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International Journal of Ambient Energy

ISSN: 0143-0750 (Print) 2162-8246 (Online) Journal homepage: https://www.tandfonline.com/loi/taen20

Solar photovoltaic water pumping in India: a


financial evaluation

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

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: https://doi.org/10.1080/01430750.2005.9674983

Published online: 30 Mar 2011.

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International Journal of Ambient Energy, Volume 26, Number 3 July 2005

SYNOPSIS
Solar A simple framework for the financial performance
evaluation of a solar photovoltaic (SPV) water

photo 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
water pumping 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
in India: investment in an SPV water pump have also been
estimated. The effect of fuel price escalation on

a financial the financial performance indices has been


evaluated along with estimation of the break-even
prices of diesel and electricity. The effects of

evaluation 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
P. Purohit* and T, C. Kandpal** 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
Pallav Purohit, MSc. (Physics), Senior Research Fellow, the past two decades, considerable efforts have
Centre for Energy Studies, Indian Institute of Technology Delhi,
Hauz Khas, New Delhi - 110016, India.
been made for large scale dissemination of SPV
" Tara C. Kandpal, MSc. (Physics), PhD, Professor, Centre for pumps in lndia as well as in other developing
Energy Studies, lndian Institute of Technology Delhi, Hauz Khas, countries [5-1 I]. Small pumping systems with an
New Delhi - 110016. India. (To whom all correspondence be array capacity of 300-360 Wp were developed and
addressed) E-mail: tarak@ces.iitd.ernet.in tried during the 1980s (121. Based on the
O Ambient Press Limited 2005 experience gained, a special programme was
Solar photovoltaic water pumping in India: a financial evaluation Purohit, Kandpal

evolved in 1993 for the supply and installation of worth of fuel saved. An SPV water pumping
larger capacity SPV water pumping systems for system usually replaces either diesel or electricity.
agriculture and related uses [13]. Under this The monetary worth of fuel saved can be
programme, users were offered a subsidy linked to estimated as a product of annual fuel savings and
the capacity of the PV array used in the pumping the market price of the fuel saved.
system and a soft loan was also provided to cover The annual electricity output of the PV module
90% of the remaining cost of the system after the depends upon the capacity of the SPV system and
capital subsidy [ I 31. its capacity utilisation factor. Thus, the annual
An ambitious programme for installation of electricity output, ESP,, of the PV module used
50,000 SPV water-pumping systems over a period with the SPV pump can be expressed as:
of 5 years was also formulated by the Ministry of
Non-conventional Energy Sources (MNES) of the ESP, = 8760 CUF P (1
Government of India [13]. However, till December
2002, only 51 13 SPV systems for water pumping where P (in kW,) represents the capacity of the
were reportedly installed [9]. One of the possible SPV system and CUF (in fraction) the capacity
barriers to large-scale uptake of SPV water pumps utilisation factor of the SPV pump.
is the financial unattractiveness of these systems Photovoltaic modules are rated in peak Watts
to the farmers. In addition, users' inability to pay (W,). This is the maximum power output from the
for PV infrastructure and a lack of available credit module at a cell temperature of 25 OC and solar
or financing both hindered the dissemination of irradiance of 1 kW/m2. The actual power obtained
photovoltaic systems [14-191. It is therefore from the system in the field is generally less than
necessary to study all the relevant aspects and the rated power because: (i) the efficiency of a
issues affecting the financial feasibility of SPV solar cell decreases as its temperature increases
water-pumping systems to farmers. It is in this and cells in the field may often operate at
context that an attempt has been made in this temperatures higher than 25 OC in tropical areas,
paper to develop a simple framework to assess (ii) the solar irradiance is usually less than
the financial feasibility of an SPV water pumping 1 kW/m2, (iii) imperfect matching of the load may
system. The unit costs of water and of hydraulic cause the module to operate at a voltage and
energy delivered by the SPV pump have been current that gives a power output less than the
estimated. The monetary benefits accrued to the maximum, (iv) the pumping system is operated
end user have also been quantified on the basis of during periods of irrigation water demand only,
the amount of diesel and/or electricity saved. The and (vi) downtime required for repair and
Net Present Value (NPV) and Internal Rate of maintenance etc. In fact the average output over
Return (IRR) of investment in an SPV water pump daylight hours may be much less than the rated
have also been estimated. The effect of fuel output even in a location with high average daily
price escalation on these financial performance solar irradiation, thus resulting in a low capacity
indicators has been evaluated along with utilisation of the SPV pump.
estimation of the break-even prices of diesel and The annual amount of water, A, (in m3),
electricity. The effect of various financial delivered by an SPV system can be estimated as:
incentives on the break-even prices of diesel and
electricity has been analysed.

