Solar Power Station Project Analysis Report for Power Plant of 10MW capacity Rusiru Sanjaya 2016-08-19 SunPower Systems (PVT) LTD. CONTENT Page Introduction………………………………………………………………………………………… 1 SWOT analysis of the Power Plant Strengths……………………………………………………………………………………2 Weaknesses……………………………………………………………………………….3 Opportunities…………………………………………………………………………….4 Threats……………………………………………………………………………………….5 Project Implementation Process…………….…………………………………………….6 Pre-feasibility report and statutory approval……………………………………..…7 Financial Aspects of the project…………… ………………………………………………10 P age |1 INTRODUCTION At the moment according to the energy consultants, Sri Lanka is heading to an energy crisis during early 2020s. Though the country has policies to get rid of fossil fuel generated energy by 2030, there are still projects which are proposed and about to implement, that burn fossil fuels to generate energy. But now the world trend has gone far more away than this condition. Now most of foreign countries are implementing thousands of projects to introduce renewable energy to their power systems whereas some countries have already produce their total power required for the consumers using renewable energy. Due to burning fossil fuels, global warming and environmental effects have increased day by day. At this rate of CO 2 emission to the air, sooner the earth will become place which is not suitable for human to live anymore. As responsible citizens and businessmen in the country, we should lead this country to find environmental friendly power solutions to compete with the energy crisis. Among these renewable energy solutions, Solar Power systems have become most important and favourite energy source. Most of the foreign countries have implemented large scale of solar power systems projects because using solar insolation, it could be easily obtain large amount of energy with zero environmental pollution, for zero cost except for the installations and zero noises. And this would not be a solution just for two three years, but it can provide energy free of charge as our Sun will provide solar energy for another thousands of years. So investing on solar energy will be much better decision for the energy solutions. This report will be focused on describing and analyse the strengths, weaknesses, opportunities, treats as well as guide on project implementation process, governing and ruling bodies relevant to these kind of projects and also the sequence of process which has to be done. And also brief financial analysis on the 10MW solar power plant is also included in this report. P age |2 SWOT Analysis Strengths Geographically, Sri Lanka is located near the equator which is the ideal position for a country finding energy solution by solar energy because of the high sun irradiations. Thus it would be really good decision to invest for solar power plant in this country as the payback period is minimum compared to the other countries which are located in away from the equator. As our company has done few other large scale solar projects, we have many experiences regarding the maintenance problems and problems which would arise after the installation of the system. Therefore prior steps can be taken to avoid those issues happening in this kind of a project and it’ll minimize or eliminate potential losses that company would incur by this project. As we have done so many other projects including moderately large scale projects (200kW, 400kW), our company has engineers and technicians with full of experiences. So there is no considerable issues regarding the technical skills required to operate 10MW solar power plant. Having all the experience obtaining by solar installation done so far, our company has good knowledge of the quality of our products and also currently we are importing components in best and reputed brands in the world. So durability and reliability of our instruments and components is not an issue at all for this kind of a long term investment. According to solar installations done so far around the country, our company has good idea about the weather conditions around the country with experiences from installed systems’ outputs behaviours during past years. So choosing suitable and best geographical locations for the system becomes easy task. By implementing a Solar Power Plant, we can contribute to reduce CO 2 emission to atmosphere in millions of tons for each year. So that effects such as global warming can be minimized. P age |3 Weaknesses All the projects we have done so far are below the 1MW capacity. But we are looking about 10MW system in this project. Thus we may suffer out of numbers of engineers and technicians to maintain such large system in once. If this project going to be implemented, large amount of money has to be invested undoubtedly. Our company may not have that much of money to implement this project. If our capital strength is not sufficient for a project like this, it will be disastrous if it’s unable to complete the project because there is no return on investment until the project has successfully done. If grid becomes unstable or go offline when during the operation of the power plant, the generated energy will no more be transferred to the grid and hence that energy will be lost due to lack