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information:http://www.tandfonline.com/loi/taen20Solar photovoltaic
water pumping in India: a financialevaluationP. Purohit MSc.
(Physics) a & T. C. Kandpal MSc. (Physics) PhD ba Centre for
Energy Studies, Indian Institute of Technology Delhi, Hauz Khas,
New Delhi, 110016,Indiab Centre for Energy Studies, Indian
Institute of Technology Delhi, Hauz Khas, New Delhi,
110016,IndiaPublished 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: afinancial
evaluation, International Journal of Ambient Energy, 26:3, 135-146,
DOI: 10.1080/01430750.2005.9674983To link to this
article:http://dx.doi.org/10.1080/01430750.2005.9674983PLEASE
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Journalof AmbientEnergy,Volume 26, Number 3July 2005 Solar photo
waterpumping in India: a financial evaluation P.Purohit* andT, C.
Kandpal** Pallav Purohit,MSc. (Physics), Senior Research Fellow,
Centre forEnergy 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:
[email protected] O AmbientPress Limited 2005 SYNOPSIS
Asimpleframeworkforthefinancialperformance
evaluationofasolarphotovoltaic(SPV)water pumphasbeenpresented.
Theunitcostofwater deliveredbysuchapumphasbeenestimated.
Themonetarybenefitsaccruedtotheenduser
havealsobeenquantifiedonthebasisofthe
amountofdieselorelectricitysaved.TheNet
PresentValueandInternalRateofReturnof investmentinanSPVwaterpump
havealsobeen estimated.Theeffectoffuelpriceescalationon
thefinancialperformanceindiceshasbeen
evaluatedalongwithestimationofthebreak-even
pricesofdieselandelectricity.Theeffectsof
financialincentivessuchascapitalsubsidy,
accelerateddepreciation-relatedincometax benefits and provision of
a low interest loan on the
break-evenpricesofdieselandelectricityhave
alsobeenstudied.Resultsofsomenumerical calculationsfora1. 8kWp
SPVpumparebriefly presented anddiscussed. INTRODUCTION
Irrigationwaterpumpingisthesecondmost
importantenergyenduseinlndianagriculture
afterfertilisers.Dieselandelectricityare
commonlyusedformeetingirrigationenergy
demandinthecountry.Morethan11.8million
electricpumpsetsarereportedlyi noperationin
theagriculturesector[I]. Formeetingthe
increasingdrinkingandirrigationwaterdemand
morewellswouldbedugandenergisedthus
increasingthedemandsofelectricityanddiesel. Due to a
varietyofreasons generationcapacityis
notmatchingtheincreasingdemand ofelectricity
inthecountry.Ontheotherhand,dieselis
expectedtobecomeincreasinglyexpensiveand
scarce.Consequently,problemsarebeingfaced
inthelarge-scaleenergisationoftubewellsused forirrigation [2].
Erraticsupplyofconventionalsourcesof
energyandconcernfortheenvironmentand
sustainabledevelopmenthasprovidedrenewed
thrusttothedevelopmentanddisseminationof renewable energysources to
power the pumpsets. Renewableenergyoptionsforwaterpumping
includesolarphotovoltaic(SPV)pumps,wind
pumpsanddual-fuelenginepumpsusingbiogas
orproducergas.Oftheserenewableenergy
optionsforwaterpumping,solarphotovoltaic pumps areconsidered tohave
a large potential of utilisationindevelopingcountries,dueto
decentralisedavailabilityofsolarenergyandthe
graduallyreducingcostofSPVsystems[3-41.In
thepasttwodecades,considerableeffortshave
beenmadeforlargescaledisseminationofSPV
pumpsinlndiaaswellasinotherdeveloping
countries[5-1I].Smallpumpingsystemswithan array capacity
of300-360Wp weredeveloped and triedduringthe1980s(121.Basedonthe
experiencegained,aspecialprogrammewas Downloaded by [Tezpur
University] at 04:46 13 September 2013 Solar photovoltaic water
pumping in India: a financial evaluationPurohit, Kandpal
evolvedin1993 forthesupplyandinstallationof
largercapacitySPVwaterpumpingsystemsfor
agricultureandrelateduses[13].Underthis programme,users were
offered a subsidylinked to thecapacityofthePVarrayusedin thepumping
system and a softloan wasalsoprovided to cover 90% oftheremaining
costofthesystemafterthe capital subsidy[ I 31.
