Solar power for IT office buildings in India

Beuth University of Applied Sciences Department of Business Administration and Social Sciences Program: MBA Renewables Solar power for IT office buildings in India: Evaluating cost benefits and ancillary advantages Master's Thesis In order to earn the Master of Business Administration degree Submitted by: Sakthi Ganesh Jayakumar Matriculation Number: 804748 Submitted on: 27 January 2016 Supervisor: Prof Heinrich Lüthi-Struder Evaluator: Prof Dr.-Ing Sven Tschirley Executive Summary In human history the 21st century will be described as the era of Information technology (IT) The innovations in Information technology has benefited other areas such as Medicine, Education, Transportation and many more India has been one of the biggest beneficiaries of the IT wave However the growth of the ICT sector in India is pulled back because of external circumstances like problems in Power Sector Unreliable power supply is a major problem for the ICT sector The main goal of this thesis is to determine if renewable energy could solve this problem and if renewable energy is financially feasible for the IT industry The results of this study shows that Solar PV is a good fit when compared to other technologies and if the incentives and tax concessions extended by the government are appropriately utilized then it is financially viable for the IT companies to implement Solar PV for captive generation The study also shows that there are substantial cost benefits associated with replacement of Diesel generated electricity with the Solar PV generated electricity The financial analysis carried out as part of this study shows that the Levelized Cost of Energy (LCOE) of Solar PV electricity can be as low as INR 5-7 and the payback period of Solar PV project could be as low as years under certain conditions The diesel replacement scenario results show that merely by reducing the diesel generated electricity by Solar PV, a company can save substantial amount of money Apart from the direct economic benefits for the company, it is also shown that if all the existing IT companies generate 100% of their consumption, then at least million other people will be benefited from Grid electricity I List of Figures FIGURE CONTRIBUTION OF SECTORS TO THE INDIAN GDP SOURCE: PLANNING COMMISSION FIGURE MARKET SIZE OF IT INDUSTRY IN INDIA SOURCE: NASSCOM, TECHSCIRESEARCH FIGURE GROWTH OF ELECTRICITY SECTOR IN INDIA FROM 1947-2015 SOURCE: PIE CHART: 9, CEA, INDIA FIGURE DEMAND SUPPLY GAP IN TAMIL NADU, INDIA SOURCE: BUSINESS TODAY, JULY 22 2012 10 FIGURE INDIA IT/ITES REVENUE AND EMPLOYMENT GROWTH SOURCE: DATA COLLECTED FROM MULTIPLE SOURCES 12 FIGURE ELECTRICITY DEMAND GROWTH OF THE ICT SECTOR SOURCE: GREENPEACE, MAY 2015 14 FIGURE RENEWABLE ENERGY INVESTMENTS BY TOP IT COMPANIES SOURCE: GREENPEACE INTERNATIONAL, MAY 2015 15 FIGURE RENEWABLE ENERGY BY INSTALLED CAPACITY IN INDIA SOURCE: “CREATIVE COMMONS RENEWABLE ENERGY SHARE INDIA 2013” BY SKYDOC28 IS LICENSED UNDER CC BY 2.0 16 FIGURE COLOCATION DATA CENTER STATISTICS, INDIA SOURCE: DATA CENTER MAP 19 FIGURE 10 INFORMATION TECHNOLOGY COMPANY LOCATIONS IN SOUTH INDIA SOURCE: GOOGLE MAPS 19 FIGURE 11 POWER TARIFF HIKE IN TAMIL NADU SOURCE: RECONNECT ENERGY 22 FIGURE 12 2014 THUS FAR: THE FALL OF OIL AND ITS EFFECTS ON INDIAN FUEL PRICES, SOURCE: CAPITAL MIND 23 FIGURE 13 POWER GRID TRANSMISSION SYSTEM SOURCE: GREEN CLEAN GUIDE , AUTHOR: SHAILESH 25 FIGURE 14 TYPICAL BREAKDOWN OF THE DATA CENTER ENERGY CONSUMPTION, SOURCE: ELECTRONICS COOLING , ISSUE: DECEMBER 2010 29 FIGURE 15 SOLAR ASSISTED COOLING USING ARUN DISH, SOURCE: CLIQUESOLAR 30 FIGURE 16 ADVANCED SOLAR AIR CONDITIONING TECHNOLOGY IN ARAB EMIRATES, SOURCE: RAC MAGAZINE 31 FIGURE 17 SOLAR PV ROOFTOP SYSTEM IMPLEMENTED AT MURUGAN TEXTILES SOURCE: TATA POWER SOLAR 34 FIGURE 18 SOLAR PV CAPACITY IMPLEMENTED BY INFOSYS IN DIFFERENT CITIES SOURCE: INFOSYS 36 FIGURE 19 COMPARISON OF SOLAR PV SYSTEM PERFORMANCE WITH E-W FACING PANELS WITH A SYSTEM WITH SOUTH FACING PANELS SOURCE: ENERGETICA INDIA 37 FIGURE 20 RID TIED ROOF TOP SOLAR PV SYSTEM WITH FULL LOAD DG BACKUP SYSTEM SOURCE: FIRSTGREEN CONSULTING 42 FIGURE 21 CONDENSED LIST OF SOLAR POLICIES IN SOUTH INDIAN STATES SOURCE: MARCH 2015 SUMMARY SHEET PUBLISHED BY IREEED 43 FIGURE 22 RECOMMENDED FLOW OF IMPLEMENTING SOLAR PV SYSTEM 45 FIGURE 23 TOP VIEW OF THE INFOSYS POCHARAM CAMPUS SOURCE: GOOGLE MAPS 48 FIGURE 24 FRONT VIEW OF INFOSYS POCHARAM CAMPUS SOURCE: THATSOKDUDE.COM 48 FIGURE 25 SOLAR IRRADIATION DATA FOR HYDERABAD SOURCE: GAISMA 49 FIGURE 26 SUN RISE AND SUN SET TIMES FOR MONTHS FROM THE DATE OF ACCESS