Prof. Dr. Ajay ChandakCertified Energy Auditor & Renewable Energy Consultant

PRINCE, Suman Foundation, DHULE: 424005

People’s Green Power Project

A business method Innovation

Innovative business method proposes:1. Capital investment by users and not corporate. 2. Investors get major returns by way of slice of power

(assured return) and cash incentive (floating). Investor is insulated from any price rise for the life of project.

3. Investor gets cash bonus from cash generated from sell of RECs, CDM etc.

4. Expectations of returns of end users is low @ 12% while for corporate the returns expected are 30%. Individual investors can tolerate lower returns in initial years and higher gains for later years, which corporate can’t.

5. Corporate companies, Governments, PSUs, Electricity boards, industry organisations are intermediatieries.

Where Lies Innovation

1. Capital is raised from common investors in the form of some kind of bond, say Rs. 1 lakh each. Investors can be domestic, industry or commercial consumers.

2. Project is installed with this capital, by the People’s Green power company. 3. Agreements are made with all stakeholders like transmission company,

distribution company etc. for availing their services. They are paid in terms of power or cash or both as the case may be.

4. Distribution company maintains special status of these bond holders in their data base.

5. Once power starts generating, there is power available for distribution to the investors. Also cash available from sell of RECs and CERs. Available power and cash is distributed in following order.• Part of the power and cash goes in paying for transmission and

distribution companies for their services.• Out of remaining power and cash some part goes to the People’s power

company for its operation and profits.• Remaining power goes to the investors/bond holders and remaining cash

distributed as cash incentive.

How exactly the business model works?

How Business Innovation works

Returns and Revenue model

50 MW Solar Power Project Case:

Who gets what?

Solar PV ProjectPeople’s Power

Company Investor IP holder

Capital invested 8 crores

Rs. 1 lakh /

0.8 Lakh NIL

One time revenue 8.50 crores -- 4.00 crores

Power per year 8000 MWh 1050 kWh/yr 800 MWh/yr

Cash revenue per yr24.00 crores 11000 Rs*. 2.4 crores

Total Revenue per

year 28 crores

Avg. return

more than Rs.

35000 Per year 2.80 crores

*Depends on rate of CER & CDM benefits.

Current rate presumed is Rs. 9 (Floor rate Rs. 9.30) and Rs. 1 resp..

People’s Green Power Company1. Company can be Private company or Industry Associations like

FICCI, CII or joint ventures, or government companies like SECI, MIDC, DISCOMs etc. If SECI or DISCOM plays the role of this company it is the best choice. These being primarily government companies investors will feel safe to invest, otherwise the projects can be leased to state govt. for financial security of the bond holders. In case of solar city project corporation will take a role of Peoples Green Power Company.

2. Company needs to invest in formation and marketing.

3. Strong RPOs are required for good business potential.

4. If the investment in ‘Green Power Bonds’ gets status of infrastructure bonds then investor can avail 20% tax benefit and profitability will be still higher.

5. Issues required to resolve: Govt. permissions, Policy changes, liasoning with state distribution company.

Advantages over rooftop installation1. Amount of utilisable power per rupee invested is at least 3 times more in

case of centralised power plant than a roof top power generation. This ratio becomes more than 5 times in case of solar pumps.

2. Rooftops are normally not the best sites. You can have tall buildings, trees in the surroundings. Exact south orientation may not be feasible. Lot of fabrication is required. Capital cost: Centralised system capital costs is 50% less with 50% more power generation. Most of the rooftop installations generate @ 1100 MWh per MW per year, while good centralised sites deliver more than 1600 MWh per MW per year.

3. Wheeling of power from rooftop installation in low voltage grid have its own problems. Liasoning with distribution companies and maintaining records is easier when project done in centralised manner.

4. Cost of land is hardly 2% of project cost and using inconvenient roofs, just because roof is available is not a good idea. In fact roof space is cities is extremely expensive and have many other productive uses.

Advantages over rooftop installation contd…..

5. All operation and maintenance of the system is problem of the installer. In centralised system this is taken care of by the company in professional manner.

6. Government is promoting solar pumps for farmers. This is in a way bad idea. In the same cost at least five times more power can be generated in a centralised plant and can be reserved for the farmers.