Anambitiousprogrammeforinstallationof 50,000 SPV
water-pumpingsystemsovera period
of5yearswasalsoformulatedbytheMinistryof
Non-conventionalEnergySources(MNES)ofthe
GovernmentofIndia[13].However,tillDecember 2002,only51 13
SPVsystemsforwaterpumping
werereportedlyinstalled[9].Oneofthepossible barriers to
large-scaleuptake ofSPV waterpumps
isthefinancialunattractivenessofthesesystems
tothefarmers.Inaddition,users'inabilitytopay forPVinfrastructure
andalackofavailablecredit orfinancingbothhinderedthedisseminationof
photovoltaicsystems[14-191.Itistherefore
necessarytostudyalltherelevantaspectsand
issuesaffectingthefinancialfeasibilityofSPV
water-pumpingsystemstofarmers.Itisinthis
contextthatanattempthasbeenmadeinthis
papertodevelopasimpleframeworktoassess
thefinancialfeasibilityofanSPVwaterpumping
system.Theunitcostsofwaterandofhydraulic
energydeliveredbytheSPVpumphavebeen
estimated.Themonetarybenefitsaccruedtothe end userhave alsobeen
quantified on thebasis of theamountofdieseland/orelectricitysaved.
The NetPresentValue(NPV)andInternalRateof Return(IRR)
ofinvestmentin anSPVwaterpump havealsobeenestimated.Theeffectoffuel
priceescalationonthesefinancialperformance
indicatorshasbeenevaluatedalongwith
estimationofthebreak-evenpricesofdieseland
electricity.Theeffectofvariousfinancial
incentivesonthebreak-evenpricesofdieseland electricityhas been
analysed. SPVWATERPUMP AnSPVwaterpumpingsystem(Figure1) consists
ofaphotovoltaicarray,motor-pumpandpower
conditioningequipment(optional).Provisionfor
storageofelectricityisnotprovidedinthese
systems.Instead,ifdesired,provisioncanbe made forwaterstorage,
whichmaybe more cost- effective thanprovision ofa storagebattery in
the SPVsystem. Thepower conditioningequipmentis
usedtostabilisethefluctuatingelectricalenergy
outputofthearray.Dependinguponthetotal dynamichead and the required
flow-rateofwater, thepumpingsystemcanbesurfaceorsub- mersible type
and the motor can be either ACorDC. For ACpumping systems an
inverter is also required. VALUATIONOFBENEFITS
ThemonetarybenefitsassociatedwithanSPV waterpumping systemdepend
upon themonetary worthoffuelsaved.AnSPVwaterpumping
systemusuallyreplaceseitherdieselorelectricity.
Themonetaryworthoffuelsavedcanbe estimated asa productofannual
fuelsavingsand themarketprice of thefuelsaved.
TheannualelectricityoutputofthePVmodule depends upon the capacity
of the SPV systemand itscapacityutilisationfactor.Thus,theannual
electricityoutput,ESP,,ofthePVmoduleused with theSPVpump can be
expressed as: ESP,=8760 CUF P(1
whereP(inkW,)representsthecapacityofthe
SPVsystemandCUF(infraction)thecapacity utilisation factorof
theSPVpump. PhotovoltaicmodulesareratedinpeakWatts
(W,).Thisisthemaximumpoweroutputfromthe
moduleatacelltemperatureof25 OC andsolar irradianceof1 kW/m2.
