13 Power Grid Transmission System. Source: Green Clean Guide43 , Author: Shailesh
The various Open Access charges include Transmission charges,
wheeling charges, wheeling loss compensation, surcharge etc.
42 See Ministry Of Law and Justice, The Electricity Act 2003, http://www.cercind.gov.in/Act-with-amendment.pdf , (30.10.2015) 43 See Green Clean Guide, Introduction of Open Access Mechanism, http://greencleanguide.com/introduction-of-open-access-mechanism/ , (30.10.2015)
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All these charges are largely determined by the state electricity
regulatory commissions. The inter-state open access regulations are
governed by the Central electricity regulation commission.
The OA mechanism can also be leveraged when the generator and
the consumer are the same entity. If used efficiently this can enable
the company to become independent of the grid power.
2.3.3.2.1 Downsides associated with Open Access
mechanism44:
The downsides to Open Access are that the regulations
governing the level of Open Access differ from state to state. It may
be possible in one state and may not be possible in another state.
Also, even though the minimum requirement is 1MW only for
leveraging the Open Access mechanism, the generators prefer to
sell electricity in at least in 10s of megawatts in a single contract.
So this is more suitable for heavy industries and may not be
suitable for Software companies depending on their consumption
requirement. However due to the changing regulations in this area,
it would be worthwhile to evaluate applicability of this option
depending on the location and the existing regulations at that time.
2.3.3.3 Investing in Renewable energy power generation
The next option is to invest in renewable energy generation.
Here the companies have few options. They can either invest in
local generation and consumption setup or they can also opt for
remote generation (either themselves or purchase from 3rd party)
and then combine it with the Open Access mechanism to transmit
the power to the consuming location. However with the later, they
may incur Transmission and Distribution losses which can be up to
23% or more depending on the location.
44 See Energy Next, Open Access: Advantage or Bottleneck ? , http://www.energynext.in/open-accessadvantage-bottleneck/ , (30.10.2015)
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The past few years have been conducive for private investment in
renewable energy generation and the companies will be able to take
advantages of some of the incentives provided by the Government
of India. Many of the states also have introduced Feed-In-Tariffs for
renewable energy.
2.3.3.3.1 Possible benefits in adopting renewable energy:
By opting to invest in renewable energy generation, the
Information technology companies would be able to:
Reduce their dependency on unreliable grid electricity
Reduce their fossil fuel usage, thereby reducing
operating
costs and maintenance cost of diesel generators
Reduce their carbon footprint
Fulfill their Renewable purchase obligations if any
2.4 Selection of suitable renewable energy source for IT
companies:
If the company decides to purchase renewable energy from a
3rd party power generator, it does not really matter which
technology is used to generate the electricity. The only
consideration in that case would be the cost of electricity and the
reliability offered by the power producer. The other aspect to
consider would be the transmission and line losses. But the
consumer would be billed based on the consumer side on-premise
energy meter and not on the basis of source side meter. If the
company decides to go for local captive generation, the company
has quite a few options of Renewable energy source for captive
generation. Indian renewable industry has a strong presence of
Hydro electric energy, Biomass, Wind energy, Geo thermal energy,
Solar thermal and Solar PV. Out of all the possible renewable energy
sources, Solar PV and Solar Thermal are most suitable for the IT
companies because of the following reasons:
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Solar PV and Solar thermal setup can be integrated in
the existing roof top without the need for significant
changes
South India has more than 300 days of good solar
radiation. So it is much more reliable than Wind
energy.
Availability of Solar energy has a higher coincidence
with the regular office hours of the IT companies
Solar projects take relatively less time to setup
Integrating the plant on the roof top allows the
companies to get a better return on their building
investment
Other options such as Wind, Biomass, hydro etc have
specific location based requirement which cannot be
guaranteed in the same area as the IT companies.
Incentives available for Solar projects is better than
other renewable energy
It is relatively easy to scale up the Solar deployment as
and when required.
Problems associated with other technologies such as
aesthetics (Wind), smell (Biomass) etc are avoided
with Solar energy
Solar projects have relatively moderate capex and
nearly zero opex.
Both Solar Thermal and Solar PV can be used to generate
Electricity. The other important form of energy required by IT
companies is Cooling/ Air conditioning. In a typical Information
technology company HVAC cooling contributes to significant
percentage of energy consumption. Figure 2-12 shows the typical
consumption of power by various different components in a data
center. It is clear from the pie chart that the consumption vy HVAC
is a significant percentage.
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Figure 14 Typical breakdown of the data center energy consumption, Source: Electronics Cooling , Issue: December 201045
Most of the companies use grid electricity and Diesel generators
(during the absence of Grid electricity) to run the HVAC systems.
There are other possible but not so popular alternative methods
such as Solar Thermal to run HVAC Systems. Government of India
is taking steps to popularize alternative methods of cooling by
offering incentives and also by sponsoring R&D projects in this area.
2.4.1 Review of Solar thermal energy based models
2.4.1.1 Solar Thermal Air conditioning options:
Solar thermal Air conditioning can be a good fit for
Information Technology companies as it can offset some of the Grid
electricity costs or Diesel Generator usage. Even though this
alternative method of cooling has been available for a while,
commercial solutions are not prevalent in the industry.
Solar thermal assisted cooling solution based on Vapor Absorption
Machine (VAM) is deployed in India as a proof of concept project.
The Vapor Absorption Machine is powered by large parabolic ARUN
dish/linear Fresnel solar thermal system. Another novel system
based on flat panel micro-concentrator and Absorption Chillers is
deployed in Abu Dhabi.
45 See Electronics Cooling, Energy Consumption of Information Technology Data Centers by Madhusudan Iyengar and Roger Schmidt, http://tinyurl.com/ElectronicsCooling , (1.11.2015)
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Due to less space requirements, the micro concentrator based
systems might be suitable for IT companies who will be able to
integrate it on their roof tops.
2.4.1.1.1 Solar Assisted Cooling using VAM and Arun Dish:
ARUN dishes are large Solar Concentrator dishes developed at
Clique Developments Pvt. Ltd with sponsorship from Ministry of
Non-Conventional Energy Sources (MNES)46. The schematic diagram
of the Solar Assisted cooling system using ARUN Dishes is shown in
Figure 2-13 below.
Figure 15 Solar Assisted Cooling using ARUN dish, Source: CliqueSolar47
In this model, the Solar energy is harvested through the ARUN
dishes and used to heat the water which in turn runs the 50 TR
(about 175 kw) Vapor Absorption Machine (VAM). The Vapor
Absorption Machine requires pressurized hot water at 180o C for
optimum operating conditions.
46 See CliqueSolar, Cooling Industry – Solar Assisted Cooling using ARUN dish, http://www.cliquesolar.com/Comfort.aspx , (01.11.2015) 47 See CliqueSolar, Cooling Industry – Solar Assisted Cooling using ARUN dish, http://www.cliquesolar.com/Comfort.aspx , (01.11.2015)
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Nitrogen cylinders connected to the expansion tank are used to
pressurize the water to 15 bar. This results in the cooling of the
Office Room indicated in the diagram above. The return
temperature of the hot water is at 160o C. The “Global Environment
Facility Project document” published by United Nations Development
Programme (UNDP) and Ministry of Non-Conventional Energy
Sources (MNES) indicates that the simple payback for ARUN
Concentrated Solar Heating systems at furnace oil pricing of INR 36
per litre was calculated to be 4-8 years48.
