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HOW TO MAKE YOUR

PV PROJECT
BANKABLE?

HOW TO SELECT EPC

CONTRATCOR?

ROLE OF TECHNLOGY
SELECTION

BANKABILITY OF
SOLAR PROJECTS
www.firstgreen.co

IMPACT OF O&M ON
BANKABILITY

SOLAR RESOURCE
ASSESSMENT

FIRSTGREEN CONSULTING
U28A/3 FF
DLF Phase III, GURGAON
122002 INDIA
www.firstgreen.co

Table of Contents
I.

Introduction ........................................................................................................... 2

II.

Site and Solar Resource Assessment ..................................................................... 3

III.

Design Optimisation ............................................................................................. 4

IV.

EPC Selection ........................................................................................................ 5

V.

Installation and Commissioning ........................................................................... 6

VI.

Operation and Maintenance ................................................................................. 7

VII. Other Issues ........................................................................................................... 7

VIII. Conclusion ............................................................................................................. 8

Firstgreen Consulting ............................................................................................ 8

FIRSTGREEN WHITE PAPER |BANKABILITY OF SOLAR PV PROJECTS - DECEMBER 2013

Introduction
While conventional power projects are facing the
fuel availability challenges and fuel price
uncertainty, investors are looking renewable as
preferred options to remain in power sector.
Especially solar PV projects are much more
appealing to the investors due to their scalability
and flexibility in nature. While Indian
Government has withdrawn the accelerated
depreciation from wind projects, solar provides a
yet another tax aversion tool to the investors. The
cash flow of solar present a much more stable
and risk free cash flow as compared to the
conventional power projects where you cannot
predict the fuel prices.
The higher cost of capital can significantly make
projects unviable. Hence it is important for the
project developers to take care of the factors
which affects the bankability of solar projects.
There are five major parameters which affects the
bankability of solar projects which include

The Banks and Financial institutions are concerned on

the risk associated with the solar projects due to high
capital cost requirements in these projects. The financing
institutions in India do not have enough experience in
these technologies and always concerned about the
following issues:
Is the yield assessment reliable?
Are there any power evacuation risks?
How about degradation?
How about performance in the Indian dusty and high
temperature conditions?
What about skilled labour for maintenance?
How about the reliability of the PPAs signed with the
state utilities which are already under financial crunch?
Are there any generation guarantee available?
How about future policy framework?
Is the technology proven?
Has the EPC demonstrated the ability to deliver the
projection-time and on-budget?
What is the anticipated ROI?
How quickly can the project start generating a return?

Most of the solar projects face delays due to the reason of the financial
closure and hence bankability of a solar project is a major issue. The
degree of bankability is dependent on the reliability technology
supplier, reliability of EPC contractor, Reliability of the yield assessment,
and the financial health of the promoter company.

FIRSTGREEN WHITE PAPER |BANKABILITY OF SOLAR PV PROJECTS - DECEMBER 2013

Site and Solar Resource Assessment

What level of confidence should be applied to
historical solar data?
Selecting a proper site is important aspect which may affect the
What is known and what might not know of the
site?

bankability of solar project. While solar radiation do not

change at a location within few kilometers, it is less risk in a
selecting a project site as compared to wind power projects

What are the weather, Water, Geo-Technical and

other infrastructure conditions ?

where the variability of wind is highly location specific.

Developers should consider a project site with good solar
insolation and near to the grid substation so that the

Does the project developer own the project

location ?

transmission losses are lower. Selection of site should also

consider the legal aspects of the land, clear title of land and
position is required to make your project bankable.
Many times developer consider the solar radiation data for a
single year, however long term solar radiance data should be
collected for the proposed site in order to give comfort to the
banker. This days satellite based as well as ground based
measurement data is available through which inter and annual
variability in generation can be assessed. If developers have
one year of major data, banks have to assume the minimum
radiation levels observed at the site which will reduce the
generation almost by 10% and project may become non
bankable. Many times project developer take one year of solar
radiation data, however it may note that there is a significant
inter-annual variability in solar radiation data. Following
example highlights that for a typical location in Rajasthan the
solar radiation (GHI) has a variation from 1900

kwh/m2/year

to 2100 kwh/m2/year. Typically banks expect P50, P75 and

P90 level of confidence in solar radiation data. The P90 level
of solar radiation of data is accepted globally by banks.

