Cost Comparison Of Solar PV Projects over past 5 Financial Years
The cost of setting up a solar power project has reduced by 34.2% over the past 5 years. Lets have a look at the analysis and understand the several factors effecting the benchmark capital cost of setting up a solar power project for the year 2016-2017.
1. Modules : Several stakeholders have pointed out that assuming a drop of 11% in module prices might be unjustified, as the module prices have stabilized over last few months. Mercom has also reported stagnant prices for Chinese/Taiwanese modules for past several months in their newsletter. This sentiment has been echoed in stakeholder comments. While the spot prices reflect short term market rates, for planned projects, it is a standard practice for developers to negotiate price and quantity ahead of time. However, given quality concerns and to ensure life of 25 years, we must consider Tier-1 module prices. Industry players such as Adani Power, Tata Solar, Welspun etc. have also suggested that module prices be considered at $0.48/W. Thereby, the Commission sets module prices at $0.48/W, assuming prices are expected to be fairly stable in the coming year. Regarding the domestic content requirement, the Commission would like to clarify that the present exercise of benchmark capital cost is for generic tariff and not for project specific projects.
*Please Note : The cost analysis is per MW capacity of solar power projects
2. Exchange Rate : Average exchange rate for Rupees to US $ for the past six months (May 2015-Oct 2015) as per RBI is Rs. 64.58. This exchange rate has been considered for this exercise. Stakeholders have pointed out that Indian Rupee has been depreciating for the pastseveral months. Several companies such as Suzlon, Tata Solar, Adani and Solar Power Developer Association have suggested that currency future market data from NSE be used for arriving at the exchange rate assumption for 2016-17. While the Commission appreciates the currency risk in the current global scenario, the same cannot be ascertained in advance. Average exchange rate for the most recent six months can be considered. For September 2015 to February 2016, the average exchange rate was 66.59 INR/USD, as per RBI website, which is closer to the prevalent exchange rate. The Commission decides to use this exchange rate for the benchmark cost model.
3. Module Degradation : The Commission has considered module degradation as of about 0.6%, which gives a module degradation cost of Rs 9.89 lakhs/MW. The Commission acknowledges the suggestion from SunEdison, NSEFI and Tata Solar regarding incorporating degradation of modules in reduced PLF of the modules. However, since PLF is already fixed at an average value of 19% for solar PV projects (and 23% for solar thermal projects) for this control period, the Commission has sought to compensate the developers with additional capital cost. A degradation of 0.5% is assumed on a yearly basis, which is then applied to module cost to arrive at yearly degradation cost, followed by discounting to arrive at the net present value of this degradation cost at Rs.8.77 lakhs/MW.
4. Land : The commission has proposed that land cost be retained at Rs. 25 lakhs/MW. The land costs vary from state to state and based on the particular location of the projects. However, it must be noted that typically land deployed for these projects is barren in nature. Additionally, land cost has been stagnant over the last financial year. Thus, the Commission retains the land cost at Rs. 25 lakhs/MW.
5. Civil & General Work : Civil and general works cost is proposed to be set to INR 35 lakhs/MW. The cost of civil works depends on the quality of soil, ground water table, contour of ground, etc. It should be noted that this cost is on a per MW basis, and as plant size increases to 5-10 MW, the costs of control/inverter room, boundary wall, approach road, lighting, etc. get distributed over a larger base. It is neither feasible nor prudent to account for special ground or soil conditions in a generic tariff order.
Civil works include preparation of terrain for digging, levelling and mounting, building control room to house inverter and other BoS components, building approach roads,fencing or boundary wall, cable trenching, arranging water supply, lighting etc.
General works include security of solar farm, setting up of power back-up generator; yard lighting, earthing kits, etc.
6. Mounting Structures : The amount of steel used will vary from 50 MT/MW to 70 to 100 MT/MW. This is a rather wide range of amount of material needed. The Commission feels that 40-45 MT of steel per MW is a good benchmark assumption for the amount of steel used in mounting structures, if based on cold rolled coil. For very strong wind conditions, one can assume 50 MT/MW at the high end of the spectrum. If based on hot rolled coil, the weight of the structure might be slightly higher. Price of hot or cold rolled coil as raw material for the c-channel may be assumed to be Rs. 41,500/ton on average*, with an additional cost for galvanization and channel preparation. Price of finished structure may be assumed to be around Rs.60,000-70,000/ton. Thus, the cost of mounting structures, assuming 50 tons/MW, is determined to be Rs.35 lakhs/MW.
7. Power Conditioning Unit : The commission acknowledges the fact that the additional cost of replacement of inverter parts or upgrade of inverter at 12-14 years should be considered. Thus the commission includes additional Rs. 5 lakhs/MW for requisite replacement or upgrade. The PCU cost is thereby set to Rs. 35 lakhs/MW.
8. Evacuation cost upto interconnection point ( Cables & Transformers ) : The following costs are included by the Commission under this heading: cost of transformers and all DC and AC cabling within the solar farm, including DC cabling between solar PV panels and inverters, junction boxes, AC cabling between inverter and pooling station, earthing; LT & HT switchgear, step-up transformer, breakers, isolators, protection relays, CT, PT, and metering.
Additionally, given the critical role played by telemetry, the Commission accepts the suggestion to include cost of SCADA systems. This cost may be pegged as ~Rs.4-5 lakhs/MW.
While a few stakeholders have mentioned that the developers have to construct overhead transmission lines to the nearest grid sub-station, this cost is beyond the scope of RE Regulations, and may be considered on a project-to-project basis by the procurer. The total cost for evacuation is hereby set to Rs. 44 lakhs/MW.
As analysed, the Commission accepts the following changes to the parameters:
a) Exchange rate to be taken as average over most recent six months
b) Module prices to be taken as $0.48/W
c) PCU cost to be taken as Rs.35 lakhs/MW
d) Evacuation cost to include cost of SCADA/telemetry, and now taken as Rs. 44 lakhs/MW
Source : Central Electricity Regulatory Commission – http://cercind.gov.in/
*Project Capacity : 1 MW
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