technologies in large scale storage system. Hence lack of storages become weakness point. Sri Lanka being an island, salty atmosphere may cause badly to the system lifeti me as its components become corroded sooner. As Sri Lanka is a tropical country, panels’ temperature become increased due to hot atmosphere and hence the efficiency of the panel get reduced. And also due to high relative humidity, solar irradiations may be reduced in some areas. P age |4 Opportunities In around 2020s, Sri Lanka will be facing a huge power crisis as at the moment the demand for the power in Sri Lanka is increasing rapidly. There are no any additional power plants in near future to be run to meet this demand. So the government will have to lookup renewable energy sources as it can be implement very quickly compared to the other large scale power plants. So in this scenario, Solar Power Plants are the best solution and this creates many benefits to the firms who runs solar power plants. The fossil fuel reserves in the world become over during next decades. So the only solution for power crisis is become renewable energy and thus Solar energy for countries near the equator. Now many firms are manufacturing solar panels and other products. Thus competency among these firms become very high. Due to that price of the solar products become less. This ensure to build the plant with quality products for minimum costs. It is well known that the efficiency of the PV panels are very low. But many R&A projects are ongoing to maximize the efficiency of the solar panels. This will be a great opportunity in the future improvements of the systems. Comparison to other power generating systems, solar power plants have less operation and maintenance manpower required. A solar power plant will be running a very long time compared to other power generating systems. In environmental perspective, solar power plants generates clean energy without emitting any gas. This leads to maximum environmental clean development. P age |5 Threats It is obvious that after completing the project, if the solar insolation failed to reach the system properly due to some long term bad weather or clouds, there are no other option except to bear the losses occurring initial capital cost and maintenance. So weather would be uncontrollable threat for the project in the future. If the grid becomes unstable of the country or if the power cuts going to happen very frequently, then power generated by our system won’t exported during that time. If there is no other auxiliary system for storing that energy, it will cause huge losses to the plant as that energy is wasted. So considering the grid stability of the country should be very important. Nowadays as many companies are tending to install sola power systems and thus there may be lack of employees who are well trained about the solar systems because of the higher job demand for the employees such as technicians and engineers . When this project is implementing, company would have to look after its past customers’ service to maintain its usual customer relationships as well as the project which is going to implementing in future. If customers feel that they are not supplied with the service which they deserved from the company, they will definitely be a huge threat to the company. Villagers in this area may not willing to accept this kind of project in their area due to varies reasons. So we have to consider villager’s concerns also because without their support project won’t be able to implement and it’ll be great threat to the project. P age |6 Project Implementation process 1. Selecting a suitable site – According to the sola insolation and other requirements, suitable area in the country should be selected. 2. Pre-feasibility study and financial analysis of the project –Before starting a renewable energy project, it should be done a feasibility study according to the regulations of SEA and a Financial feasibility of basic inputs like land, labour, solar insolation, solar PV systems etc. with the output which can obtain by the system. 3. Statutory Approvals and obtaining an Energy Permit – To implement the project, company should obtain relevant statutory approvals from regulatory bodies. If the project is approved by them, an energy permit will be granted by these authorities to continue generating energy and sell it to the national grid. 4. Getting into power purchase agreement – A power purchase agreement is signed between CEB and the company to get into an agreement which CEB buys the electricity from the company. 5. Financing to solar project – This is usually very high investment because tools and components used in a solar system are very expensive. And further there are more other expenses that would incur during the implementation of the project. So it is necessary to have a clear vision in financing the project. 6. Acquire the Land – If the project becomes financially feasible, then the Land space should be leased or bought first. 7. Basic technological design of the system – The layout of the basic technological design of solar power system is prepared by the engineers and technicians having experience in the field. 