As a business owner, ensuring the continuity and growth of your firm’s operations would be the paramount priority, as long as your expenses remain reasonable. For instance, you may be willing to pay more for electricity, but you may not consider how to reduce your business’s power consumption. Given that the electricity cost can comprise as much as 40-50% of your business’s product cost, you may need to think about increasing your operating margins with a one-time solution that can last at least 25 years. Adopting energy management systems and making your business functions more energy efficient, for instance, or asking your team leaders to disseminate tips for saving electricity in the office can boost your bottom line.
In the current Indian context, however, your business likely faces not just rising electricity costs, but also supply disruptions as a result of the ongoing energy crisis. Many companies are looking to bring down their costs - and better manage their cash flows and profitability - by getting third party investors to set up solar power plants on their rooftops and purchase the power generated from the plant for their use. While it is easy to say that businesses can get a solar power plant or another renewable energy system installed, achieving the expected business outcomes is crucial, as is estimating and optimally using the available physical and financial resources.
For instance, depending on the capacity required, a large vacant space such as a rooftop or an empty ground may be needed for installing a solar power plant, which could necessitate significant upfront expenditure. When compared to the realisable long-term savings, however, this expense would be an investment cost that may be paid back many times over.
As an example, B.U.Bhandari installed a 1200 kW rooftop solar power plant for the car windshield maker Luminaz Safety Glass (image above). This plant generates over 18 lakh units of electricity every year - or about a third of the company’s annual electricity consumption. Luminaz chose to install the plant through a 20-year power purchase agreement, via an OPEX model. Per this arrangement, B.U. Bhandari Energy would build, own, and operate the solar power plant for 20 years and transfer the ownership to Luminaz thereafter.
From Luminaz’s perspective, this model requires no upfront investment or even maintenance costs, as B.U. Bhandari Energy takes care of the plant. After accounting for the cost Luminaz has to pay in buying the electricity generated by the solar plant, the company realises a 40% saving on its electricity bills, which would only increase once the ownership is transferred. Effectively, the cost of installing the solar power plant is distributed as an operational expense over the 20-year agreement period. Also, Luminaz has to pay less for solar power than for buying electricity from the grid, which is a further saving.
You could opt for the OPEX model, as done by Luminaz, when switching to solar power, but you can also choose from the other business models B.U. Bhandari Energy offers, as detailed below.
The electricity generated from the solar power plant installed on your premises can be used to power your operations, but you can also choose to sell that electricity to the distribution company through a net-metering arrangement and, by doing so, get a further discount on your electricity bills. In Maharashtra, for instance, if you are generating less than 1 MW of electricity at your business premises, you are eligible to apply for net-metering, irrespective of whether you own the solar power plant or have leased it for a specified period. The units of electricity you export are then adjusted against the units you import from the grid, and if the units you sell exceed the units you buy, you will be earning by selling electricity instead of paying to buy electricity.
With this little extra thought, you can turn your transition to solar energy into a credible cost-saving exercise and in the process deliver some environmental benefits as well. Consider speaking to one of the consultants at B.U. Bhandari Energy to understand not only how much your business can save by switching to solar, but also how you can take advantage of the incentives available from exporting the excess electricity you could generate.
|CAPEX||OPEX||Operating Lease||Performance-linked Loan|
|You invest in and own the solar power plant||We invest in and own the plant for a fixed tenure||You sign a 3-5 year operating lease for the asset||The plant is invoiced to, owned by and loaned to the offtaker|
|You recover the installation costs in 3 - 4 years typically||The electricity is sold to an offtaker at a discounted tariff compared to the grid||You can repay the lease instalments from the savings||You return the loan over a predefined period, for a predefined tariff, based on the units of electricity generated|
|You enjoy 100% savings at grid tariff||Electricity is sold based on number of units generated||You take over ownership when the lease ends||We bear all O&M costs|
|You have to bear Operation & Maintenance (O & M) costs||We are responsible for the O&M costs during the tenure||You enjoy electricity savings as well as tax benefits from lease expenses|
|We can arrange collateral-free funding, and you can pay the EMIs from the electricity savings||You become the owner at the end of the tenure|
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At B. U. Bhandari Energy, we have spent years providing onsite solar power solutions to countless industries and businesses in India. We utilise the best technologies with the best design to create customised solar rooftop installations. Talk to us today to discover the perfect financial model for your rooftop solar installation.