Theactualpower obtained fromthesystemin thefieldisgenerallylessthan
theratedpowerbecause:(i)theefficiencyofa
solarcelldecreasesasitstemperatureincreases
andcellsinthefieldmayoftenoperateat temperatureshigherthan25 OC
intropicalareas, (ii)thesolarirradianceisusuallylessthan 1
kW/m2,(iii)imperfectmatchingoftheloadmay
causethemoduletooperateatavoltageand
currentthatgivesapoweroutputlessthanthe
maximum,(iv)thepumpingsystemisoperated
duringperiodsofirrigationwaterdemandonly,
and(vi)downtimerequiredforrepairand
maintenanceetc.Infacttheaverageoutputover
daylighthoursmaybemuchlessthantherated
outputeveninalocationwithhighaveragedaily
solarirradiation,thusresultinginalowcapacity utilisation
oftheSPVpump. Theannualamountofwater,A, , , , (inm3), deliveredby
anSPVsystemcan be estimated as:
whereq,(infraction)representstheoverall efficiencyofthe
SPVwaterpump, p(in kg/m3) the densityofwater,g(inm/s2)
theaccelerationdue togravityandh(m) theeffectiveheadforwater
pumping. Theannualamountofdiesel,A, , (inlitres), requiredbya
dieselenginepurnpset t o pump the
sameamountofwaterasdeliveredbytheSPV pump (Equation (2)) could be
determined by using thefollowing expression:
whereSF,(inlitre/bhp-h)representsthe
specificdieselconsumptionintheconventional
dieselenginepumpsetandq,(infraction)its efficiency. Downloaded by
[Tezpur University] at 04:46 13 September 2013 Solar
photovoltaicwater pumping in India: a financial evaluationPurohit,
Kandpal Solar photovoltaic array +-- Water supply for irrigation I
- / I / / /Iv K / / ' / ' /I ,Submersible pumps driven by A.C.
motor Substituting the valueofESP!, fromEquation (1)
intoEquation(3) A, , can be est~matedas: A, , =8760 CUF P SF,q
(0.746 q, Themonetary worthoftheannual dieselsaved (MW,,) can be
expressed as: MWd,=8760( CUF P SF,q, 0.746 q,Pd wherep, represents
themarketprice ofdiesel(in Euros ( e /litre).
Similarly,theannualamountofelectricity
savinglikelytobeaccruedtotheuseofanSPV Storage tank Figure 1
Schematicdiagramofa solarphotovoltaic water Pump.
waterpumpingsystem,A,,, (inkwh)canbe expressedas: Ae,= 8760 CUFP (
5)Te whereq,(in fraction)representstheefficiencyof an electricmotor
pumpset. Themonetaryworthoftheannualelectricity saved (MW,,) by the
SPVpump can be expressed as: rl MW,, =8760 CUF P (P)p, (7) T e
wherep,represents themarketprice ofelectricity (in C2 / kwh).
Downloaded by [Tezpur University] at 04:46 13 September 2013 Solar
photovoltaic water pumping in India:a financial evaluationPurohit,
Kandpal UNlTCOSTOFWATERANDUNlTCOSTOF USEFULENERGYDELIVEREDBYSPVPUMP
Theunitcostofwater(U,,,, in fS/ m3) foran SPV waterpump canbe
estimated as: Co CRF + Ci Uc,,= Aa,w whereC,
representsthecapitalcostoftheSPV waterpump,Ci its annualrepairand
maintenance cost, and CRF the capital recovery factor,defined as:
CRF= d(1 + d)' (1 + d)' - 1
withadiscountratedandusefullifetimetofthe SPVpump.
Theunitcostofusefulhydraulicenergy (U,,,, in fS / MJ)
deliveredbythe SPVsystemmay be expressedas:
PRESENTVALUEOFNETBENEFITSFORAN INVESTMENTINTHESPVPUMP
Thedifferencebetweenthecumulativepresent valueofthebenefits(duet
osubstitutionof commercial fue1.s)andthecosts(i.e.capitalcost and
annual repair and maintenance cost) is the net presentvalue(NPV)
oftheinvestmenton theSPV pump. In thepresentcase, the
cumulativepresent valueofbenefits,CPV,,canbe expressedas:
CPV,=MW,,I (1 + dl t - 1 d (1 + d)'1 where the terminside the
bracket of the right hand side ofEquation (1 1) representsthe