2.4.1.1.2 Solar Cooling using Micro-Concentrators and
Absorption Chillers:
Chromasun, one of the commercial/industrial Solar building
solutions provider has developed Micro Concentrators that can be
easily integrated on the rooftop due to its light weight and low
profile. This system uses a 25x Fresnel reflector and generates up to
220oC. The schematic diagram of this system is shown below:
Figure 16 Advanced Solar Air conditioning Technology in Arab Emirates, Source: RAC Magazine49
Cost wise, Micro concentrators are cheaper when compared to the
Parabolic Trough or the Linear Fresnel.
48 See UNDP, Global Environment Facility Project Document, http://www.undp.org/content/dam/india/docs/market_development_and_promotion_of_solar_concentrators_based_project_document.pdf , (1.11.2015) 49 See RAC Magazine, Advanced solar air conditioning technology in Arab Emirates by Julian Milnes, http://www.racplus.com/news/advanced-solar-air-conditioning-technology-in-arab-emirates/8609581.fullarticle , (1.11.2015)
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There is also a 30% capital subsidy available from the
Ministry of New and Renewable Energy (MNRE) for Solar Thermal
cooling solutions50. In addition to the capital subsidy the project
developer would be able to avail Accelerated depreciation of 80% in
the first year and the remaining 20% in the following year. So
comparatively Solar thermal has a better incentive structure from
the government.
2.4.2 Recommended Solar Technology suitable for ICT
companies:
Even though both these novel Solar thermal solutions have
been installed commercially, the lack of wide spread availability,
lack of sufficient supply, unreliable after sales support etc are
important considerations before making the decision to go with one
of these technologies or other similar Solar thermal technologies.
Also, the simple payback period of 4-8 years even including the
capital subsidy and Accelerated depreciation, does not impress
potential customers. Lack of accurate information on investment vs
benefit does not give enough confidence for the customers. The
document “Renewables beyond Electricity – Solar air conditioning &
Desalination in India” published by WWF-India and CEEW51 (Council
on Energy Environment and Water) outlines the potential market
opportunity in this space. The author concurs with the report that
better technological improvements and better policy framework are
needed before Solar thermal cooling is implemented seriously in the
commercial/industrial scenarios. In contrast, Solar PV is widely
implemented in the industrial and domestic segments. It is a proven
technology and there are lots of consultants and developers
available in the market who can help with the implementation.
50 See Ministry of New & Renewable Energy, Subsidy pattern for Solar thermal Systems/devices, http://mnre.gov.in/file-manager/UserFiles/subsidies_solar_thermal_systems_devices.pdf , (15.1.2016) 51 See Council on Energy, Environment and water, http://ceew.in/pdf/CEEW-WWF-Renewables-beyond-Electricity-Report%203Aug14.pdf , (14.1.2016)
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Between these two technologies, Solar PV is more suitable for
electricity generation due to lower Levelized cost of energy
compared to Solar Thermal. According to the November 2013 study
published by Fraunhofer Institute for Solar energy Systems ISE,
LCOE for Solar PV is nearly half of Solar Thermal52. Due to lower
LCOE and reduced land requirements, at present Solar PV is more
suitable for Urban areas where the IT companies are generally
located.The costs of Solar panels are coming down and in many
parts of India the Solar electricity cost is nearly on par with the grid
electricity. In fact there are consumers who are willing to
generate/buy reliable electricity at a price slightly higher than Grid
electricity if they can get reliable power supply. So it is clear that
Solar PV is a clear choice for the IT companies till the Solar thermal
industry matures in the future.
2.5 Overview of existing Solar PV implementations in
India
2.5.1 Notable Solar PV projects in South India:
Companies around India have already begun to generate
electricity for their own consumption reducing their dependence on
the unreliable grid electricity. This enables them to run their
business much more efficient and without much down time. Also
this results in long term savings as they reduce/do away with
dependence on Diesel whose price fluctuates resulting in
unexpected economic impact for the companies. We already have
quite a few good examples of such companies in South India in
Information Technology and also even in manufacturing sector
which generally has heavy electrical load equipment. Two of these
examples are summarized below to give an overview of how Solar
PV plants are being utilized in these sectors.
52 FRAUNHOFER INSTITUT FOR SOLAR ENERGY SYSTEMS ISE (Nov 2013): Levelized Cost of Electricity Renewable energy technologies, Freiburg: https://www.ise.fraunhofer.de/en/publications/veroeffentlichungen-pdf-dateien-en/studien-und-konzeptpapiere/study-levelized-cost-of-electricity-renewable-energies.pdf , p.31 , (2.11.2015)
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2.5.1.1 Solar PV Project Case Study 1 - Murugan Textiles53:
Murugan textiles is the largest Power loom producer in India.
They have been using Renewable energy for their consumption for
quite a while now. They are using Grid energy as backup energy
and Renewable energy as their primary source of energy. Their
renewable energy generation is a combination of Wind energy and
Solar energy. Solar PV contributes about 25% of their usage
through the recently setup 2MW rooftop plant and the rest comes
from their Wind energy installations. This is one of the biggest roof
top solar PV installations in South India.
Figure 17 Solar PV Rooftop System implemented at Murugan Textiles. Source: TATA Power Solar
Rooftop Solar PV Summary:
Goal : Operate Open-end Spinning machines
with Solar energy
System Size : 2000 KW
Modules : Crystalline Panels of 245Wp and 250Wp
Inverter : 30 kW (57 nos)
Roof Area : 18850 Sq m
Projected Generation : 3 million KWh per annum
Type : Captive consumption, Grid integrated
through 11KV dedicated Feeder Line
53 See TATA Power Solar, Murugan Textiles - the first power loom producer to use 100% renewable energy, http://www.tatapowersolar.com/download_pdf.php?file=images/module/case_study/Murugan_Textiles - Case_Study.pdf , (2.12.2015)
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Future Plan : Expand Solar PV by another 1000 KW
Location : Tirupur, Tamil Nadu, India
Murugan Textiles anticipates the following economic benefits:
Cost savings of approx. INR 110 million in 25 years
CO2 displacement of approx. 2500 tonnes per annum54
Fixed energy costs for the next 25 years
Other benefits:
By choosing a Roof top design, they were able to utilize
the unused roof top space thereby realizing more value
of their investment in the building. Also this helped to
save close to 10 Acres of land space had they chose to
implement through a ground mounted plant.
Their estimated break even period is 6 years with the
added advantage of reliable power availability.
By designing this as a Grid integrated Captive
Generating plant, Murugan textiles is able to avail
REC55 benefits.
Will be able to benefit from the Accelerated
Depreciation incentive extended by Government of
India. Through this the company will be able to claim
80% depreciation at the end of the first year there by
reducing the project cost.
2.5.1.2 Solar PV Project Case Study 2 - Infosys56:
Infosys is one of the biggest Information technology
companies in India. Infosys employs around 180,000 + (as of Sep
2015) employees around the globe.
54 See Energetica India, Tata Power Solar commissions the largest rooftop solar plant in South India , http://www.energetica-india.net/news/tata-power-solar-commissions-the-largest-rooftop-solar-plant-in-south-india , (2.12.2015) 55 See Renewable Energy Certificate Registry Of India, Frequently Asked Questions,
https://www.recregistryindia.nic.in/index.php/general/publics/faqs , (2.12.2015)
56 See Energetica India, Shifting Towards New Dimensions in Solar Photovoltaic (PV) Roof Top Systems, http://www.energetica-india.net/download.php?seccion=articles&archivoDc8op3chKxZAqhj5rsAiGVsOlZEJSD40g1mKrDr32G3gnbZTIa3PvkdV.pdf , (3.12.2015)
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It became part of RE100 companies in 201557. RE100 companies
aim to generate 100% of their energy from Renewable energy
sources. Infosys has carried out numerous Sustainability initiatives
to reduce their consumption and currently produces about 25% of
the required energy through renewable sources.