It is not only important to assess the energy

yield for a single year, there is a requirement to
have the energy yield assessment on long-term
basis for which you are required to have the
historical solar radiation data at least for 10
years for the site location.

The project developer should also consider the other factors

such as historical flood data, seismic data, etc. which may save
the developer the insurance cost and provide the lender
significant comfort in terms of site location.

FIRSTGREEN WHITE PAPER |BANKABILITY OF SOLAR PV PROJECTS - DECEMBER 2013

Design Optimisation
Selecting an appropriate technology for your solar project plays
a very important role in the bankability of a solar project. The
major aspects in the technology selection are selection of PV
module supplier which should be from the reputed
manufacturer who provide the warranties for 5-10 year
workmanship and performance guarantee for a period of 25
years.
The guarantees and warranties of BOS also play an important
role as PV module contributes only 50% of the project cost.
Typically all the PV module manufacturers offer long term
performance warrantee, however the question remains on the
effectiveness of the warrantees. If a PV module manufacturer
goes bankrupt, then there is no entity left to the developer for
honoring the warrantees of the bankrupt of the manufacturer.
Many developers take warrantee insurance to mitigate the risk
associated with the bankruptcy of PV module supplier which
help them in maintaining bankability of their solar projects.
Apart from guarantees and warrantees most of the PV module
suppliers conduct IEC and UL certification tests to justify their
module degradation, performance and reliability. Selecting a
PV module supplier with IEC and UL certification not only
justifies the bankability of the selected modules, but also
reduces risk of technology failure.

In state like Rajasthan the ambient

temperature reaches as high as 50C
and modules surface
temperature reach of the order of
75 C and accordingly the string
voltage is of the order 560 V. It is
equally important that we consider

It is important to optimize your system sizing while selecting

PV technology and BOS. The major consideration should be
given to levelized cost of energy to evaluate various design
configurations.

the minimum temperature of the

site conditions while doing the array
layout .During winters the
temperature go as low as 0 C and
the module surface temp is also

Are there any equipment warrantees?

Are the manufacturers still able to service
them?

reaching to C and hence the voltage

of the string reach 770 V. It may be
noted that the temperature has the
greater impact on voltage ,while the
irradiance has greater impact on

What are the components failure/Reliability

Risk?
Is there adequate availability of spare parts?

current .Hence while selecting array

size maximum irradiance and
minimum irradiance will dictate
cable size for interconnecting the
modules in the string.

FIRSTGREEN WHITE PAPER |BANKABILITY OF SOLAR PV PROJECTS - DECEMBER 2013

EPC Selection
Selecting the right EPC is key to ensure the project
commissioning as scheduled and as per the quality standards
specified. Reputed EPCs offers significant advantage through
their linkages for equipment procurement and standard
installation practices. Many times the banks and financial
institutes have their comfort for some of the empanelled EPC
contractors who maintain certain quality standards and
developers are required shortlist EPCs from the empanelled
EPCs only. Some of the developers would like to reduce their
upfront cost through fragmenting the single EPC into multiple
EPC contractors, however this exposes the developer in terms
of performance guarantee of the overall plant. If the EPC
contractor is not reputed this increases the project risk ratings
and in-turn increases the cost of capital available to the project.
While selecting EPC the developer should consider not only
experience and reliability but also the balance sheet of EPC
should also take in to consideration so that the EPC can honor
the guarantees and warrantees for the future.
We have personally seen that in 2009-2011 years, many
investors in India adopted only one criteria for the selection of
EPC contractor. Yes, you are right, it was Money. At present
many of those are not happy with their plant and for some of
them, conditions are so bad that when they want to sell their
solar plant to get rid of it, they didnt find any buyer.
Banks/ financial institution are the major stakeholder in the
solar plant investment. Selection of a reputed EPC contractor
for your solar money plant can help you to get cheaper
finance. Typically saying a 0.5% decrease in cost of debt can
reduce the LCOE (Levelized cost of electricity) even by 30
paisa/ kWh.

