Power Purchase Agreement

Khanak solar System makes settlements easy through introducing attractive offer in form of PPA agreements, it is a legal contract between an electricity generator and a power purchaser. Khanak Solar System facilitates turnkey projects at MW scale under agreed terms of PPA.
We installs, maintains and transfers solar panel system on your ownership. Solar power plant can be installed on your property; be it residential, commercial or industrial and the customers who sign PPA agreement have only pay for solar power, used Solar Power Consultant not for the solar equipment or installation costs.

What indeed is a PPA and why is it such an important aspect of solar power plants? What is a PPA?

Power Purchase Agreement is a legal contract between an electricity generator and a power purchaser. In India, Central and State utility PPA contractual terms last for three different terms – short term, medium term and long term. Solar PPAs usually include terms of agreement i.e. details on interfacing and evacuation facilities, operation and maintenance, metering arrangements, scheduling of solar power, rate of energy including escalation rates, dispute settlement, billing and payment.

Pros of PPAs include:

  • No/low up-front cost.
  • A predictable cost of electricity over 15–25 years.
  • No need to deal with complex system design and permitting process.
  • No operating and maintenance responsibilities.
  • Customer enjoys marketing benefits of their green energy
  • Price of electricity is indexed to inflation and therefore is increasingly cost effective as fossil fuel based electricity gets increasingly expensive.

PPA gives you assured ROI for longer period if you install it for captive power consumption. Imagine you are starting a business but you have no idea who your customer or you do not have a plan of how to sell your product. Under such circumstances, how will your business make money? It cannot! Similarly, the PPA is the contract that essentially gets you a customer for your solar power plant. As solar power plants are long term investments, you cannot put up a power plant and then search for a customer. What happens if you are not able to get one? Such a huge investment goes for a waste. It is hence imperative that you first identify a customer who agrees to off-take the power generated by your solar power plant for a specified number of years (preferably 10+ years), and then, once you are sure that you would be able to get your money back within the PPA period, invest in the power plant.

Khanak Solar System extends professional consultancy related to get a PPA done.

  • Identify potential and usable area locations
  • Identify potential solar policies applicable for the land
  • Respond to the Request for Proposal (RfP)
  • Contract Development and Negotiation
  • Permitting, approvals and Rebate Processing
  • Project Implementation and Commissioning
  • Tariffs may be overturned by SERC
  • Poor financial health of DISCOM might lead to delay in payments to developer
  • Generally speaking, government PPAs are regarded as low(er) risk as they are backed by the government and are usually signed for the duration of plant life (25 years)
  • 3rd Party’s financial health may be better than DISCOM’s, but long-term business prospects need to be evaluated
  • Credit rating of the 3rd party should be considered as they are not backed by a government
  • PPAs need not be signed for 25 years. Some are signed for as short as 3 years, leaving future revenue generation of the plant in doubt

The following incentives were granted under the policy until 2021.

  • Tax concessions – For entry tax, stamp duty, and registration charges as per industrial policy
  • Contract demand – Industrial consumers buying solar power will be allowed pro-rata deduction in contract demand
  • Wheeling, Banking, Cross Subsidy charges – Fully exempt for 10 years from commissioning of plant, for plants commissioned between 01.04.2013 and 31.03.2018 This exemption does not apply to captive plants availing RECs.

Disclaimer – The above contents are based on details available from concerned Government department. Khanak Solar System does not guarantee for applicability of above description under PPA. Khanak Solar System is not responsible if terms and conditions under PPA are changed by Government for time to time.

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