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Solar photovoltaic water pumping in India: a financial

evaluation
a

P. Purohit MSc. (Physics) & T. C. Kandpal MSc. (Physics) PhD

Centre for Energy Studies, Indian Institute of Technology Delhi, Hauz Khas, New Delhi, 110016,
India
b

Centre for Energy Studies, Indian Institute of Technology Delhi, Hauz Khas, New Delhi, 110016,
India
Published online: 30 Mar 2011.

To cite this article: P. Purohit MSc. (Physics) & T. C. Kandpal MSc. (Physics) PhD (2005) Solar photovoltaic water pumping in India: a
financial evaluation, International Journal of Ambient Energy, 26:3, 135-146, DOI: 10.1080/01430750.2005.9674983
To link to this article: http://dx.doi.org/10.1080/01430750.2005.9674983

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International Journal of Ambient Energy, Volume 26, Number 3

Solar
photo
water pumping
in India:
a financial
evaluation
P. Purohit* and T, C. Kandpal**

Pallav Purohit, MSc. (Physics), Senior Research Fellow,

Centre for Energy Studies, Indian Institute of Technology Delhi,
Hauz Khas, New Delhi - 110016, India.
" Tara C. Kandpal, MSc. (Physics), PhD, Professor, Centre for
Energy Studies, lndian Institute of Technology Delhi, Hauz Khas,
New Delhi - 110016. India. (To whom all correspondence be
addressed) E-mail: tarak@ces.iitd.ernet.in
O Ambient Press Limited 2005

July 2005

SYNOPSIS
A simple framework for the financial performance
evaluation of a solar photovoltaic (SPV) water
pump has been presented. The unit cost of water
delivered by such a pump has been estimated.
The monetary benefits accrued to the end user
have also been quantified on the basis of the
amount of diesel or electricity saved. The Net
Present Value and Internal Rate of Return of
investment in an SPV water pump have also been
estimated. The effect of fuel price escalation on
the financial performance indices has been
evaluated along with estimation of the break-even
prices of diesel and electricity. The effects of
financial incentives such as capital subsidy,
accelerated depreciation-related income tax
benefits and provision of a low interest loan on the
break-even prices of diesel and electricity have
also been studied. Results of some numerical
calculations for a 1.8 kWp SPV pump are briefly
presented and discussed.
INTRODUCTION
Irrigation water pumping is the second most
important energy end use in lndian agriculture
after fertilisers. Diesel and electricity are
commonly used for meeting irrigation energy
demand in the country. More than 11.8 million
electric pumpsets are reportedly in operation in
the agriculture sector [I]. For meeting the
increasing drinking and irrigation water demand
more wells would be dug and energised thus
increasing the demands of electricity and diesel.
Due to a variety of reasons generation capacity is
not matching the increasing demand of electricity
in the country. On the other hand, diesel is
expected to become increasingly expensive and
scarce. Consequently, problems are being faced
in the large-scale energisation of tubewells used
for irrigation [2].
Erratic supply of conventional sources of
energy and concern for the environment and
sustainable development has provided renewed
thrust to the development and dissemination of
renewable energy sources to power the pumpsets.
Renewable energy options for water pumping
include solar photovoltaic (SPV) pumps, wind
pumps and dual-fuel engine pumps using biogas
or producer gas. Of these renewable energy
options for water pumping, solar photovoltaic
pumps are considered to have a large potential of
utilisation in developing countries, due to
decentralised availability of solar energy and the
gradually reducing cost of SPV systems [3-41. In
the past two decades, considerable efforts have
been made for large scale dissemination of SPV
pumps in lndia as well as in other developing
countries [5-1 I]. Small pumping systems with an
array capacity of 300-360 Wp were developed and
tried during the 1980s (121. Based on the
experience gained, a special programme was