SOURCE: GAISMA 49 FIGURE 27 SUN RISE AND SUN SET TIMES FOR PREVIOUS MONTHS FROM THE DATE OF ACCESS SOURCE: GAISMA 49 FIGURE 28CONSOLIDATED LCOE VALUES FOR 4KWH PER KWP PER DAY YIELD 55 FIGURE 29 FIGURE: 2-26 CONSOLIDATED LCOE VALUES FOR 5KWH PER KWP PER DAY YIELD 56 FIGURE 30 CONSOLIDATED SOLAR PV FINANCIAL PARAMETERS FOR KWH PER KWP PER DAY YIELD 57 FIGURE 31CONSOLIDATED SOLAR PV FINANCIAL PARAMETERS FOR KWH PER KWP PER DAY YIELD 58 FIGURE 32 TYPICAL AC AND DC POWER SYSTEMS IN DATA CENTERS SOURCE: NTT FACILITIES, INC TOKYO JAPAN 70 II Table Of Contents Executive Summary 1 Introduction to thesis task and scientific methods Implementation of the thesis tasks 2.1 Understanding Interdependence of Indian Economy, Power Sector and the IT Sector 2.1.1 Overview of Power Sector in India _ 2.1.1.1 Existing Challenges in Indian Power sector: _ 2.1.2 Overview of Indian IT Market: _ 10 2.1.2.1 Effect of Growth of ICT sector on Power Sector: 13 2.2 Overview of Renewable energy focus of India 15 2.3 South Indian ICT Sector and Power challenges faced: _ 18 2.3.1 Clustered model of IT Company locations 18 2.3.2 Existing power supply scenario and challenges faced by IT companies: 20 2.3.2.1 Impact of unreliable Power supply: 21 2.3.2.2 Impact of rising Electricity costs: 21 2.3.2.3 Impact of rising fossil fuel prices: 23 2.3.2.4 Impact on community: 24 2.3.3 Options available for IT Companies to meet power supply requirements _ 24 2.3.3.1 Using Grid as Primary and Diesel as secondary source _ 24 2.3.3.2 Purchasing power through Open Access Mechanism (OA): _ 25 2.3.3.2.1 Downsides associated with Open Access mechanism: _ 26 2.3.3.3 Investing in Renewable energy power generation _ 26 2.3.3.3.1 Possible benefits in adopting renewable energy: _ 27 2.4 Selection of suitable renewable energy source for IT companies: _ 27 2.4.1 Review of Solar thermal energy based models 29 2.4.1.1 Solar Thermal Air conditioning options: _ 29 2.4.1.1.1 Solar Assisted Cooling using VAM and Arun Dish: 30 2.4.1.1.2 Solar Cooling using Micro-Concentrators and Absorption Chillers: _ 31 2.4.2 Recommended Solar Technology suitable for ICT companies: 32 2.5 Overview of existing Solar PV implementations in India 33 2.5.1 Notable Solar PV projects in South India: 33 2.5.1.1 Solar PV Project Case Study - Murugan Textiles: _ 34 2.5.1.2 Solar PV Project Case Study - Infosys: _ 35 2.5.1.2.1 Special feature of Solar PV system installation at Chennai campus: 37 2.6 2.6.1 2.6.2 2.7 Solar PV implementation models available for IT companies: 38 Arrangement as a captive generating plant for the roof owners 39 Solar Lease Model with Sale of electricity to Grid 39 Selection of Solar PV System type suitable for IT Companies _ 40 2.7.1 Type of Solar PV Systems, their Pros and Cons: _ 40 2.7.1.1 Grid Tied Solar PV System: _ 41 2.7.1.2 Off grid Solar PV System: _ 41 2.7.1.3 Grid Interactive Solar PV System: 41 2.7.2 Suitable Solar PV System type for IT Companies _ 42 2.8 2.8.1 Policies and Incentives available for Solar PV: _ 43 Accelerated Depreciation Benefit: 44 III 2.9 Recommended flow for implementing Solar PV System: 44 2.10 Typical electricity consuming devices in Information Technology companies: 45 2.11 Analysis of financial viability of Solar PV Roof top Systems for IT Companies: 47 2.11.1 Method followed to select project location of example Solar PV System: 47 2.11.2 Selected building and Solar Potential in that location: 48 2.11.3 Overview of selected financial parameters: 50 2.11.3.1 Levelized Cost of Energy – (LCOE) 50 2.11.3.2 Payback period: 51 2.11.3.3 Internal rate of return – (IRR): 51 2.11.3.4 Cost Benefit Analysis of Diesel Replacement: 52 2.11.4 Assumptions made for financial analysis: 52 2.11.5 Detailed explanation of the Excel file layout: _ 54 2.11.6 Interpretation of the financial analysis results: _ 55 2.11.6.1 LCOE Analysis results: _ 55 2.11.6.2 Payback period Calculation results: 56 2.11.6.3 Internal Rate of return calculations: 56 2.11.6.4 Cost benefit analysis of Diesel Replacement scenario results: _ 57 2.11.7 Consolidated results and conclusions: 57 2.12 Analysis of Ancillary benefits of implementing Solar PV System: 58 2.12.1 2.12.2 2.12.3 2.13 Ancillary benefits for the company implementing Solar PV: _ 58 Impact of Captive generation by the IT Company on the Grid: _ 59 Impact of Captive generation by the IT Company on the community: _ 60 Risk Analysis of Solar PV System implementation Project: _ 61 Solar PV Financial viability calculation results and conclusions: 67 Future prospects and emerging technologies relevant to ICT sector: 69 IV Introduction to thesis task and scientific methods The Master’s