present worth factorwithadiscountratedandusefullifetimet ofthe
SPVpump. Similarly,thecumulativepresentvalueof costs,CPV,,canbe
expressed as: CPV,=Ci { (1 + d)' - 1 d (1 + d)' )- c
oTherefore,inthecaseofdieselreplacement,
thepresentvalueofnetbenefits(NPV,)ofan investmentin
theSPVwaterpumping systemcan be expressedas: NPV,=CPVb-CPV,(13)
UsingEquations (1 1) and (12): (1 + d)' - 1 NPV,=[ (MW,,-Ci) {1-co]
(14) d (1 + d)' Similarly,inthecaseofsubsti tuti onofgri d
electricity, the present value ofnet benefits (NPV,) canbe
expressedas: NPV,= (MW,,- Ci) { [ (1 + dlt - 1 d (1 + d)' - ] (15)
Itmaybenotedthatthesalvagevalueofthe SPVwaterpumpingsystemhasbeen
assumed t o be negligiblysmallinderivingEquations (1 I ) ,(14) and
(15). Ifthepricesofdieselandelectricityare
expectedtoescalateatuniformannualrates(in
fractions)E,,andE,,respectively,Equations(14) and (15) maybe
modified as: (MW,,)1 + 5,NPV,'=---]- 1 1[(E,,-d)[ {1 i d- Ci (1 +
d)' - 1 (d (1 + d)'I - ~ o l(17) Equations(14-17)werealsousedfor
estimatingthevalueoftheinternalrateofreturn (IRR) on the
investmentforthe respective cases. BREAK-EVENANALYSIS
ItisnormallyexpectedthatanSPVwaterpump shall be financiallymore
attractive with an increase inthepricesofdieselandelectricity.Itmay
thereforebeusefult oestimatethebreak-even
pricesofdieselandelectricitybeyondwhichan SPVpump wouldbe
financiallyviabletotheuser. The break-evenprices ofdiesel and
electricity with andwithoutfuelpriceescalationhavebeen estimated in
the following subsections. The effects
ofcapitalsubsidyandotherfinancialincentives have also been
incorporated in the analysis.
Nofinancialincentives(referencecase).The
followingexpressionshavebeenobtainedforthe
break-evenpricesofdiesel(p,,,in f S/ litre)and electricity(p,,,in
fS/kwh)withoutanyfinancial incentives. 1 Pe,,=- d (1 + ) + Ci] [ C0
1 (1 + d)' - 1 (19) Aes Withfuelpriceescalationtheexpressionsfor
thebreak-evenprices ofdieseland electricity are: Downloaded by
[Tezpur University] at 04:46 13 September 2013 Solar photovoltaic
water pumping in India:a financial evaluationPurohit, Kandpal
respectively. (21) Capitalsubsidy.Ifacertainfractionfofthe
capitalcost isprovi dedascapitalsubsidythe
followingexpressionsareobtainedwi thand
withoutfuelpriceescalationforthebreak-even prices ofdieseland
electricityrespectively. (a)Withoutfuel pri ce escalation 1 = - [ (
1 - f ) ~ , [(l+) + ci l (22) pdrbA, , (1 + d)' - 1 (6) With fuel
pri ce escalation + Ci( (1 + d)' - 1 d (1 + d)'I1 + Ci{ (1 + d)'- 1
d (1 + d)'I 1Lowinterestloan.Incertaincases,financing
agenciesprovidel owinterestloans(upt o90% ofthecapitalcost)
tousersfortheinstallationof SPVwaterpumps.Ifafractionf,ofthecapital
costisprovidedby the financingagencyasalow
interestloan,thefollowingexpressionsare
obtainedforthebreak-evenpricesofdieseland electricity.
(a)Withoutfuel pri ce escalation 1 - [ ~ , { ( l - f l ) + f l (
im(1 + i ,)"Pd,b- - Ads (1 + im)"- 1 I (1 + dm)" - 1d(1 + d)' It1 (
dm(1 + dm)"(1 + d)'- 1 ] + c i ] (26) ( l+ dm)"( l+] + ci ] (27) (
dm(1 + dm)" ) J{(l+ d)' - 1 (b)Withfuel price escalation (1+ dlt -
1 + Ci (d (1 + d)'I1 (1 + d)' - 1 + Ci (d ( I + d)'I1 wherei ,
representsthemonthlyinterestrate levied on the loan by the
financingagency,dm the monthlydiscountrateandnthetotalnumberof
installmentspaidby theuserforrepaymentofthe loan.
Accelerateddepreciation-relatedincometax
benefits.ToencourageuptakeofSPVwater
pumps,theusermaybeallowedaccelerated
depreciation-relatedincometaxbenefits.
