Summer Internship Project on SODEXO

7/28/2019 Summer Internship Project on SODEXO

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FINANCIAL MODELS- PAGE 1

FINANCIAL MODELS FOR

ALTERNATIVE SOURCES OF

ENERGY UNDER BETTERTOMORROW PLAN


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SUMMER INTERNSHIP REPORT

ROHAN KARDILE

P1121

SYDENHAM INSTITUTE OF MANAGEMENT STUDIES, RESEARCH

AND ENTREPRENEURSHIP EDUCATION


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ACKNOWLEDGEMENT

I would like to take this opportunity to thank everyone who has been instrumental towards the

completion of this project.

I would like to thank my mentor from Sodexo, Mr. Ninad Chikhalikar head of QM & HSE.

Without his patient advice, guidance and encouragement, this project would not have been

possible. Also, I would like to thank Ms. Rupali, who has been extremely helpful.

I am also extremely grateful to all my colleagues at Sodexo Ltd for all their support, guidance

and assistance. This project would have been incomplete without their inputs.

I would also like to thank Dr. M.A. Khan and all the faculty of Sydenham Institute of

Management Studies, Research and Entrepreneurship Education (SIMSREE) for giving me the

opportunity to work on this project of Sodexo.

Last, but not the least, Id like to thank my family and friends for their continuous support and

also everyone else who has contributed directly or indirectly to the completion of this project.


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ContentsOBJECTIVE ..................................................................................................................................................... 5

Executive Summary ....................................................................................................................................... 6

Introduction .................................................................................................................................................. 7

About BTP plan.......................................................................................................................................... 7

About MNRE.............................................................................................................................................. 7

About Renewable sources of energy ........................................................................................................ 9

Understanding the Requirement ................................................................................................................ 26

From SODEXO point of view ................................................................................................................... 26

About the Hospital sector ....................................................................................................................... 28

Governments supporting program ........................................................................................................ 30

Solar Water Heater ..................................................................................................................................... 33

FINANCIAL MODELS .................................................................................................................................... 43

Technical Specification ............................................................................................................................ 43

Supplier Details: ...................................................................................................................................... 43

Terms and conditions .............................................................................................................................. 44

Cost Details ............................................................................................................................................. 45

Means of Financing ................................................................................................................................. 46

How to calculate best financial model? ...................................................................................................... 54

Net Present Value ............................................................................................................................... 54

Calculations ................................................................................................................................................. 56

BEST MODEL................................................................................................................................................ 62

FUTURE PROJECTION USING THE BEST MODEL .......................................................................................... 63

CONCLUSION ............................................................................................................................................... 69

RECOMMENDATIONS ................................................................................................................................. 70

REFERENCES ................................................................................................................................................ 71


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OBJECTIVE

As a part of SODEXO- QHSE team (Quality, Health, Safety and Environment), this project

will basically concentrate on non-conventional sources of energy to promote GO GREEN

motto. Hence this project will assist BTP (Better Tomorrow Plan) by performing the

following action

- To understand the requirement of the industry

- Identify the best alternative source of energy

- Design different financial models

- Choose the best financial model


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Executive Summary

Protection of the Environment and Climate, and their preservation for the generations to come

is a demanding social, scientific and economical task. Utilization of renewable energy, efficientconversions of fossil fuel are not only environmentally and climatically beneficial, they also

preserve the finite energy sources. SODEXO has identified this gap and SODEXO will try to

bridge this gap by implementing BETTER TOMORROW PLAN, which also forms the base of this

project.

With an overall idea of improving energy efficiency, this project studies different Alternative

Sources of Energy, listed under MNRE that is, and MINISTRY OF NEW AND RENEWABLE

ENERGY. Project also identifies SOLAR WATER HEATER as the most feasible Alternative Sourceof Energy for SODEXO and its clients. To conclude sustainability, project proposes different

financial models supporting the use of Solar Water Heater. Selection of different financial

models depend upon some important parameters like Availability of fund, Future perspective,

Loans available, Life of Solar water Heater, Depreciation.

To incorporate detailed figures, specific example has to be taken. Here example of Hospital is

taken. Hospitals are one of the important clients for SODEXO. SODEXO has its own canteen in

Jogeshwari too. And as known, hot water is required by SODEXO canteen on daily basis too.Hence financial models stated at the end of this project can also be adapted by SODEXO in

order to go green by adapting SOLAR technology. Main form of energy required by Hospitals, to

obtain hot water is electricity or LPG. Solar water heater will allow hospitals to cut their cost in

electricity or LPG, thus making them financially and environmentally viable in long run.

This project will be subjected to Capital subsidy by MNRE (Ministry of New and Renewable

Energy) which is the nodal Ministry of the Government of India for all matters relating to new

and renewable energy.


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Introduction

About BTP plan

Sodexo, world leader in Quality of Life solutions has announced the creation of the "BetterTomorrow Plan," designed to better respond to the challenges of proper Nutrition, Health and

Wellness, Local communities and Environment. The Plans objective is to take a new step by

consolidating Sodexos sustainability performance and measuring the impact of its actions.

The "Better Tomorrow Plan" comes from a long process of upstream work during which Sodexo

consulted experts and all of its stakeholders, both internal and external, over a twelve-month

period.

"This Plan includes three original elements," said Sodexos Damien Verdier, Group Chief

Marketing Officer. He added, "It formalizes our goals across our three focus areas (Nutrition,Health and Wellness; Local communities; Environment) with 14 specific commitments. In

addition, because we work every day directly on our clients sites, our approach is collaborative,

encompassing our own employees as well as our clients and suppliers in carrying out our

commitments. Finally, the Better Tomorrow Plan is a long term process, which provides tools

for measuring our progress and sets dates for progress assessments in 2012, 2015 and 2020.

Through this Plan, we are engaged in a process of continuous improvement that commits us,

and our stakeholders, to improve Quality of Life for present and future generations."

Pierre Bellon, Sodexos Chairman, founded the company in 1966, setting out the companys

beliefs, mission, values and ethical principles, which continue to serve as a unifying force for the

Groups 380,000 employees around the world today.

Sodexos mission, which has remained the same for 43 years, is two-fold: "To improve the

Quality of Daily Life for all those who we serve and to contribute to the economic, social and

environmental development of the cities, regions and countries in which we operate."

About MNRE

The Ministry of New and Renewable Energy (MNRE) is the nodal Ministry of the Government of

India for all matters relating to new and renewable energy. The broad aim of the Ministry is to

develop and deploy new and renewable energy for supplementing the energy requirements of

the country. Creation CASE and Ministry:

Commission for Additional Sources of Energy (CASE) in 1981.


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Department of Non-Conventional Energy Sources (DNES) in 1982.

Ministry of Non-Conventional Energy Sources (MNES) in 1992.

Ministry of Non-Conventional Energy Sources (MNES) renamed as Ministry of New and

Renewable Energy (MNRE) in 2006.

The role of new and renewable energy has been assuming increasing significance in recent

times with the growing concern for the country's energy security. Energy self-sufficiency was

identified as the major driver for new and renewable energy in the country in the wake of the

two oil shocks of the 1970s. The sudden increase in the price of oil, uncertainties associated

with its supply and the adverse impact on the balance of payments position led to the

establishment of the Commission for Additional Sources of Energy in the Department of Science

& Technology in March 1981. The Commission was charged with the responsibility of

formulating policies and their implementation, programs for development of new and

renewable energy apart from coordinating and intensifying R&D in the sector. In 1982, a new

department, i.e., Department of Non-conventional Energy Sources (DNES), that incorporated

CASE, was created in the then Ministry of Energy. In 1992, DNES became the Ministry of Non-

conventional Energy Sources. In October 2006, the Ministry was re-christened as the Ministry of

New and Renewable Energy.


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About Renewable sources of energy

Power plays a great role wherever man lives and works. The living standard and prosperity of a

nation vary directly with the increase in the use of power. The electricity requirement of the

world is increasing at an alarming rate due to industrial growth, increased and extensive use of

electrical gadgets.

According to world energy report, we get around 80% of our energy from conventional fossil

fuels like oil (36%), natural gas (21%) and coal (23%). It is well known that the time is not so far

when all these sources will be completely exhausted. Nuclear energy is a comparatively clean

source of energy. However, safe handling of nuclear energy reactor is a sophisticated task and

only around 7% of the worlds total energy requirement is being satisfied by it today.