The company has a number of campuses across India and
has a combined Solar PV capacity of around 3MWp. Infosys aims to
increase this to 175 MWp by 2018. The current installations are
spread across many cities, most of which are in South India.
Infosys Campus
Location Solar PV Capacity in kWp
Chennai 1792
Trivandrum 127
Hyderabad 555
Jaipur 253
Mangalore 212
Bangalore 265
Total = 3204 Figure 18 Solar PV capacity implemented by Infosys in different cities. Source: Infosys58
The Solar PV plant in Chennai is one of the biggest so far. It
has a capacity of approx. 1.8 MWp. Before implementing Solar PV,
this campus consumed approximately 7 million KWh through Diesel
generators. In Chennai, Diesel power is at least 2-3 times costlier
compared to Grid power.
The Solar PV system helped to displace the diesel generation thus
saving considerable amount of money for the company. Infosys
team estimates the ROI for the Chennai Solar PV systems in Infosys
campus to be about 6 years. Through the use of renewable energy
and energy efficiency measures Infosys claims to have cut CO2
emissions by about 57% in the year 2013-2014 compared to 2007-
200859.
57 See Infosys Newsroom, Infosys Becomes the First Indian Company to Join RE100 Renewable Energy Campaign, https://www.infosys.com/newsroom/press-releases/Pages/join-renewable-energy-campaign.aspx , (2.12.2015) 58 See Infosys, Greenfinity. A world that runs on itself., https://www.infosys.com/sustainability/Documents/greenfinity-report.pdf , (9.11.2015) 59 See Energetica India, Shifting Towards New Dimensions in Solar Photovoltaic (PV) Roof Top Systems, http://www.energetica-
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2.5.1.2.1 Special feature of Solar PV system installation at
Chennai campus:
The specialty of this campus is that the PV panels are
installed in the East – West orientation improving the space
utilization and also higher yield per sq m of installed area.
Their experience shows that by implementing the East – West
orientation instead of the traditional South orientation, there are
multiple benefits in addition to the number of modules that can be
mounted in a given space. The table below shows the technical
details from this experiment:
Orientation
Installed DC
Capacity (Kwp)
No of modules
(327 Wp)
Specific Yield (KWh/kwp/year)
PR% Energy
Generation (MWh/Year)
South Facing
235.4 720 1566 77.1 368.8
E-W facing 313.92 960 1557 77.6 488.7 Figure 19 Comparison of Solar PV System performance with E-W facing panels with a system with South Facing panels Source: Energetica India
They cite the following as the advantages observed in this
experiment:
20-30% additional modules can be installed for a given
area
Higher yield per sq.m of installed area even though the
yield per panel reduces by 2% due to the orientation
Reduction in Wind load in case of aero dynamic
structure
Even distribution of electricity throughout the day
Higher Peak hour generation (Morning and evening)
india.net/download.php?seccion=articles&archivoDc8op3chKxZAqhj5rsAiGVsOlZEJSD40g1mKrDr32G3gnbZTIa3PvkdV.pdf , (3.12.2015)
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From these examples it is clear that the companies implementing
the Solar PV system are not only realizing the economic benefits,
but are also able to enjoy the additional benefits such as reliable
power, meeting their RPO quota etc.
2.6 Solar PV implementation models available for IT
companies:
IT companies can either choose to participate in the end to end
setup and maintenance or just engage a 3rd party provider to setup
the plant on an EPC/BOOT/DBOOT basis.
In the EPC model the capital costs of the project are estimated and
provided by the client. The EPC contractor executes the project as
per the scope of the client. The EPC contractor takes care of the
Engineering, Procurement and Construction aspects of the project.
In the BOOT model, the contractor builds the project as per client’s
design. Contractor will be building the project using their own funds.
After the project is implemented, the contractor can collect a fee
from the client for a specific period to recoup the investment and
optionally transfer the control of the project to the client if that was
the original agreement.
DBOOT model is similar to BOOT except that even the design phase
will be taken care by the contractor.
Ministry of New and Renewable Energy (MNRE) of Government of
India website indicates that the following models are possible60:
“(a) Solar installations owned by consumer
i) Solar Rooftop facility owned, operated and
maintained by the consumer(s).
60 See Ministry of New and Renewable Energy, Frequently Asked Questions, http://mnre.gov.in/file-manager/UserFiles/FAQs_Grid-Connected-Solar-Rooftop-Systems.pdf , (3.12.2015)
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ii) Solar Rooftop facility owned by consumer but
operated and maintained by the 3rd party.
(b) Solar installations owned, operated and maintained by 3rd
Party
If the 3rd party implements the solar facility and provides services
to the consumers, combinations could be:
2.6.1 Arrangement as a captive generating plant for the roof
owners
The 3rd party implements the facility at the roof or within the
premise of the consumers; the consumer may or may not invest
any equity in the facility as mutually agreed between them. The
power is then sold to the roof owner.
2.6.2 Solar Lease Model with Sale of electricity to Grid
The 3rd party implementing the solar facility shall enter into a
lease agreement with the consumer for medium to long term basis
on rent. The facility is entirely owned by the 3rd party and
consumer is not required to make any investment in facility. The
power generated is fed into the grid and the roof top owner gets a
rent.
(c) Solar Installations Owned by the Utility
i) Solar installations owned operated and maintained by the
DISCOM
The DISCOM may own, operate and maintain the solar facility
and also may opt to sub contract the operation and
maintenance activity. The DISCOM may recover the cost in
the form of suitable tariff. The electricity generation may also
be utilized by DISCOM for fulfilling the solar renewable
purchase obligation.
ii) Distribution licensee provides appropriate viability
gap funds
The DISCOM may appoint a 3rd party to implement the
solar facilities on its behalf and provide appropriate funds or
viability gap funds for implementing such facility.”
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Solar Energy Corporation of India (SECI) (registered under
MNRE) categorizes the consumer owned model as CAPEX model and
the 3rd party owned model as RESCO (Renewable Energy Service
Company) model61. For consumers that have adequate
manpower/expertise for O&M, rooftop access concerns, availability
of funds upfront, CAPEX model is better. Consumers in certain
Indian states that have net metering regulations can take benefit of
the same in case they have substantial excess generation. On the
other hand, consumers who prefer not to take responsibility for the
system O&M, do not have rooftop security concerns and prefer to
pay on a monthly basis rather than bulk upfront payment may
choose to go for RESCO model.
Information technology companies in general have sufficient
cash flow and would be able to invest the required CAPEX. Also the
companies themselves are in need of electricity for their own
consumption. So the first model will be suitable for IT companies.
