According to reports, Tamil Nadu is hot for solar. Even before the state-mandated ‘solar purchase obligation’ has kicked-in, and before power purchase agreements are signed for a big bunch of projects, a number of solar projects are coming up in the State.
Most of the investors are textile businessmen, who want to avail themselves of the ‘accelerated depreciation’ benefit — which allows them to depreciate the solar plant by 80 per cent in the first year, so that the consequent dip in taxable profits helps avoid paying tax. These businessmen used to put up windmills to get AD. Ever since the sop was scrapped for wind power projects, the businessmen are turning to solar.
Around this time last year, the total installed, grid-connected solar power capacity in Tamil Nadu was 15 MW. The figure will at least triple by March.
Earlier this month, a Madurai-based company called JVS Exports announced it had commissioned a 5 MW solar power plant. For the Rs 250-crore home textiles manufacturer, whose products are bought by Walmart, USA, it was a “diversification”. M Britto, Managing Director of the company told Business Line that the 5 MW plant, incidentally, built by the Kolkata-based Vikram Solar, was more like testing the waters. The company could do more solar, Britto said.
On Monday, Sterling & Wilson, part of the Shapoorji Pollonji group, announced that it had bagged a contract for building a 10 MW solar park for a group of textile manufacturers near Karur, Tamil Nadu. The park is expected to be commissioned in February 2014. Chemtrols Solar, another solar project builder, has been contracted by another group of textile companies for putting up a 20 MW solar farm at Toraiyur, near Tiruchi. Two auto components manufacturers, M M Forgings and Super Auto Forge, have put up 3 MW solar plant near Tiruchi. In addition to these, there are a number of 1-2 MW projects at various stages of planning or execution, apart from the non-grid connected, large rooftop projects.
Solar investors such as JVS Exports will sell the power to other industries at negotiated rates. Solar electricity fetches around Rs 6 when sold directly to customers. They will also get ‘solar renewable energy certificates’ which can be sold in the power exchanges to entities that are obligated by law to buy the certificates (or electricity generated from renewable sources). The ‘third party sales + accelerated depreciation + REC’ model makes solar a good business to be in.
Some other investors, such as K.S. Kamalakannan of Naga Detergents, see the ‘solar purchase obligation’ as inevitable. The State-mandated obligation requires certain specified classes of consumers to buy 6 per cent of their electricity consumption from ‘solar’. The SPO has been challenged in the courts. While many industries are preparing themselves for the ‘eventuality’ of SPO, some are not waiting for the verdict. Naga Detergents for one has just put up a 600 kW rooftop plant, spending Rs 6 crore — it was built by the Chennai-based Zynergy Projects. Incidentally, Zynergy has also recently put up a 523 kW rooftop project for KTV Foods, Chennai.
It is a myth that solar energy is expensive, says Rohit Rabindernath, Group Managing Director and CEO of Zynergy Projects & Service. The solar power cost stays fixed over a quarter century, whereas the cost of other electricity will rise.