As human needs know no bounds, today most of the nations worldwide have been passing

through a phase of power deficit. The crisis is more critical among the developing nations. In

India, energy demand is increasing at the rate of 9% per annum and supply is not keeping pace.

Present deficit of electrical energy is 8%.

The increased power demand, depleting fossil fuel resources and growing environmentalpollution have led the world to think seriously for other alternative sources of energy. Basic

concept of alternative energy relates to issues of sustainability, renewability and pollution

reduction. In reality alternative energy means anything other than deriving energy via fossil

fuel combustion.

Various forms of alternative energy sources are solar, wind, biogas/biomass, tidal, geothermal,

fuel cell, hydrogen energy, small hydropower etc.

Solution to long-term energy problem will come only through Research and Development in the

field of alternative energy sources.


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Many rural communities consume little electricity, and extending electricity grids to meet their

energy needs may prove more costly and take longer than harnessing new and alternative

sources of energy already available in these communities wind, solar, and biomass

through Renewable Energy Technologies (RETs). The attraction of these sources lies primarily in

their abundance and ready access. The RETs for exploiting these sources include biogas plants,

solar lanterns, solar home lighting systems, improved cook stoves, improved kerosene lanterns,

solar water pumping systems, solar water heating systems and water mills.

Solar energy panels are little costly considering our average economic standard. Studies

indicate that cooking with biogas (a highly combustible fuel comprising methane, carbon

dioxide, nitrogen, hydrogen and hydrogen sulphide produced through anaerobic fermentation

of organic matter) can be cheaper than cooking with any commercial fuel.

Let us study 4 major Alternative sources of energy

1. Hydro Power

2. Solar Energy

3. Wind Energy

4. Biomass energy


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1.Hydro Power

Let us first understand Indias general electricity consumption.

The hydroelectric power refers to the energy produced from water (rainfall flowing into rivers,

etc).Consequently, rainfall can be a good indicator to investors looking for a location to

implement or build a new hydroelectric power plant in India.


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It is, in fact, the case, if we compare the map of Annual Rainfall and the Energy Map of India,

that hydropower plants are situated in regions of the major rainfall. The dominant annual

rainfall is located on the north/eastern part of India: Arunachal Pradesh, Assam, Nagaland,

Manipur and Mizoram, and also on the west coast between Mumbai (Bombay) and Mahe.

It is important to understand how does it work? The following diagram and explanation will

throw some light on modern technology of Hydro power.


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The natural water cycle is driven directly by solar energy. When the sun heats up water in the

sea and surface water, vaporization takes place and the water rises in the form of water vapor.

The water vapor rises. When the water vapor reaches higher layers of air and is cooled down,

the water falls down in the form of rain, hail or snow. The water runs naturally towards the

lowest level and is transported on the earth surface in streams and rivers, and finally reaches

the sea where it again evaporates. By letting the water flow through turbines on its way to the

sea, we can harness the kinetic energy of the moving water to produce electricity.

Volume and head of water determine the potential energy of a waterfall. The head of water is

the height difference between reservoir intake and power station outlet. Water is directed into

pressure shafts leading down to a power station, where it strikes the turbine runner at high

pressure. The kinetic energy of the water is transmitted via the propeller shaft to a generator,

which converts it into electrical energy. Water power plants can be divided in two types based

on the pressure height: low- and high-head power plants.


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Low-head power stations often utilize a large water volume but have a low head, as in a run-of-

river power station. Since regulating the flow of water is difficult, it is used when available. The

amount of electricity generated therefore increases considerably when the river is carrying

more water during the spring thaw or when precipitation is very high. The river is dammed up

by the power plant to lead the water into one or more turbines. After having been exploited inthe turbines, the water runs out in the river below the power station.

High-head power stations are generally constructed to utilize a high head but smaller volume of

water than run-of-river installations.


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2.Solar Energy

Solar energy, radiant light and heat from the sun, has been harnessed by humans since ancient

times using a range of ever-evolving technologies. Solar energy technologies include solar

heating, solar photovoltaic, solar thermal electricity and solar architecture, which can make

considerable contributions to solving some of the most urgent problems the world now faces.

Solar technologies are broadly characterized as either passive solar or active solar depending on

the way they capture, convert and distribute solar energy. Active solar techniques include the

use of photovoltaic panels and solar thermal collectors to harness the energy. Passive solar

techniques include orienting a building to the Sun, selecting materials with favorable thermalmass or light dispersing properties, and designing spaces that naturally circulate air.

In 2011, the International Energy Agency said that "the development of affordable,

inexhaustible and clean solar energy technologies will have huge longer-term benefits. It will

increase countries energy security through reliance on an indigenous, inexhaustible and mostly

import-independent resource, enhance sustainability, reduce pollution, lower the costs of

mitigating climate change, and keep fossil fuel prices lower than otherwise. These advantages

are global. Hence the additional costs of the incentives for early deployment should beconsidered learning investments; they must be wisely spent and need to be widely shared"
http://en.wikipedia.org/wiki/Lighthttp://en.wikipedia.org/wiki/Heathttp://en.wikipedia.org/wiki/Sunhttp://en.wikipedia.org/wiki/Ancient_historyhttp://en.wikipedia.org/wiki/Ancient_historyhttp://en.wikipedia.org/wiki/Solar_heatinghttp://en.wikipedia.org/wiki/Solar_heatinghttp://en.wikipedia.org/wiki/Solar_photovoltaicshttp://en.wikipedia.org/wiki/Solar_thermal_electricityhttp://en.wikipedia.org/wiki/Solar_architecturehttp://en.wikipedia.org/wiki/Passive_solarhttp://en.wikipedia.org/wiki/Active_solarhttp://en.wikipedia.org/wiki/Solar_thermal_energyhttp://en.wikipedia.org/wiki/Thermal_masshttp://en.wikipedia.org/wiki/Thermal_masshttp://en.wikipedia.org/wiki/Ventilation_(architecture)http://en.wikipedia.org/wiki/International_Energy_Agencyhttp://en.wikipedia.org/wiki/Sustainabilityhttp://en.wikipedia.org/wiki/Climate_changehttp://en.wikipedia.org/wiki/Fossil_fuelhttp://en.wikipedia.org/wiki/Fossil_fuelhttp://en.wikipedia.org/wiki/Climate_changehttp://en.wikipedia.org/wiki/Sustainabilityhttp://en.wikipedia.org/wiki/International_Energy_Agencyhttp://en.wikipedia.org/wiki/Ventilation_(architecture)http://en.wikipedia.org/wiki/Thermal_masshttp://en.wikipedia.org/wiki/Thermal_masshttp://en.wikipedia.org/wiki/Solar_thermal_energyhttp://en.wikipedia.org/wiki/Active_solarhttp://en.wikipedia.org/wiki/Passive_solarhttp://en.wikipedia.org/wiki/Solar_architecturehttp://en.wikipedia.org/wiki/Solar_thermal_electricityhttp://en.wikipedia.org/wiki/Solar_photovoltaicshttp://en.wikipedia.org/wiki/Solar_heatinghttp://en.wikipedia.org/wiki/Solar_heatinghttp://en.wikipedia.org/wiki/Ancient_historyhttp://en.wikipedia.org/wiki/Ancient_historyhttp://en.wikipedia.org/wiki/Sunhttp://en.wikipedia.org/wiki/Heathttp://en.wikipedia.org/wiki/Light


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Now lets understand few applications of solar energy

- Agriculture and horticulture

- Solar lighting

- Water heating

- Heating, cooling and ventilation

- Water treatment- Cooking

- Solar power

- Solar chemical

- Solar vehicles


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1. Agriculture and horticulture

While sunlight is generally considered a plentiful resource, the exceptions highlight the

importance of solar energy to agriculture. During the short growing seasons of the Little Ice

Age, French and English farmers employed fruit walls to maximize the collection of solar

energy. These walls acted as thermal masses and accelerated ripening by keeping plants warm.

Applications of solar energy in agriculture aside from growing crops include pumping water,

drying crops, brooding chicks and drying chicken manure. Greenhouses convert solar light to

heat, enabling year-round production and the growth (in enclosed environments) of specialty

crops and other plants not naturally suited to the local climate.