2.7 Selection of Solar PV System type suitable for IT
Companies
2.7.1 Type of Solar PV Systems, their Pros and Cons:
The Solar PV Systems can be deployed in the following three
different models62:
Grid tied Solar PV System
Off-Grid Solar PV System
Grid Interactive Solar PV System
61 See Solar Energy Corporation of India, Frequently Asked Questions, http://seci.gov.in/upload/uploadfiles/files/FAQ.pdf , (7.12.2015) 62 See FirstGreen Consulting Private Limited, List of various Schemes of grid tied roof top solar pv system , https://firstgreenconsulting.wordpress.com/2012/06/14/list-of-various-schemes-of-grid-tied-roof-top-solar-pv-system/ , (7.12.2015)
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2.7.1.1 Grid Tied Solar PV System:
In this type of Solar PV System the Solar Panels are
connected to the load via an inverter which is also continuously
monitoring the Grid connection. When the Grid goes down, the Solar
System is disconnected by the inverter and it can no longer supply
the load. This is because the inverter requires a reference voltage to
start and since the reference (grid) is no longer available, the
inverter cannot start. Advantage with this system is that when the
Solar panels do not produce enough energy required by the
connected load, the excess required power can be derived from the
Grid.
2.7.1.2 Off grid Solar PV System:
In this type of Solar PV System, the whole set up is
independent of the Grid. As long as the sun is shining the load is
serviced through the Solar panels. The Off grid system also includes
Battery storage which acts as a backup source when there is not
enough sunlight for the panels to generate the required power.
Inclusion of battery storage typically increases the system cost by at
least 30%. Also the batteries require regular maintenance and
possible replacement when it stops working.
2.7.1.3 Grid Interactive Solar PV System:
In this type of Solar PV System, the Solar PV system works
along with the Grid and also Diesel Generator or Battery backup
system. The inverter will continuously monitor the Grid availability
and when the grid becomes unavailable, the Solar System is
disconnected from the grid and the Diesel Generator would start.
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The Solar System can be connected back to the AC circuit after it is
synchronized with the Diesel Generator. When the Grid becomes
available again, the Diesel generator is stopped automatically. The
schematic diagram of this setup is given below:
Figure 20 rid tied roof top solar PV system with full load DG backup system Source: FirstGreen Consulting63
This type can also be combined with partial load battery bank as
well.
2.7.2 Suitable Solar PV System type for IT Companies
The main requirement from IT companies is uninterruptable
power supply. The secondary requirement is moderate costs for the
system. The first requirement means that, Grid tied system will not
be suitable for IT companies.
63 See FirstGreen Consulting Private Limited, List of various Schemes of grid tied roof top solar pv system, https://firstgreenconsulting.wordpress.com/2012/06/14/list-of-various-schemes-of-grid-tied-roof-top-solar-pv-system/ , (7.12.2015)
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With Solar Off grid system there is a danger of not enough power
when sun is not shining and also increased cost due to battery
backup. So the best model suitable for the IT companies is the Grid
interactive model as it gives the flexibility to power the load through
Solar or through Diesel generator and it is not as expensive as a
battery backup included system.
2.8 Policies and Incentives available for Solar PV:
There are two types of possible incentives available for the
consumers who wish to implement Solar PV. There are some
incentives extended by the Central Government of India. On top of
this there can be incentives depending on which state the Solar PV
system is installed. The table below shows the Solar energy related
incentives from the four southern states.
Figure 21 Condensed list of Solar policies in South Indian states. Source: March 2015 Summary sheet published by IREEED64
The central government extends the Accelerated Depreciation
benefit for Solar PV system implementations for eligible entities.
This benefit is available throughout India irrespective of other state
government level incentives.
64 See Indian Renewable Energy and Energy Efficiency Policy database, State-wise Renewable Purchase Obligation, ireeed.gov.in/summarysheet , (12.12.2015)
Tamil Nadu
One REC per MW wheeled to DISCOM ; Eligible for CDM benefits ; Tax
concessions as per Tamilnadu Industrial policy ; FIT INR 7.01 without
AD ; INR 6.28 with AD
KarnatakaTax concessions as per Karnataka Industrial policy ; FIT INR 8.40 with
AD and INR 9.56 without AD
Andhra
Electricity duty excemption for Captive consumption and 3rd party
sale; VAT for all inouts for Solar Project will be refunded ; Refund of
Stamp duty and registration charges for land purchase; Excemption
from pollution control board certification for Solar projects ; FIT INR
17.91 without AD and INR 14.95 with AD
Kerala
Energy generated is exempted from Electricity duty; Open Access
charges not applicable for Solar ; Wheeling and T&D losses not
applicable for Captive Solar generation within the state; FIT INR 15.18
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2.8.1 Accelerated Depreciation Benefit:
In the context of Indian Tax System, Section 3265 of Income Tax act
provides Accelerated depreciation benefit of 80% of invested capital
into Solar PV Projects to professional companies with tax liability.
Investors can set off their tax liability on the taxable income to the
tune of 80% in the first year and subsequently 20% in the second
year. To avail the full 80% AD, the solar pv system should be
commissioned before September 30th of the financial year. If the
plant is commissioned after this date, only 40% AD can be claimed
in that year and the remaining in the following years.
2.9 Recommended flow for implementing Solar PV
System:
Successful implementation of Solar PV requires careful
preparation. The required steps to implement Solar PV are described
below:
Decide on the goal that needs to be achieved through
the Solar PV System. The goal could be to power the
office with 100% renewable energy, displace the power
generated by the diesel generator etc.
Analyze the current consumption and identify areas
which can be improved through energy efficiency
measures
Carry out Efficiency measures. Analyze the
consumption post efficiency measures and include the
capacity required for future plans.
Identify the shade free roof space that can be used for
installing the Solar PV system
65 See Income Tax India, Section - 32, Income-tax Act, 1961-2014, http://www.incometaxindia.gov.in/_layouts/15/dit/pages/viewer.aspx?grp=act&cname=cmsid&cval=102120000000037129&opt=&isdlg=1 , (22.09.2015)
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At this point, if the company has sufficient expertise, a
suitable plant as per the requirement can be designed.
If there is no expertise in house, speak to vendors and
call for quotations from multiple vendors.
Select the vendor based on price, quality, warranties
etc and implement
After implementation continue monitoring the
performance and the usage pattern to identify
improvement areas and expand if required.
Figure 22 Recommended flow of implementing Solar PV System
2.10 Typical electricity consuming devices in Information
Technology companies:
Information technology companies have a huge dependency
on the electrical energy as most of their work is done on computers.
However along with the large number of computer and networking
hardware, there are other office equipment as well. From a load
standpoint we can subdivide an IT office electrical load in to the
following categories:
Light loads – Electrical appliances that require very low
starting current. The following are a list of typical light loads found
in IT Companies.
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Lighting
Laptops, Desktops, Workstations and additional
monitors
Servers and Network equipment
Sever Racks, Storage racks, Network equipment racks
Printers, Fax machines and paper shredders
Security camera systems
Toaster, Coffee Machines, Microwave and dishwasher
Televisions, Projectors and Telephone systems
Vaccum cleaner
Fridge and Vending machines
Apart from these the other possible equipment that can be
present are gaming consoles, ATM machines, Hand drying
machines, fancy light signs, AV units with speakers etc.
Heavy Loads – Electrical appliances that require very high
starting current
Chiller units
Escalators/Lifts
Water pumps
Water heaters
In general the light load and the heavy load are separated in
different electrical circuits. Even within the Heavy loads the Chiller
units are sometimes separated from other loads. Depending on the
size of the company they may have an on premise datacenter or a
remote data center where all their servers and network equipment
are maintained. The Chiller equipment for the data center is highly
critical as the computer and network equipment get heated up
pretty quickly when the Chillers do not work correctly. This will
result in either the equipment performing slowly, equipment
shutdown or even a hardware failure there by impacting the
production.
