Power project developers today are facing an existential crisis. Reverse auction competitive bidding process has become the norm for selection of power project developers and the power project development has been reduced to testing the risk-taking ability of the developers. Luckily for the developers, the risk has paid off since the module prices have been steadily coming down.
The honeymoon period euphoria of the RE sector is rapidly wearing off and the cracks have started to develop in the form of delayed payments from the beleaguered discoms. Transitioning to the RE power generation which is essentially decarbonization of the power sector has not in anyway contributed in improvement of the Discom’s health.
The successive governments have all been helpless in finding the solution for the ailment afflicting the discoms since they have all been resorting to symptomatic treatment rather than attacking the root cause of the disease. Periodic financial blood infusion have somehow kept the discoms alive.
Given the above scenario, the power project developers need to explore options to derisk the power business. One potential option is to parallelly get into developing the Electric Vehicle business. The power project developers may well think that vehicle building or transportation is not their business just as the coal-based power project developers felt that coal mining was not their business in the start of this century. Ultimately the power project developers had to get into coal mining.
In case of the coal projects, the fuel risk was mitigated by backward integration to coal mining and incase of the RE projects, since there is no fuel risk, the off-taker risk can best be mitigated by forward integration to EV business.
Let us examine the economics of a EV business. Let us take the example of the Electric Bus. An airconditioned E-bus consumes about 1 KWhr per Km. If the power project developers sets up the fleet of E-bus as a captive user, then with a base price of Rs 3 / KWhr at the power plant busbar factoring in the open access & wheeling charges and additional surcharge, the delivered cost of power at the charging station will be about Rs 5 / KWhr. Thus the operational cost / Km of running the E-bus translates to Rs 5/Km. In contrast, the typical cost / Km of conventional AC diesel or CNG bus works out to about Rs 24 / Km. With a capex cost of Rs 60 lakhs per bus for the AC diesel bus, the fixed cost / KM translates to about Rs 25 / Km for annual running of 60,000 Kms. Thus the cost/Km for a conventional diesel bus works out to about Rs 50/Km.
If the E-bus cost / Km has to be comparable to that of the diesel bus, the fixed cost/Km has to work out to Rs 45 / Km ( Rs 50-5 ). With an annual running of 60,000 Kms, the annual fixed cost recovery would be Rs 27 Lakhs. The annual fixed cost recovery of Rs 27 Lakhs would imply a cost of Rs 1.08 Cr for the bus. An E-bus cost of Rs 1.08 Cr can thus provide the same cost / Km as a conventional diesel bus.
E-bus integration is no different from building a solar power plant or a wind power plant. A solar power developer who is used to carrying out his own EPC can easily integrate an E-bus. He takes a ready built chassis, fits the electric motor, AC drive & the Li battery and builds the bus body from any of the 200 odd bus-body builders in the country and the bus can be built.
The bus chassis cost is about Rs 8- 10 Lakhs ( without engine ), the motor and AC drive costs about US$ 15,000( Rs 10 Lakhs ) and the battery of 150 KWhr @ US $ 300 / KWhr works out to Rs 30 Lakhs and the bus body is about Rs 20 Lakhs, cost of integration at Rs 15 Lakhs & 20% margin will translate to Rs 1.02 Cr. Thus the E-bus can be built at about Rs 1 Cr.
The project cost of a 5 MW solar power plant is about Rs 20 Cr. 5 MW solar plant generates about 87 Lakh KWhr per year which can power 145 E-bus for 60,000 Kms / Yr. With Rs 50/Km, the 145 buses at Rs 145 Cr will yield Rs 43.5 Cr / Yr which with 11% interest rate and 25% equity gives a pre-tax IRR of 40% for a ten yr contract.
The integrated Solar Cum EV project can provide a high IRR of 40% as against a standalone power project with competitive bidding yields a sub 10% IRR.
The initial investment needed to integrate one prototype and obtain ARAI approval including the cost of all material & development fees for me and my team is Rs 5 Cr ( US $ 800,000 ) and the time duration needed is 8-9 months.
If anybody is interested and willing to invest, they can mail me at email@example.com .