Alternatively,thefinancialintermediariescantake
theaccelerateddepreciation-relatedincometax
benefitsandtransferacertainfraction(f')ofthe income taxbenefitto
the farmers.Ifitisassumed thatonlya fractionm oftheunsubsidised
amount Downloaded by [Tezpur University] at 04:46 13 September 2013
Solar photovoltaic water pumping in India: a financial
evaluationPurohit, Kandpal
isallowedtobedepreciatedinthefirstyearand thattheuserisableto
getthe income taxbenefit afterxmonthsofpurchaseoftheequipment,the
followingexpressionsareobtainedforthebreak- evenpricesofdieseland
electricity. (a)Withoutfuel price escalation 1f ' mT Pd'b= - [
cO{I-(I+ d)X/12 +d)t - 1 Ads 1f ' mT 'esb= - [ c O -(I+4)"12)I(1+d)
t - 1 Aes(b)With fuel price escalation + Ci[ (1 + dl' - 1 d (1 +
d)'I 1+ Ci( ('1 + dl' - 1 d (1 + d)'I
1whereTrepresentsthemarginalincometaxrate applicable to theuser.
Combination ofcapital subsidy andlow interest
loan.Sometimes,theusermaybeprovided with both
thecapitalsubsidyaswellasalowinterest
loan.Inthiscase,thefollowingexpressionsare
obtainedforthebreak-evenpriceofdieseland electricity.
(a)Withoutfuel price escalation + dm)"- 1 (l+ ) + ci](35) dm(1 +
dm)")]{(I+dl t - 1 (a)Withfuel price escalation 1 Pd,b=- [5d- d1 -
c 1 - f , )Ads( 1 + 5aJt - 1 1 + d+ ci ( ( 1 +d ) ' - l ] ]d (1 +
d)' + Ci{(l+d) ' - l ] ]d (1 + d)'
Combinationofcapitalsubsidyandincome tax benefit due to accelerated
depreciation.In thiscasetheexpressionsobtainedforthebreak-
evenpriceofdieselandelectricityaregiven below. (a)Withoutfuel price
escalation (b)With fuel price escalation f ' mT ] +ci( (1 + d)' - 1
(' - (1 + d)X"Z d (1 + d)' Downloaded by [Tezpur University] at
04:46 13 September 2013 Solar photovoltaic water pumping in India:
a financial evaluationPurohit, Kandpal
Combinationofcapitalsubsidy,accelerated
depreciation-relatedincometaxbenefitand
lowinterestloan.Theexpressionsobtainedfor
thebreak-evenpriceofdieselandelectricityfor theabove-mentionedcase
aregivenbelow. (a)Without fuel priceescalation 1i m( l +iJn d=- [ (
l - f ) ~ , { ( l - f , ) + f ,A,, ( ( 1+ imln- 1 1 (b) With fuel
priceescalation -f ' mT] + C i( ( 1]I(44) (1 + d)X/12d (1 + d)' 1
P= - [61 -1 [ (1 - f) Co{(l- 1,) Aes( 1 + i e l t - 11 + d-f ' mT]
+ C i { ( l + d ) t - l ] ] (45) (1 + d)X/12d (1 + d)' ((1 + d)' -
1 (42)RESULTSANDDISCUSSION Forexemplifyingtheuseofthegeneralised
frameworkdevelopedinthisstudy,calculations 1 im (1 + i,)"forthe
case ofan SPV waterpumping system with ,=- [ ( I- f) co((1 - f1) +
f1 ) aratedcapacityof1.8kW,withaDCsurface
Ampumphavebeenmadeandtheresultsbriefly summarisedin
thissection.Thecapitalcostofan SPVwaterpumpingsystemwithacapacityof
( ~ m ~ ~ f ~ ~ ) ~ 1- (1 1.8 kW,wasapproximately9000 [20-211in the
Indian market duringthe year2000-01. The annual
repairandmaintenancecostoftheSPVwater (43) pumphasbeenestimatedate
2 0 . Table1 presentsthevaluesofvariousinputparameters Table1.