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Solar photovoltaic water pumping in India: a financial evaluation

evolved in 1993 for the supply and installation of

larger capacity SPV water pumping systems for
agriculture and related uses [13]. Under this
programme, users were offered a subsidy linked to
the capacity of the PV array used in the pumping
system and a soft loan was also provided to cover
90% of the remaining cost of the system after the
capital subsidy [ I 31.
An ambitious programme for installation of
50,000 SPV water-pumping systems over a period
of 5 years was also formulated by the Ministry of
Non-conventional Energy Sources (MNES) of the
Government of India [13]. However, till December
2002, only 51 13 SPV systems for water pumping
were reportedly installed [9]. One of the possible
barriers to large-scale uptake of SPV water pumps
is the financial unattractiveness of these systems
to the farmers. In addition, users' inability to pay
for PV infrastructure and a lack of available credit
or financing both hindered the dissemination of
photovoltaic systems [14-191. It is therefore
necessary to study all the relevant aspects and
issues affecting the financial feasibility of SPV
water-pumping systems to farmers. It is in this
context that an attempt has been made in this
paper to develop a simple framework to assess
the financial feasibility of an SPV water pumping
system. The unit costs of water and of hydraulic
energy delivered by the SPV pump have been
estimated. The monetary benefits accrued to the
end user have also been quantified on the basis of
the amount of diesel and/or electricity saved. The
Net Present Value (NPV) and Internal Rate of
Return (IRR) of investment in an SPV water pump
have also been estimated. The effect of fuel
price escalation on these financial performance
indicators has been evaluated along with
estimation of the break-even prices of diesel and
electricity. The effect of various financial
incentives on the break-even prices of diesel and
electricity has been analysed.
SPV WATER PUMP
An SPV water pumping system (Figure 1) consists
of a photovoltaic array, motor-pump and power
conditioning equipment (optional). Provision for
storage of electricity is not provided in these
systems. Instead, if desired, provision can be
made for water storage, which may be more costeffective than provision of a storage battery in the
SPV system. The power conditioning equipment is
used to stabilise the fluctuating electrical energy
output of the array. Depending upon the total
dynamic head and the required flow-rate of water,
the pumping system can be surface or submersible type and the motor can be either AC or DC.
For AC pumping systems an inverter is also required.
VALUATION OF BENEFITS
The monetary benefits associated with an SPV
water pumping system depend upon the monetary

Purohit, Kandpal

worth of fuel saved. An SPV water pumping

system usually replaces either diesel or electricity.
The monetary worth of fuel saved can be
estimated as a product of annual fuel savings and
the market price of the fuel saved.
The annual electricity output of the PV module
depends upon the capacity of the SPV system and
its capacity utilisation factor. Thus, the annual
electricity output, ESP,, of the PV module used
with the SPV pump can be expressed as:

ESP, = 8760 CUF P

(1

where P (in kW,) represents the capacity of the

SPV system and CUF (in fraction) the capacity
utilisation factor of the SPV pump.
Photovoltaic modules are rated in peak Watts
(W,). This is the maximum power output from the
module at a cell temperature of 25 OC and solar
irradiance of 1 kW/m2. The actual power obtained
from the system in the field is generally less than
the rated power because: (i) the efficiency of a
solar cell decreases as its temperature increases
and cells in the field may often operate at
temperatures higher than 25 OC in tropical areas,
(ii) the solar irradiance is usually less than
1 kW/m2, (iii) imperfect matching of the load may
cause the module to operate at a voltage and
current that gives a power output less than the
maximum, (iv) the pumping system is operated
during periods of irrigation water demand only,
and (vi) downtime required for repair and
maintenance etc. In fact the average output over
daylight hours may be much less than the rated
output even in a location with high average daily
solar irradiation, thus resulting in a low capacity
utilisation of the SPV pump.
The annual amount of water, A,
(in m3),
delivered by an SPV system can be estimated as:

where q, (in fraction) represents the overall

efficiency of the SPV water pump, p (in kg/m3) the
density of water, g (in m/s2) the acceleration due
to gravity and h (m) the effective head for water
pumping.
The annual amount of diesel, A, (in litres),
required by a diesel engine purnpset t o pump the
same amount of water as delivered by the SPV
pump (Equation (2)) could be determined by using
the following expression:

where SF,
(in litre/bhp-h) represents the
specific diesel consumption in the conventional
diesel engine pumpset and q, (in fraction) its
efficiency.

Solar photovoltaic water pumping in India: a financial evaluation

Purohit, Kandpal

Figure 1
Schematic diagram of a
solar photovoltaic water
Pump.

