The economic and technical feasibility analysis for solar power plant

Abstract

Solar power plants connected to the grid have emerged as reliable sources of renewable energy to supplement conventional fossil fuel power plants connected to the grid. The capital investment for solar power projects has become economical in the present time due to the advancement in photovoltaic module technology. The investment in a solar power project is non-recourse in financial structure. The case study for project finance in the renewable energy domain is narrated with the help of the operation research methodology of mathematical models for financial statements. The economic viability of a project is analysed by financial metrics, i.e., internal rate of return (IRR), net present value (NPV), and debt service coverage ratio (DSCR). The mathematical model for financial statements provides forecasts of revenue and cash flow. The mathematical model provides a risk assessment for credit. The identification of technical requirements for a greenfield project is described for the assessment of the technical feasibility of the project. The decrease in capital and operating costs associated with the increase in efficiency of solar power plants, accompanied by the financial incentive scheme introduced by the government, provides attractive business opportunities for the renewable energy value chain.