SPV WATER PUMP


An SPV water pumping system (Figure 1) consists where q, (in fraction) represents the overall
of a photovoltaic array, motor-pump and power efficiency of the SPV water pump, p (in kg/m3) the
conditioning equipment (optional). Provision for density of water, g (in m/s2) the acceleration due
storage of electricity is not provided in these to gravity and h (m) the effective head for water
systems. Instead, if desired, provision can be pumping.
made for water storage, which may be more cost- The annual amount of diesel, A, (in litres),
effective than provision of a storage battery in the required by a diesel engine purnpset t o pump the
SPV system. The power conditioning equipment is same amount of water as delivered by the SPV
used to stabilise the fluctuating electrical energy pump (Equation (2)) could be determined by using
output of the array. Depending upon the total the following expression:
dynamic head and the required flow-rate of water,
the pumping system can be surface or sub-
mersible type and the motor can be either AC or DC.
For AC pumping systems an inverter is also required.
where SF, (in litre/bhp-h) represents the
VALUATION OF BENEFITS specific diesel consumption in the conventional
The monetary benefits associated with an SPV diesel engine pumpset and q, (in fraction) its
water pumping system depend upon the monetary efficiency.
Solar photovoltaic water pumping in India: a financial evaluation Purohit, Kandpal

Figure 1
Schematic diagram of a
Storage tank
solar photovoltaic water
Solar
Pump.
photovoltaic
array

+-- Water supply


for irrigation

I
-

/ I / / /
I v K / / ' / ' /

I
, Submersible pumps
driven by A.C. motor

Substituting the value of ESP!, from Equation (1) water pumping system, A, (in kwh) can be
into Equation (3) A, can be est~matedas: expressed as:
CUF P SF, q
A
,, = 8760 Ae, = 8760 CUF P (5)
( 0.746 q, Te
The monetary worth of the annual diesel saved where q, (in fraction) represents the efficiency of
(MW,,) can be expressed as: an electric motor pumpset.
The monetary worth of the annual electricity
MWd,= 8760 ( CUF P SF, q,
0.746 q, Pd
saved (MW,,) by the SPV pump can be expressed as:

MW, = 8760 CUF P rl ) p,


(P (7)
where p, represents the market price of diesel (in Te
Euros ( e /litre).
Similarly, the annual amount of electricity where p, represents the market price of electricity
saving likely to be accrued to the use of an SPV (in C2 / kwh).
Solar photovoltaic water pumping in India: a financial evaluation Purohit, Kandpal

UNlT COST OF WATER AND UNlT COST OF Similarly, in the case of substitution of grid
USEFUL ENERGY DELIVERED BY SPV PUMP electricity, the present value of net benefits (NPV,)
The unit cost of water (U, in fS / m3) for an SPV can be expressed as:
water pump can be estimated as:
(1 + dlt - 1
Co CRF + Ci
NPV, =
[ (MW,, - Ci) {
d (1 + d)'
- ] (15)
Uc,, =
Aa,w
It may be noted that the salvage value of the
where C, represents the capital cost of the SPV SPV water pumping system has been assumed to
water pump, Ci its annual repair and maintenance be negligibly small in deriving Equations (1 I ) , (14)
cost, and CRF the capital recovery factor, defined as: and (15).
If the prices of diesel and electricity are
d (1 + d)' expected to escalate at uniform annual rates (in
CRF =
(1 + d)' - 1 fractions) E,, and E,, respectively, Equations (14)
and (15) may be modified as:
with a discount rate d and useful lifetime t of the
SPV pump. NPV,' = (MW,,)
- --
[(E,,-d)
]1 + 5,
[ { 1i d
-11
The unit cost of useful hydraulic energy
(U,,, in fS / MJ) delivered by the SPV system may
be expressed as:

