Solar through my lens!

It might be considered as a sin to talk about solar energy in Nepal. The country, rich in hydro resources, is inclined to be blatantly loud and assertive in self-defense. It is not everyone's cup of tea due to its expensive LCOE (levelized cost of electricity). Name-calling is expected when you try to explore the solar opportunity in this country. 

Well, things are about to change. The news about solar energy getting as cheap as US 30 dollar per megawatt-hour certainly raised some eyebrows in Nepal.

According to newspapers, the main reason for such low LCOE is due to availability of cheaper solar panels that are produced in China (China is now the largest producer of solar panels in the world). The decline is also caused by a decline in the cost of the inverters that convert the DC power produced by solar panels to AC power for the grid. 

                                                                                        

The low LCOE in international arena is surely a welcoming news for Nepal since many Nepali are also keeping their eyes on this industry. And now, without further ado, let's find out the opportunities and challenges of solar in Nepali context.

Opportunities

Solar is relatively a new concept here. It is limited to rooftop for residential purposes only as of now. People started taking it seriously for commercial energy generation only after the devastating earthquake that struck on 2015. 

It was last year when ‘National Energy Crisis Reduction and ElectricityDevelopment Decade’ was declared to end the energy crisis which announced ‘take or pay’ PPA for solar for 25 years with a benchmark unit rate of NRs. 9.61 per kWh for the first time. GoN aims to generate 10 percent of the total capacity through solar and wind, i.e., roughly about 100 MW. Soon after, few solar projects were awarded to private developers.

Challenges

The first question that pops up in my mind 'is NRs. 9.61 per kWh reasonable enough to make solar project feasible in present context?' 

Yes, it is highly feasible if we consider the above mentioned LCOE. But, considering the Nepali market (the quoted price of solar panel by the local suppliers, interest rate and other factors), the answer, however, seems to be complicated.

Assuming 300 days of sunshine a year with a daily solar radiation of 4.5 KWh/m2, one MWp solar PV system will generate 1.35 GWh a year (very realistic). Therefore, the ideal project cost would be in between NRs. 7 to 8 crores per MW in order to be able to earn reasonable profits at NRs. 9.61 per kWh or let's say to be at par with what Nepali hydropower is offering.

Having quoted the ideal per MW cost for NRs. 9.61 per unit, it is, however, hard to accurately forecast the project cost. There is a significant variability in price of panels which varies from NRs. 40 per Watt to NRs. 75 per Watt. The drastic variability in panel cost suggests us few things we need to consider.

First, we do not have enough experiences in solar project so most of us have no idea about the actual amount of energy that different solar modules/brands generate. Second, solar panel degrades gradually. It's a fact. The amount of energy it generates will decrease over time. The degrading rate can be 0.5 percent per annum or a lot higher depending upon the quality of solar panels. 

All these considerations force us to go for a high quality solar panels. And now assuming NRs. 75 per watt as a top notch quality in terms of energy generation, 1 MWp would cost around NRs. 20 crores (higher price is equal to higher quality and higher energy generation, a layman's thinking). It is no way near the cost I quoted earlier. At this cost, I reckon that the unit rate should be around NRs. 25.

S.N.	Cost Component of Solar PV	Percentage
1	PV Module	69%
2	Array Supporting Structures
3	PV String Junction Box
4	PV String Combiner Box
5	PV On Grid Inverter
6	AC Combiner Box
7	Cables, Conduits and Accessories (DC and AC)
8	Circuit Breakers, Isolators, Surge Protectors etc.
9	Earthing and Protections
10	Monitoring System
11	Transportation of Equipments (Local)
12	Civil Works
13	Protection Fence and Gate
14	Installation, Testing and Commissioning
15	Transmission Line and electrical works	25%
16	Land Acquisition Cost	1%
17	Miscellaneous Cost	5%
	Total	NRs. 20 crores

* It is important to note that the solar PV project costs are also site specific like hydropower projects and depends on various factors such as length of transmission lines, cost of land, infrastructure and so on. I have ruled out the option of installing solar project in urban areas due to higher value of land. The rule of thumb says a MW scale solar project requires about 30 ropanis of land. 

The other challenge is the location. GoN has issued several survey licenses for solar recently. But, almost all projects are in Terai belt. Data have shown that solar radiation is higher in mountainous regions of Nepal than Terai.

List of Survey license awarded by DoED in the past 6 months

S. N.	Developers	Capacity (MW)	Location
1	KTM Energy Pvt. Ltd	10	Morang
2	KTM Energy Pvt. Ltd	5	Morang
3	KTM Energy Pvt. Ltd	10	Morang
4	NEA	8.3	Nuwakot
5	NEA	3.5	Nuwakot
6	NEA	8.1	Nuwakot
7	Api Power Company Ltd.	1	Bardaghat
8	Api Power Company Ltd.	1	Dhalkebar
9	Api Power Company Ltd.	0.5	Kawasoti
10	Api Power Company Ltd.	1	Kawasoti
11	Api Power Company Ltd.	1	Simara
12	Api Hydro-mechanical Pvt. Ltd	1.5	Duhabi
13	Ridi Hydropower Development Company Ltd	8.5	Butwal
14	Api Power Company Ltd.	4	Chandranigahpur
15	Api Power Company Ltd.	1.5	Chanauta
16	Api Power Company Ltd.	8	Parwanipur
17	Asian Tech Corporation Pvt. Ltd.	4	Lahan
18	Clean Communication Pvt. Ltd	4	Hetauda
19	Global Energy & Construction Pvt. Ltd.	8	Duhabi
20	Gorkha Congenial Energy & Investment Pvt. Ltd.	3	Lamahi
21	Kantipur Energy Investment & Construction Pvt. Ltd.	2	Anarmani
22	Kantipur Energy Investment & Construction Pvt. Ltd.	2	Anarmani
23	Kantipur Energy Investment & Construction Pvt. Ltd.	1.5	Birgunj
24	Kantipur Energy Investment & Construction Pvt. Ltd.	2	Birgunj
25	Kantipur Energy Investment & Construction Pvt. Ltd.	2.5	Damak
26	Sagarmatha Energy & Construction Pvt. Ltd.	3	Dhalkebar
27	Asian Tech Corporation Pvt. Ltd.	1	Lahan
	Total	105.9

Conclusion

Although I feel like GoN declared the solar unit price without a proper research but the recent progress has opened up a huge opportunity for Nepali investors. It seems like solar has a good future ahead.

P.S. This post is not about Hydro Vs Solar.