Hi Friends,

Even as I launch this today ( my 80th Birthday ), I realize that there is yet so much to say and do.

There is just no time to look back, no time to wonder,"Will anyone read these pages?"

With regards,
Hemen Parekh
27 June 2013

Sunday, 29 January 2017

Solar Power at Rs 1 per Kwh ?

Today’s MINT carries following news report :
 Govt mulls introducing fixed-cost component in renewable energy tariff :

The idea is to prevent distribution companies (discoms) shying away from procuring electricity generated by such projects, as they will have to pay the fixed tariff component even if they don’t buy the electricity contracted for.

Such a tariff mechanism already exists for electricity from conventional sources such as coal and gas which has two parts—A FIXED COST, WHICH IS THE INVESTMENT INCURRED TOWARDS POWER GENERATION EQUIPMENT, and a variable cost or the cost of fuel.

“The idea is to fix a certain component which will allow a renewable energy project developer to SERVICE THE DEBTS even if the distribution companies (discoms) back down from buying electricity. It is under consideration,” said a government official, who too sought anonymity.

In case of solar power ,

·        Cost of fuel ( sunlight ) is ZERO
·        Cost of Maintenance is almost ZERO ( wash the panels )
·        Cost of Investment  is “ Interest on borrowed funds “
How low can this “ fixed cost “ ( servicing the debt of the company generating solar power ), go ?

In California , when interest cost went down to 1 % , fixed cost of generation went down to 4 cents / Kwh ! ( Rs 2.7 )

Website of  MASDAR (http://www.masdar.ae/ )  , talks of latest installation where this has gone down to 2.6 cents ( Rs 1.74 / Kwh ) !

In India , we are planning to add Solar Power to the tune of 100 GW by 2022

How can we make that happen ?

And , can we make that happen at Re 1 per Kwh ? or less ?

We can , if  CAPITAL COST  is  ZERO !  No interest burden !

How ?

It can happen if NDA government musters enough courage to implement what I have been suggesting for past 2 years, viz:
  *  Government declares units belonging to " Solar Power ( Panel Mfr / Power Production &
    Distribution / Ancillary Mfr  ) " as    a "  SOS " industry

*   Units will need to register as such with Department of Company Affairs ( DIPP )

*  Units will be exempt  from paying Corporate Income Tax for 10 years , on whatever
   income they earn ( only those starting operations latest by 31 March 2018 )

 *  No questions will be asked as to the " source " of funds invested in the shares of such
   units ( a kind of Temporary Amnesty Scheme - 01 April 2017  till 31 March 2018 - to
   channelize BLACK MONEY into creation of PRODUCTIVE  / NON-POLUTING assets )

 *  Units cannot engage in any other Industrial / Commercial / Financial activities

 *  Units cannot declare any dividends to share-holders for 10 years

These are just broad outlines and details need to be worked out

If there is political courage to pull off such an initiative , government will NOT need to allocate ANY AMOUNT !


Remember , how , only a few months back , tiny Indonesia managed to collect $ 300 billion of its Black Money , by levying tax ( no penalty ) of just 4 % !

And with this kind of  INCENTIVE WINDOW ( to convert BLACK into WHITE ) , expect

*  Hundreds of SOS Units to spring up before 31 March 2018

*  They will have ZERO cost as far as servicing of EQUITY is concerned ! No dividends !

*  They will not need to borrow funds from banks and pay interest ( no danger of NPA ! )

*  They will compete with each other fiercely and ( as it is already happening in USA ) ,
   start offering roof top installations, absolutely FREE, and selling the generated power at
   20 paise/Kwh, for 10 year purchase agreement and with a 5 % tariff reduction per year !

   We can look forward to witnessing similar competition among large , land-based ,  solar
   power installations which will be the main suppliers to large commercial establishments /
   industrial factories / infrastructure projects / Electric Vehicle Charging stations , etc

Just imagine


*  the rise in GDP !

*  the possibility of being able to export our surplus power to neighbouring countries

*  Being able to replace 6 million petrol / diesel vehicles with EVs by 2020 , due to
   easily available charging stations on every street corner

*  Reduction in pollution by shutting down of hundreds of existing fossil fuel based power
    plants , whose utilization will drop below 10 % by 2022 ( as against National Electricity
    Plan expectation of 48 % , and a un-viability threshold of 55 % )

30  Jan  2017