(1 + d)' - 1
- Ci
PRESENT VALUE OF NET BENEFITS FOR AN ( d (1 + d)' I-~ol (17)
INVESTMENT IN THE SPV PUMP
The difference between the cumulative present Equations (14-17) were also used for
value of the benefits (due t o substitution of estimating the value of the internal rate of return
commercial fue1.s) and the costs (i. e. capital cost (IRR) on the investment for the respective cases.
and annual repair and maintenance cost) is the net
present value (NPV) of the investment on the SPV BREAK-EVEN ANALYSIS
pump. In the present case, the cumulative present It is normally expected that an SPV water pump
value of benefits, CPV,, can be expressed as: shall be financially more attractive with an increase
in the prices of diesel and electricity. It may
CPV, = MW,
I (1d +(1d+l td)'- 1 1 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.
where the term inside the bracket of the right hand The break-even prices of diesel and electricity with
side of Equation (1 1) represents the present worth and without fuel price escalation have been
factor with a discount rate d and useful lifetime t estimated in the following subsections. The effects
of the SPV pump. of capital subsidy and other financial incentives
Similarly, the cumulative present value of have also been incorporated in the analysis.
costs, CPV,, can be expressed as:
No financial incentives (reference case). The
(1 + d)' - 1
CPV, = Ci
{ d (1 + d)'
)-co 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
Therefore, in the case of diesel replacement, incentives.
the present value of net benefits (NPV,) of an
investment in the SPV water pumping system can
be expressed as:

NPV, = CPVb-CPV, (13) 1 d (1 +


Using Equations (1 1) and (12):
Pe,, = -
Aes C0[(1 1
+ d)' - 1 ) + Ci ] (19)

NPV, = [ (MW,,- Ci) { (1 + d)' - 1 1-co] (14) With fuel price escalation the expressions for
d (1 + d)' 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)" I
Ads (1 + im)" - 1

(1 + dm)" - 1 d (1 + d)'
( d m(1 + dm)" It1(1 + d)' -1
]+ci] (26)

(21)
respectively. ( l + dm)" (l + ] + ci] (27)
)
+ d)' - 1
( d m(1 + dm)" J{(l
Capital subsidy. If a certain fraction f of the
capital cost is provided as capital subsidy the
following expressions are obtained with and (b) With fuel price escalation
without fuel price escalation for the break-even
prices of diesel and electricity respectively.

(a) Without fuel price escalation


1
pdrb
=-
A,
[(1 - f ) ~ , (l+ [
(1 + d)' - 1
) + cil (22)

(1 + dlt - 1
+ Ci ( d (1 + d)' I1
(6) With fuel price escalation

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


(1 + d)' - 1
+ Ci ( d (I + d)' I1
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
+ Ci { (1d +(1d)'+ d)'- 1 I 1 installments paid by the user for repayment of the
loan.

Accelerated depreciation-related income tax


Low interest loan. In certain cases, financing benefits. To encourage uptake of SPV water
agencies provide low interest loans (up to 90% pumps, the user may be allowed accelerated
of the capital cost) to users for the installation of depreciation-related income tax benefits.
SPV water pumps. If a fraction f, of the capital Alternatively, the financial intermediaries can take
cost is provided by the financing agency as a low the accelerated depreciation-related income tax
interest loan, the following expressions are benefits and transfer a certain fraction (f') of the
obtained for the break-even prices of diesel and income tax benefit to the farmers. If it is assumed
electricity. that only a fraction m of the unsubsidised amount
Solar photovoltaic water pumping in India: a financial evaluation Purohit, Kandpal