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In addition to these known loads, we will also need to take in to
consideration the devices that are brought in by the employees for
the personal use such as Laptops, Mobile phone, tablets, e-readers
etc. It has become very common for an employee to own at least
two or more electronic devices. It is technically possible to meet
100% of electricity requirement through Solar PV and Storage
battery systems. However it should also be economically feasible. In
the following sections the implementation costs of an example
project will be discussed and the financial indicators such as
Payback period, Levelized Cost of Energy, cost benefit etc are
calculated.
2.11 Analysis of financial viability of Solar PV Roof top
Systems for IT Companies:
In order to analyze the financial viability of Solar PV System
implementation in an IT company first an example company with
known energy consumption is selected.
Based on the location of the company, the other supporting data
such as Solar irradiance data, grid electricity cost, Cost of Diesel etc
are collected and the final analysis is made.
2.11.1 Method followed to select project location of example
Solar PV System:
For the purposes of this analysis, the Infosys, Panchoram,
Hyderabad campus was selected. Power consumption details for this
campus is taken from the report “Performance Monitoring of IGBC
Rated Buildings” available from Center for Science and
Environment66. This specific building is given a rating of Platinum by
the Indian Green Building Council. This is the highest rating given to
buildings to recognize that the building is highly energy efficient.
The report documents the energy consumption of this campus for
the year 2012 as 2,000,000 kWh.
66 See Center for Science and Environment, Performance Monitoring of IGBC Rated Buildings, https://igbc.in/igbc/html_pdfs/PM-2014N12.pdf , (20.10.2015)
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The financial analysis of the Solar PV system would be done for
meeting the requirement of this building.
2.11.2 Selected building and Solar Potential in that location:
The campus is located in the city of Hyderabad which is part
of the State of Telangana (formerly Andhra Pradesh). It is located at
17°26'53.7"N 78°38'09.0"E.
Figure 23 Top view of the Infosys Pocharam Campus. Source: Google Maps67
Figure 24 Front view of Infosys Pocharam campus. Source: Thatsokdude.com68
From the top view and front view of the building it can be
seen that this is the tallest building in that location and there is no
other structure that can cast shadow on the roof of this building.
The Solar irradiation data obtained from Gaisma website shows that
the location has an average of 5.2 kWh/m2/day Solar radiation and
also it is consistently above 4 kWh throughout the year.
67 See Google Maps, Location Search, http://tinyurl.com/InfosysPocharam , (20.10.2015) 68 See Thatsokdude, Infosys To Unveil Its Largest Campus In Hyderabad’s Pocharam In Feb 2016 , http://thatsokdude.com/featured/infosys-to-unveil-its-largest-campus-in-hyderabads-pocharam-in-feb-2016/ , (20.10.2015)
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Figure 25 Solar Irradiation data for Hyderabad. Source: Gaisma69
The geographical location and the availability of sufficient
Solar energy makes this location a good fit for the Roof top Solar PV
System. Further the data on Sunrise and Sunset shows that this
location gets at least 11 hours of Sunlight per day.
Figure 26 Sun rise and Sun set times for 6 months from the date of Access Source: Gaisma
Figure 27 Sun rise and Sun set times for previous 6 months from the date of Access Source: Gaisma
69 See Gaisma, Solar irradiation data, http://www.gaisma.com/en/location/hyderabad.html , (20.10.2015)
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2.11.3 Overview of selected financial parameters:
The core idea behind this analysis is to determine if
implementing the Solar PV System to replace the existing
combination of Grid electricity and Diesel Generator is economically
feasible. To achieve this goal, first the data regarding the current
energy usage of the building, prevailing grid electricity rates, cost of
diesel etc were gathered. Certain parameters like contribution of
Diesel generator towards day to day operation, T&L power losses for
that region etc are assumed based on realistic average values found
from various different sources. Similarly for the Solar PV System
cost and the yield produced by the Solar PV system are calculated
based on certain facts pertaining to the project location and some
reasonable assumptions.
A list of assumptions for the specific project under analysis is
provided in a separate section of this document. To determine the
financial viability of the Solar PV project, the following parameters
were calculated:
Cost benefit of replacing portion of diesel consumption
by Solar
Levelized cost of Energy (LCOE)
Payback period
Internal Rate of Return (IRR)
LCOE, IRR and Payback period are calculated for two different
scenarios:
1) When Accelerated Benefits are availed
2) When Accelerated Benefits are not availed
From the results of the financial analysis, the conclusions are
derived and presented.
2.11.3.1 Levelized Cost of Energy – (LCOE)
LCOE is a metric used to financially compare two different
types of energy generating methods, often to compare a fossil fuel
energy generation method to a renewable energy generation
method.
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LCOE method accounts for all the lifetime costs of a system
including cost of construction, maintenance, financing, tax benefits,
other incentives etc. All the costs and benefits are adjusted for
inflation by discounting them suitably.
𝐿𝐶𝑂𝐸 = 𝐶𝑢𝑚𝑢𝑙𝑎𝑡𝑖𝑣𝑒 𝑑𝑖𝑠𝑐𝑜𝑢𝑛𝑡𝑒𝑑 𝑐𝑜𝑠𝑡𝑠
𝐶𝑢𝑚𝑢𝑙𝑎𝑡𝑖𝑣𝑒 𝑑𝑖𝑠𝑐𝑜𝑢𝑛𝑡𝑒𝑑 𝑒𝑛𝑒𝑟𝑔𝑦 𝑔𝑒𝑛𝑒𝑟𝑎𝑡𝑒𝑑
LCOE calculations in this example are made under two specific
scenarios:
Scenario 1: Company is able to avail Accelerated depreciation
benefit.
Scenario 2: Company is not able to avail Accelerated
depreciation benefit.
This is done to analyze the impact of Accelerated Depreciation
benefit on the LCOE. Only companies implementing the project in
their books can avail Accelerated depreciation benefit.
2.11.3.2 Payback period:
Investors are always interested in knowing how many years it
will take them to recoup their investments and start making profit
on investment. In this example there is no explicit Income for the
company from this project. However by avoiding the consumption of
grid electricity, the company would be reducing their electricity bill
for the grid electricity. The amount of money the company would
save is taken as their income for that year and is compared against
the cost of Solar PV system to determine the payback period. The
payback period is calculated for both the AD benefit scenarios
discussed above.
2.11.3.3 Internal rate of return – (IRR):
The Internal rate of return of a project is the rate at which
the Net Present value of all the costs becomes equal to the Net
Present Value of all the benefits. The Net Present Value function is
given as:
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𝑁𝑃𝑉 = ∑𝐶𝑛
(1 + 𝑟)𝑛
𝑁
𝑛=0
Where
N Total number of periods
Cn Cash flow in period n.
r Discount rate.
IRR is the Discount rate at which NPV becomes Zero. If IRR is
higher than the Cost of Capital then we can consider that as an
acceptable investment.
2.11.3.4 Cost Benefit Analysis of Diesel Replacement:
The higher diesel costs in India compared to the Grid
electricity prices make it apparent that using Diesel generators to
tide over the power cuts is an expensive method. In this specific
analysis, the cost benefit of replacing a portion of the diesel
generated electricity with the Solar generation is calculated.
It is assumed that 10% of the overall yearly consumption of
electricity is met by diesel generators. The calculation is done for
10% replacement of this Diesel electricity by the Solar PV system.
The result shows the amount of money the company would be able
to save over the life time of the project by replacing just 10% of the
diesel electricity. The cost of Solar PV electricity is taken as the
LCOE of “Option 1 Scenario 1” which is Solar PV System installation
cost of 0.075 Million INR per kWp and Accelerated Depreciation
benefits availed in 80%-20% ratio.
