Financial analysis tool is used to find out the financial feasibility of solar Photo voltaic Lantern. Topic used simple financial tool with self explanatory formula and explain financial analysis of SPV lantern. It is easy to understand the financial analysis specially for beginner.

1. Presented By
Malik Sameeullah
School of Renewable Energy and Efficiency
NATIONAL INSTITUTE OF TECHNOLOGY, KURUKSHETRA 1

2. Contents
 Introduction
 Economical Parameter for Engineering Project
 Net Present Value
 Payback Period
 Technical Parameter of SPV Lamp
 Data Analysis for SPV Lamp
 Result and Conclusion
2

3. Introduction
 Renewable system have a potential of meeting energy
demand in an environment friendly manner
 There is a financial, technical and social issue related
to RET
 Financing which is a crucial element for any project
 Socio-Cost benefit analysis is used to judge the
financial feasibility of RET
 Detail discussion on payback period and NPV in
upcoming slide
 Cost benefit analysis of Solar PV Lantern is done using
relevant data
3

4. Economical Parameter For Engineering Project
 When the purpose of an economic analysis is to help make a
decision, there are several key managerial indicators or
economic parameters that are considered. common decision
criteria are:
1. Net Present Value: The Net Present Value is defined as the
different between the present value of the cost inflows and
the present value of the cash outflows.
2. Payback Period: It is defined as the time required to
recover the initial investment in a project from operations.
3. Internal Rate of Return: IRR is discount rate that equates
PV(Inflows) = PV(Outflows)
4. Profit to Investment Ratio
4

5. Payback Period
 Time take to recover the investment
 For simple payback period with zero interest rate, payback
period (n) is given by:
𝒏=𝟎
𝒏 𝒔𝒑
𝑩 𝒏 − 𝑪 𝒏 ≥ 𝟎
Where 𝐵𝑛= cash benefit
𝐶 𝑛=cash expenses
𝑛 𝑠𝑝payback period usually less than 𝑛 𝑚𝑎𝑥
Example: A solar water heater will cost Rs. 600000 and life of 15 year.
Annual electricity saving is of Rs. 85000. Then calculate payback period?
Solution: 𝑆𝑖𝑚𝑝𝑙𝑒 𝑝𝑎𝑦𝑏𝑎𝑐𝑘 𝑝𝑒𝑟𝑖𝑜𝑑 =
𝐼𝑛𝑖𝑡𝑖𝑎𝑙 𝐼𝑛𝑣𝑒𝑠𝑡𝑚𝑒𝑛𝑡
𝑁𝑒𝑡 𝐴𝑛𝑛𝑢𝑎𝑙 𝑆𝑎𝑣𝑖𝑛𝑔
=
600000
85000
= 7.06 𝑦𝑒𝑎𝑟𝑠
5

6.  Simple Payback period formula modified if we
consider changing value of money with time.
 Let there is interest rate (i) on initial investment
𝐶 𝑜. Then payback period formula is:
(𝐵 − 𝐶)
(1 + 𝑖)
+
(𝐵 − 𝐶)
(1 + 𝑖)2
+
(𝐵 − 𝐶)
(1 + 𝑖)3
+ … +
𝐵 − 𝐶
1 + 𝑖 𝑛
= 𝐶 𝑜
 Calculated payback period is compared with life cycle of
project. It suggest whether project is financially acceptable
or not
 Basic reason of its popularity:
1. It is very easy to understand
2. It reduce the complexity of calculation by giving the expected time
of investor money recovery
6

7. Net Present Value
 The difference between the present value of
benefits and the cost resulting from investment is
NPV of investment
 It value indicate the financial position of investor
 For long term project. It is a mean to calculate the
financial feasibility of project in real time
 In mathematical term:
𝑁𝑃𝑉 = 𝑗=0
𝑛 (𝐵 𝑗−𝐶 𝑗)
(1+𝑖) 𝑗
7

8. 𝑁𝑃𝑉 = 𝐵0 − 𝐶0 +
𝑗=1
𝑛
(𝐵𝑗 − 𝐶𝑗)
(1 + 𝑖) 𝑗
 As initial benefit is zero, so 𝐵0 = 0
𝑁𝑃𝑉 = −𝐶0 + 𝑗=1
𝑛 (𝐵 𝑗−𝐶 𝑗)
(1+𝑖) 𝑗
Here 𝐶0is the initial investment
 If we assume that 𝐵𝑗 − 𝐶𝑗 = 𝐵 − 𝐶 then:
𝑁𝑃𝑉 = −𝐶0 + (𝐵 − 𝐶) 𝑗=1
𝑛 1
(1+𝑖) 𝑗
 𝑁𝑃𝑉 = −𝐶0 + 𝐵 − 𝐶 [
1+𝑖 𝑛−1
𝑖 1+𝑖 𝑛 ]
8