Input parametersused in the financialevaluation of the SPV
waterpumping system parameterSymbolUnitValue Capacity ofSPVpumpP
Daily average solar radiation availabilityI W,kWh/m2/day Capacity
utilisation factor Capital cost ofSPVpump Annual repair and
maintenance cost of SPV pump Discount rate Useful lifetime
ofSPVsystem Fraction of capital cost as a low interest loan
Annualinterest rate of the financing agency Effective head Specific
fuel consumption in diesel engine pumpset Efficiency
ofelectric-motor pumpset Efficiency ofdiesel-engine pumpset
Efficiency of SPV pumpset Market price ofdiesel Market price
ofelectricity CUF c oc, d t f, i h SF, fl e 'ld fl P PdPefraction c
e fraction years fraction fraction metre I/bhp-hr fraction fraction
fraction fS /litre e /kwh Downloaded by [Tezpur University] at
04:46 13 September 2013 Solar photovoltaicwater pumping in India: a
financial evaluationPurohit, Kandpal
usedinthenumericalcalculations[22-231.The
capitalsubsidyprovidedbytheGovernmentof
IndiaonthepurchaseofanSPVpumpwas C
2.47/Wpduringtheyear2000-01[20-21,241.
Theloanrepaymentperiodhasbeen takenas10 yearsand
theloanamountisassumed tobe paid
backinequalmonthlyinstallments.Itisalso
assumedthat,incaseoftheprovisionof
accelerateddepreciation-relatedincometax benefitbeingavailablet
otheuser,thetotal unsubsidisedcomponentofthecapitalcostgets
depreciatedinthefirstyearitselfandtheamount ofapplicableincome
taxrebate forthesamehas beenassumedtobetransferredtotheenduser
after sixmonths of purchase. Themarginal income taxrate applicable
fortheuserhasbeen takenas 30%.Theannualrateofescalationindieseland
electricity prices hasbeen taken as5%.
Theannualamountsofdieselandelectricity
savedbya1.8kW,SPVwaterpumpingsystem have been estimated at1187
litre (ca 12,500kwh) and2286kwh respectivelyforthevaluesofother
inputparametersaslistedinTable1. Theannual
amountofwaterdeliveredbytheSPVpumpis estimated at43641m3.
Theestimated valuesofunitcostofwaterare
presentedinTable2fordifferenttypesofsingle and combined
financialincentives. The unit cost of
waterpumpedbytheSPVpumphasbeen estimatedatC24. 7perthousandm3forthe
reference case withoutany financialincentive. The
correspondingvalueoftheunitcostofuseful
hydraulicenergyhasbeenestimatedat
C0.25/MJ.Asexpected,theavailabilityof
financialincentivestotheuserhelpsinreducing
theunitcostofwaterpumped.Ofcourse,the
efficacyofaparticularfinancialincentivei n
loweringtheunitcostofwaterwilldependupon
thevaluesofseveralinputparameters.Theunit costsof waterdeliveredby
theSPV pump in case ofcapitalsubsidy,lowinterestloan(@5%)and
accelerateddepreciation-relatedincometax benefits have been
estimated at4312.74,C20.39, ande17. 76perthousandm3ofwater
respectively.It may be noted that, for the values of
inputparameters as listed in Table1, the unit cost
ofwaterdeliveredbytheSPVpump islowestfor
thecaseofcapitalsubsidy(@C2.