8. Testing and connecting to Grid – After the system is tested for the correct working conditions, power plant is connected to the Grid to export energy in order to sell them to CEB. 9. Operating and Maintenance – A typical solar PV panel has 25 – 30 lifetime and an inverter has 10 – 15 years lifetime. To expand their lifetime, it should be well maintained and cleaned the components of the system. P age |7 Pre-feasibility Report and Statutory Approval Sustainable Energy Authority (SEA) is the main legal body to manage and control over the renewable energy sources in Sri Lanka. All the instructions and permissions will be given by Sustainable Energy Authority regarding a renewable energy project is to be implemented. If the proposed project is more than 10MW capacity, then acquiring a generation license from CEB will be necessary as well. Since this project is of 10MW capacity, there is no need of acquiring a generation license of CEB. Before applying a formal application to the SEA for renewable energy project, recourses are provided in the On-Grid Renewable Energy Projects Regulation 2009 to verify the availability of the suitable NRE site for development. And then a formal application need to be prepared to submit to the SEA as prescribed in Section 16(2) of the On-Grid Renewable Energy Projects Regulation 2011 and this application should be accompanied with a Pre-feasibility study report. When the application is being submitting, a non-refundable application fees should be paid to SEA. Pre-feasibility Study report In this study report it should be include a Summary of the Pre-feasibility study, Certification by the accredited Consultant and Study report based on the list of contents. Standard format for Summary of the Pre-feasibility study Standard format for Certification by the accredited Consultant Format_F2.pdf Standard format for Study report based on the list of contents Format_F3.pdf Format_F1.pdf When preparing the pre-feasibility study report following aspects should be given focused attention. Land issues must be sort out( availability of the land for the project, consent of the agency to whom the land belongs to etc.) and clear identification of ownership P age |8 Resource issues (availability of the resource for the project, conflicting uses of the resource etc.) must be clearly understood by studying all aspects of the resources such as seasonality and other uses (existing and future) of the resource which may compromise the project feasibility. Issues with respect to affected communities will have to be understood and documented to avoid conflicts during project implementation Making an Application In this process proponent has to make the contact with SEA by making an application to SEA. When applying for renewable energy project, proponent has to make an application fee to the SEA as described below. Following main components should be included in the Application form a) Pre-feasibility report prepared by a Consultant accredited by SEA, with one page summary b) A copy of the map of the geographical location of the proposed project c) A brief description of the project, including the amount of power to be generated. d) The total estimated cost and financial model including the optimisation criteria adopted. e) Proof of availability of adequate finances or the manner in which the required finances for the project are to be obtained. f) Project location, describing the relative location of the energy conversion plant and equipment to the resource, as a further explanation of (b) above g) A statement explaining how the Applicant intends to deliver electricity generated by the project to the national grid, and geographical area travelled by the power line to be constructed for that purpose. h) A copy of the receipt obtained from the SEA, for the payment of the application fee, which will be calculated according to the schedule given overleaf Application fee Amount of power proposed to be Fee to be paid on application generated 1000kW or part thereof LKR 100,000 Each additional 1,000kW LKR 50,000 payable on pro rata basis P age |9 Approval Phase In this process, proponent has to obtain formal approval from several other agencies to proceed with the project development. The approval of Divisional Secretary Central Environment Authority and an assurance from CEB on purchasing energy from the proposed project will provide a strong acceptance to the project beforehand. Divisional Secretary’s Approval - Divisional Secretary is considered as the representative of the Government at the grass root level who protects and manages the state land and other natural resources. Under the 13th Amendment to the constitution, getting the consent of the respective Provincial Council is also compulsory. Letter of intent – This document is issued by CEB to signify the assurance of CEB to procure the electricity generated by the project. When applying for this letter proponent should be made an application fee of LKR 100,000 to CEB. Feasibility Study Phase In this phase, the Developer makes detailed evaluation of the feasibility of the project, giving due consideration to the input resources and outcome of the project. Comprehensive Feasibility Study - The Developer is required to evaluate all factors which influence the project, ranging from weather and climate conditions to eventualities of relocating people who may be affected by the project implementation. Environmental Examination - The Developer is required to make an application to the Central Environmental Authority (CEA) seeking environmental clearance. Depending on the severity of the environmental impact of the project, the project may be required to undergo either an Initial Environmental Examination (IEE) or a more comprehensive Environmental Impact Assessment (EIA). Licensing Phase Having obtained statutory clearance to proceed, the Developer is required to secure an Energy Permit to use the renewable energy resource, a Generation License from PUCSL to generate electricity and sell energy to the CEB. Energy Permit – All renewable energy resources are owned by the republic of Sri Lanka. Hence the utilization of resources is granted through a 20 year permit P a g e | 10 system. Once all other approvals are secured by a project Developer, the PAC grants a 20 year permit (extendable by a further 20 years after the successful operation of the project during the initial 20 year period) to the Developer allowing him to use the resource under several conditions. The Developer will have to pay a fee of LKR 500,000/- (per MW of capacity) as the permit fee in the case of projects with capacities of 10MW or less. The Energy Permit carries a grace period of 2 years to allow for construction activities, and the Developers are required to complete implementation within this period. Generation License - The project Developer, possessing an Energy Permit is required to obtain a Generation License from the Public Utilities Commission of Sri Lanka (PUCSL) with the enactment of the Sri Lanka Electricity Act 20 of 2009. The annual fees payable to PUCSL for the Generation License will be LKR 10,000/- per MW. Power Purchase Agreement - All projects having capacities of 10MW or less have to be taken under the Standardised Power Purchase Agreement (SPPA), reached between the CEB and the power producer. The time tested agreement is supported by tariffs offered to various technologies and are subject to revisions based on project cost escalations, at appropriate intervals. The SPPA is valid for a period of 20 years from the date of commercial operation. Financial Aspects of the project After obtaining the statutory permissions, company should manage the financial resources to implement the project. Even though the project is in statutory clearance procedures, company can handle financing resources because no sooner the required approvals will be given for the project by the relevant parties if the necessary documents and requirements are provided accordingly. Financing methods should be decided based on the capital strength of the company and required mount of investment to the project. Company has to decide whether the capital strength of the company to implement this project is strong or else to obtain debt from external parties. To decide these things, company has to do a proper analysis on all expenditures on this project. P a g e | 11 Let’s assume the solar irradiation of the site is 1kW/m2 and PV panel with the dimensions 1639*983 mm2 and efficiency of 16%. Then required panel area to generate 10MW system capacity is as follows, 𝐴𝑟𝑒𝑎 = 10 × 106 = 62,500 𝑚2 1 × 103 × 0.16 Therefore at least 5.053*105 m2 land area is required to establish the system. Thus number of panels required is, 𝑃𝑎𝑛𝑒𝑙 𝑛𝑜𝑠 = 62500 = 38,793 𝑛𝑜𝑠 1639 × 983 × 10−6 If a panel cost is around Rs.20, 000 then cost of the panels = 38,793*20,000 = 775.86 million rupees If 1MW inverters are used, then required number of inverters = 10 Cost of each inverter = 2.5 million rupees Then cost for the inverters = 25 million rupees Then the total cost for the PV panels and Inverters = 800 million rupees In additional to the above cost, there are many other costs associated with this projects such as installation costs, transportation costs, system mounting costs, costs for developments of infrastructures etc. Therefor total amount required for a 10MW project may be around 1.5 to 2.0 billion rupees. Ceylon Electricity Board offers Three-Tier Tariff method which describes how the rates are calculated. According to their tariffs, Solar Power Plant will be offered a flat tariff of Rs. 23.10 / kWh (non-escalable for 20 years). Therefore required energy to be generated to recover the cost incurred for this project can be calculated as follows by assuming the cost is 1.5 billion rupees for the project. By considering average Sun time is 5 hours and energy generating in this sun hours is 10MW, we can calculate the approximate payback period. 𝑅𝑒𝑞𝑢𝑖𝑟𝑒𝑑 𝑒𝑛𝑒𝑟𝑔𝑦 𝑡𝑜 𝑟𝑒𝑐𝑜𝑣𝑒𝑟 𝑡ℎ𝑒 𝑐𝑜𝑠𝑡 = 𝑅𝑠. 1.5 × 109 = 6.494 × 107 𝑘𝑊ℎ = 2.34 × 1011 𝑘𝐽 𝑅𝑠. 23.1/𝑘𝑊ℎ 𝑇ℎ𝑒𝑟𝑒𝑓𝑜𝑟 𝑝𝑎𝑦𝑏𝑎𝑐𝑘 𝑝𝑒𝑟𝑖𝑜𝑑 𝑖𝑠 𝑎𝑝𝑝𝑟𝑜𝑥𝑖𝑚𝑎𝑡𝑒𝑙𝑦 = 2.34 × 1011 𝑘𝐽 = 1299 𝑑𝑎𝑦𝑠(≈ 3.6𝑦𝑒𝑎𝑟𝑠) 10 × 5 × 3600 × 103 𝑘𝐽 P a g e | 12 Above payback period is calculated without considering any interest rates. If interest rates are considered, above payback period will be increased. For an instance let’s assume an interest rate of 15% of financing method to be used. Then the actual payback period can be calculated as follows. 𝑚𝑎𝑥𝑖𝑚𝑢𝑚 𝑟𝑒𝑣𝑒𝑛𝑢𝑒 𝑡ℎ𝑎𝑡 𝑐𝑎𝑛 𝑏𝑒 𝑜𝑏𝑡𝑎𝑖𝑛 𝑏𝑦 𝑡ℎ𝑒 𝑠𝑦𝑠𝑡𝑒𝑚 𝑝𝑒𝑟 𝑚𝑜𝑛𝑡ℎ = 5 × 104 𝑘𝑊ℎ × 𝑅𝑠. 23.1/𝑘𝑊ℎ × 30 = 𝑅𝑠 3.465 × 107 𝑇ℎ𝑒𝑟𝑒𝑓𝑜𝑟 𝑝𝑎𝑦𝑏𝑎𝑐𝑘 𝑝𝑒𝑟𝑖𝑜𝑑 𝑖𝑠 𝑎𝑝𝑝𝑟𝑜𝑥𝑖𝑚𝑎𝑡𝑒𝑙𝑦 = 1920 𝑑𝑎𝑦𝑠(≈ 5.3 𝑦𝑒𝑎𝑟𝑠)