9.  NPV>0, accept the project
 NPV= 0, remain indifferent
 NPV<0, reject the project
Features of NPV:
 It consider the time value of money in it computation
through the interest rate I
 It concentrate the value of cash at a particular point in
time
 NPV give the actual present benefit or loss
 It computation is straight forward
9

10. Solar Photovoltaic Lanterns
 SPV lanterns are widely excepted for domestic lighting
in rural and sub urban area.
 Several incentives have been introduce by GOI to
promote SPV lantern
 There is direct subsidy and soft installment facility to
purchase SPV lanterns
 Large scale acceptance of SPV lantern depend upon a
variety of socio-techno- economics factor
 As initial cost of SPV lantern is higher than other
domestic lighting option
 Financial viability analysis is play a crucial role in its
dissemination
10

11. Design parameter of Solar Photovoltaic Lanterns
 The main part of SPV Lantern:
1. PV module
2. Storage battery
3. Charge regulator
4. Light source (CFL, LED)
5. Other auxiliary item (Mobile charging port)
 The size of SPV lantern can be specified in two way:
1. Power rating of module/CFL
2. Capacity of battery
 Generally mono-crystalline silicon solar module of rating
between 6-15 peak Watts is used
 Similarly, wattage of CFL/LED in the range of 2-9 W.
11

12.  The size of module (in peak Watts 𝑊𝑃 ) corresponding to
particular power rating of LED may be estimated as:
𝑊𝑃 =
𝑊𝑙 ∗ ℎ
𝐼 𝐺 ∗ 𝜂 𝑏 ∗ 𝜂𝑖
 Where 𝑊𝑙 is the power rating of LED
 h=daily hour of operation
 𝜂 𝑏and 𝜂𝑖is the efficiency of battery and charger
 𝐼 𝐺 is the annual mean daily global solar radiation in 𝑘𝑊ℎ 𝑚2 𝑑𝑎𝑦
 The battery storage capacity S in Ah is given by:
𝑆 =
𝐿𝐸𝐷 𝑃𝑜𝑤𝑒𝑟 ∗ ℎ𝑜𝑢𝑟 𝑜𝑓 𝑜𝑝𝑒𝑟𝑎𝑡𝑖𝑜𝑛 ∗ 𝑛𝑜. 𝑜𝑓 𝑑𝑎𝑦 𝑜𝑓 𝑜𝑝𝑒𝑟𝑎𝑡𝑖𝑜𝑛
𝐵𝑎𝑡𝑡𝑒𝑟𝑦 𝑣𝑜𝑙𝑡𝑎𝑔𝑒 ∗ 𝑐ℎ𝑎𝑟𝑔𝑒𝑟 𝑎𝑛𝑑 𝑏𝑎𝑡𝑡𝑒𝑟𝑦 𝑒𝑓𝑓𝑖𝑐𝑖𝑒𝑛𝑐𝑦 ∗ max 𝐷𝑂𝐷
Note: DOD is the maximum percentage of battery energy which can be used
(when battery is fully charged)
12

13. Capital cost of Lantern
Lamp (LED) Module Battery (12V) Cost of
charge
regulato
r (Rs)
Cost of
cable and
housing
(Rs)
Total
compone
nt Cost
(Rs)
Approx
Market
Cost
(Rs)
Power
rating
(W)
Cost
(Rs)
Ratin
g
(𝑊𝑃)
Cost
(Rs)
Capacit
y (Ah)
Cos
t
(Rs)
3 250 5 900 6 500 300 250 2200 2750
5 260 8 1440 10 600 300 275 2875 3600
7 265 10 1800 15 700 300 300 3365 4200
9 275 14 2520 18 750 300 325 4170 5210
11 290 16 2880 22 850 300 350 4670 5840
Component-Wise cost of different size SPV Lanterns
• By using the interpolation method, we can develop a relation between Captial
cost of lantern (𝐶𝑐) and power rating of CFL (W)
• As clearly indicate in table, there is two type of component: fixed cost and
variable cost depend upon rating
• 𝐶𝑐 = 1366 𝑊0.6
13

14. 0
1000
2000
3000
4000
5000
6000
7000
0 2 4 6 8 10 12
CostofLantern(Rs)
Power Rating of CFL (W)
Cost of Lantern
Linear (Cost of Lantern)
0
500
1000
1500
2000
2500
0 1 2 3 4 5 6
CapitalCost(Rs)
Hours of Operation (h))
Capital Cost (Rs)
Linear (Capital Cost (Rs))
Graph between cost of
Lantern and Power rating
of CFL
Graph between capital
cost of lantern and
hours of operation
Courtesy: Financial Evaluation of Renewable Energy Technology
by S P Garg
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15. Operation and Maintenance cost
 SPV Lantern designed as maintenance free unit during
its life time
 For charging it need to expose panel and system to the
sun during day and bring it back to the point of use
 As the system is designed for rural area, there is no
charge spent on labor.
 Useful life of SPV lantern is reported to be 20 year,
which is the life of module and housing
 Useful life of battery, CFL and electronics item in the
range of 3-8 year.
 So there is little bit maintenance charge involved
15

