SOLAR RESOURCE DATA (BUILDING BANKABLE !) and It’s relationship to FINANCING  What the Lender wants & more !!!!

With the Indian solar industry especially Gujarat, is on the verge of contributing  meaningfully to the energy mix of Indian Power Sector with 600 MW installed till date along with the ambitions Canal top project and upcoming Roof top photovoltaic program along with all indications pouring in that solar installations are expected to continue to grow, and recent trends show an appetite for large-scale utility installations ( At least for  a while in India). Frankly speaking, what has been noticed in India and in Gujarat is that financing has emerged as an important consideration / bumper / road blocker or whatever you say it, in deploying a solar generating facility and meeting the needs of the financing parties.  While there are many considerations in solar generating facility financing, the key considerations include capital cost and system performance (which is largely based on the available solar resource).

 In order to obtain financing at a competitive interest rate, one of the most key factor is Reliable solar resource data that are essential for the development of a solar PV project. Almost all solar radiation datasets are derived from publically available data, with their own strengths and weaknesses. While these data at a site can be defined in different ways, the Global Horizontal Irradiation (the total solar energy received on a unit area of horizontal surface) is generally of most interest to developers. In particular, a high long term average annual GHI is desired. While the financing community generally views the solar resource as stable, They would many times also view the material miscalculation of the solar resource as one of the biggest risks in a solar project. There are two main sources of solar resource data: satellite derived data and land-based measurement / Onsite Measurement. Since both sources have particular merits, the choice will depend on the specific site location. Also to determine the viability at the least 10-15 years of data are usually required to give the variation to a reasonable degree of confidence before proceeding further.

In INDIA, the solar resource data are available from various sources. These include the Indian Meteorological Department, NASA’s Surface Meteorology and Solar Energy data set, METEONORM’s global climatological database, and satellite derived geospatial solar data products from the United States National Renewable Energy Laboratory. These sources are of varying quality and resolution. Appropriate expertise is needed to interpret the data. Also as of now most solar EPC companies in INDIA use solar maps made by NASA. But at the same time there is a big question regarding the accuracy and adequacy of these data after a certain period of time. The correctness might have to face the testing times ahead !!

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While there are many factors considered when the Financiers evaluate the ability of the project to repay its loan, the sale of the generated electricity is one of the most-important factors for assessing a project’s viability and ability to repay its debt.

In order to have a successful financing, a thorough and rigorous evaluation of the solar resource suitable for a project’s proposed technology is required.  To effectively analyse the solar resource, one needs to evaluate more than just the average irradiance available at the proposed site.  In addition, knowledge is required on how the availability of the resource varies over a day, month, year, or the duration of the project  life.  Furthermore, plant design and operational planning benefit from a detailed understanding of the solar resource fuelling the plant.

What’s the Financial Perspective related to the Resource data ?

Of all the Utmost importance to a lender is how the project provides and maintains cash flow over the debt term and its ability to meet certain lending covenants including debt service coverage ratio (DSCR).  Key factors that  lenders consider in evaluating a project’s ability to repay its debt includes not only the stability and financial cost and  performance of the project owner and credit worthiness of  the off-taker, but also the ability of the project to maintain  adequate cash flow under potential down side scenarios / even in stress cases). Hence there needs to be the robustness in the revenue scheme / amount of electricity produced and fed into the grid which of course is reliant on the solar resource.  Unlike fossil-fuel generating facilities, solar generating facilities cannot control their fuel input and the variation of the fuel resource, which lenders recognize as risks associated with solar generating facilities.  Knowledge of the amount, timing, and variability of the solar resource influence the amount of electricity produced, and thus the revenue stream.

Therefore, it is crucial to understand the variability of the resource from year-to-year and season-to season. Once the irradiance dataset has been gathered, the performance of the solar system can be calculated through a variety of models.  With  20 to 30 years of data, one can then evaluate the minimum, maximum, and average production of the facility.

This further would lead to the estimation of the capacity factor and so the variability of the production can thus be determined. Capacity factor is the annual estimated output of the plant divided by the output of the plant if it ran 24 hours per day, 365 day per year at maximum output.

       Capacity Factor =  Annual Energy Measured / (Installed Capacity X  8760)

The above factor would hence again have impact on the overall performance of plant and thus on the electricity generation and thus on the FINANCIAL VIALBILITY of the Project. All closely linked together !

Hence thorough knowledge of the uncertainties and accuracy of the data set is important.  When the production of the system is analysed for financing, the accuracy affects the risk involved. Above all the development of solar projects has expanded significantly and appears to have a promising future. However, even the best locations are not immune to normal year-to-year variations in solar irradiance, which have a corresponding impact on power production and the ability of the project to service its debt.

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Example of Solar Monitoring System

Ups & Downs : While on-site observations capture the localized nuances of solar irradiance at a particular location, they do not provide the long-term perspective required for project funding and must be well maintained to be trusted. Satellite derived solar datasets, on the other hand, accurately capture year-to-year fluctuations, but do not always capture micro-scale effects. A solar resource assessment, combining both on-site observations and long-term satellite derived data, helps extend measurement records and gain long-term context. This method greatly reduces uncertainty, and provides the “bankable” production estimates required to secure financing. Widespread adoption of this practice will ensure that only profitable solar projects are constructed and secure the future success of the solar energy industry.

Meanwhile there is also a very good news coming in that a Chennai-based Government agency has claimed that they can build India’s first “SOLAR ATLAS” within a span of 2 years ! The atlas, which will identify the solar hotspots where the sun’s radiation has optimum intensity for power generation, will enable developers to accurately pinpoint locations for projects, according to the Centre for Wind Energy Technology, which is creating the database. This certainly is pretty impressive if successfully implemented which would make project developers and most importantly EPC players in Indian Industry armed with good amount of information which would certainly expedite process of Solar Project development in INDIA.

Cheers….

References : BUILDING A BANKABLE SOLAR RADIATION DATASET by Frank Vignola & Cathy Grover

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About Urvish Dave

Urvish Dave is working as a Project Consultant in the Renewable Energy Arena with an expertise and keen focus on Solar Energy Sector viz. Rural Electrification, Off-Grid Solar Projects, Grid connected, Captive power plants, Renewable Energy Certificates (REC) Mechanism etc. for various Renewable Projects in India along with market intelligence pertaining to renewable energy sector. He holds the distinction of executing numerous Solar projects during the career path including EPC projects for Rural Electrification, Solar Grid Connected Projects, Off-Grid Projects etc. For Consultation and Turnkey Solutions in Renewable Energy Projects and energy efficient product's, visit www.urvishdave.com or write him at info@urvishdave.com
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One Response to SOLAR RESOURCE DATA (BUILDING BANKABLE !) and It’s relationship to FINANCING  What the Lender wants & more !!!!

  1. Pingback: Solar Projects in India | Financing Cloud & Commonly Encountered Challenges ! | urvishdave

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