Rooftop solar PV installations have seen tremendous growth over the last decade. Improvement in module efficiency and falling costs year on year have made setting up of solar PV plants an attractive proposition. High electricity tariffs charged by the DISCOMs and unreliable power supply have provided further impetus to organisations deciding to generate their own power. Also, with the signing of the Paris Climate accord, a lot of organisations have decided to move towards sustainable business practices, thereby creating demand for renewable solar power.
The installed capacity of rooftop solar power plants in India is estimated to be approx. 6,000 MW. Industrial and commercial customers have been at the forefront of setting up solar power plant for captive consumption accounting for more than 67% of the installed base. Since electricity cost comprises a major expense for both industries and commercial establishments, replacing costly grid power by investing in rooftop solar system helps them in improving competitiveness and profitability. A healthy payback of 3-3.5 years on an average with lower LCOE (Levelised Cost of Energy) has increasingly made setting up solar power plant for captive consumption an obvious choice for most companies.
While there are many existing models to finance your plant, investing in your own solar power plant ensures maximum benefits. The plant not only generates free power for 25 years, but you can also gain by claiming accelerated depreciation and reducing your carbon footprint, besides meeting RPO obligation through solar power.
However, it might not always be possible to allocate capital for investing in solar power plant. For example, in the current situation with organisations reeling under the impact of COVID-19, preserving capital has taken precedence over investing in projects. Sometimes the constraints might be on obtaining bank financing, or the customer might have other investment opportunities or capex requirements in their core business which needs to be prioritised.
Leasing provides a perfect solution for gaining most of the benefits of self-financing with little upfront investment. In this model, the customer obtains the rooftop solar system on lease from a financing partner by agreeing for a down payment (typically 15%-20%) and an agreed lease rental for a fixed period (up to 60 months). The monthly rentals are worked out such that the electricity cost saved is higher than the lease payment, thereby ensuring net savings. During the lease period, the customer is also able to gain tax benefit by accounting for lease payments as an expense. Also, leasing does not lead to an increase in liability as the asset stays off the balance sheet of customers. The project and performance risks are borne by the EPC partner on whom the financing company places a turnkey order. At the end of the lease period, the customer has the option to purchase the investment at the residual value and enjoy free solar power for the remaining 20+ years.
Thermax has executed multiple projects for its customers under the leasing model. We have pre- approved tie-ups with reputed financial partners to make it a seamless experience for customers. Once the customer chooses to go for leasing, Thermax brings on board the financial partner who then conducts the necessary due diligence. Once approved, an EPC order is placed on Thermax to set up the solar power plant with agreed specifications and timelines. The entire process is managed with minimal paperwork and on an average takes less than 3-4 weeks from application to order placement. Following are some examples of our successful installations through leasing model:
1. 1,000 KWp solar power plant for footwear manufacturer
2. 742 kWp rooftop solar plant for a leading sports company
3. 500 kWp rooftop solar plant for food & packaging company
4. 250 KWp solar power plant for a leading food processing company