2. Solar Light

Hybrid solar lighting is an active solar method of providing interior illumination. HSL systemscollect sunlight using focusing mirrors that track the Sun and use optical fibers to transmit it

inside the building to supplement conventional lighting. In single-story applications these

systems are able to transmit 50% of the direct sunlight received. Solar lights that charge during

the day and light up at dusk are a common sight along walkways. Solar-charged lanterns have

become popular in developing countries where they provide a safer and cheaper alternative to

kerosene lamps.

3. Water heating

Solar hot water systems use sunlight to heat water. In low geographical latitudes (below

40 degrees) from 60 to 70% of the domestic hot water use with temperatures up to 60 C can

be provided by solar heating systems.The most common types of solar water heaters are

evacuated tube collectors (44%) and glazed flat plate collectors (34%) generally used for

domestic hot water; and unglazed plastic collectors (21%) used mainly to heat swimming pools.

4. Heating, cooling and ventilation

A solar chimney (or thermal chimney, in this context) is a passive solar ventilation

system composed of a vertical shaft connecting the interior and exterior of a building. As

the chimney warms, the air inside is heated causing anupdraftthat pulls air through the

building. Performance can be improved by using glazing and thermal mass materials.
http://en.wikipedia.org/wiki/Little_Ice_Agehttp://en.wikipedia.org/wiki/Little_Ice_Agehttp://en.wikipedia.org/wiki/Solar_power_in_the_United_Kingdomhttp://en.wikipedia.org/wiki/Greenhousehttp://en.wikipedia.org/wiki/Hybrid_solar_lightinghttp://en.wikipedia.org/wiki/Active_solarhttp://en.wikipedia.org/wiki/Solar_trackerhttp://en.wikipedia.org/wiki/Optical_fiberhttp://en.wikipedia.org/wiki/Updrafthttp://en.wikipedia.org/wiki/Updrafthttp://en.wikipedia.org/wiki/Updrafthttp://en.wikipedia.org/wiki/Updrafthttp://en.wikipedia.org/wiki/Optical_fiberhttp://en.wikipedia.org/wiki/Solar_trackerhttp://en.wikipedia.org/wiki/Active_solarhttp://en.wikipedia.org/wiki/Hybrid_solar_lightinghttp://en.wikipedia.org/wiki/Greenhousehttp://en.wikipedia.org/wiki/Solar_power_in_the_United_Kingdomhttp://en.wikipedia.org/wiki/Little_Ice_Agehttp://en.wikipedia.org/wiki/Little_Ice_Age


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A solar air conditioner uses a solar panel (not electricity) to super heat the refrigerant (the

hotter it is... the higher the energy saved) to deliver a super heated higher pressured gas to a

condenser and then to the evaporator and then to the Solar Compressor.

When the working fluid leaves the condenser, its temperature is colder and it has changed from

a gas to a 100% liquid under high pressure. By the time the working fluid leaves the evaporator,

it is a cool, low pressure gas. It then returns to the solar panel to begin its trip all over again

5. Water Treatment

Solar water disinfection (SODIS) involves exposing water-filled plastic polyethylene

terephthalate (PET) bottles to sunlight for several hours. Exposure times vary depending on

weather and climate from a minimum of six hours to two days during fully overcast

conditions. It is recommended by the World Health Organization as a viable method forhousehold water treatment and safe storage. Over two million people in developing countries

use this method for their daily drinking water.

Solar energy may be used in a water stabilization pond to treat waste water without chemicals

or electricity. A further environmental advantage is that algae grow in such ponds and

consume carbon dioxide in photosynthesis, although algae may produce toxic chemicals that

make the water unusable

6. Cooking

Solar cookers use sunlight for cooking, drying and pasteurization. They can be grouped into

three broad categories: box cookers, panel cookers and reflector cookers. The simplest solar

cooker is the box cooker first built by Horace de Saussure in 1767. A basic box cooker consists

of an insulated container with a transparent lid. It can be used effectively with partially overcast

skies and will typically reach temperatures of 90150 C. Panel cookers use a reflective panel to

direct sunlight onto an insulated container and reach temperatures comparable to box cookers.

Reflector cookers use various concentrating geometries (dish, trough, Fresnel mirrors) to focus

light on a cooking container. These cookers reach temperatures of 315 C and above but

require direct light to function properly and must be repositioned to track the Sun.

The solar bowl is a concentrating technology employed by the Solar Kitchenin Auroville, Pondicherry, India, where a stationary spherical reflector focuses light along a line

perpendicular to the sphere's interior surface, and a computer control system moves the

receiver to intersect this line. Steam is produced in the receiver at temperatures reaching

150 C and then used for process heat in the kitchen.
http://en.wikipedia.org/wiki/Disinfectionhttp://en.wikipedia.org/wiki/Polyethylene_terephthalatehttp://en.wikipedia.org/wiki/Polyethylene_terephthalatehttp://en.wikipedia.org/wiki/World_Health_Organizationhttp://en.wikipedia.org/wiki/Waste_waterhttp://en.wikipedia.org/wiki/Carbon_dioxidehttp://en.wikipedia.org/wiki/Pasteurizationhttp://en.wikipedia.org/wiki/Horace_de_Saussurehttp://en.wikipedia.org/wiki/Solar_bowlhttp://en.wikipedia.org/wiki/Aurovillehttp://en.wikipedia.org/wiki/Pondicherryhttp://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Pondicherryhttp://en.wikipedia.org/wiki/Aurovillehttp://en.wikipedia.org/wiki/Solar_bowlhttp://en.wikipedia.org/wiki/Horace_de_Saussurehttp://en.wikipedia.org/wiki/Pasteurizationhttp://en.wikipedia.org/wiki/Carbon_dioxidehttp://en.wikipedia.org/wiki/Waste_waterhttp://en.wikipedia.org/wiki/World_Health_Organizationhttp://en.wikipedia.org/wiki/Polyethylene_terephthalatehttp://en.wikipedia.org/wiki/Polyethylene_terephthalatehttp://en.wikipedia.org/wiki/Disinfection


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7. Solar Power

Solar power is the conversion of sunlight into electricity, either directly using photovoltaic (PV), or

indirectly using concentrated solar power (CSP). CSP systems use lenses or mirrors and tracking systems

to focus a large area of sunlight into a small beam. PV converts light into electric current using

the photoelectric effect.

Following are the current PV technologies making their way in market

- Crystalline silicon (c-Si) modules represent 85-90% of the global annual market today. C-Si

modules are subdivided in two main categories: i) single crystalline (sc-Si) and ii) multi-

crystalline (mc-Si).

- Thin films currently account for 10% to 15% of global PV module sales. They are subdivided into

three main families: i) amorphous (a-Si) and micro morph silicon (a-Si/c-Si), ii) Cadmium-

Telluride (CdTe), and iii) Copper-Indium-Diselenide (CIS) and Copper-Indium-Gallium-Diselenide

(CIGS).

- Emerging technologies encompass advanced thin films and organic cells. The latter are about to

enter the market via niche applications.

- Concentrator technologies (CPV) use an optical concentrator system which focuses solar

radiation onto a small high-efficiency cell. CPV technology is currently being tested in pilot

applications.

- Novel PVconcepts aim at achieving ultra-high efficiency solar cells via advanced materials and

new conversion concepts and processes. They are currently the subject of basic research.