2.11.4 Assumptions made for financial analysis:
There are several assumptions made for calculating the
Levelised Cost of Energy, Payback period and Cost benefit analysis
of Diesel replacement.
It is assumed that the solar power generated per day
per kWp is 4 kWh.
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It is assumed that this building’s electricity
consumption is entirely during day time operation and
the building incurs negligible night time electricity
consumption.
Based on current market data, setting up of Solar PV
system costs anywhere from INR 75,000 – 100,000 per
KWp depending on various factors. For the purposes of
financial calculations, two different costs (INR 75,000
and INR 90,000) are assumed and corresponding
Levelised Cost of Energy is calculated.
The Solar PV System is assumed to be commissioned
before September month of the financial year if
availing the Accelerated Depreciation benefit. In this
scenario 80% of Solar PV System cost can be
depreciated during the first year and 20% in the
second year.
It is assumed that the Solar PV plant has a life time of
25 years
Inverter cost is assumed to be 23% of the total PV
plant cost and also it is assumed that the inverters
have to be replaced after every 10 years
Maintenance cost of the Solar PV power plant is
assumed to be 1% of the total plant cost and the
maintenance cost escalation is 5% every year.
70% debt and 30% equity model is assumed with 12%
debt Interest rate and a repayment period of 7 years.
It is assumed that the Equity is company’s own cash
and there is no Interest on Equity.
Corporate tax is assumed to be 35% (Maximum level).
Discount rate is assumed to be 12% for the LCOE
calculations.
Panel degradation is assumed to be 1% per annum and
a loss of 3% in generation is assumed due to lower
load on holidays and similar factors.
54 | P a g e
For calculating the benefit of replacing 10% of diesel
power by Solar power, the following reasonable
assumptions based on current data are made:
(i) Cost of diesel per litre is INR 50
(ii) Diesel required to generate 1 kWh electricity is
0.294 litres
(iii) Diesel cost escalation per year is 3%
(iv) Diesel generator is used to meet 10% of the
total electricity required
(v) 10% of Diesel generation is replaced by Solar PV
System.
2.11.5 Detailed explanation of the Excel file layout:
Under these assumptions, the financial calculations of the
above mentioned financial parameters were carried out using the
Microsoft Excel Program. The excel file forms the core financial
calculation document of this thesis and is attached with the main
document for reference. The excel file titled
“PVSystemCalculations.xlsx” has 7 different sheets namely:
Input – System Details – This sheet tabulates the various
different variables which are used in the calculations on the other
sheets. These variables can be adjusted to determine the results
under various different circumstances.
Option 1 Scenario 1 – This sheet calculates the LCOE under
the condition where the Solar PV System setup cost is 0.075 Million
INR and that the company implementing the Solar project is able to
fully avail the Accelerated Depreciation benefit.
Option 1 Scenario 2, Option 2 Scenario 1 & Option 2 Scenario
2 – Similar to the sheet discussed in point 2, all these three sheets
show the LCOE under various combinations of Solar PV cost and AD
benefits.
Diesel Replacement Benefit – This sheet calculates the life
time savings of replacing portion of the diesel generated electricity
by Solar generated electricity. Cost of Solar is taken as the LCOE of
Option 1 Scenario 1
55 | P a g e
Payback Calculation – This sheet calculates the number of
years it will take to break even under each of the scenarios. The
year in which the project turns to profit is highlighted in green. The
Internal Rate of Return is also calculated in this sheet and is shown
as IRR for each scenario.
2.11.6 Interpretation of the financial analysis results:
2.11.6.1 LCOE Analysis results:
From the analysis we have got the following consolidated
results for the Levelized cost of energy.
Solar PV System cost
per kWp (Million INR)
Avail Accelerated
depreciation?
LCOE
(INR)
0.075 Yes 6.66
0.075 No 7.6
0.09 Yes 8.22
0.09 No 9.55
Figure 28Consolidated LCOE values for 4KWh per kWp per day yield
From the table above we can see that the LCOE in the best case
scenario is INR 5.74 per kWh and in the worst case scenario INR
9.55 per kWh. The current tariff of Grid Electricity in the State of
Telangana is INR 9.70/- for units above 500 per month70.
Comparing the LCOE of Solar PV System to the Grid electricity
prices, it is clear that even in the worst case scenario of the four
scenarios considered, Solar energy is cheaper than the Grid
electricity. In fact this calculation was also under the assumption of
the lower range of the possible yield of 4 KWh per kWp per day.
Based on the location where this Solar PV System is assumed to be
implemented, yield above 4 KWh is expected. Changing the “Power
generated per kWp in a day (in KWh)” value in the “Input – System
Details” sheet of PVSystemFinancials.xlsx to 5 KWh, results in the
following values:
70 See Telangana Discom, Retail Supply Tariff Schedule for FY 2015-16, https://tssouthernpower.com/CPDCL_Home.portal;jsessionid=9hJLWySDLdwqsmpyPcPfZ1yLL11P8z1gpPz2yNYBcTQw19GTPvH2!309511689?_nfpb=true&_pageLabel=CPDCL_Home_portal_page_1215 , (5.1.2016)
56 | P a g e
Solar PV System cost
per kWp (Million INR)
Avail Accelerated
depreciation? LCOE (INR)
0.075 Yes 5.11
0.075 No 6.37
0.09 Yes 6.35
0.09 No 7.64
Figure 29 Figure: 2-26 Consolidated LCOE values for 5KWh per kWp per day yield
From the results obtained above it is very clear that Levelized cost
of energy obtained from Solar PV is less than the Grid electricity
prices even when the lowest yield figures are assumed.
2.11.6.2 Payback period Calculation results:
The investment payback calculations of the project under
various different scenarios were calculated. The results show that
the Accelerated Depreciation (AD) benefit from Government of India
makes a huge difference in the results. In the best case scenario
where AD is fully available we see that the project will break even
between year 6 and 7 (discounted) and will make profit thereafter.
In the worst case scenario where AD is not available, it can take up
to 23 years (discounted) for the investor to recoup the initial
investment. From these results it is clear that the financial viability
of the Solar PV project greatly depends on the Accelerated
Depreciation benefit available for the companies. As in the case of
LCOE, modifying the yield to 5 kWh per day also has a positive
impact on the payback calculations. The best case scenario
improves to 2 years (discounted) and the worst case scenario to 10
years (discounted) which is still very attractive for any investor.
2.11.6.3 Internal Rate of return calculations:
The Internal Rate of return is consistently higher for all the
four scenarios indicating that the investment is expected to give
good returns.
57 | P a g e
The lowest IRR (12.45%) for the worst case scenario under 4kWh
yield is marginally better than the assumed discount rates. The
highest IRR (53.26%) is seen for the best case scenario under the 5
kWh yield. The consolidated table in Figure 2-27 and 2-28 shows
the list of IRRs under varying conditions.
2.11.6.4 Cost benefit analysis of Diesel Replacement scenario
results:
The LCOE calculations were made under the assumption that
the entire yield of the Solar PV was used only to offset the Grid
electricity. However due to unreliable grid electricity scenario, most
of the IT companies maintain Diesel Generators for captive power
generation. To cover this scenario, the financial benefits of replacing
10% of Diesel power is calculated. The calculations show that the
Information Technology Company would have saved approximately
INR 2.2 Million over the life time of the Solar PV project. From these
results we can conclude that the more diesel energy is replaced by
Solar energy, the better the returns are for the company.