Storage tank

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Solar
photovoltaic
array

+--

Water supply
for irrigation

I
/

I
I

'

'

Submersible pumps
driven by A.C. motor

Substituting the value of ESP!, from Equation (1)

into Equation (3) A, can be est~matedas:
A
,,

= 8760

CUF P SF, q
0.746 q,

Ae,

P SF, q,
( CUF
0.746 q,

8760 CUF P

(in kwh) can be

(5)
Te

The monetary worth of the annual diesel saved

(MW,,) can be expressed as:
MWd,= 8760

water pumping system, A,

expressed as:

where q, (in fraction) represents the efficiency of

an electric motor pumpset.
The monetary worth of the annual electricity
saved (MW,,) by the SPV pump can be expressed as:

Pd

where p, represents the market price of diesel (in

Euros ( e /litre).
Similarly, the annual amount of electricity
saving likely to be accrued to the use of an SPV

MW,

= 8760 CUF P

rl ) p,
(P

(7)

Te

where p, represents the market price of electricity

(in C2 / kwh).

Solar photovoltaic water pumping in India: a financial evaluation

UNlT COST OF WATER AND UNlT COST OF

USEFUL ENERGY DELIVERED BY SPV PUMP
The unit cost of water (U,
in fS / m3) for an SPV
water pump can be estimated as:
Uc,,

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Similarly, in the case of substitution of grid

electricity, the present value of net benefits (NPV,)
can be expressed as:
NPV, =

Co CRF + Ci
Aa,w

where C, represents the capital cost of the SPV

water pump, Ci its annual repair and maintenance
cost, and CRF the capital recovery factor, defined as:
CRF =

Purohit, Kandpal

d (1 + d)'
(1 + d)' - 1

with a discount rate d and useful lifetime t of the

SPV pump.
The unit cost of useful hydraulic energy
(U,,, in fS / MJ) delivered by the SPV system may
be expressed as:

CPV,

I (1d +(1d+l td)'- 1 1

MW,

where the term inside the bracket of the right hand

side of Equation (1 1) represents the present worth
factor with a discount rate d and useful lifetime t
of the SPV pump.
Similarly, the cumulative present value of
costs, CPV,, can be expressed as:
CPV, = Ci

(1 + d)' - 1
d (1 + d)'

)-co

Therefore, in the case of diesel replacement,

the present value of net benefits (NPV,) of an
investment in the SPV water pumping system can
be expressed as:
NPV, = CPVb-CPV,

(13)

NPV,'

NPV, =

[ (MW,,-

Ci)

{ (1 + d)' - 1 1-co]
d (1 + d)'

(14)

]1 + 5,
[ { 1i d

-11

(1 + d)' - 1
d (1 + d)'

I-~ol

(MW,,)
-[(E,,-d)

(15)

(17)

Equations (14-17) were also used for

estimating the value of the internal rate of return
(IRR) on the investment for the respective cases.
BREAK-EVEN ANALYSIS
It is normally expected that an SPV water pump
shall be financially more attractive with an increase
in the prices of diesel and electricity. It may
therefore be useful to estimate the break-even
prices of diesel and electricity beyond which an
SPV pump would be financially viable to the user.
The break-even prices of diesel and electricity with
and without fuel price escalation have been
estimated in the following subsections. The effects
of capital subsidy and other financial incentives
have also been incorporated in the analysis.
No financial incentives (reference case). The
following expressions have been obtained for the
break-even prices of diesel (p,,, in fS / litre) and
electricity (p,,, in fS / kwh) without any financial
incentives.

1
d (1 +
Pe,, = C0
(1
+ d)' - 1
Aes

Using Equations (1 1) and (12):

(1 + dlt - 1
d (1 + d)'

It may be noted that the salvage value of the

SPV water pumping system has been assumed to
be negligibly small in deriving Equations (1 I ) , (14)
and (15).
If the prices of diesel and electricity are
expected to escalate at uniform annual rates (in
fractions) E,, and E,, respectively, Equations (14)
and (15) may be modified as:

- Ci
PRESENT VALUE OF NET BENEFITS FOR AN
INVESTMENT IN THE SPV PUMP
The difference between the cumulative present
value of the benefits (due t o substitution of
commercial fue1.s) and the costs (i. e. capital cost
and annual repair and maintenance cost) is the net
present value (NPV) of the investment on the SPV
pump. In the present case, the cumulative present
value of benefits, CPV,, can be expressed as:

- Ci) {

[ (MW,,

) + Ci ]

(19)

With fuel price escalation the expressions for

the break-even prices of diesel and electricity are:

Solar photovoltaic water pumping in India: a financial evaluation

Purohit, Kandpal

(a) Without fuel price escalation

- 1
Pd,b - - [ ~ , { ( l - f l ) + f l ( im(1 + ,i)"
(1 + im)" - 1
Ads

(1 + dm)" - 1
( d m(1 + dm)"

d (1 + d)'
]+ci]
-1

It1(1 + d)'

(21)

respectively.