8. Solar Chemical

Solar chemical processes use solar energy to drive chemical reactions. These processes offset energy

that would otherwise come from a fossil fuel source and can also convert solar energy into storable and

transportable fuels. Solar induced chemical reactions can be divided into thermo chemical

or photochemical. A variety of fuels can be produced by artificial photosynthesis. The multi electron

catalytic chemistry involved in making carbon-based fuels (such as methanol) from reduction ofcarbon

dioxide is challenging; a feasible alternative is hydrogen production from protons, though use of wateras the source of electrons (as plants do) requires mastering the multi electron oxidation of two water

molecules to molecular oxygen. Some have envisaged working solar fuel plants in coastal metropolitan

areas by 2050- the splitting of sea water providing hydrogen to be run through adjacent fuel-cell electric

power plants and the pure water by-product going directly into the municipal water system.
http://en.wikipedia.org/wiki/Electricityhttp://en.wikipedia.org/wiki/Photovoltaicshttp://en.wikipedia.org/wiki/Concentrated_solar_powerhttp://en.wikipedia.org/wiki/Photoelectric_effecthttp://en.wikipedia.org/wiki/Photochemicalhttp://en.wikipedia.org/wiki/Artificial_photosynthesishttp://en.wikipedia.org/wiki/Methanolhttp://en.wikipedia.org/wiki/Carbon_dioxidehttp://en.wikipedia.org/wiki/Carbon_dioxidehttp://en.wikipedia.org/wiki/Hydrogenhttp://en.wikipedia.org/wiki/Hydrogenhttp://en.wikipedia.org/wiki/Carbon_dioxidehttp://en.wikipedia.org/wiki/Carbon_dioxidehttp://en.wikipedia.org/wiki/Methanolhttp://en.wikipedia.org/wiki/Artificial_photosynthesishttp://en.wikipedia.org/wiki/Photochemicalhttp://en.wikipedia.org/wiki/Photoelectric_effecthttp://en.wikipedia.org/wiki/Concentrated_solar_powerhttp://en.wikipedia.org/wiki/Photovoltaicshttp://en.wikipedia.org/wiki/Electricity


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3.Wind EnergyIndia is surpassed only by Germany as one of the world's fastest growing markets for wind

energy. By the mid 1990s, the subcontinent was installing more wind generating capacity than

North America, Denmark, Britain, and the Netherlands.

The ten machines near Okha in the province of Gujarat were some of the first wind turbines

Installed in India. These 15-meter Vestas wind turbines overlook the Arabian Sea. In 2011, there

is an installed capacity of 6,430 MW; however, 7 times that potential or 46,092 MW exists.

Advantages

It is one of the most environment friendly, clean and safe energy resources.

It has the lowest gestation period as compared to conventional energy.

Equipment erection and commissioning involve only a few months.

There is no fuel consumption, hence low operating costs. Maintenance costs are low.

The capital cost is comparable with conventional power plants. For a wind farm, the capital cost

ranges between 4.5 crores to 5.5 crores, depending on the site and the wind electric generator

(WEG) selected for installation.


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Requirement for Wind Farm

An area where a number of wind electric generators are installed is known as a wind farm.

The essential requirements for establishment of a wind farm for optimal exploitation of the

wind are the following:

High wind resource at particular site.

Adequate land availability

Suitable terrain and good soil condition

Maintenance access to site

Suitable power grid nearby

Techno-economic selection of specific turbines

Scientifically prepared layout

Wind energy generation has limitations which will influence the extent and type of role itwill ultimately play in overall generation of electricity in India.


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Limitations

Wind machines must be located where strong, dependable winds are available most of

the time.

Because winds do not blow strongly enough to produce power all the time. Energy from

wind machines is considered "intermittent," that is, it comes and goes. Therefore,

electricity from wind farms must have a back-up supply from another source.

As wind power is "intermittent," utility companies can use it for only part of their total

energy needs.

Wind towers and turbine blades are subject to damage from high winds and lighting.

Rotating parts, which are located high off the ground can be difficult and expensive to

repair.

Electricity produced by wind power sometimes fluctuates in voltage and power factor,

which can cause difficulties in linking its power to a utility system.

The noise made by rotating wind machine blades can be annoying to nearby neighbors.

Some environmental groups have complained about aesthetics and avian mortality from

wind machines


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4.Biomass Energy

Biomass includes solid biomass (organic, non-fossil material of biological origins), biogas

(principally methane and carbon dioxide produced by anaerobic digestion of biomass and

combusted to produce heat and/or power), liquid biofuels (bio-based liquid fuel from biomass

transformation, mainly used in transportation applications), and municipal waste (wastes

produced by the residential, commercial and public services sectors and incinerated in specific

installations to produce heat and/or power).

The most successful forms of biomass are sugar cane bagasse in agriculture, pulp and paper

residues in forestry and manure in livestock residues. It is argued that biomass can directly

substitute fossil fuels, as more effective in decreasing atmospheric CO2 than carbon

sequestration in trees. The Kyoto Protocol encourages further use of biomass energy.

Biomass may be used in a number of ways to produce energy. The most common methods are:

Combustion

Gasification

Fermentation

Anaerobic digestion

India is very rich in biomass. It has a potential of 19,500 MW (3,500 MW from bagasse based

cogeneration and 16,000 MW from surplus biomass). Currently, India has 537 MW

commissioned and 536 MW under construction. The facts reinforce the idea of a commitment

by India to develop these resources of power production.

Following is a list of some States with most potential for biomass production:

Andhra Pradesh (200 MW)

Bihar (200 MW)

Gujarat (200 MW)

Karnataka (300 MW)

Maharashtra (1,000 MW)

Punjab (150 MW)

Tamil Nadu (350 MW)

Uttar Pradesh (1,000 MW)


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Understanding the Requirement

From SODEXO point of view

In India alone Sodexo employs 30,000 people, and serves 662,000 consumers every day.

Currently, Sodexo has a colossal portfolio of prestigious clients and we as a company are the

largest private purchaser of food on the Indian sub-continent. With this enormous reach we

want to be more conscious about improving the quality of food we serve thus ensuring a

sustainable future.

The importance of Food Safety in Sodexo India:

Demonstrates commitment of serving safe food

Reduces risk associated with food

Sodexo commit towards serving Safe Food to our Customers by rigorously implementing Food

Safety Practices through:

Use of Safe and Quality materials in food preparation

Evaluate and Partner with our suppliers to secure and maintain quality of delivered products

Maintain highest standards of hygiene and adherence to temperature norms for food

Continuously Train and educate our employees to achieve high food safety and hygiene

standards

Conduct periodic audits to ensure adherence to Food safety standards

Based on the above practices Sodexo have launched Food Safety policy that has been displayed

at all sites and it demonstrates Sodexos commitment towards serving safe food. Sodexo ensure

that non adherence to the Food Safety policy leads to reinforcing a zero tolerance policy. Failing

to non compliance of the zero tolerance policy would lead to disciplinary actions and

terminations of services for our employees.

Wateris not always considered to be strictly afoodin itself, but by its aid many foods andflavors

are put in forms more acceptable to the palate and more readily absorbed by the body than

they could be in any other way. In order to get clean water one can boil the water in order to

kill the impurities if any. Hence from point of Quality, it is advisable that one needs to heat the

water before it is used.
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The other important aspect of Food Safety is clean vegetables and fruit. Farmers use

insecticides, pesticides on them. Also these vegetables travel from farmer to middlemen, from

middlemen to wholesalers, from wholesalers to retailers and finally to buyers. During this long

journey there are chances that vegetables will fall on the unclean ground or catch dust. Hence

when buyers receive it, he or she should make sure that vegetables or fruits are cleaned beforeconsumption. As scientifically proven, hot water will be very useful in such cases.

At Sodexo Jogeshwari canteen, it will be really helpful if the hot water is available for

sanitization. This will make sure that Base of Food safety is achieved.

Apart from Food Services, Sodexo Globally has its expertise in Facility Management too. Facility

Management basically is divided into 2 parts which are Soft services and hard services.

Soft services are

Reception Cleaning

Pantry

Grounds keeping

Waste management

Vendor management

Hard services are

Electrical system

Energy efficiency system

Water treatment

Maintenance of Equipment

Under hard services, this project aims to improve Energy efficiency of clients. Hence

understanding the requirements play an important role. To scrutinize the understanding

specific example of Hospital sector has been taken.


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About the Hospital sector

The hospital sector is expanding in India to meet the medical needs of growing population.

According to BEE (Bureau of Energy efficiency) there were approximately 512000 beds in

private hospitals. This number is greater than that of public hospitals, which are 495000. In this

way total number of beds in India equals to approximately 10, 00,000.

In hospitals, heat stream is used in the form of steam and hot water. Steam is used in the

kitchens and for humidification in HVAC and sterilization process. In addition steam is used to

transport heat over longer distances. In many cases heat is transported from the heat

generating station in the form of steam and then converted locally into central heating or hot

tap water. Oil/Gas-fired boilers are used to generate steam and hot water.