2.11.7 Consolidated results and conclusions:
The consolidated results of LCOE and Payback period under
various scenarios is given in the tables below for two different yield
assumptions:
Under 4 kWh per kWp per day yield conditions:
Figure 30 Consolidated Solar PV financial parameters for 4 KWh per kWp per day yield
Solar PV System cost per
kWp (Million INR)
Avail Accelerated
depreciation?
LCOE
(INR)
Payback
periodIRR
0.075 Yes 6.66 7 30.34%
0.075 No 7.96 12 18.70%
0.09 Yes 8.22 12 18.47%
0.09 No 9.55 23 12.45%
58 | P a g e
Under 5 kWh per kWp per day yield conditions:
Figure 31Consolidated Solar PV financial parameters for 5 KWh per kWp per day yield
We can derive the following conclusions from these results:
Accelerated Benefit incentive provided by Government
of India is critical for realizing faster and better returns
from the Solar PV investment.
Solar PV systems implemented in higher solar yield
locations can break even at a much faster rate than the
ones with average yield.
Replacing Diesel Generated electricity by Solar
electricity is beneficial than replacing Grid generated
electricity by Solar generated electricity.
Higher IRR values indicate that the investment in Solar
PV plants add value to the company’s wealth in the
long run.
The financial analysis results of this example project can be adapted
to any IT building analysis in India provided adjustments to the
parameters are made as per the location of the building.
2.12 Analysis of Ancillary benefits of implementing Solar
PV System:
2.12.1 Ancillary benefits for the company implementing Solar PV:
Apart from the financial aspects of the project, there are
other important factors to consider as well. Every major corporation
wants to showcase their commitment towards environmental
protection through projects like these. These additional benefits
may not be readily quantifiable. However they do make a positive
impact.
Solar PV System cost per
kWp (Million INR)
Avail Accelerated
depreciation?
LCOE
(INR)
Payback
periodIRR
0.075 Yes 5.11 2 53.26%
0.075 No 6.37 7 29.21%
0.09 Yes 6.35 5 33.81%
0.09 No 7.64 10 20.35%
59 | P a g e
By integrating the Solar PV system to the energy mix, the ICT
Company under discussion will be able to realize the following
benefits:
The stability of operations will improve as the
dependency of unreliable grid electricity has been
reduced
Reduction in the Noise pollution and air pollution due to
reduced dependence of diesel generators for power
Improved working environment quality for the
employees of the company due to reduced air and
noise pollution within the company premises.
Company is able to meet the Renewable Purchase
Obligation targets set by the government.
Company has reduced its carbon foot print by reducing
the grid energy which contributes to greenhouse gas
emissions and also by generating clean energy.
2.12.2 Impact of Captive generation by the IT Company on
the Grid:
It was discussed earlier that the T&L losses in India are at an
average of 23%. If we take this in to account, the 2 Million kWh of
electricity per annum that is not drawn by this company from the
grid is worth 2.59 Million kWh per annum for the Grid. This energy
can be then diverted to other consumers reducing the gap between
the supply and demand. In addition, as most of the Grid electricity
is based on imported Coal or Oil, the reduced demand results in
Forex savings for the country. As noted earlier, in many parts of
India the losses are higher than the assumed average. So the local
generation of electricity by any private entity is a good news for the
grid.
60 | P a g e
2.12.3 Impact of Captive generation by the IT Company on
the community:
Electric Power consumption data from World Bank shows that
India’s per capita Electricity consumption was at 744 kWh per year
during the period 2011-2015. This means that the IT company
which saved 2.59 Million kWh per annum for the grid is indirectly
helping at least around 3500 people who never had access to
electricity before, to get access to that electricity for one complete
year (assuming that the same T&L loss of 23% was incurred in
delivering the electricity to this new set of consumers). The number
of beneficiaries will be definitely higher than this as the consumption
of these new consumers will be far less than the national average
figures.
IT companies are projected to employ 5 Million people by
2020. If all of these IT companies generate 100% of their own
consumption, assuming that the per employee consumption per
year reflects the consumption of an Infosys employee71 before
energy efficiency measures (297 kWh/year per m2), at least 2
million people from rural population would be benefitted.
Considering that at least 300 Million people in India are without
electricity, this is a very significant percentage that can be easily
achieved.
In addition to the savings in electricity, implementing Solar
PV system will also contribute towards reduction in air and noise
pollution levels which would otherwise be incurred to generate the
required power through Thermal power stations or through Diesel
generator. Each MW of grid electricity in India produces the
equivalent of 0.8 tonnes of CO2. So by not drawing 2 Million kWh of
electricity from the grid, the company would have avoided 207200
tonnes of CO2 per year. The effects of such a pollution if not
reduced by Solar PV, will result in increased health costs for the
community.
71 See Infosys, Greenfinity. A world that runs on itself., https://www.infosys.com/sustainability/Documents/greenfinity-report.pdf , (9.11.2015)
61 | P a g e
In addition poor health situation will result in the reduction of
productivity of the country’s human resource. So it is clear that by
expanding the usage of renewable energy, apart from the direct
financial benefits realized by the company, there can be various
other ancillary benefits that can be realized by the community in
general.
2.13 Risk Analysis of Solar PV System implementation
Project:
There are risks associated with any project implementation.
Implementation of Solar PV project is no different. The risks and
their associated mitigation steps that are discussed in this section
are kept to be as generic as possible so that these can be adapted
to any Solar PV System project planned at any part of India.
S.N
o
Risk
Category
Risk
identificatio
n and
Analysis
Impa
ct
(1 -
10)
Probabili
ty
Risk
Scor
e
Risk
Mitigation
plan
1
Project
Manageme
nt
Delay in
Governmen
t
permissions
delaying
the project
9 50% 4.5
Include a
reasonable
time buffer in
the project
timeline to
accommodate
for the delay.
Regularly
followup with
the
concerned
department
to keep track
of the
approval
process
62 | P a g e
2
Project
Manageme
nt
Equipment
damange
due to
mishandling
or during
transportati
on
9 40% 3.6
Take
appropriate
Insurance
cover for
damages to
equipment.
Factor in the
insurance
costs in the
financial
calculations
3
Project
Manageme
nt
Lower plant
output due
to faulty
constructio
n practices
of sub
contractors
8 40% 3.2
Engage with
contractor
with good
track record
and negotiate
a precise
contract with
the sub
contractor
with the help
of legal
teams.
Include
clauses in the
contract to
penalise the
sub
contractor in
case of non
delivery/deliv
ery without
certain level
of quality.
Allocate a
resource with
specific
domain
knowledge to
supervise and
track the
progress.
63 | P a g e
4
Project
Manageme
nt
Poor
coordinatio
n between
multiple
vendors
8 40% 3.2
Identify
appropriate
point of
contacts and
laydown
escalation
rules to
address the
concerns
quickly. Meet
all the
vendors
regularly to
keep track of
the
implementati
on. Make
sure every
vendor is
aware of who
else is
dependent on
them and
how their
work
timelines
affect the
work of other
teams
5 Financial
Lack of
funds in
timely
manner
10 30% 3
Allocate and
keep a
contigency
fund to cater
for the delay.
Factor in such
a delay in the
financial
calculations.
64 | P a g e
6 Financial
Governmen
t policy
change
results in
Accelerated
Depreciatio
n benefit
10 30% 3
Changes to
Government
policies in
India in
general do
not happen
overnight.