( l + dm)"
(l +
( d m(1 + dm)" J{(l
+ d)' - 1

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Capital subsidy. If a certain fraction f of the

capital cost is provided as capital subsidy the
following expressions are obtained with and
without fuel price escalation for the break-even
prices of diesel and electricity respectively.

ci]

I
(26)

(27)

(b) With fuel price escalation

(a) Without fuel price escalation

1
[(1 - f ) ~ ,
(l+
A,
(1 + d)' - 1

=pdrb

) + cil

(22)

+ Ci

(1 + dlt - 1
d (1 + d)'

I1

+ d)' - 1
+ d)'

I1

(6) With fuel price escalation

Ci

( (1d +(1d)'+ d)'- 1 I1

(1

+ Ci ( d (I

Ci

{ (1d +(1d)'+ d)'- 1 I 1

Low interest loan. In certain cases, financing

agencies provide low interest loans (up to 90%
of the capital cost) to users for the installation of
SPV water pumps. If a fraction f, of the capital
cost is provided by the financing agency as a low
interest loan, the following expressions are
obtained for the break-even prices of diesel and
electricity.

where ,i represents the monthly interest rate

levied on the loan by the financing agency, dm the
monthly discount rate and n the total number of
installments paid by the user for repayment of the
loan.
Accelerated depreciation-related income tax
benefits. To encourage uptake of SPV water
pumps, the user may be allowed accelerated
depreciation-related
income
tax
benefits.
Alternatively, the financial intermediaries can take
the accelerated depreciation-related income tax
benefits and transfer a certain fraction (f') of the
income tax benefit to the farmers. If it is assumed
that only a fraction m of the unsubsidised amount

Solar photovoltaic water pumping in India: a financial evaluation

is allowed to be depreciated in the first year and

that the user is able to get the income tax benefit
after x months of purchase of the equipment, the
following expressions are obtained for the breakeven prices of diesel and electricity.

Purohit, Kandpal

(a) With fuel price escalation

1
5d-d
1
Pd,b = Ads ( 1 + 5 a J t - 1
1+d

c 1-f,)

(a) Without fuel price escalation

1
Pd'b

- [cO

Ads

f'mT
{I-(I
+ d)X/12

+d)t - 1

+
1

'esb

= -

[cO

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Aes

f'mT
-(I
+4)"12

)I(1
+d)t-1

ci ( ( 1 + d ) ' - l ] ]
d (1 + d)'

(b) With fuel price escalation

Ci

[ (1 + dl' - 1
d (1 + d)'

Ci

( ('1 + dl' - 1
d (1 + d)'

I1

+ Ci { (+ld ) ' - l ] ]
d (1 + d)'

Combination of capital subsidy and income

tax benefit due to accelerated depreciation. In
this case the expressions obtained for the breakeven price of diesel and electricity are given
below.

I1

(a) Without fuel price escalation

where T represents the marginal income tax rate

applicable to the user.
Combination of capital subsidy and low interest
loan. Sometimes, the user may be provided with
both the capital subsidy as well as a low interest
loan. In this case, the following expressions are
obtained for the break-even price of diesel and
electricity.

(a) Without fuel price escalation

(b) With fuel price escalation

+ dm)"- 1

(l+
dm (1 + dm)" ) ] {+(dIl t - 1

) + ci]

(35)

('-

f'mT
(1 + d)X"Z

-1
] + ci( (1d +(1d)'+ d)'

Solar photovoltaic water pumping in India: a financial evaluation

Purohit, Kandpal

(b) With fuel price escalation

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Combination of capital subsidy, accelerated

depreciation-related income tax benefit and
low interest loan. The expressions obtained for
the break-even price of diesel and electricity for
the above-mentioned case are given below.