16. Financial Evaluation of Lantern
 There is two way of financial evaluation
1. The cost per hour of illumination (𝐶ℎ𝑙)
2. The cost per unit useful energy (𝐶 𝑢𝑢)
• The cost per hour of illumination (𝐶ℎ𝑙) : It is obtained by
dividing the annualized cost of the SPV lantern with the
total duration of lighting provided by it during a year
𝐶ℎ𝑙 =
𝐶𝑐 𝑅 𝑑, 𝑡 𝑠 + 𝐶 𝑚
𝑁0 ∗ ℎ
 Where 𝑅(𝑑, 𝑡 𝑠) is the capital recovery factor
 𝑁𝑜is the number of day in which lantern use
 𝐶 𝑚 is the annual maintenance cost
16

17. • The cost per unit useful energy (𝐶 𝑢𝑢): It is obtained as the
ratio of annualized cost of the lantern to the amount of
energy delivered by it.
𝐶 𝑢𝑢 =
103
[𝐶𝑐 ∗ 𝑅 𝑑, 𝑡 𝑠 + 𝐶 𝑚]
𝑁𝑜 ∗ ℎ ∗ 𝜙
• Fuel Cost of Conventional Lamp:
𝐵𝑎 = 𝑁𝑜 ∗ ℎ ∗ 𝑟𝑓 ∗ 𝑝 𝑓
Where 𝑟𝑓 hourly consumption rate
𝑝 𝑓 the market price of fuel
Market price of fuel is escalating at an annual rate e. The present worth
benefit to user is given by Present Worth Factor (𝑃(𝑑, 𝑒, 𝑡 𝑠))
• NPV of the investment in the SPV may be calculated as:
𝑁𝑃𝑉 = 𝐵𝑎 𝑃 𝑑, 𝑒, 𝑡 𝑠 − 𝐶 𝑚 𝑃 𝑑, 𝑡 𝑠 − (𝐶𝑐 − 𝜎)
Where 𝐶𝑐 is the capital cost and 𝜎 is the government subsidy
17

18. Battery
21%
Module
53%
Charge
regulator
15%
Housin
g
9%
Lamp
2%
Battery
42%
Module
35%
Charge
Regulator
14%
Housin
g
6%
Lamp
3%
Capital Cost Annualized Capital
Cost
Percentage Contribution of the component of the capital and annualized
capital cost of SPV Lantern
18

19.  When condition are identical, two hurricane lantern are
needed to provide similar illumination as given by 3 W SPV.
 Light output of 11 W SPV Lantern is comparable to a
petromax lantern
 Market price of kerosene is Rs 40/liter and after subsidy it
cost Rs 14/ liter approx.
 1 liter is used to light one hurricane lantern for approx 40
hour
2 Hurricane lanterns 3 W SPV
lantern
Petromax 11 W SPV
lantern
Subsidized
Kerosene
Market
Price of
Kerosene
Subsidized
Kerosene
Market
Price of
Kerosene
𝐶ℎ𝑙
(Rs/hr)
0.63 1.8 0.23 0.58 1.65 0.61
Comparison of Cost per hour of illumination of SPV lantern with conventional
lantern
19

20.  Assume SPV lamp operate for 4 hour every day
for 300 days a year, It save about 60 liters of
Kerosene.
 3-5 W SPV Lamp cost approx. Rs. 2000 and
average life of 3 year
 Net Saving=(Fuel saving cost) – (Initial
investment cost)
 For subsidized kerosene, net saving come out to
be Rs 520 and for non subsidized kerosene, net
saving is Rs 5200.
20

21. Conclusion
 For acceptability of any project, payback period
and cost base analysis must show positive.
 Most of the renewable energy projects are not
financial viable, we consider only the net profit
 Social issue and GHG policy allow renewable
energy to make there own platform.
 SPV lantern which provide a option of clean
light in rural area are financial viable and
socially acceptable.
 Result show that SPV lantern have a good
market potential. 21

22. References
1. A. K. Sinha, Chiranjib Bhattacharjee, “Cost Benefit
Analysis of Solar Powered LED Based Lighting System
for NIT Silchar”, Third International conference on Power
System, Kharagpur, Dec-2009
2. “The Economics of Money, Banking and Financial
Markets”, Frederic S. Mishkin, 7th Edition Pearson,
Boston.
3. “Financial Evaluation of Renewable Energy
Technologies”, H. P. Garg, 1st Edition Macmillan, New
Delhi
22

23. Contact Info: malik_sameeullah@rediffmail.com
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