The hot water requirement in hospitals, theoretically, stems from three purposes

Patient room

Laundry

Kitchen


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The laundry and kitchen are features of large corporate or public hospitals and these hospitals

contribute a tiny percentage of total hospital beds in India. The kitchen requirement is for

cleaning and works out less than 5 liters per bed. For practical purpose, patient room or bathing

constitutes the hot water requirement of hospitals. The arrangement, typically, is shower

and/or bucket bath. There are patients who, for medical reasons, are required to abstain frombathing. The care-takers accompanying the patient, in many instances, do not bathe in the

hospitals. These practices bring down the hot water consumption in a hospital.

The hospital owners/managers interviewed by us estimated hot water consumption per bed to

be 25 lpd/bed for patients who are permitted to bath. The growth of beds in government

hospitals is expected to be tardy- 2% per annum till 2022. We expect private hospital growth

@7% per annum till 2013 and to taper to 5% over 2014-17 period and 3% per annum

thereafter.

The total hot water requirement will escalate from 45.18 million lpd in 2011 to 75.11 million lpd

in 2022.

Let us understand the Hot water consumption in hospitals with the help of following chart.


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After understanding the requirement of hot water, means of financing it should be identified.

Project then identified MNREs efforts to promote the clean energy sources. The next section

will give the detailed view of MNREs JNN solar mission.

Governments supporting program

Jawaharlal Nehru National Solar Mission - Towards Building SOLAR INDIA

The National Solar Mission is a major initiative of the Government of India and StateGovernments to promote ecologically sustainable growth while addressing Indias energy

security challenge. It will also constitute a major contribution by India to the global effort to

meet the challenges of climate change

1. Objectives and Targets


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The objective of the National Solar Mission is to establish India as a global leader in solar

energy, by creating the policy conditions for its diffusion across the country as quickly as

possible. The Mission will adopt a 3-phase approach, spanning the remaining period of the 11th

Plan and first year of the 12th

Plan (up to 2012-13) as Phase 1, the remaining 4 years of the 12th

Plan (2013-17) as Phase 2 and the 13

th

Plan (2017-22) as Phase 3.

- To create an enabling policy framework for the deployment of 20,000 MW of solar

power by 2022.

- To ramp up capacity of grid-connected solar power generation to 1000 MW within

three years - by 2013; an additional 3000 MW by 2017 through the mandatory use of

the renewable purchase obligation by utilities backed with a preferential tariff

- To create favorable conditions for solar manufacturing capability, particularly solar

thermal for indigenous production and market leadership.

- To promote programs for off grid applications, reaching 1000 MW by 2017 and 2000

MW by 2022.

- To achieve 15 million sq. meters solar thermal collector area by 2017 and 20 million by

2022.

- To deploy 20 million solar lighting systems for rural areas by 2022.

2. The Proposed RoadmapThe aspiration is to ensure large-scale deployment of solar generated power for grid-connected

as well as distributed and decentralized off-grid provision of commercial energy services. Thedeployment across the application segments is envisaged as follows:

3. Mission strategy for Solar water heater


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The Mission in its first two phases will promote solar heating systems, which are already using

proven technology and are commercially viable. The Mission is setting an ambitious target for

ensuring that applications, domestic and industrial, below 80 C are solarised. The key strategy

of the Mission will be to make necessary policy changes to meet this objective:

- Firstly, make solar heaters mandatory, through building byelaws and incorporation

in the National Building Code

- Secondly, ensure the introduction of effective mechanisms for certification and rating of

manufacturers of solar thermal applications

- Thirdly, facilitate measurement and promotion of these individual devices through local

agencies and power utilities

- Fourthly, support the upgrading of technologies and manufacturing capacities through

soft loans, to achieve higher efficiencies and further cost reduction

4. Subsidies by MNREa) Capital SubsidyCapital subsidy equivalent to upfront interest subsidy Rs. 1850 per sq. m. to

registered institutions and Rs 1400 per sq. m. of collector area to registered commercial

establishments. For housing complexes Rs. 1900/ sq. m. of collector area

b) Interest Loan SubsidyIf solar water heater costs above 500,000 INR, then 80% of the costof the project will be provided loans for 5 years from IREDA/Banks at 2% for domestic users,3%

for institutional and 5% for commercial users. Banks too get an incentive of 1% of the loan.31

Banks are supporting the interest subsidies.

In this way, we understand that SOLAR WATER HEATERS will satisfy the growing needs of

hospitals. And since solar investment is encouraged by government, there will be monetary

incentives from the government as well. Apart from monetary incentives, hospitals will also

achieve environmental and social benefits.

After understanding the requirement of Solar Water Heater, there arises some important

financial decisions to satisfy the need of Solar Water heater. Hence this project will eventually

analyze and compare different financial decisions, followed by selecting the best model out of

them. The best model will project Cash flows, Profit and loss statement and balance sheet.


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Solar Water Heater

In order to acquire any asset, it is necessary to study the asset.

- Solar Water Heater is a device that helps in heating water by using the energy from the

SUN. This energy is totally free.

- Solar energy (sun rays) is used for heating water. Water is easily heated to a

temperature of 60-80o C.

- Solar Water Heaters (SWHs) of 100-300 liters capacity are suited for domestic use.

- Larger systems can be used in restaurants, canteens, guest houses, hotels, hospitals etc.

- A 100 liters capacity SWH can replace an electric geyser for residential use and may save

up to 1500 units of electricity annually.

- The use of 1000 SWHs of 100 liters capacity each can contribute to a peak load saving of

approximately 1 MW.

- A SWH of 100 liters capacity can prevent emission of 1.5 tonnes of carbon-dioxide per

year.

MAIN COMPONENTS OF SOLAR WATER HEATER


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Main components of Solar Water Heater are:

- Solar Collector( to collect solar energy)

- Insulated Tank (to store hot water)

- Supporting Stand

- Connecting Pipes and Instrumentation, etc.

WORKING OF A SOLAR WATER HEATER


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- The Suns rays fall on the Collector Panel (a component of Solar Water Heater). A blackabsorbing surface (absorber) inside the collectors absorbs solar radiation and transfers

the heat energy to water flowing through it. Heated water is collected in a tank which is

insulated to prevent heat loss. Circulation of water from the tank through the collectors

and back to the tank continues automatically due to thermo siphon principle.

- A Solar Water Heater consists of a Collector panel to collect solar energy and an

Insulated Storage Tank to store hot water.

TYPES OF SOLAR WATER HEATERS

Generally two types of Solar Water Heaters are available in the market.

- Flat Plate Collector based Solar Water Heater

This consists of flat plate collectors covered by an insulated metallic box with glass

sheet on the top to receive sun rays.

- Evacuated Tube Collector based Solar Water Heater

In this, the Collector is made up to double layer evacuated borosilicate glass tubeshaving selective coating on outer surfaces of inner tubes.

- Other Components

Rest of the components is same in both type of Solar Water Heater.


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FLAT PLATE COLLECTOR BASED SOLAR WATER HEATER

- In this system the solar radiation is absorbed by flat plate collectors which consist of an

insulated outer metallic box covered on the top with glass sheet. Inside it are blackened

metallic absorber (selectively coated) sheets with built in channels or riser tubes to carry

water. The absorber sheets absorb the solar radiation and transfer the heat to the

flowing water. The flowing hot water is then collected in the storage tank.

- These systems have long life (15-20 Years) and work efficiently especially in non-hillyregions and regions where water quality is good. For other regions Heat-exchangers are

required.

- These systems are available in multiple of 100 LPD (Liters per day) i.e. 100, 200, 300 LPD

etc.

- Bureau of Indian Standards has standardized the collectors for this type of Solar Water

Heaters. IS 12933: 2003 gives the details of these standards.

EVACUATED TUBE COLLECTOR BASED SOLAR WATER HEATER

In this system the collector is made of double layer borosilicate glass tubes evacuated for

providing insulation. The outer wall of the inner tube is coated with selective absorbing

material. This helps absorption of solar radiation and transfers the heat to the water which

flows through the inner tube. The flowing hot water is then collected in the storage tank.


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The features of Evacuated Tube Collector are as under:-

- These systems are less expensive and can work efficiently in hilly regions and also in regions

where water quality is not very good.

