Solar Energy Techno-economic Assessment in Northwestern India

Open Access
Author:
Patrick, Steven Sullivan
Area of Honors:
Interdisciplinary in Energy, Business and Finance and Energy Engineering
Degree:
Bachelor of Science
Document Type:
Thesis
Thesis Supervisors:
  • Jeffrey Brownson, Thesis Supervisor
  • Andrew Nathan Kleit, Honors Advisor
  • Sarma V Pisupati, Faculty Reader
Keywords:
  • solar
  • india
  • photovoltaic
  • economic
  • finance
  • energy
Abstract:
Indian electricity demand has rapidly grown, creating the need for quick sustainable solutions. Solar photovoltaic power plants are potential solutions to India's energy crisis. In order for India to reach their goal of 20,000 MW of grid-connected solar energy by 2022, investors and independent power producers (IPPs) must understand the financial benefits from these projects as well as the risks they must mitigate. The Northwestern cities of Jaipur and Ahmedabad were selected to explore the financial feasibility of these projects. Weather files from 2004 to 2008 were provided by the National Renewable Energy Laboratory (NREL) to analyze the total annual solar output of a 1-megawatt hypothetical solar power plant situated in either Jaipur or Ahmedabad. The performance prediction software, System Advisor Model (SAM), used Perez irradiance modeling to determine the total annual electricity output for each of the five years in each city. Two financial base case simulations were performed for each city, assuming the average electrical output of each year remained constant over the consecutive 25 years. Net present value (NPV), internal rate of return (IRR), and levelized cost of energy (LCOE) are the three financial metrics used to compare projects. The financial metrics of the base case scenario are considered the most likely outcomes for the solar projects. Multiple simulations were compiled in order to observe how NPV, IRR, and LCOE are affected by changing the solar resource, renewable energy credit (REC) clearance percentage, project leveraging, electricity price escalation rates, and interest rates. Ahmedabad, which is located 300 miles south of Jaipur, had a higher annual electrical output than the projects based in Jaipur, thus leading to a higher NPV and IRR, and a lower LCOE. An increased REC market clearance percentage resulted in an increased NPV and IRR. A larger equity percentage led to a decreased NPV and an increased LCOE. An increased electricity price escalation rate caused NPV and IRR to both increase. Finally, an increased interest rate caused a decrease in NPV and an increase in LCOE. It is important for the Indian government and power producers to mitigate financial risks associated with solar projects in order to attract investments for solar photovoltaic systems. Long-term measured weather data would provide a significantly more accurate picture of a solar project's revenue streams and the variability associated with them. The REC market clearance percentage can be increased through government enforcement of recent Renewable Purchase Obligation legislation. Additionally, a stronger estimate of electricity price escalation rates over the next 25 years would assist investors and IPPs in better determining the financial feasibility of these projects. By having a more accurate picture of the future price of electricity, the Indian government can appropriately subsidize solar energy. Solar energy is proving to be one of the major energy solutions in India. This study analyzes the relationship between economics, the solar resource, and government policy in hopes to explain the benefits and challenges of Indian solar energy.