is allowed to be depreciated in the first year and (a) With fuel price escalation
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 break-
Pd,b = -
1
[5d-d
Ads ( 1 + 5 a J t - 1
1 - c 1-f,)
even prices of diesel and electricity. 1+d
(a) Without fuel price escalation
1 f'mT
Pd'b = - [cO {I-(I+ d)X/12 +d)t - 1
Ads
+ ci ( ( 1 + d ) ' - l ] ]
d (1 + d)'
1 f'mT
'esb = -
Aes
[cO
-(I+4)"12 )I(1
+d)t-1

(b) With fuel price escalation

+ 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 break-
even price of diesel and electricity are given
+ Ci ( ('1 + dl' - 1 below.
d (1 + d)' 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+ ) + ci] (35) ('- f'mT


(1 + d)X"Z ] + ci( (1d +(1d)'+ d)'
-1

dm (1 + dm)" ) ] {+(dIl t - 1
Solar photovoltaic water pumping in India: a financial evaluation Purohit, Kandpal

(b) With fuel price escalation

Combination of capital subsidy, accelerated


depreciation-related income tax benefit and
low interest loan. The expressions obtained for
- f'mT
(1 + d)X/12
] + C i ((1
d (1 + d)'
]I (44)

the break-even price of diesel and electricity for


the above-mentioned case are given below.

(a) Without fuel price escalation


P =-
1
[ 61 -
Aes ( 1 + i e l t - 1
1[ (1 - f) Co {(l
- 1,)

1+d
1 i m ( l +iJn
d = - [(l-f)~,{(l-f,)+f,
A,, ( ( 1 + imln- 1 1
- f'mT ]+Ci{(l+d)t-l]] (45)
(1 + d)X/12 d (1 + d)'

(42) RESULTS AND DISCUSSION


((1 + d)' -1 For exemplifying the use of the generalised
framework developed in this study, calculations
for the case of an SPV water pumping system with
1 im (1 + i,)"
, = - [ ( I - f) co( (1 - f1) + f1 ) a rated capacity of 1.8 kW, with a DC surface
Am 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
(~ m ~ 1 - (1
~ f ~ ~ ) ~
1.8 kW, was approximately 9000 [20-211 in the
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
(43)
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 Value

Capacity of SPV pump P W,


Daily average solar radiation availability I kWh/m2/day
Capacity utilisation factor CUF fraction
Capital cost of SPV pump co c
Annual repair and maintenance cost of SPV pump c, e
Discount rate d fraction
Useful lifetime of SPV system t years
Fraction of capital cost as a low interest loan f, fraction
Annual interest rate of the financing agency i fraction
Effective head h metre
Specific fuel consumption in diesel engine pumpset SF, I/bhp-hr
Efficiency of electric-motor pumpset fl e fraction
Efficiency of diesel-engine pumpset 'ld fraction
Efficiency of SPV pumpset fl P fraction
Market price of diesel Pd fS/litre
Market price of electricity Pe e /kwh
Solar photovoltaic water pumping in India: a financial evaluation Purohit, Kandpal