- [(l-f)~,{(l-f,)+f,
A,,

i m ( l +iJn
( ( 1 + imln- 1

=-

(42)

-1
im (1 + i,)"

- [ ( I - f) co( (1 - f1) + f1
Am

(~

1 - (1
~

61 -

1[

]I

(44)

(1 - f) Co {(l
- 1,)

1
-

((1 + d)'

Aes ( 1 + i e l t - 1
1+d

(a) Without fuel price escalation

d

f'mT
] + C i ((1
(1 + d)X/12
d (1 + d)'

)
~

(43)

f'mT
]+Ci{(l+d)t-l]]
(1 + d)X/12
d (1 + d)'

RESULTS AND DISCUSSION

For exemplifying the use of the generalised
framework developed in this study, calculations
for the case of an SPV water pumping system with
a rated capacity of 1.8 kW, with a DC surface
pump have been made and the results briefly
summarised in this section. The capital cost of an
SPV water pumping system with a capacity of
9000 [20-211 in the
1.8 kW, was approximately
Indian market during the year 2000-01. The annual
repair and maintenance cost of the SPV water
pump has been estimated at e 2 0 . Table 1
presents the values of various input parameters

Table 1. Input parameters used in the financial evaluation of the SPV water pumping system
parameter

Symbol

Unit

Capacity of SPV pump

Daily average solar radiation availability
Capacity utilisation factor
Capital cost of SPV pump
Annual repair and maintenance cost of SPV pump
Discount rate
Useful lifetime of SPV system
Fraction of capital cost as a low interest loan
Annual interest rate of the financing agency
Effective head
Specific fuel consumption in diesel engine pumpset
Efficiency of electric-motor pumpset
Efficiency of diesel-engine pumpset
Efficiency of SPV pumpset
Market price of diesel
Market price of electricity

P
I
CUF

W,
kWh/m2/day
fraction

co
c,

d
t
f,

i
h
SF,
fl e
'ld

fl P
Pd
Pe

(45)

c
e

fraction
years
fraction
fraction
metre
I/bhp-hr
fraction
fraction
fraction
fS/litre
e /kwh

Value

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Solar photovoltaic water pumping in India: a financial evaluation

used in the numerical calculations [22-231. The

capital subsidy provided by the Government of
India on the purchase of an SPV pump was
C 2.47/Wp during the year 2000-01 [20-21, 241.
The loan repayment period has been taken as 10
years and the loan amount is assumed to be paid
back in equal monthly installments. It is also
assumed that, in case of the provision of
accelerated depreciation-related income tax
benefit being available to the user, the total
unsubsidised component of the capital cost gets
depreciated in the first year itself and the amount
of applicable income tax rebate for the same has
been assumed to be transferred to the end user
after six months of purchase. The marginal income
tax rate applicable for the user has been taken as
30%. The annual rate of escalation in diesel and
electricity prices has been taken as 5%.
The annual amounts of diesel and electricity
saved by a 1.8 kW, SPV water pumping system
have been estimated at 1187 litre (ca 12,500 kwh)
and 2286 k w h respectively for the values of other
input parameters as listed in Table 1. The annual
amount of water delivered by the SPV pump is
estimated at 43641 m3.
The estimated values of unit cost of water are
presented in Table 2 for different types of single
and combined financial incentives. The unit cost of
water pumped by the SPV pump has been
estimated at C24.7 per thousand m3 for the
reference case without any financial incentive. The
corresponding value of the unit cost of useful
hydraulic energy has been estimated at

Purohit, Kandpal

C0.25/MJ. As expected, the availability of

financial incentives to the user helps in reducing
the unit cost of water pumped. Of course, the
efficacy of a particular financial incentive in
lowering the unit cost of water will depend upon
the values of several input parameters. The unit
costs of water delivered by the SPV pump in case
of capital subsidy, low interest loan (@ 5%) and
accelerated depreciation-related income tax
benefits have been estimated at 4312.74, C20.39,
and e 1 7 . 7 6 per thousand m3 of water
respectively. It may be noted that, for the values of
input parameters as listed in Table 1, the unit cost
of water delivered by the SPV pump is lowest for
the case of capital subsidy (@ C 2 . 4 7 per W,)
followed by income tax benefits due to hundred
percent depreciation in the first year itself. Even at
an interest rate of 2.5% (i, e. i = 0.025) the
provision of a low interest loan is not as attractive
as the provision of capital subsidy or the
accelerated depreciation-related income tax
benefits. Obviously, an increase in the rate of
interest on the loan would make the provision of
an interest subsidy even less attractive for the
investor. Therefore, in the initial phase of
promoting SPV pumps the provision of capital
subsidy on the SPV pump is expected to be more
attractive to the user. The effect of several
combinations of incentives can also be observed
from Table 2. Obviously, provision of more than
one incentive makes the investment more
profitable for the user. However, detailed, in-depth
analysis would be required to identify the most

