According to Mercom Capital Group & Greenpeace Surveys, when asked about the impression of solar energy, 58 percent survey respondents said they strongly favor solar. Despite the higher favor respondents gave solar relative to other generation sources, throughout the survey they found a general lack of education and awareness, and in some instances misconceptions about solar.
I also found out that the space constraints and cost of solar energy per unit are two important parameters while deciding to go solar. Also, it would be very easy for companies to take a decision if they can quantify and relate the Solar Installation to increase in profits.
Businesses always rely on empirical evidences before making any choice and take informed decisions. There is compelling evidence for technical and economic feasibility of captive solar plants. I think the following case study shall help you to take informed decision.
Typical Case: Dairy and Food Processing Company
The company has electricity expense of Rs. 34 million, total revenue of Rs. 1620 million, total expense of Rs.1550 million, EBIDTA (operating profit) of Rs.70 million and net profit of Rs.52 million.
Assume,
Electricity cost per unit : Rs. 7.5
Solar captive generation : 30% of total annual electricity consumption
Space for solar : 10,000 square meter
CAPEX Mode
- Solar plant capacity : 1 MWp
- Solar plant price : Rs. 45 million
- Operation & Maintenance : Rs. 1 million
- Electricity expense : 2.2% of total expenses
- Reduction in electricity expenses per year : 1,450,000 * 7.5 = Rs. 10.87 million
- Increase in EBITDA : Rs. 9.87 million
30% solar share in electricity will increase the EBITDA (operating profit) by 14.1%
- Financing at 11% interest & period 7 years : Rs. 4.95 million per year
- Accelerated Depreciation (AD) : 40% (Rs. 18 million)
- Tax benefit : Rs. 6.3 million
OPEX/PPA Mode
- Electricity expense : 2.2% of total expenses
- Solar generation price : Rs. 5/unit
- Contract period : 20 years
- Reduction in electricity expenses per year : 30% *100(1-(5/ 7.5)) = 10% (Rs.3.4 million)
30% solar share in electricity will increase the EBITDA (operating profit) by 4.85%
Each company has different priorities and purposes assigned for expenses. Energy is a cost just like any other for a company. Now that the price of solar is drastically declining, adoption of cleaner energy is not just simple cost-saving strategy for businesses but also good PR that comes with adopting sustainable practices. By reducing their carbon emissions, businesses are saving money, they're building their brands, and they're attracting consumers that want to buy from businesses that are acting in the most sustainable way.
Is the measurable adoption data available?
According to Pew Research Report published in March 2017, globally 62% people point to ISIS and 61% Climate Change as Leading Security Threats and Indian’s think that Climate change is 2nd biggest concern (47%) next to ISIS (66%).
PWC’s 20th CEO Survey-20 years inside the mind of the CEO... What’s next? Highlights that globally 50% CEO’s consider climate change and volatile energy cost as biggest threats to their organization’s growth prospects.
World Bank Group’s global private infrastructure investment data reports renewables jumped ahead in 2015 as private infrastructure investment in solar energy swelled to US $9.4 billion-72% higher than the last 5 years till 2017.
It is becoming very clear that the solar energy adoption is not just green branding or cost reduction but a pure profit making proposition. Also, we cannot deny the role of climate change in making solar an attractive energy to combat greenhouse gases and stay below 20C agreed at COP Paris.
In September 2015, the United Nations adopted the new Sustainable Development Goals (SDGs) for the year 2030, setting an ambition for a safe and sustainable future for everyone, and especially for the less privileged passengers aboard ‘Spaceship Earth’. Solar energy is becoming one of the major contributors to achieve SDG 7-Affordable and clean energy, SDG 9 - Industry, innovation and infrastructure, SDG 11 - Sustainable cities and communities and SDG 13 - Climate action.
To slow climate change, India is moving towards renewable energy specifically solar energy by adopting Auction propelled energy pricing revolution. The price for utility scale solar plants of 100MW & above has reached around Rs. 2.44/unit. Distributed and captive solar installations crossed 1.3GW and prices have reached around Rs. 5/unit, well below the billing rate of grid supply. It is not so surprising that Industrial & Commercial segment has cornered more than 70% of the 1.3GW solar installations.
Solar Auction as enabling tool
Solar Auctions have gained universal acceptance and wide adoption.
Why will the Solar Auctions rapidly emerge as a business model?
Because Corporate Solar Auctions allow corporates to:
- contract stable and low cost energy supplies
- reduce CO2 emissions and meet sustainability targets
What is the easiest way to exploit this opportunity and benefit from Corporate Solar Auctions?
There are online auction platforms like BuySolar.me where multinational corporations, solar energy developers and senior decision-makers will exchange information and make the connections to rapidly increase the procurement of solar power. If you are interested in either procuring or selling solar energy, if you want to make contracts with leading players in the solar market, or if you simply wish to learn more about this global solar auction phenomenon, BuySolar.me is the unique and not to be missed opportunity for your organization.