used in the numerical calculations [22-231. The C0.25/MJ. As expected, the availability of
capital subsidy provided by the Government of financial incentives to the user helps in reducing
India on the purchase of an SPV pump was the unit cost of water pumped. Of course, the
C 2.47/Wp during the year 2000-01 [20-21, 241. efficacy of a particular financial incentive in
The loan repayment period has been taken as 10 lowering the unit cost of water will depend upon
years and the loan amount is assumed to be paid the values of several input parameters. The unit
back in equal monthly installments. It is also costs of water delivered by the SPV pump in case
assumed that, in case of the provision of of capital subsidy, low interest loan (@ 5%) and
accelerated depreciation-related income tax accelerated depreciation-related income tax
benefit being available to the user, the total benefits have been estimated at 4312.74, C20.39,
unsubsidised component of the capital cost gets and e 1 7 . 7 6 per thousand m3 of water
depreciated in the first year itself and the amount respectively. It may be noted that, for the values of
of applicable income tax rebate for the same has input parameters as listed in Table 1, the unit cost
been assumed to be transferred to the end user of water delivered by the SPV pump is lowest for
after six months of purchase. The marginal income the case of capital subsidy (@ C 2 . 4 7 per W,)
tax rate applicable for the user has been taken as followed by income tax benefits due to hundred
30%. The annual rate of escalation in diesel and percent depreciation in the first year itself. Even at
electricity prices has been taken as 5%. an interest rate of 2.5% (i, e. i = 0.025) the
The annual amounts of diesel and electricity provision of a low interest loan is not as attractive
saved by a 1.8 kW, SPV water pumping system as the provision of capital subsidy or the
have been estimated at 1187 litre (ca 12,500 kwh) accelerated depreciation-related income tax
and 2286 k w h respectively for the values of other benefits. Obviously, an increase in the rate of
input parameters as listed in Table 1. The annual interest on the loan would make the provision of
amount of water delivered by the SPV pump is an interest subsidy even less attractive for the
estimated at 43641 m3. investor. Therefore, in the initial phase of
The estimated values of unit cost of water are promoting SPV pumps the provision of capital
presented in Table 2 for different types of single subsidy on the SPV pump is expected to be more
and combined financial incentives. The unit cost of attractive to the user. The effect of several
water pumped by the SPV pump has been combinations of incentives can also be observed
estimated at C24.7 per thousand m3 for the from Table 2. Obviously, provision of more than
reference case without any financial incentive. The one incentive makes the investment more
corresponding value of the unit cost of useful profitable for the user. However, detailed, in-depth
hydraulic energy has been estimated at 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 17.76


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

Capital subsidy and low interest loan 10.55 0.1 1

Capital subsidy and accelerated depreciation-related 9.22


income tax benefit

Capital subsidy, low interest loan and accelerated 7.04


depreciation-related income tax benefit
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 sd= 0.05 5, = 0.0 E,, = 0.05
NPV IRR NPV IRR NPV IRR NPV IRR
( 1 (96) ( 1 (%I (C1 (%I ( 1 (%I
No financial incentive

Capital subsidy (@ e 2.47NVp)


Low interest loan (@ 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 reportedly changed considerably with time [25]. It
specific case. may therefore be necessary to include the effect
Table 3 presents the values of Net Present of escalation in the price of fuel saved by the SPV
Value (NPV) and Internal Rate of Return (IRR) for pump in its financial feasibility evaluation. Table 3
investment in an SPV pump. Both the cases of also presents the effect of diesel and electricity
diesel and electricity replacement have been price escalation on NPV and IRR of investment in
presented. In the absence of financial incentives the SPV pump. As expected, the financial
to the users the NPV of investment in the attractiveness of the SPV pump for irrigation water
SPV water pumping system is found to be very pumping improves with the inclusion of fuel price
low in both diesel and electricity substitution. escalation rate. However, even with an annual fuel
Thus, in normal circumstances, with the prevailing price escalation of 5%, the SPV pump does not
values of associated costs and benefits, appear to be a financially viable investment for the
investment in an SPV water pumping system may user (unless a combination of financial incentives
not be financially attractive to a user. With the is also considered).
inclusion of financial/fiscal incentives considered With the assumption that the financial viability
in this study the use of SPV pumps is likely to of the SPV pump for the user would be an
become financially viable in the case of diesel overriding requirement for its large-scale
substitution. acceptance, it may be useful to identify the
As mentioned earlier, the financial viability of situation(s) that would make the use of the SPV
an SPV pump essentially depends on the pump financially viable. Several conditions such as
monetary worth of the fuel saved by its use. In the an increase in the price of the fuel saved,
case of commercial fuels, it has been observed decrease in the capital cost of the SPV pump,
that their prices change with time owing to a increase in the efficiency and useful life of the SPV
variety of factors related to demand, supply and pump may help improve its financial attractiveness
geopolitical situations etc. This is true for coal and to the user. Therefore, for an SPV pump that is
oil as well as natural. gas. In fact, even the prices currently not financially viable it may be useful to
of fuelwood sold in semi-urban areas have 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 Electricity
kd = 0.0 cd = 0.05 5, = 0.0 5, = 0.05
Pd,b Pd,b Pe,b Pe,b
(C /litre) (C /litre) (G/kwh) (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