Table 2 Unit cost of water and unit cost of useful energy delivered by the SPV pumping system
Financial incentives

Unit cost of water

Unit cost of useful energy

No financial incentive

24.70

0.25

Capital subsidy (@ C 2.47NV,)

12.74

0.13

Low interest loan

Accelerated depreciation-related income tax benefit

(100 % of capital cost depreciated in the first year)

17.76

Capital subsidy and low interest loan

10.55

Capital subsidy and accelerated depreciation-related

income tax benefit

9.22

Capital subsidy, low interest loan and accelerated

depreciation-related income tax benefit

7.04

0.1 1

Solar photovoltaic water pumping in India: a financial evaluation

Purohit, Kandpal

Table 3 Financial figures of merit for the SPV water pump.

Financial incentives

Fuel saved by the SPV water pump

Diesel

Electricity

td= 0.0
NPV

IRR

(96)

sd= 0.05

5,

E,,

0.0

NPV

IRR

NPV

IRR

NPV

( 1

(%I

(C1

(%I

0.05
IRR

(%I

No financial incentive
Capital subsidy (@

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Low interest loan

e 2.47NVp)
(@ 2.5%)
(@ 5.0%)
(@ 7.5%)

Accelerated depreciation-related income tax

benefit (100 % of the capital cost depreciated
in the first year)
Capital subsidy and low interest loan
Capital subsidy and accelerated
depreciation-related income tax benefit
Capital subsidy, low interest loan and
accelerated depreciation-related income
tax benefit
a

very low IRR

attractive combination(s) of incentives for each

specific case.
Table 3 presents the values of Net Present
Value (NPV) and Internal Rate of Return (IRR) for
investment in an SPV pump. Both the cases of
diesel and electricity replacement have been
presented. In the absence of financial incentives
to the users the NPV of investment in the
SPV water pumping system is found to be very
low in both diesel and electricity substitution.
Thus, in normal circumstances, with the prevailing
values of associated costs and benefits,
investment in an SPV water pumping system may
not be financially attractive to a user. With the
inclusion of financial/fiscal incentives considered
in this study the use of SPV pumps is likely to
become financially viable in the case of diesel
substitution.
As mentioned earlier, the financial viability of
an SPV pump essentially depends on the
monetary worth of the fuel saved by its use. In the
case of commercial fuels, it has been observed
that their prices change with time owing to a
variety of factors related to demand, supply and
geopolitical situations etc. This is true for coal and
oil as well as natural. gas. In fact, even the prices
of fuelwood sold in semi-urban areas have

reportedly changed considerably with time [25]. It

may therefore be necessary to include the effect
of escalation in the price of fuel saved by the SPV
pump in its financial feasibility evaluation. Table 3
also presents the effect of diesel and electricity
price escalation on NPV and IRR of investment in
the SPV pump. As expected, the financial
attractiveness of the SPV pump for irrigation water
pumping improves with the inclusion of fuel price
escalation rate. However, even with an annual fuel
price escalation of 5%, the SPV pump does not
appear to be a financially viable investment for the
user (unless a combination of financial incentives
is also considered).
With the assumption that the financial viability
of the SPV pump for the user would be an
overriding requirement for its large-scale
acceptance, it may be useful to identify the
situation(s) that would make the use of the SPV
pump financially viable. Several conditions such as
an increase in the price of the fuel saved,
decrease in the capital cost of the SPV pump,
increase in the efficiency and useful life of the SPV
pump may help improve its financial attractiveness
to the user. Therefore, for an SPV pump that is
currently not financially viable it may be useful to
determine the break-even values of the relevant

Solar photovoltaic water pumping in India: a financial evaluation

Purohit, Kandpal

Table 4. Break-even prices of diesel and electricity with and without fuel price escalation.
Financial incentives

Break-even prices
Diesel

cd = 0.05

Electricity

kd = 0.0

5,

Pd,b
(C /litre)