- The life of the system may, however, be less than that of FPC system as their collectors are

made of glass.

- These systems are available in any size e.g. 50, 75, 100, 125, 150 LPD etc. Presently thesesystems do not have BIS Standards, though they have approval of Ministry of New and

Renewable Energy, GOI.

DESIRABLE CHARACTERISTICS OF A HOT WATER STORAGE TANK

The Hot Water Storage Tank in Domestic Solar Water Heaters is a double walled tank. The

space between the inner and the outer tank is filled with insulation to prevent heat losses. The

inner tank is generally made of stainless steel to ensure long life. The outer tank could be made

of a stainless steel sheet, painted steel sheet or aluminum. Thermostat controlled electrical

heating elements can also be provided (optional) in the tank to take care of those days when

the sun does not shine or demand of water goes up. The capacity of the tank should be in

proportion to the collector area used in the system. A commonly used thumb rule is to provide

50 liters of storage for every one sq. m. of collector area.


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FEATURES OF A GOOD SOLAR WATER HEATER

First and foremost requirement of a good Solar Water Heater is that it should have sufficient

collector area for the capacity claimed. The collector area used in the system determines thecapacity of water heating. For example, in typical North Indian weather conditions, on a sunny

winter day, one sq. m. of flat plate collector area can be expected to heat approximately 50

liters of water by a temperature of 30-40 C. Typical flat plate collectors made in the country

have an area of around 2 sq. m and are thus capable of heating around 100 liters of water in a

day. An ETC based system of 14 tubes covering an area of 1.5 Sq. m. is able to provide 100 Liters

of hot water in a day. This proportion serves as a benchmark. Further, the collectors should be

of good material and the absorbers should carry good quality coating (BIS approved collectors

are being provided by large number of established manufacturers). The system should be

mounted on a rigid structure and should be firmly fixed with the roof to prevent damage duringhigh winds.

ESTIMATED REQUIREMENTS OF HOT WATER

Some important thumb rules are:

COST OF A SOLAR WATER HEATER

As per guidelines of Ministry of New and Renewable Energy (MNRE), GOI the upper cost limits

for Solar Water heaters are detailed below:


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SITE REQUIREMENTS FOR INSTALLATION OF SWH

The basic requirement of site for installation of a Solar Water Heater depends on the following

factors:-

- For functioning of a Solar Water Heater the most important thing is the availability of

unobstructed sunlight for the whole day. Typically, domestic Solar Water Heating

Systems are installed on the roof of the house. The Collectors of the system have to face

the sun and hence should be oriented towards the North-South axis for maximum

interception of sunlight. Thus there should be no obstruction to sunlight in any

directions (an arc of about 60 with the ground should ideally be shadow free).

- As a thumb rule, the requirement of shadow free area is around 3 sq. m for each 1 x 2 m

Collector used. As far as possible, the area should be flat, away from rain water drainsand close to the bathrooms where hot water is to be supplied.

- Cold water should be available at a height of around 2.5 m from the base of the system.

WORKING OF SOLAR WATER HEATER ON CLOUDY DAYS


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The heating of water by the solar system will obviously be affected. If it is so cloudy that energy

received from the sun is almost zero, the output of solar collectors also will be nil. On partially

cloudy days some output can be expected. But, the system can be designed with a suitable

electrical back up heater to take care of hot water demand on cloudy days.

LIFE SPAN OF SOLAR WATER HEATER

Typical Solar Water Heaters made by using materials as per BIS specifications could last for 15 -

20 years depending upon the general upkeep, maintenance.

SUPPLIERS OF DOMESTIC SOLAR WATER HEATERS

There are 56 BIS approved Manufacturers of FPC based Solar Water Heaters and 23 MNRE

approved suppliers of ETC based Solar Water Heaters. The list of these manufacturers is

available on MNRE website (www.mnes.nic.in).

Some of the providers are:
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OPERATIONAL REQUIREMENTS

Domestic solar systems do not require any special operational skills. However, if the following

tips are observed, the efficiency of the systems will be maintained at a high level:

- Try to consume most of the heated water at one time -either in the morning or in the

evening. Frequent ON and OFF of the hot water tap would lead to reduced

electricity savings.

- If an electrical back-up is provided in the tank, set the thermostat at the lowest

acceptable temperature.


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- In the North Indian climate, hot water may not be used for bathing in summers. If the

system is to be put totally out of use, it should be drained of water and the collector

should be covered. Alternatively, if the hot water requirement remains in summers also,

though at a reduced level, cover the collector partially.

- Dust deposition on the collector would reduce its efficiency. Try to get it cleaned at leastonce in a week.

MAINTENANCE REQUIREMENTS

Domestic Solar Water Heater does not need significant maintenance. Occasional leakages in

plumbing could be easily repaired by common plumbers. In case quality of water is hard, scale

deposition in the collectors may result over the years. This may require treatment with acids forwhich it is best to contact the suppliers. Broken glass may also have to be replaced by the

suppliers.


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FINANCIAL MODELS

Let us consider a hospital whose daily need of hot water is 1000 Liters per day. Hospital is

situated in non hilly region like Mumbai, where there is no hard water. For such water Flat Plate

Collector SWH should be used.

Technical Specification

Particular Detail

Name of the equipment Solar water Heater

Company name Tata BP solar

Model Name VAJRA

Capacity 1000 Liters per day

Input temperature of water 25 degree Celsius

Output temperature of water 60 degree Celsius

Cost 173000

Subsidy available 1890/- per square meter

Size of SWH 22.75 Sq meterTotal subsidy 43000/-

Net cost 130000/-

VAJRA 1000 LPD Non-Press, Non- HHC, Thermosyphon type Solar Water Heating system @

60 deg. C consisting of:

1 nos. x 1000 liters insulated SS304 hot water storage tanks

8 nos. of TBP make solar flat plate collectors

Mounting stand for tanks & collectors

Supplier Details:


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Terms and conditions


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Cost Details

Cost of equipment

The total cost of equipment and machinery is estimated ` 1.55 lakh, the total cost includes for

solar collectors, insulated hot water tanks of SS make, mounting stands for hot water tank &collectors besides the installation & commissioning cost.

Other costs

Other cost includes erection & commissioning cost which is 0.03 lakh and Construction cost

which is 0.15 lakh. The total cost of implementation of the SWHS is estimated at 1.73 lakh.

Sr No Details Cost in Lakh

1 Equipment and machinery 1.552 Erection & Commissioning 0.15

3 Contingency cost 3

4 Total 1.73


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Means of Financing

When it comes to financing the equipment, following are the options that can be executed

1. One time cash payment from pocket

2. Loan

3. Lease

1. One time cash paymentOnetime cash payment is simple to understand. If buyer has enough funds or cash in hand,

buyer can pay instantly at the deal. This is very efficient as compared to loan. When loan is

taken bank makes sure that profit is earned. That profit margin has to bear by buyer.

2. LoanWhen buyer does not have enough money, buyer can seek the help of banks or lenders. Lender

will lend the money at some interest rate. This Loan can be secured or unsecured.

In secured loan some asset is used as pledge in the deal. When buyer is unable to pay back,

lender will get ownership of underlying asset. For example, if bank has given a loan of 30 lakh

with pledge worth 50 lakh. If borrower is unable to pay, bank will sell the pledge for 50 lakh.

Bank will keep its 30 lakh and remaining 20 lakh will be given back to borrower.

In unsecured loan there is nothing as pledge. Hence lender carries extra risk. To cover for this risk,

lender usually levies extra interest rate.

Usually calculation of interest is confusing. In order to understand, let us study different methods of

computation existing in this market.