Low interest loan (@ 2.5%)


(@ 5.0%)
(@ 7.5%)

Accelerated depreciation-related income tax benefit 0.65 0.46 0.26 0.18


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

Capital subsidy and low interest loan 0.39 0.27 0.16 0.1 1

Capital subsidy and accelerated depreciation-related 0.34 0.24 0.14 0.10


income tax benefit
Capital subsidy, low interest loan and accelerated 0.26 0.18 0.10 0.07
depreciation-related income tax benefit

parameters so that the user is equally disposed to the provision of multiple financial incentives
the conventional and the SPV pump. Such break- combined with an annual fuel price escalation rate
even values provide an important perspective to of 5% are the break-even values for the unit price
policy makers and planners for decision making in of diesel and electricity in an acceptable range.
situations with'uncertainty. In view of the above, Figure 2 shows the results of a sensitivity
the break-even prices of diesel and electricity analysis undertaken t o study the effect of
have also been estimated for the 1.8 kW, SPV uncertainties associated with some of the
pump considered in this study. important input variables on the unit cost of water.
Table 4 presents the break-even prices of The unit cost of water is found t o b e quite
diesel and electricity. The break-even prices of sensitive to the capacity utilisation of the system.
diesel and electricity have been estimated at As expected, the effective head also affects the
fSO.Sl/litre and G0.36/kWh respectively in the unit cost of water substantially. The other two
case of no financial incentives. The effect of fuel factors, i.e. useful lifetime of the SPV pump and
price escalation on the break-even prices of diesel discount rate have a rather moderate effect on the
and electricity is also presented in Table 4. With unit cost of water. A similar sensitivity curve for
5% annual escalation in the prices of diesel and the unit cost of useful energy is shown in Figure 3.
electricity the break-even prices of diesel and
electricity have been estimated at fS0,64/litre and CONCLUSION
C0.26/kWh respectively in the reference case. It may be concluded that, with the prevailing costs
The current price of electricity for the users in the and performance characteristics, SPV pumps may
country normally being in the range of fS0.02 to not be financially viable to potential users in India.
C0.07 per kwh, the break-even price of electricity The provision of financial incehtives, however,
is rather high. Similarly, with diesel being priced improves the financial attractiveness of SPV
around C0.50 per litre, the high break-even price pumps. With inherent distortions in the pricing of
of diesel is also not very encouraging for diesel and electricity in India, it may therefore be
promoting SPV pumps. It is therefore surmised necessary to support the uptake of SPV pumps
that with their prevailing costs and performance through capital subsidy and/or other suitable
characteristics, the SPV pumps may not b e financial/fiscal incentives in the initial stage of their
financially viable to the users in India. Though the dissemination.
inclusion of financial incentives lowers the break-
even values of unit price of electricity and diesel, ACKNOWLEDGEMENT
the latter are still too high to motivate the users The financial assistance provided by the Council
towards investments in SPV systems. Only with of Scientific and Industrial Research (CSIR), New
Solar photovoltaic water pumping in India: a financial evaluation Purohit, Kandpal

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.

."
-60 4 -20 0 20 40 60

-
Percentage variation fromthe base case

I -h CUF -d -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 40 GO
Percentage variation frombase case

Delhi t o the first author (Pallav Purohit) is gratefully Tubewells in West Bengal", Economic and
acknowledged. Political Weekly, 1995, pp. A1 17-A1 22.
3. Kandpal, T. C., Purohit, P., Kumar, A. and
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