Solar Rooftop for the MSME's

 Solar Roof top for the MSME’s

The Micro small & Medium Enterprises (MSME’s) are back bone for Indian economy and always found a steady growth of 25 to 30 %.

MSME’s are going to be better  in future and play a key role as the Government focussing on the Atma Nirbar Bharat Mission in the wake of this Covid. With the increase in the number of MSMEs, their electricity requirement will also increase.  Therefore, to meet this requirement, rooftop solar photo voltaic is the best possible solution, which will help these industries to become self-reliant as they will be generating electricity on their own. The solar rooftop offers not only environmental  benefits but also commercial benefits. The factories can adopt solar PV system as per their need or the area available on their rooftop. 

The total power generated by the solar plant will reduce the electricity bill. 

My observation : 

• The MSME’s sector is one of the largest consumer of energy in the economy, accounting appx 25% of energy consumed in the Industry sector. 
• We find 50% of the industries have the  connected power is less than 25 KW, balance 50% of the industries have been connected load any where between 25 KW may go up to 200 KW and may be very few up to 500KW.
• The electricity spending in the MSME’s is any where between 10 to 20 % on the revenue generated , of course  depending on the type of industries. Some of the Industries ,the energy cost are making big difference to MSME’s profitability and sustainability. 
• We also observed majority  MSME  owns the land and buildings. Few survey reports says  90% of MSME has their own buildings.
• Guidelines: Few states have cap on the capacity installation like 50% or 80% of the demand  connected. But few states have removed and can install higher capacity also which fetch income to the MSME as an add on business. But In Karnataka we can install up to 80 % of the demand and Net metering is available. These solar plants run through Net-Metering facility provided by the Discom’s in which the billing and settlement happen at the end of each month. Any surplus power generated from solar plant will be carried forward to the next month.
• Installing solar plants makes the industry self-sufficient as they are producing the electricity that they need. Hence, there will be no concern for an increase in tariff from Discom's.
• Solar reduces tax liability as adopting solar for commercial sector provides 40% accelerated tax benefit that can be availed from the first year itself. It leads to achieving an early payback period.
• As renewable energy is in trend, adopting solar will create a positive impact on their brand image, making the industry a socially and environmentally responsible business. 
• As the On-Grid solar plant is connected to the LT panel, therefore the industry can run all their equipment as this system does not require battery backup. Also, the solar plant can be synchronised with Diesel generators hence solar will help to reduce the diesel consumption.
• Nowadays, the cost of solar rooftop plant has become very affordable, therefore the payback of the solar will be typically in the range of 4 to 5 years. Looking at this, we can see that installing solar is very beneficial and lucrative for MSMEs.

Challenges: 

• The Roof top potential based on the roof availability is always less than 50 % of the connected load in MSME segment. 
• The level of awareness about rooftop solar still lacking. Many high-power consuming SMEs were hesitant to install rooftop solar because of the perceived performance risks.
• The MSME’s are reluctant for capital invest, since it is not their core business. 
• Traditionally the MSME’s believe more the nationalised banking and dependency on financing.
• Traditional bank always go by the banking norms and collateral requirements to finance the Solar projects going to consume their credit line or the existing collateral. Some MSMEs found it difficult to meet collateral requirements as their plant and machinery were already committed to other term loans.
• In Karnataka Third party invested & operated model can be done only in gross metering. Not on a  Net metering. So the third party investment is a challenge.
• As per the few state guidelines MSME will have to pay electricity duty and wheeling charges. Which does not attract the MSME as far as savings point of view. How ever in Karnataka we do not have that restriction now unless it in Open access bilateral  investment.

Advantages: 

• The total power generated by the solar plant will reduce the electricity bill.
• The savings in electricity costs will be more than sufficient to repay the loan instalments and the interest.
• Many private equity funds and developers started offering the Loan/financing  with equipments( Typically: like EMI Model) which does not  involve the collateral or disturbing their existing banking systems & working capital.
• Setting up solar plants also results in reduction of power bills for 25 years and provides additional cash flows from the project post payment of all expenses during loan tenure.
• While the payback period on the 75% loan ranges between 4 and 5 years, cash flow generation will be for 25 years, thereby generating substantial income after the repayment of loan.
• It also provides intangible benefits to export-oriented units, who would enjoy an edge over their competitors using fossil fuel based energy alone.
• investments in setting up of solar plants gives industrial units benefits in the  (IGST) Integrated Goods and Services Tax,

Author : 

Ramesh Shivanna 

Ramesh Shivanna, Director - FKCCI

Chairman- Pride Energy Environmental Research Resource Institute(PEERRI)