47perW,)followedbyincometaxbenefitsduetohundred percent
depreciation in the firstyearitself. Even at
aninterestrateof2.5%(i,e.i = 0.025)the provision ofa
lowinterestloanisnot asattractive
astheprovisionofcapitalsubsidyorthe
accelerateddepreciation-relatedincometax
benefits.Obviously,anincreaseintherateof
interestontheloanwouldmaketheprovisionof
aninterestsubsidyevenlessattractiveforthe
investor.Therefore,intheinitialphaseof
promotingSPVpumpstheprovisionofcapital subsidyon
theSPVpumpisexpectedtobe more attractivet
otheuser.Theeffectofseveral
combinationsofincentivescanalsobeobserved
fromTable2.Obviously,provisionofmorethan
oneincentivemakestheinvestmentmore profitable forthe user. However,
detailed, in-depth analysiswouldberequiredtoidentifythemost Table
2Unit cost ofwaterand unit cost of usefulenergy deliveredby the
SPVpumping system Financial incentivesUnit cost of waterUnit cost
of useful energy No financial incentive24.700.25 Capital subsidy
(@C 2.47NV,)12.740.13 Low interest loan Accelerated
depreciation-relatedincome tax benefit17.76 (100 % ofcapital cost
depreciatedin the firstyear) Capital subsidy and low interest
loan10.550.1 1 Capital subsidy and
accelerateddepreciation-related9.22 income tax benefit Capital
subsidy,low interest loan and accelerated7.04 depreciation-related
income tax benefit Downloaded by [Tezpur University] at 04:46 13
September 2013 Solar photovoltaic water pumping in India:a
financial evaluationPurohit, Kandpal Table 3Financial figures
ofmerit forthe SPV waterpump. Financial incentivesFuel saved by the
SPVwaterpump DieselElectricity td= 0.0sd= 0.055,= 0.0E, , = 0.05
NPVIRRNPVIRRNPVIRRNPVIRR (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 % ofthe 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
taxbenefit averylow IRR attractivecombination(s)ofincentivesforeach
specificcase. Table3presentsthevaluesofNetPresent
Value(NPV)andInternalRateofReturn(IRR) for
investmentinanSPVpump.Boththecasesof
dieselandelectricityreplacementhavebeen
presented.Intheabsenceoffinancialincentives t
otheuserstheNPVofinvestmenti nthe SPVwaterpumpingsystemisfoundt
obevery lowinbot hdieselandelectricitysubstitution. Thus,in normal
circumstances,with the prevailing
valuesofassociatedcostsandbenefits, investmentinanSPVwaterpumping
systemmay notbefinanciallyattractivet oauser.Withthe
inclusionoffinancial/fiscalincentivesconsidered
inthisstudytheuseofSPVpumpsislikelyt o
becomefinanciallyviableinthecaseofdiesel substitution.
Asmentionedearlier,thefinancialviabilityof
anSPVpumpessentiallydependsonthe monetary worth of the fuel savedby
its use.In the caseofcommercialfuels,i thasbeenobserved
thattheirpri ceschangewi thtimeowingt oa varietyoffactorsrelatedt
odemand,supplyand geopolitical situations etc. This is true forcoal
and oil aswellasnatural. gas.In fact,eventheprices offuelwoodsol
dinsemi-urbanareashave reportedlychangedconsiderablywithtime[25].It
maythereforebenecessaryt oincludetheeffect ofescalationin the price
offuelsavedby the SPV pump in its
financialfeasibilityevaluation.Table3
alsopresentstheeffectofdieselandelectricity
priceescalationonNPVandIRRofinvestmentin
theSPVpump.Asexpected,thefinancial attractivenessofthe SPV pump
forirrigation water pumpingimproveswiththeinclusion offuelprice
escalationrate. However, even with anannual fuel
priceescalationof5%,theSPVpumpdoesnot appearto be a
financiallyviableinvestmentforthe
user(unlessacombinationoffinancialincentives is also considered).
Withtheassumptionthatthefinancialviability
oftheSPVpumpfortheuserwouldbean overridingrequirementfori
tslarge-scale acceptance,i tmaybeusefult oidentifythe
situation(s)thatwouldmaketheuseoftheSPV pump financiallyviable.
Several conditions such as anincreaseinthepriceofthefuelsaved,
decreaseinthecapitalcostoftheSPVpump, increase in the efficiencyand
useful life ofthe SPV pump mayhelp improve its financial
attractiveness totheuser.Therefore,foranSPVpumpthatis
currentlynotfinanciallyviableitmaybeuseful to
determinethebreak-evenvaluesoftherelevant Downloaded by [Tezpur
University] at 04:46 13 September 2013 Solar photovoltaic water
pumping in India:a financial evaluationPurohit, Kandpal Table
4.Break-even prices ofdiesel and electricity with and without fuel
price escalation. Financial incentivesBreak-even prices
DieselElectricity kd = 0.0cd = 0.055,= 0.05, = 0.05
Pd,bPd,bPe,bPe,b (C /litre)(C /litre)(G/kwh)(C /kwh) No financial
incentive0.910.640.360.26 Capital subsidy(@C
2.47/WP)0.470.330.190.13 Low interest loan(@2.5%) (@5.0%) (@7.5%)
Accelerated depreciation-related income tax benefit0.650.460.260.18
(100 % ofthe capital cost depreciated in the first year) Capital
subsidy and low interest loan0.390.270.160.1 1 Capital subsidy and
accelerated depreciation-related0.340.240.140.10 income taxbenefit
Capital subsidy, low interest loan and accelerated0.260.180.100.07
depreciation-related income tax benefit parameters sothatthe useris
equally disposed t o theconventionaland theSPVpump.Suchbreak-
evenvaluesprovideanimportantperspectivet o policy makers and
planners fordecisionmaking in
situationswith'uncertainty.Inviewoftheabove,
thebreak-evenpricesofdieselandelectricity
havealsobeenestimatedforthe1.8kW,SPV pump consideredin thisstudy.
