Business model: How to go the solar way?
26th December 2017
Solar energy power plants (both utility and rooftop scale) have seen tremendous amount of growth in last few years. With such growth in conjunction with the country's ambitious target of 100 GW, the market is to achieve new heights. However, acting as a hitch to such target (from consumer's perspective) may be selecting the correct investment plan (or more commonly business model) by which a consumer can get desired return. Additionally the prices of solar power plant have seen a huge downshift (Figure 1) due to various (positive and negative) reasons. Such downshift of prices has led to a round of curiosity among the investors on the profit margins from the system. With the advancement of technology it is now possible to have various alterations (both technical and commercial) in a solar power plant. A business model in simple terms may be defined as a plan which would deliver a particular product or service and earn profits in return. With reference to solar power plant a business model is the method by which either revenue is generated by selling the generated energy or savings are made by consuming the generated electricity. From a consumers and/or investors prospective it is important that he chooses the right business model to minimize his risks and maximizes his returns. This article aims to educate its reader on the various types of business models he could possibly choose from.
Figure 1: Recent trends of Utility scale solar energy price (Source: Mercom Capital Group)
Customer owned business model
As the name suggest, self owned business model are the ones which require the consumer to invest themselves in the solar rooftop system. They can be further sub categorized as follows:
Figure 2: A typical gross metering arrangement (Source: Google images)
Figure 3: A typical net metering arrangement (Source: Google images)
Let's say a consumer's consumption is 150 units (tariff of 10 Rs/kWh) and the generation is 100 units (with FiT of 6 Rs/kWh). By using gross metering one would pay the utility 900 Rs while by using net metering he would pay only 500 Rs. This means that a customer who is (almost always) consuming more than his generation, he would always tend to pay more in gross metering if his FiT is less than his tariff while compared to net metering where he would be paying for the net import of energy.
Figure 4: Cost benefit analysis of gross and net metering
Figure 5: Flow of energy in captive consumption (Source: Google images)
Third party owned business model
Community shared business model
While the first two types of business model have dominated the market, community shared business model have been emerging in small urban centres and rural areas. Here the generated energy (from various sources) is utilized by the entire community as per their energy needs. They can be connected to the grid or completely disconnected from the grid based on grid availability. The customer themselves or third party investor coupled with subsidy from the state and/or central government is generally used to set up such communities. The energy mix from various power plants can be used by all the consumers. Such community may be connected to the grid and hence could utilize the grid power when power deficit. Such plant may also be off grid mandating the usage of storage technology. A variation to such model is also possible when instead of centralized generation each house has a distributed generation. In such cases few houses, if have increased power requirement can obtain excess energy from other houses which has low power demand. The house supplying power can be paid for this extra energy while maintaining the balance in the grid.Such innovative and disruptive business models arein place and more variations of such models may be added in near future. Additionally they would enable rural electrification along with improved quality of power at a cheaper cost (when compared to the primitive methods of generation).
Figure 6: Micro-gird (on left) and a Mini-grid (on right)
Waaree is committed to deliver Avant grade products and services to its consumers. The group has more than 10 years of experience in the solar business and is a trusted name for solar modules and EPC service. We have executed more than 300 MW of solar EPC projects under various business models.We have assisted our customers on the optimal system and the business model for maximizing their returns.Additionally,weare also capable of performing O&M of the solar plant to realize its life time and maximize the energy output from the plant.
Let us all pledge to make solar energy the primary source of energy in the near future.
RAHE ROSHAN HAMARA NATION