Professional Documents
Culture Documents
Applications
Tara C. Kandpal
• Introduction
• Measures of Financial/Economic Performance
• Financial Incentives and Measures of Financial
/Economic Performance
• Case Studies
Pre-requisites to Diffusion of
Solar Energy Technologies
◆Resource availability
◆Technological appropriateness
◆Energetic feasibility
◆Socio-cultural acceptability
◆Environmental sustainability
Hence
•Opportunity to invest
(rate of return, r)
Present Future
•Change in purchasing
power of money
(inflation, I)
D = (r – I) / (1 + I)
r = 0.15, I = 0.08
d = (0.15 – 0.08) / (1 + 0.08)
= 0.065
Formulae Based on Time Value of Money
n Bi − Ci
NPV = ∑ i
− Co
i =1 (1 + d )
For an investment in a solar energy system to be
profitable NPV should be positive.
The value of NPV is very sensitive to the value of d used
in its determination.
Comparison of projects with same NPV but different
capital costs.
Benefit to Cost Ratio
n
Bi
∑
B = i =1 (1 + d )
i
C n Ci
∑i=1 (1 + d ) i + Co
or
( Bi − Ci )
n
∑i=1 (1 + d ) i
B =
C Co
at d = IRR
n ( Bi − Ci )
NPV = ∑ i
− Co = 0
i =1 (1 + IRR)
Financial
Attractiveness Cost of operation
Benefits accrued
to the user Cost of repair, replacement
and maintenance
Amount of
fuel(s) saved Monetary worth of
fuel(s) for the user
The values of
Useful life
Discount rate
Cost of operation, repair and maintenance
Amount of energy (fuel) saved and its price to the user
have considerable uncertainty associated.
Reasons of Uncertainty in Input Parameters
Scenario Analysis
Probability Based Approaches
Computer Simulations
Breakeven Analysis
Sensitivity Analysis
Incentives
◆Capital subsidy
◆Low interest loan (interest subsidy)
◆Income tax benefit on accelerated
depreciation
Interest Subsidy Accelerated
Capital Subsidy
(soft loan) Depreciation Benefits
Reduced income
Reduced Effective User need not arrange,
tax payments
Capital Cost invest own money for
purchase
Reduction in
Effective capital Cost
Enhanced Potentially suitable
affordability of for users with High income group
very poor users regular income users can be
motivated to invest in
solar energy systems
Defining the Extent of Incentive
d e (1 +d e )
N
MRI = f Co
(1 +d e ) −1
N
100
100
90
Number of households (million)
90
Number of households (million)
80
80 70
60
70
50
60 40
50 30
20
40
10
30 0
20 20000 30000 40000 50000 60000 70000 80000 90000
Annual income (Rs)
10
0
20000 30000 40000 50000 60000 70000 80000 90000
Annual income (Rs)
FUEL PURCHASE vs.
FUEL GATHERING
Use of non-commercial fuels
Fuelwood
Agricultural residues
Dungcakes
at
ZERO PRIVATE COST
to the user
Internalization of Externalities
d(1+d)
Conv/reg. depreciation 108385 147908 192394
n
CRF
Other depreciation 216770 295816 384788
100 11.08
150 16.62
5 22.16
250 27.70
PV POWER
Financial
Attractiveness Cost of operation
Benefits accrued
to the user Cost of repair, replacement
and maintenance
Amount of
fuel(s) saved Monetary worth of
fuel(s) for the user
Financial
Attractiveness Cost of operation
Benefits accrued
to the user Cost of repair, replacement
and maintenance
Amount of
fuel(s) saved Monetary worth of
fuel(s) for the user
Social/environmental
barriers