Implementing MW Solar Power Plants – Action Framework
Large, ground-connected solar power plants require significant investments. The main monetization from the MW solar power plants is either through the sale of power or savings accrued from captive power generation. While availability or ownership of land are important, these are not the most critical factors determining the success of ground mounted solar farms. The framework below provides more details on the key drivers and actionable for implementing MW solar power plants.
Step 1: Getting a PPA for a MW Solar Power Plant:
PPA A solar Power Purchase Agreement (PPA) is an agreement between a solar power generator (developer) and an energy consumer or utility (off-taker) to buy the solar power generated by the developer. In many countries, PPA contractual terms last for 25 years. It is during this time the power purchaser buys energy. Solar Developers are able to competitively price solar power for both public as well as private customers under the terms of the PPA. PPAs usually include terms of agreement i.e. details on interfacing and evacuation facilities, operation and maintenance, metering arrangements, scheduling of solar power, rate of energy including escalation rates, dispute settlement, billing and payment The PPA should specify the tariff (cents/kWh or equivalent) and the duration for which it will apply.
Challenges associated with Government/Utility PPAs:
- Tariffs may be overturned by Regulatory Commissions with time
- Poor financial health of DISCOM might lead to delay in payments to developer
- Generally speaking, government PPAs are regarded as low(er) risk as they are backed by the government and are usually signed for the duration of plant life (25 years)
Challenges associated with 3rd Party PPAs:
- 3rd Party’s financial health may be better than DISCOM’s, but long-term business prospects need to be evaluated
- Credit rating of the 3rd party should be considered as they are not backed by a government
- PPAs need not be signed for 25 years. Some are signed for as short as 3 years, leaving future revenue generation of the plant in doubt
Steps to follow to get a PPA for a MW Solar Power Plant:
- Identify potential locations :
Identify approximate area available for PV installation including any potential shading. The areas may be either on rooftops or on the ground. A general guideline for solar installations is 5–10 watts (W) per square foot of usable rooftop or other space.
- Identify potential solar policies applicable for the land :
State policies differ from region to region. The tariff rates at which PPAs are signed differ region to region. Hence zero in on a policy that can bag you a PPA that ensures profitable returns.
- Respond to the Request for Proposal (RfP) or win bids issued by the Power Purchaser:
The developer may have to respond to RfPs or win bids issued by the Third Party Power Purchaser or the Utility.
- Contract Development:
After a winning bid is selected, the contracts must be negotiated—this is a time-sensitive process. In addition to the PPA between the government agency and the system owner, there will be a lease or easement specifying terms for access to the property (both for construction and maintenance). REC(Renewable Energy Certificate) sales may be included in the PPA or as an annex to it.
- Permitting and Rebate Processing:
The system owner (developer) will usually be responsible for filing permits and rebates in a timely manner. However, the government agency should note filing deadlines for state-level incentives because there may be limited windows or auction processes.
- Project Implementation and Commissioning:
The developer should complete a detailed design based on the term sheet and more precise measurements; it will then procure, install, and commission the solar PV equipment. The commissioning step certifies interconnection with the utility and permits system startup. Once again, this needs to be done within the timing determined by the state incentives. Failure to meet the deadlines may result in forfeiture of benefits, which will likely change the electricity price to the government agency in the contract. The PPAs usually establish realistic developer responsibilities along with a process for determining monetary damages for failure to perform.
Step 2: Financing Options for a MW Solar Power Plant
A general schematic of financing options for MW Solar PowerPlants is shown below: