Harnessing Solar energy, Options for India

NPV of Govt. Subsidies (` in Lakhs)
The section, ‘Bouquet of Incentive Instruments’ of the guidelines for off-grid applications a recognises
the need for a flexible funding approach for the programme to be effective. A few alternative
financial support schemes are suggested in this document. While these are not strictly part of the set
of possible incentives, they are related to the arrangements envisaged for successful utility-scale
projects.
It can be seen in Figure 10 that the net present value (NPV) of the generation-based incentive (GBI)
is within reasonable limits at tariffs of `3.50 and `4 per unit of electricity generated. However, this
may not be economically viable to the developer. For a microgrid based on 25% solar and 75%
biomass, Figure 11 shows that if the households were to be charged `2 per unit of electricity
consumed then the government has to pay at least `5.50 of GBI for the IRR to be 10%. However, if
the households paid `3 per unit, then it suffices for the government to pay `4.50 for 10% IRR.
Alternate subsidy regimes are discussed in the next section.
60
50
NPV of GBI
40
30
Current Capital
20
10
0
0 0.5 1 1.5 2 2.5 3 3.5 4 4.5 5 5.5 6 6.5 7 7.5
Generation Based Incentive (`/ kWh)
Figure 10: NPV of Generation-based Tariff for Twenty-five Years vs. Today’s Subsidy Regime for a
System with 50% Solar PV
The IRR for the project developer as a function of government tariff and consumer tariff are plotted
in Figure 11.
a JNNSM guidelines for off-grid and decentralised solar applications, and rooftop and other small solar plants,
http://pib.nic.in/archieve/others/GuidelinesJNNSolarMission.pdf, accessed 20 November 2010.
Solar Photovoltaic Applications CSTEP | Page 70