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Build-Operate-Own-Transfer

BUILD-OPERATE-OWN-TRANSFER-OBJECTIVE

GRAVASTAR BOOT Model

BOOT MODEL

Build-Operate-Own-Transfer provides a remedy to the demand for power which is always on the rise despite appliances and applications are driving to achieve highest efficiency ever possible. However to meet the energy demand and set up a solar power generation plant it does cost a lot of capital. Hence with business objective in mind the investors come forward to invest the fund there by large scale solar power plants are started in partnership of agreement.

Build-Operate-Own-Transfer is a solution to consumers who are low in capital and require energy to meet their power demand.

INVESTORS INTEREST IN BUILD-OPERATE-OWN-TRANSFER
Potential investors in solar power projects with an intent to reap returns over a period of time from the solar power consumers would bring in Build-Operate-Own-Transfer projects which are usually called as Build Own Operate Transfer (BOOT) (or) Lease model (or) OPEx (since no capital involved) (or) Solar Power Purchase Agreement (PPA)

CONSUMERS INTEREST IN BUILD-OPERATE-OWN-TRANSFER
The usual agreement with the solar power supplying companies will be on a long term for 15 to 20 years.

The consumer does not invest on capital except the consumption of generated solar power pays for having used the units of solar power as consumed and metered.

Different Solar company service providers on this model will have varied terms and conditions which are agreed usually at the time of agreement and locked in for a period of time.

REASONS FOR WHICH CONSUMERS PREFER TO SOLAR ELECTRICITY BUILD-OPERATE-OWN-TRANSFER MODEL A FEW ARE AS FOLLOWS.

  • The pricing is competitive when compared to the local distribution company
  • Individual’s social responsibility in contributing towards use of green energy.
  • The price hikes on Tariffs are fixed for a longer period of time unlike the local utility companies
  • Independence of choice from any power interruptions or dependencies

Some of the attributes one must consider before entering into the Lease or PPA model, this would be beneficial to both parties, investors/providers and consumers to plan appropriately.

REASONS WHY CONSUMERS PREFER BOOT MODEL

GRAVASTAR SOLAR INSTALLATION

Energy Demand

INVESTOR [POWER SUPPLIER]

  • From an investor perspective anything above 10Kwh in the market.
  • The scale of such investments are usually focused towards commercial establishments
  • There are small scale efficient players as well who can host the PPA from as low as 3Kwh in certain locations.

CONSUMER [CUSTOMER]

  • A Domestic customer usually requires minimum 3Kwh where as a Commercial establishment would require >10Kwh.
  • The evaluation is unique to each requirement and depends on the load the customer intends to use.
  • It should also be noted in today’s market there are lot of energy efficient appliances available, combining these with PPA model will definitely bring down the load factor as well as the cost per unit associated towards the same.

GRAVASTAR SOLAR INSTALLATION

Solar Packages in Build-Operate-Own-Transfer

INVESTOR [POWER SUPPLIER]

  • Investors hesitate to provide systems with battery bank backup plan.
  • The reasons are batteries are expensive on capital and the way how batteries are responsibly utilized during their power discharge operations.
  • Most consumers are not technically sound to use and maintain these batteries.
  • Hence most investors PPA would be ready to supply the Grid tied solar plans without battery banks.

CONSUMER [CUSTOMER]

  • The need for power for domestic customers are primarily during the early hours and late hours of the day, however without battery backup plan the use of Solar PPA makes no sense to domestic customers.
  • In case of commercial establishments the requirement is constant throughout the day except few hours during late mid nights. Hence commercial establishments can couple with local on Grid power supply when there is no sun.
  • Alternatively both commercial and domestic consumers can invest on the battery banks and learn how to maintain, operate them in safe limits. The breakeven could be achieved in 2 to 2.5 years.

GRAVASTAR SOLAR INSTALLATION

Customer Financial Reputation

INVESTOR [POWER SUPPLIER]

  • The Solar PPA investors are keen in safely gaining their returns over a period of time.
  • PPA check the financial stability of the customers before making any investment on the PPA.
  • Occasionally the PPA Company would be interested to read customer’s financial sheets domestic or commercial.
  • PPA would also may ask to deposit 5% to 15% of the cost of project or a guarantor of 3 months for domestic to 12 months or commercial establishments of the estimated billing.

CONSUMER [CUSTOMER]

  • Consumer must evaluate the long term benefits while opting for solar PPA. This applies to both commercial and domestic establishments.
  • Sharing proof of financial stability or ability will bring the investor to an agreeable platform.
  • The self-evaluation by the customer on the load energy demand will help the PPA to cap the pricing and design the PPA accordingly. Hence its customer’s responsibly to understand their power load utilization.
  • Over consumption of energy or over load above the design of system will trip the solar power and make system not usable or account for more units consumed and billed. This would bring in disagreements with the PPA.

GRAVASTAR SOLAR INSTALLATION

Agreement Term Period in Build-Operate-Own-Transfer

INVESTOR [POWER SUPPLIER]

  • The usual term period is 15 to 25 years depending on the PPA provider.
  • Mid-size players <5kwh provide as short as for 10 years

CONSUMER [CUSTOMER]

  • A higher term period will have lower tariff rates
  • Post the term period, the solar setup is transferred to the customer.

GRAVASTAR SOLAR INSTALLATION

Tariff Plan in Build-Operate-Own-Transfer

INVESTOR [POWER SUPPLIER]

Multiple factors determine the rate per unit on Solar PPA.  Few of them include

  • Project capacity,
  • project cost of ownership,
  • location of the project,
  • PPA tenure period,
  • Security deposit and annual escalation.

CONSUMER [CUSTOMER]

  • The larger the project capacity, lower the cost, longer the PPA term and higher the annual escalation, the lower will be the starting tariff.
  • Most PPA models have an annual increase of 3% price hike per unit of power, unless the initial investment or tenure period is heavier or longer respectively.

GRAVASTAR SOLAR INSTALLATION

Surge Prices

INVESTOR [POWER SUPPLIER]

  • The higher the visibility of tariff escalation to investor, the lower will be the tariff that you can obtain from investor. Accordingly a fixed escalation in % or value will help you negotiate the lowest tariff with the investor.

CONSUMER [CUSTOMER]

  • Assuming the current variable tariff is above local utility and for a larger capacity project, agreeing for a grid linked price hike is a good option. This is on an assumption the rate per unit does not increase in near term period of 5 to 8 years.

GRAVASTAR SOLAR INSTALLATION

Roof Structural Stability

INVESTOR [POWER SUPPLIER]

  • PPA providers evaluate the structural strength of the roof top infrastructure for a 25 year time
  • Depending the 25th year assumed strength of the structure the cost of PPA and ownership is evaluated appropriately.

CONSUMER [CUSTOMER]

  • The ownership in providing structural stability lies with the customer. As the PPA provider uses customer facility and outlines the maintenance of structure is taken care by the customer in most scenarios.

GRAVASTAR SOLAR INSTALLATION

Lease term of Roof

INVESTOR [POWER SUPPLIER]

  • PPA investors prefer to secure legal rights to utilize the roof top space
  • The right to utilize the space help investors secure bank loan for the project.

CONSUMER [CUSTOMER]

  • Customers can request PPA investor on a mutual agreeable terms for the use of Rooftop.
  • The lease rights to the investors also provides a comfort if the consumer were to default in making bill payments

For the market best practice its important to learn the approach on how Build-Operate-Own-Transfer model can be establised. to understand more follow the link.

LEARNERS GUIDE TO SOLAR ELECTRICITY

GRAVASTAR SOLAR INSTALLATION

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