Changes will
also be
applicable for
future
projects
rather than
applying
retrospectivel
y. If the
policy change
happens
during the
planning/desi
gn phase,
rework the
financial
calculations
to avail newly
announced
benefits in
the place of
AD or explore
other possible
benefits like
the
Generation
Based
Incentive
(GBI) that
can be
claimed when
AD cannot be
claimed.
65 | P a g e
7 Financial
Not able to
avail full
Accelerated
depreciatio
n benefit on
the first
year
9 30% 2.7
Plan the
project
deadline well
before the
Accelerated
Depreciation
timeline for
the year
(before Sep
30th).
Prepare
secondary
financial
analysis
where the full
AD benefit is
not taken in
the first year
to understand
if the
financial
impact on
project
returns is
acceptable
66 | P a g e
8 Operations
Faulty
design
resulting in
reduced
system
output
9 30% 2.7
Engage with
reputed
consulting
companies
who have
prior track
record
implementing
the scale of
project under
plan. Review
the design
once finalized
by engaging
OEM partners
and get their
technical
opinion about
the
performance
of their
components
in the
proposed
design.
9 Operations
Equipment
malfunction
due to
manufacturi
ng defect
8 30% 2.4
Purchase
quality
equipment
from reputed
manufacturer
s with
appropriate
warranty.
67 | P a g e
10 Operations
Due to
inclement
weather the
output of
the system
is
consistently
lower for
longer
period
5 10% 0.5
Reduced
output of
Solar PV
system will
not impact
the operation
as more
power would
be drawn
from the Grid
or generated
by Diesel
generator if
the Grid is
not available.
Factor in
additional
possible
losses in the
financial
calculations
to determine
the financial
benefits of
the project.
3. Solar PV Financial viability calculation results and
conclusions:
The goal of this thesis is to determine answers for the
following questions:
I. Is it financially viable to implement renewable energy
in Indian IT Companies?
II. What are the other possible benefits for the company
implementing renewable energy for their own
consumption?
III. What ancillary advantages can be expected by self-
generation of electricity by IT companies?
68 | P a g e
Based on the results of the financial analysis of the example
Solar PV implementation project by an ICT company, we can
conclude that it is financially feasible to implement Solar PV systems
for captive generation. The analysis clearly shows that the Solar PV
power has achieved grid parity in some places and for industrial and
commercial purposes it is even lower than the grid costs and much
lower than the diesel generated electricity costs. The recent multiple
MW capacity Solar PV bids won by companies show that the
financial results obtained in this thesis are realistic and may even be
considered as based on conservative assumptions. The intention
was certainly to give a balanced view instead of making all best
case assumptions. The trend in the Indian Solar PV market indicates
that the Solar PV might achieve grid parity for Industrial and
commercial applications throughout the country faster than
anticipated before.
When we discuss the non-financial benefits for the company,
the company will be able to realize additional benefits such as
reduced dependency on unreliable grid power, improved working
conditions for the employees, reduced carbon footprint etc. The
additional benefits have ripple effects that will ultimately help the
company as well as the society around it.
On the other hand ancillary benefits which are indirect results
of such a project is an added bonus. It was shown that the example
project could free up electricity for an additional 3500 people who
do not have access to grid electricity. By extrapolating the numbers
it is determined that atleast 2 million citizens could be added to the
grid when all the ICT companies generate 100% of their electricity.
69 | P a g e
In a vast country like India which is struggling with large
population and substantial section of population under poverty line,
Individuals and corporates will have to contribute to assist the
government. This analysis shows just by reducing their own
dependence on the fossil fuel resources, they will be contributing to
the growth of the country. Initiatives like these which are beneficial
for the corporates and also for the government should be
encouraged. Improving the government policies to encourage these
types of initiatives will go a long way to make the country to
achieve energy self-sufficiency. When energy costs become lower,
the country can move forward at a faster pace.
4. Future prospects and emerging technologies
relevant to ICT sector:
The electrical grid power and the building power delivery
infrastructure in most parts of the world is suitable for Alternative
Current. Traditionally this has worked well as it is more efficient to
transfer AC power over long distances. So the power can be
produced far away from the actual consumer and transported as
required. This lead to market conditions where more and more
devices that operate on AC power became available. The
innovations and growth in electronics sector has resulted in an
increase of devices that actually work on DC power but are modified
to work on AC power due to the existing infrastructure. Each of
these devices have a built in rectifier circuit that converts the AC
power from the power outlet to the usable DC power. This
conversion of power from AC to DC results in power loss. This is
applicable to most of the devices that are used in everyday life like
Mobile phones, Laptops, Televisions etc. The concept of running
devices using Direct Current is not new per se. This was a really old
argument between Mr. Thomas Alva Edison and Mr. Nikola Tesla.
The type of devices available those days were more suitable for
Alternating Current and hence AC became the accepted standard.
70 | P a g e
But with changing times, we now have more devices that run on DC
power. So it makes sense to use DC power directly without
conversion.
Most of the core equipment used in ICT companies such as
Desktop computers, laptops and Networking devices etc run on DC
power. So there is an inhernet power loss with the way we have
been operating these devices. This scenario is undergoing a change
due to the popularity of Captive generation using Solar PV Systems.
Solar PV system generated power is already DC power. So
theoretically all these devices would be able to work without the AC
to DC adapters. Unfortunately the existing infrastructure can only
handle AC power. So the Solar generated DC power is converted to
AC first then it again gets converted to DC at the device level if
required. Some companies are already experimenting even
commercially deploying DC based power infrastructure. The figure
below shows the traditional power setup where ICT equipment are
powered by AC power (top) and the proposed DC approach
(bottom) to power the ICT equipment in the data center.
Figure 32 Typical AC and DC power systems in Data centers. Source: NTT Facilities, Inc. Tokyo Japan72
72 Hirose, Keiichi (2011). DC Powered Data Centers in the world , http://ze.bot.free.fr/NTT_DC_Datacenter.pdf
71 | P a g e
There are already a few Data centers around the world which have
commercially implemented this idea. The Japanese telecom giant
NTT’s data center at Atsugi city, Tokyo is the first DC powered data
center servicing external customers. The joint study73 between the
Electric Power Research Institute (EPRI) and Duke Energy, USA,
shows that DC Power system consumes 15% less power compared
to typical double conversion UPS AC power system. They also cite
the following advantages of using DC power system:
Reduced losses
Increased reliability
Reduced cooling requirement
Higher equipment densities resulting in lower land
requirement for data center
Simpler power supplied and Reduced equipment
failures due to Heat
The preliminary results of this study show that the efficiency
of the DC power system is close to 28% better than the existing AC
power systems at a cheaper cost.
Technology improvements like this are suitable for emerging
economy like India. In developed countries like the United States,
they will have to consider the cost of removing the existing
infrastructure and putting in place the new infrastructure. But in
emerging economies like India, there are lots of places where this
will be implemented for the first time as there is no existing
infrastructure and hence the concerns related to “replacement
costs” won’t be applicable. The number of opportunities in the
emerging economies like India for such new technology would be
much greater than the developed economies. Electricity is one
commodity that has not changed much for several decades now. But
the recent trends show that we might be at the start of a new era in
the world of electricity and power generation.
73 See Duke Energy, Duke Energy - EPRI DC Powered Data Center Demonstration Executive Summary, http://docplayer.net/912930-Duke-energy-epri-dc-powered-data-center-demonstration-executive-summary.html , (20.1.2016)
72 | P a g e
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73 | P a g e
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