Pd,b
(C /litre)

Pe,b
(G/kwh)

Pe,b
(C /kwh)

No financial incentive

0.91

0.64

0.36

0.26

Capital subsidy (@ C 2.47/WP)

0.47

0.33

0.19

0.13

Accelerated depreciation-related income tax benefit

(100 % of the capital cost depreciated in the first year)

0.65

0.46

0.26

0.18

Capital subsidy and low interest loan

0.39

0.27

0.16

0.1 1

Capital subsidy and accelerated depreciation-related

income tax benefit

0.34

0.24

0.14

0.10

Capital subsidy, low interest loan and accelerated

depreciation-related income tax benefit

0.26

0.18

0.10

0.07

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Low interest loan

= 0.0

5,

= 0.05

(@ 2.5%)
(@ 5.0%)
(@ 7.5%)

parameters so that the user is equally disposed to

the conventional and the SPV pump. Such breakeven values provide an important perspective to
policy makers and planners for decision making in
situations with'uncertainty. In view of the above,
the break-even prices of diesel and electricity
have also been estimated for the 1.8 kW, SPV
pump considered in this study.
Table 4 presents the break-even prices of
diesel and electricity. The break-even prices of
diesel and electricity have been estimated at
fSO.Sl/litre and G0.36/kWh respectively in the
case of no financial incentives. The effect of fuel
price escalation on the break-even prices of diesel
and electricity is also presented in Table 4. With
5% annual escalation in the prices of diesel and
electricity the break-even prices of diesel and
electricity have been estimated at fS0,64/litre and
C0.26/kWh respectively in the reference case.
The current price of electricity for the users in the
country normally being in the range of fS0.02 to
C0.07 per kwh, the break-even price of electricity
is rather high. Similarly, with diesel being priced
around C0.50 per litre, the high break-even price
of diesel is also not very encouraging for
promoting SPV pumps. It is therefore surmised
that with their prevailing costs and performance
characteristics, the SPV pumps may not b e
financially viable to the users in India. Though the
inclusion of financial incentives lowers the breakeven values of unit price of electricity and diesel,
the latter are still too high to motivate the users
towards investments in SPV systems. Only with

the provision of multiple financial incentives

combined with an annual fuel price escalation rate
of 5% are the break-even values for the unit price
of diesel and electricity in an acceptable range.
Figure 2 shows the results of a sensitivity
analysis undertaken t o study the effect of
uncertainties associated with some of the
important input variables on the unit cost of water.
The unit cost of water is found t o b e quite
sensitive to the capacity utilisation of the system.
As expected, the effective head also affects the
unit cost of water substantially. The other two
factors, i.e. useful lifetime of the SPV pump and
discount rate have a rather moderate effect on the
unit cost of water. A similar sensitivity curve for
the unit cost of useful energy is shown in Figure 3.
CONCLUSION
It may be concluded that, with the prevailing costs
and performance characteristics, SPV pumps may
not be financially viable to potential users in India.
The provision of financial incehtives, however,
improves the financial attractiveness of SPV
pumps. With inherent distortions in the pricing of
diesel and electricity in India, it may therefore be
necessary to support the uptake of SPV pumps
through capital subsidy and/or other suitable
financial/fiscal incentives in the initial stage of their
dissemination.
ACKNOWLEDGEMENT
The financial assistance provided by the Council
of Scientific and Industrial Research (CSIR), New

Solar photovoltaic water pumping in India: a financial evaluation

Purohit, Kandpal

Downloaded by [Tezpur University] at 04:46 13 September 2013

Figure 2
Sensitivity analysis for unit
cost of water delivered by
a 1.8 kWp SPV water
pump with respect to
(i) capacity utilisation
factor; CUF,
(ii) useful lifetime; t,
(iii) discount rate; d, and
(iv) effective head; h.

."
4

-60

-20
0
20
Percentage variation fromthe base case

-h

CUF

-d

40

60

-t

Figure 3
Sensitivity analysis for unit
cost of useful energy
delivered by a 1.8 kWp
SPV water pump with
respect to
(i) capacity utilisation
factor; CUF.
(ii) useful lifetime; t,
(iii) discount rate; d, and
(iv) effective head; h.

40

-40

-.--20
0
20
Percentage variation frombase case

Delhi t o the first author (Pallav Purohit) is gratefully

acknowledged.

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