According to reports, Brakes India Ltd, of the TVS group, has formed a joint venture with the US solar major SunEdison. The joint venture’s 7.72 MW solar plant in Tamil Nadu was commissioned today and will supply power to Brakes India.
Such a structure, better known as ‘group captive model’, is common in the wind industry, but new in solar. SunEdison’s officials said at a press conference here today that the 7.72 MW plant “happens to be the largest solar power plant under the group captive scheme in India.”
The tariff that Brakes India will pay the joint venture for the solar electricity has not been disclosed. But S. Kesavan, Executive Director, Brakes India, said that while the tariff was higher than the price that the state-owned electricity utility charges, the big advantage is that the tariff remains the same for a long period.
The ‘group captive model’, where private power companies and power purchasers prefer to set up joint ventures and the joint venture companies own the power plant, is common in Tamil Nadu. This is because the group captives have one major advantage: the state does not levy the ‘cross subsidy surcharge’ on the power sold.
“Cross subsidy surcharges” are levied on third party sales of power so as to make the buyers of such power to pay to defray the subsidised power that the governments give the poor and the underprivileged.
While many States have waived the cross subsidy surcharge on wind and solar in order to encourage renewable energy installations, Tamil Nadu charges Rs. 3.46 per kWhr.
If SunEdison had set up a solar plant on its own and sold the power to Brakes India directly, the tariff would have been higher by Rs. 3.46. On the other hand, if Brakes India had owned the solar plant, it could have got ‘accelerated depreciation’, a tax-saving sop that allows a renewable energy company to write off 80 per cent of the cost of the plant in the first year as ‘depreciation’, which would result in lower taxable profits.
This project marked “the launch of a new business for us,” said SunEdison’s Asia-Pacific Head, Pashupathy Gopalan, at the press conference.
A unique feature of the plant is that it is fitted with trackers, so that the panels always keep facing the sun as it moves across the sky. Trackers typically raise the cost of a plant by 12 per cent, but result in 15-18 per cent more generation. SunEdison has assured Brakes India 1.81 million units per MW of generation.