The add-on method The discount method

The remaining balance method

Add-on Method


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Under the add-on method, the lender calculates the total interest charge by multiplying the

entire loan amount by the contractual interest rate, and then multiplying the total interest

cost by the period (months, years) covered by the loan. The interest charge is added to the

principal to determine the total amount to be repaid. This amount is then divided by the

number of repayment periods to determine each payment. The total interest charge is thus:

I = A x i x N Where:

I=total interest charge over the life of the loan

A =amount of loan

I = contractual interest rate per time period

N=number of periods covered by the loan

The periodic payment is: B = (A + I) / N

Where

B=total payment

n =repayment periods under consideration

For an example of add-on interest, assume a $3,000 loan to be repaid in two annual

installments. The annual contractual interest rate is 6 percent. Then, the total interest charge is:

I = $3,000 x .06 x 2 = $360 and the annual payments will be:

B = ($3,000 + 360) / 2 = $1,680

Discount Method


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The discount method calculates total interest the same way as the add-on method, with one

exception. The interest is subtracted from the loan amount and the borrower receives the

balance. The total interest charge is:

I = A x i x N

The amount the borrower receives is:

L = A I

Where:

L=loan proceeds

And the periodic payment is: B = A / N

Using the same data as before ($3,000 loan amount, 6 percent annual interest rate, over 2years), the total interest charge is again $360: I = $3,000 x .06 x 2 = $360

The borrower would receive $2,640:

L = $3,000 - $360 = $2,640

And would repay two installments of $1,500 each: B = $3,000 / 2 = $1,500

Remaining Balance method

When the remaining balance method is used, the interest charge is computed in each period by

multiplying the contractual interest rate by the principal balance remaining at the beginning of

the period (the unpaid balance). The major difference between this method and the previous

two, beyond the complexity of the mathematical calculations, is that interest is not charged on

principal that has been repaid.

The total interest charge, the periodic interest payment, and the periodic principal payment all

depend on the method selected for repayment. Two methods are commonly used: the equal

total payment plan (Standard plan) and the equal total principal plan (Springfield plan). To

illustrate interest computation for these two repayment methods, assume a $10,000 loan at a

12 percent annual contractual rate to be repaid in eight annual payments.


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There are 2 types of remaining balance method

- Equal total payment method

- Equal principal payment method

Equal Total Payments - Under the equal total payment method, the annual payment for thisloan is $2,013.03 for each of the 8 years. This was determined by multiplying the amortization

factor (see Table 3) for 12 percent interest and 8 year payment period times the loan amount.

The portion of each payment that is interest and the portion that is principal will vary with each

payment. At the end of the first year, interest is charged on the full $10,000 principal

outstanding:

I1 = $10,000 x 0.12 = $1,200

Thus, the principal payment is the difference: C = $2,013.00 - $1,200 = $813.00

Where:

C=the principal payment

The remaining principal balance after the first payment is: R = $10,000 - $813.00 = $9,187.00

Where:

R=the principal balance

Interest in the second year is charged on the remaining balance: I2 = $9,187.00 x 0.12 =

$1,102.44

And hence principal payment is:

C2 = $2,013 - $1,102.44 = $910.59

And

R2 = $9,187.00 - $910.59 = $8,276.41

A similar set of steps is followed each year thereafter.

Equal Principal Payments - Under the equal principal payment plan, interest charges are

calculated in a similar manner. The primary difference is that equal principal payments are


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made. In addition, the annual total repayments will decline each year due to a declining

principal balance upon which interest is calculated.

I1 = $10,000 x 0.12 = $1,200

But, the principal payment is:

C1 = $10,000 / 8 = $1,250

Thus, the total payment for the first year is: B1 = $1,250 + $1,200 = $2,450

And the remaining principal balance is:

R1 = $10,000 - $1,250 = $8,750

In the second year:

I2 = $8,750 x 0.12 = $1,050

C2 = $1,250

B2 = $1,250 + $1,050 = $2,300

R2 = $8,750 - $1,250 = $7,500

3. Leasing


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How to calculate best financial model?

Different models stated above will have different payment structures and different payment

periods. In this situation one cannot just sum up the total cash outflows to compare. Because as

the years passes value of money changes because of various factors like inflation, global trends.

Hence we need to first evaluate all the possible cash outflows and inflows. We need to then

discount the cash flows to get present value of these cash flows. This concept is called as NPV

(net present value). Whichever model has minimal of cash outflows will be best suited model.

Let us see how NPV works:

Net Present Value

In finance, the net present value (NPV) or net present worth (NPW)[1]

of a time series ofcash

flows, both incoming and outgoing, is defined as the sum of the present values (PVs) of the

individual cash flows of the same entity.

In the case when all future cash flows are incoming (such as coupons and principal of a bond)and the only outflow of cash is the purchase price, the NPV is simply the PV of future cash flows

minus the purchase price (which is its own PV). NPV is a central tool in discounted cash

flow (DCF) analysis, and is a standard method for using the time value of money to appraise

long-term projects. Used for capital budgeting, and widely used throughout economics, finance,

and accounting, it measures the excess or shortfall of cash flows, in present value terms, once

financing charges are met.

NPV can be described as the Difference Amount between the sums of discounted; cash

inflows and cash outflows. It compares the present value of money today to the present value

of money in future, taking inflation and returns into account

The NPV of a sequence of cash flows takes as input the cash flows and a discount rate or

discount curve and outputs a price; the converse process in DCF analysis - taking a sequence of

cash flows and a price as input and inferring as output a discount rate (the discount rate which

would yield the given price as NPV) - is called the yield, and is more widely used in bond

trading.
http://en.wikipedia.org/wiki/Financehttp://en.wikipedia.org/wiki/Net_present_value#cite_note-netpresworth-0http://en.wikipedia.org/wiki/Net_present_value#cite_note-netpresworth-0http://en.wikipedia.org/wiki/Net_present_value#cite_note-netpresworth-0http://en.wikipedia.org/wiki/Time_serieshttp://en.wikipedia.org/wiki/Cash_flowhttp://en.wikipedia.org/wiki/Cash_flowhttp://en.wikipedia.org/wiki/Present_valuehttp://en.wikipedia.org/wiki/Discounted_cash_flowhttp://en.wikipedia.org/wiki/Discounted_cash_flowhttp://en.wikipedia.org/wiki/Time_value_of_moneyhttp://en.wikipedia.org/wiki/Capital_budgetinghttp://en.wikipedia.org/wiki/Economicshttp://en.wikipedia.org/wiki/Financehttp://en.wikipedia.org/wiki/Accountinghttp://en.wikipedia.org/wiki/Yield_(finance)http://en.wikipedia.org/wiki/Yield_(finance)http://en.wikipedia.org/wiki/Accountinghttp://en.wikipedia.org/wiki/Financehttp://en.wikipedia.org/wiki/Economicshttp://en.wikipedia.org/wiki/Capital_budgetinghttp://en.wikipedia.org/wiki/Time_value_of_moneyhttp://en.wikipedia.org/wiki/Discounted_cash_flowhttp://en.wikipedia.org/wiki/Discounted_cash_flowhttp://en.wikipedia.org/wiki/Present_valuehttp://en.wikipedia.org/wiki/Cash_flowhttp://en.wikipedia.org/wiki/Cash_flowhttp://en.wikipedia.org/wiki/Time_serieshttp://en.wikipedia.org/wiki/Net_present_value#cite_note-netpresworth-0http://en.wikipedia.org/wiki/Finance


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Formula

Each cash inflow/outflow is discounted back to its present value (PV). Then they are summed.

Therefore NPV is the sum of all terms,

Where

t- The time of the cash flow

i- The discount rate (the rate of return that could be earned on an investment in the financial

markets with similar risk.); the opportunity cost of capital

- The net cash flow (the amount of cash, inflow minus outflow) at time t. For educational

purposes, is commonly placed to the left of the sum to emphasize its role as (minus) the

investment.

The result of this formula if multiplied with the Annual Net cash in-flows and reduced by Initial

Cash outlay the present value but in case where the cash flows are not equal in amount then

the previous formula will be used to determine the present value of each cash flow separately.

Any cash flow within 12 months will not be discounted for NPV purpose.[2]

Given the (period, cash flow) pairs ( , ) where is a positive integer and the total number ofperiods , the net present value is given by:
http://en.wikipedia.org/wiki/Discountedhttp://en.wikipedia.org/wiki/Discount_ratehttp://en.wikipedia.org/wiki/Rate_of_returnhttp://en.wikipedia.org/wiki/Net_present_value#cite_note-1http://en.wikipedia.org/wiki/Net_present_value#cite_note-1http://en.wikipedia.org/wiki/Net_present_value#cite_note-1http://en.wikipedia.org/wiki/Net_present_value#cite_note-1http://en.wikipedia.org/wiki/Rate_of_returnhttp://en.wikipedia.org/wiki/Discount_ratehttp://en.wikipedia.org/wiki/Discounted


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Calculations

Now let us apply the NPV formula and find out the best mean of financing.