7. One can get cash by selling RECs and carbon funding. This is not practicable for individual systems.

8. Idea of rooftop generation clicked in Germany because domestic power is very expensive and bank interest rates are low. Grids are very stable and wheeling of power at low voltage is possible. None of these factors applicable in India, and still we are following this German model without understanding these details. Germany does not have deserts like the ones we have in west Gujrat and Rajasthan and even Ladakh where land costs nothing and high power generation because of high solar radiation levels.

Why any investor should invest in such project?1. Investors are assured of their share of power for the life of the

project (minimum 20 years).

2. Investor gets his/her share of power irrespective of any price rise. It is expected that the price of power at the end of 20 years will be approx. Rs. 100-140 per kWh. This project idea insulates the investor from such price rise. Investor is Protected from inflation for minimum 20 years. This is main USP of the project.

3. Returns are much better than one gets from bank FDRs. You invest money in green bonds like FDR in bank and in return you get is deduction in your electricity bills and also cash incentives.

4. You become part of movement to generate renewable power by investing your own funds. Only difference is that instead of generating power on your own rooftop, it is generated somewhere else and wheeled to your house.

Why Governments Should Promote Such Project?

1. Governments need not to invest a single rupee in the project and can still get addition of few hundreds and thousands of MW of solar/wind power added to the grid. This is a big relief to the governments especially when we are so power starved and cash strapped.

2. Governments can take credit of promoting solar power with favorable policies and without investing any money.

3. Such projects will be providing primarily day power, which is expensive and where government has shortage. In many states governments do not give day power to the farmers because of shortages.

4. On global front government gets credit of combating climate change and having emission reductions.

Status of Intellectual Property

Prof. Dr. Ajay Chandak holds IP rights. He has filed a ‘Business method patent’ for this innovation.

FAQs1. Why this business model will succeed? : When investments are made

by corporate higher returns, @ 25-30% are expected in earlier years. When common investors are investing they get 8-9% returns on their FDRs from bank. Their expectations are low. However the business model projects that for the life of project the investor will get his share of power, irrespective of any price rise. He is insulated from future price rise. With current trend in 20th year, power cost will be Rs. 100-140 per kWh. Investor may get lower returns in earlier years (even these lower returns are much higher than FDR return), but very high return in future years.

2. What safety the investor has on his investment in private company? Company plans to mortgage the project to state distribution company (State Government) or any such agency authorised by government, as a security.

FAQs3. How exactly the investor gets return? : Every bond holder will be

registered with state distribution company. Power produced in earlier month will be credited to the investor’s account and will be deducted from his bill of next month. He will get the bill only for surplus power used.

4. What if the investor changes address or leaves the state?: The bonds will be transferrable/sellable.

5. What if the investors consumption is less than his share of power? Surplus units against his name will be banked and used in future months. He will have option of selling surplus units with the company and get cash.

6. How government benefits? Without investing single rupee, solar and other green power generation capacity is added to the state. People’s power company pays charges to transmission and distribution companies for their services, which is earning for the state. Also state will get its due by way of taxes.

FAQs7. Can government help in generating business? Yes, to a large extent

government can help in generating business and get solar power for the people without investing a single rupee. Govt. can make it mandatory that every new house/flat should purchase 1 bond, every new factory should invest at least 2% of the capital in these bonds, every corporation should purchase some fixed share through green bonds and similar ways. E.g. A builder will charge Rs. 36 lakhs for a flat rather than Rs. 35 lakhs and gives a bond to the house owner which almost ensures @ 1000 kWh power per year for lifetime, plus some cash revenues.

8. Areas to be worked on? : We need to work on how to avail benefits of VGF (Viability Gap Funding) mechanism of Solar Energy Corporation of India. If company can get even Rs. 2 crores per MW, then the benefit/return will increase by almost 30%

Getting status of infrastructure bonds to these projects to save 20% on investment.

We also need to find ways of partnering with a corporate so that depreciation benefit is also availed and part of that benefit is transferred to project beneficiaries.

Thank You.Questions & queries welcome.

Prof. Dr. Ajay Chandak.Ph.D. (Solar), M.Tech. (Mech) IITB

Consultant in Renewable Energy & Energy Efficiency.

PRINCE (Promotes, Researchers & Innovators in New & Clean Energy) Suman Foundation, Shamgiri, Agra Road,

Opp. Swagat Lodge, Deopur, DHULE: 424 005

PH/Fax: 0091-2562-271795, 271995

CELL: 0091-9823033344 Email: renewable.consultant@gmail.com

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