How strong is your EPC provider?

Is the EPC Firm experienced?.
Does it have strong balance sheet?
Are the Risks allocated to various parties through
contracts ?

Technology
Selection
PV module
supplier

BOS

DC/AC Ratio

5-10 year
workmanship
Performance
Guarantee
Corporate
Sustainability

Chances of meeting the promised time line for the commission

of solar money plant are very high with a reputed EPC
contractor. Take a case that this reputed EPC contractor
commission plant one month before than the other one, and a
typical 1 MW solar money plant generated around 1.3 Lac unit
of electricity. This means you can enjoy this 1.3 lac of units
which you cannot even think with another EPC contractor.

FIRSTGREEN WHITE PAPER |BANKABILITY OF SOLAR PV PROJECTS - DECEMBER 2013

Installation and Commissioning

The installation and commissioning can cut further if EPC is
selected having experience in working in a specified region of
the project. Selecting a local EPC also help in developer in
resolving the local issues. An EPC with experience in the
region is more likely to understand the regulatory and licensee
requirement which may unnecessarily delay in project
development. Many times project is to be commissioned with
the specific timelines and delay in scheduled timelines may
reduce the PPA price. Hence If the EPC contractor do not
meet the specified timeline, the project developer may suffer
significant losses because of reduced tariff beyond the agreed
timeline. The installation and commissioning of project
typically takes 6-8 months and if the EPC is not experienced it
can prolong for a year..
Some Common Installation problems

Many times the solar field terrain is uneven and requires

variable leg length to achieve the level installation and avoid
the shading of one table over another table. It becomes
critical if the liner shading is not taken into consideration
while designing the differential heights of the table.
Selection of foundation is also one of the important factors
for the structure design and layout. Where ever excavation/
drilling is possible, concrete structure are recommended,
however, some of the project developer use ramming rather
than concrete structure to save time and money. Rammed
structures are more prone to corrosion and life expectancy
for 20 years becomes critical. The structures vertical
member should be designed in such a way that they can
accommodate variability in height from one table to
another table.
Apart from the structure member clamping of module is
also one of the critical consideration to mount the module
on the structure, structure frame, there are various top
down clams are available which can hold the with frame
and frameless module efficiently. In case these
considerations are not made during array installation the
structure faces sagging and the tilt angle get disturbed.

Are there any equipment warrantees?

Are the manufacturers still able to service
them?
What are the components failure/Reliability
Risk?
Is there adequate availability of spare parts?

FIRSTGREEN WHITE PAPER |BANKABILITY OF SOLAR PV PROJECTS - DECEMBER 2013

Other Issues
Operation and Maintenance
O&M of solar project becomes significant in maintaining the
bankability of solar project, the banks and financial institutes
typically wants to ensure the projected generation. Some of the
insurance companies have also come up to cover the
generation risk and started offering generation insurance.
However the developer should consider the generation
insurance is available at what cost. In recent installations the
local site conditions were not taken in to consideration while
deciding the inverter parameters which led tripping of inverter
of solar plants this reduces generation. In order to cover the
generation risk many financing institutions look for strong
balance sheet of the developer in order to cover the generation
short falls. Some of the financing institutions also create to a
DSRA (Debt service reserve account) to mitigate the
generation risk of the solar project. It is equally important to
consider the adequate availability of spares so that equipment
failures do not cause generation reduction in solar projects.
The recent experiences in solar plants also highlight the
reduced generation because of grid tripping. Solar project
developers should take in to consideration the grid tripping
data of their respective sub-station to estimate the project
electricity generation estimates. The bankability of solar project
is also affected by O&M cost and its expected escalation.
Project developer should do sensitivity analysis of their LCOE
with reference to their O&M cost escalation.