1. LOAN

- As stated earlier 43,000 INR capital subsidy will be available for SWH.

- Bank can give loan of 130000 INR. IREDA will help regarding the loan.

- Loan tenure will be of 6 years. Interest rate will be 10%.

- Repayment scheme used by IREDA for promotion of SWH is The remaining balance

method.- IREDA has decided how Principal amount should be paid.

- Since SWH will be displayed on balance sheet of hospital, we should consider

depreciation. Accelerated 80% depreciation is applicable. Depreciation is just a notional

amount. Hence depreciation will not be considered in cash flows. But Depreciation is

deducted as expense. Hence tax saving availed because of depreciation should be

considered as cash inflow.

- Tax rate applicable is 30%.

- Interest paid is deducted as expense. But principal amount paid is not deducted as

expense.- Factor column below represents 1/ (1 + i) ^t. Where i : discount rate, t: year

Let us understand how Loan repayment works for SWH. In following table principal payment is

as directed by IREDA. Amount given below is expressed in lakh.

Table 1.1 Loan repayment


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Now let us calculate Depreciation.

Table 1.2 Depreciation

- Since we know Interest (not principal payment) and depreciation carry advantage of tax,

we should add the interest saved as cash inflows. For example, if a firm is paying 100

INR as interest, then firm will save 30% tax that is 30 INR. Hence total payment made by

that firm is 70 INR.

- These payments will be done over a course of few years. Hence we will need to

calculate present values in order to compare with other financial models. Factor below

represent, the value of 1 INR today with respect to that particular year.

Table 1.3 PRESENT VALUE OF DEPRECIATION TAX SHIELD

Table 1.4 PRESENT VALUE OF INTEREST TAX SHIELD


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Table 1.5 PRESENT VALUE OF LOAN PAID

Table 1.6 PRESENT VALUE OF RESALE VALUE

PRESENT VALUE OF CASH OUTFLOW

= PV of LOAN PAID (PV of DEPRECIATION SHIELD + PV of INTEREST SHIELD + PV of RESALE)

= 41760.82


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2. LEASE

- Lease amount can be deducted as expense

- Hence there will be tax benefit that can be availed on it.- Most of the times, asset is not shown on the books of lessee. Hence no depreciation tax

shield is available.

- Lease is taken when you do not have enough funds or you need SWH for limited period.

A) FINANCIAL LEASE

Table 2.1 PRESENT VALUE OF LEASE RENTAL- EQUAL ANNUAL PLAN

Table 2.2 PRESENT VALUE OF LEASE RENTAL- DEFERRED PAYMENT PLAN

Table 2.3 PRESENT VALUE OF LEASE RENTAL- STEPPED UP PLAN


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B) OPERATING LEASE

- Now suppose hospital has requirement of SWH for a limited period then it would go for

Operating lease.

- In operating lease, lessee can withdraw from lease agreement at any time. Hence

advantage lies with lessee.

- When lessor gives advantage to lessee, lessor charges extra rent.

Table 2.4 PRESENT VALUE OF LEASE RENTAL- OPERATING LEASE

C) SALES AND LEASE BACK

Suppose hospital has two important expenditures ahead, but can afford only one of the

expenditures, then hospital should go ahead with the Sales and lease back.


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Here Hospital buys SWH for 1.73 lakh and sells it to XYZ ltd for 1.88 lakh. But at the

same time it leases back the SWH from XYZ ltd, with annual rent of 17000 for 8 years.

Hence in the 0th year hospital has cash inflows of 15000 INR

Table 2.4 PRESENT VALUE OF LEASE RENTAL- OPERATING LEASE

Net present value

= PV of lease - Gain during the transaction at zero year

= 63485.62 - 15000

= 48485.62


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BEST MODEL

- 6 models have been stated above.

- In the financial lease models, it is possible for lessee to buy the SWH at the end of 8th

year. It depends upon the contract. Generally the resale value is more than the fees of

transfer of asset at the end lease. Hence our assumption is asset is not transferred at

the end of 8th

year to lessee.

- To find out which is the best model we only need to compare the Present Value of cash

outflow. The one with minimum cash outflow is the model that suits the need.

- As the table indicates, LOAN remaining balance method is the best model to finance

the solar water heater. The main reasons behind it are

IREDA promoting the use of Solar Water Heater

Accelerated depreciation available

- But if by any chance loan is not available and funds are not enough, one can always go

for Sale and lease back method.


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FUTURE PROJECTION USING THE BEST

MODEL

To understand the future projections, prediction of savings or revenues is must. Hence first let

us try to understand what can be the future revenues.

- Most of the hospitals these days use Diesel boiler in order to heat the water. Load

shedding has been the main reason behind it.

- According to Bureau of Energy Efficiency 6.5 liters of diesel is needed to heat 1000 liters

of water.

- At the same time hospital will not be able to claim the benefits of depreciation. The cost

of machine is 160000, with depreciation of 10%. Hence 16000 is yearly depreciation.

The tax saved is 30% of depreciation. Thus the total benefit is 4800. Hospital will miss

this benefit once they switch to SWH. Cost of machines varies from 160000 to 170000.

Hence for calculation purpose let us take the depreciation advantage as 5000.

- Other details are shown in the following chart. Following is the minimum revenue

generated using SWH, since we have not taken into consideration Loan amount, if any.

Table 5.1: Revenue prediction

- To demonstrate how solar water heater is beneficial in future, frame of 8 years is taken.

During these 8 years we project the following:

Profit and loss statement


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Balance Sheet

Cash flow

- Above financial statements will help to evaluate important parameters like IRR (internal

rate of return), NPV (Net present value) and ROI (Return on investment). Hence we will

be able to evaluate overall project.

Table 5.2 LOAN CALCULATION


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Table 5.3 PROFIT & LOSS STATEMENT

TABLE 5.4 TAX COMPUTATIONS


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TABLE 5.5 BALANCE SHEETS


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TABLE 5.6 CASH FLOW STATEMENTS


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TABLE 5.7 IRR and NPV

TABLE 5.8 ROI


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CONCLUSION

- Since Net Present value (275000) is greater than cost of equipment (130000), we can

conclude that Solar water heater is financially viable solution.

- Similarly IRR (51%) is also greater than the cost of capital (10%), hence confirming the

financially robust solution.

- Solar water heater proposed here has back-up heating ability to compensate for the

days where solar energy is not sufficient. Hence this modern solar water heater proves

efficient in performance.

- Environmentally it saves 15 tonnes of carbon dioxide. Following is the summary of fuel

savings due to the use of solar water heater 1000 liters.

-

Considering the financial and environmental factors it has been proved that SOLAR WATER

HEATERis profitable in the long run and can very well serve the purpose of BETTER

TOMORROW PLAN ofSODEXO.


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RECOMMENDATIONS

Wipro ltd has established the great example paper recycling plant. It can be followed by others

to save the environment.

Aim of Paper recycling

- To handle paper waste efficiently and to avoid data security issues

- To recycle the paper within the campus

Plant specification

- Let us take the example of a plant capable of 200 KG/ day. It will need 400 sq feet. And

on average would recycle 4800 kg of papers.

- It consists of

Paper crusher motor

Recycle water pump

Paper slurry shifting pump

Hydraulic press pump

- The plant consumes 12.5 units of electricity and 600 liters of water per day.

Cost benefits

- Average Pulp generated per day: 420 kg

- Cost of pulp : 2.25 per kg

- Revenue per day : 945 INR

- Savings per day : 529 INR

- Savings per annum : 165048 INR

Environmental Benefits

- Conservation of natural resources

- Emission reduction

- Water pollution control

- Waste disposal


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REFERENCES

- MNRE site: www.mnre.gov.in

- Bureau of Energy Efficiency site:http://www.beeindia.in/

- Financial management by Prasanna Chandra

- Environment Best practices by R.K. Narang

- ICON hospital

- Delhi energy efficiency & renewable energy management center
http://www.beeindia.in/http://www.beeindia.in/http://www.beeindia.in/http://www.beeindia.in/

Documents

Summer Internship Project on SODEXO