Table4presentsthebreak-evenpricesof
dieselandelectricity.Thebreak-evenpricesof
dieselandelectricityhavebeenestimatedat fSO.Sl/litreandG0. 36/
kWhrespectivelyinthe caseofnofinancialincentives.Theeffectoffuel
price escalationon the break-evenprices ofdiesel andelectricityi
salsopresentedin Table4.With
5%annualescalationinthepricesofdieseland
electricitythebreak-evenpricesofdieseland electricityhavebeen
estimatedatfS0,64/litreand C0. 26/
kWhrespectivelyinthereferencecase. Thecurrentprice ofelectricity
fortheusersin the countrynormallybeingintherangeoffS0.02to C0. 07
per kwh,the break-even price ofelectricity
isratherhigh.Similarly,withdieselbeingpriced
aroundC0.50perlitre,thehighbreak-even price
ofdieselisalsonotveryencouragingfor
promotingSPVpumps.Itisthereforesurmised
thatwiththeirprevailingcostsandperformance
characteristics,theSPVpumpsmaynotbe financiallyviabletotheusersin
India. Thoughthe inclusionoffinancialincentiveslowersthebreak-
evenvaluesofunitprice ofelectricityanddiesel,
thelatterarestilltoohightomotivatetheusers
towardsinvestmentsinSPVsystems.Onlywith
theprovisionofmultiplefinancialincentives combinedwithan annual
fuelprice escalationrate of5%are the break-even
valuesfortheunitprice ofdieseland electricityin an acceptable
range. Figure2showstheresultsofasensitivity analysisundertakent
ostudytheeffectof uncertaintiesassociatedwi thsomeofthe important
input variables on the unit cost of water.
Theunitcostofwaterisfoundt obequite sensitivet o
thecapacityutilisationofthesystem.
Asexpected,theeffectiveheadalsoaffectsthe
unitcostofwatersubstantially.Theothert wo
factors,i.e.usefullifetimeoftheSPVpumpand discountrate have a
rathermoderate effecton the
unitcostofwater.Asimilarsensitivitycurvefor the unit cost ofuseful
energyis shown in Figure 3. CONCLUSION Itmaybe concluded that, with
the prevailing costs and performance characteristics,SPVpumps may
not be financiallyviabletopotentialusersin India.
Theprovisionoffinancialincehtives,however,
improvesthefinancialattractivenessofSPV
pumps.Withinherentdistortionsinthepricingof
dieselandelectricityinIndia,itmaythereforebe
necessarytosupporttheuptakeofSPVpumps
throughcapitalsubsidyand/orothersuitable financial/fiscalincentives
in the initial stage of their dissemination. ACKNOWLEDGEMENT
ThefinancialassistanceprovidedbytheCouncil
ofScientificandIndustrialResearch(CSIR),New Downloaded by [Tezpur
University] at 04:46 13 September 2013 Solar photovoltaicwater
pumping in India: a financial evaluationPurohit, Kandpal ."
-604-200204060 Percentage variation fromthe base case I-h-CUF-d-
tFigure 2 Sensitivity analysis forunit cost ofwater delivered by a
1.8 kWp SPV water pump with respect to (i) capacityutilisation
factor;CUF, (ii) useful lifetime; t, (iii) discount rate; d,and
(iv) effective head; h. Figure 3 Sensitivity analysis for unit
costofuseful energy delivered by a 1.8 kWp SPVwater pump with
respect to (i) capacityutilisation factor;CUF. (ii) useful
lifetime; t, (iii) discountrate; d,and (iv) effective head; h. -.
-- 40-40-2002040GO Percentage variation frombase case Delhi t o the
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