2000
Mwh
1500

1000

500

Apart from technical aspects the bank-ability of

solar project is heavily dependent on power
purchase agreement. The PPA should be on
long-term basis on a clarity of cash flow at least
for the long tenure. The lender assess PPA and
the partys financial strength/pay ability, risk of
the buyer. In this regard the PPAs with NVVN
are considered bankable. The PPAs with state
power utilities are also bankable, however some
of the financial institutions have discomfort with
regards to balance sheet (negative) of the state
power utilities which increases the off taker
payment risk in the project.
Sometimes the PPA are signed with private
parties as part of capital/ third part sale and the
balance sheet of captive power buyer with third
party becomes a critical factor in the bankability
of the solar project. The technology selection and
EPC also play an important role with the
bankability of a solar project. For example if the
modules and inverters are supplied from the
reputed supplier. It is considered as a less risky
proportion by the banker.
Finally you should take care of permits,
agreements, licenses, land papers and other
statutory clearances available so that there is no
compliance risk seen by the lender. If you
structure your project with all above aspects the
project can be bankable, will achieve financial
closure. Many times people approach bank first
and then start accumulating this information,
however if all this information is compiled in
advance with bank/financial institution then it
will not take much time in releasing your loan.

0
1

5
Mwh

Is the project developer balance sheet strong

enough to cover this generation shortfall?
Does the generation shortfall threaten the project
debt service?

FIRSTGREEN WHITE PAPER |BANKABILITY OF SOLAR PV PROJECTS - DECEMBER 2013

Conclusion
Making solar projects bankable needs careful attention to
the not only five key factors which are highlighted in this
paper but also there are many other factors such as PPA,
Local issues, curtailment which may affect the project
economic viability. The project developer should strive in
reducing the risk associated with solar radiation and collect
local and satellite based data to attract more investors and
lower the cost of capital in the project. In other words
bankability of the solar projects is key for future capacity
installations and developers have experienced this issues in
recent installations.
Structuring a project as a bankable project requires detailed
consideration on the technical, legal and economic aspects
of the project. Every bank and financial has its own set of
criteria through which it assess the bankability of a project.
However the basic requirement is that the project should
have a stable and visible cash flow throughout the entire
financing period of the project.
The major aspect which any bank or financial institution
assess for the bankability of a solar project is the local site
conditions. The local site conditions are typically evaluated
on the basis of solar radiation available at the site and
expected yield (Annual Energy Generation) which dictates
the cash flow of the project. It is not only important to
assess the energy yield for a single year, there is a
requirement to have the energy yield assessment on longterm basis for which you are required to have the historical
solar radiation data at least for 10 years for the site location.
So that the trend can be forecasted to give the expected
future energy generation for the banker.

Firstgreen Consulting
Firstgreen provides consulting services in the area of
Renewable Energy, Building Energy Efficiency, and
Climate Change. We are one of the leading consulting
firm in the field of Solar PV projects in India and have
been involved in MW class grid connected as well as
Rooftop Solar projects. We have provided Project
Management consulting, Design and Engineering
services for over 200 MW of solar projects since 2010
of which about 100 MW is already being
commissioned and balance is under various stages of
development.
We provide various services to the client right from
the inspection of project, Design and Engineering
support, Policy and Regulatory support, financing
support and strategic business advisory to our clients.
Firstgreen has been conducting training and capacity
building programs for solar, wind and building energy
efficiency projects in India and abroad. Our training
programs has been widely attended by senior
management of various organizations which provide
hands on experience and step by step approach to
implement solar, wind, and building energy efficiency
projects.
We believe in sharing our knowledge through
technical
articles
on
our
blog
(www.firstgreen.co/blog). So far we have published
around 680 articles which reflect our experience i
policy,
technology,
financing,
and
project
management. Our blog is visited by 64 countries in
the world and having footfall over 1,40,000 people
across the globe.
We provide 360 degree turnkey solutions for solar
projects and also provide EPC services. Some of the
clients who believe in getting a quality installations
(Grid connected/Rooftop) through us.

FIRSTGREEN WHITE PAPER |BANKABILITY OF SOLAR PV PROJECTS - DECEMBER 2013