Thesis will evaluate the financial feasibility of integrating Renewable Energy in Information Technology (IT) companies located in India, the advantages of implementing renewable energy from the company’s perspective and also from the perspective of the community Information Technology (ICT) sector has grown tremendously in the past 25 years in India and is continuing to grow1 The increasing power consumption due to the increasing population and growing industrial sectors including IT Sector, is not matched by the increase in power generation This has resulted in erratic power supply even in big cities Companies in the ICT sector are largely dependent on two important resources: Human resource Computer hardware & Network equipment These computers and Network equipment require uninterrupted power supply for working The frequent power cuts prevailing in most part of the country is detrimental to the growth of the IT Industry which is one of the fastest growing sectors in India today Southern Indian states of Tamil Nadu, Karnataka, Kerala, and Andhra Pradesh (Recently bifurcated in to Telangana and Andhra Pradesh) have nearly half of all the existing IT companies in India2 Rest of the IT companies are spread across other parts of India Southern India is taken as the example region for this study The discussions related to current energy costs, energy demand gap, existing policy structures etc are limited to the Southern States due to the varied nature and the vastness of the country However the results from this study can be applied to other parts of India after considering changes pertaining to those areas See Federation Of Indian Chambers of Commerce and Industry, Sector Profile: Information Technology (IT), www.ficci.com/sector/21/project_docs/ficci_website_content_-it.pdf , (25.12.2015) See Wikipedia, Economy Of South India, https://en.wikipedia.org/wiki/Economy_of_South_India , (25.12.2015) 1|Page The goals of the thesis will be achieved through the following the logical sequence:  Understanding the interdependence of Power Sector, IT Sector and Economy  Understanding the Indian Power Sector, existing power sector setup and the current challenges  Analysis of various renewable energy sources available for the IT companies and selection of suitable option  Review of existing state policies with respect to renewable energy  Evaluate the financial viability of integrating renewable energy for a typical IT Company  Analyze the advantages of implementing the renewable energy from company’s perspective  Analyze the positive effects on the state DISCOMs because of the self-generation by IT companies  Analyze the impact on the community due to the reduced burden on the Grid With regards to the scientific methods applied, the thesis will undertake Documentary analysis using Secondary data relevant to integrating renewable energy to the energy mix of the IT companies and also Cost Benefit analysis of an example project The research undertaken and methods applied are to provide a comprehensive answer to the following questions: Is it financially viable to implement renewable energy in Indian IT Companies? What are the ancillary benefits for the company implementing renewable energy for their own consumption? What other advantages to the society can be expected by self-generation of electricity by IT companies? 2|Page The results of this thesis is expected to shed light on the suitable renewable energy technology for IT companies, key requirements for the financial viability of integrating renewable energy in IT companies and the expected benefits from the companies perspective and from the community’s perspective Implementation of the thesis tasks 2.1 Understanding Interdependence of Indian Economy, Power Sector and the IT Sector India is one of the largest democracies in the world today With over 1.3 billion people, it is already home to approximately 17.5% of all humans in this world The population is growing at a rate of 1.2% and is expected to become the most populous country in the world by 20223 This growth in population also means that the demand for any consumable goods and services will also increase The country has to grow more food, build more houses, improve infrastructure etc It is then no surprise that the requirement for electricity will also increase many fold In fact, many states in India are already struggling to meet the electricity demand It has been calculated that India’s GDP is constrained by up to 2% per annum just because of the power shortages prevalent in many parts of the country When we consider that the GDP is at approximately $8 Trillion (By Purchasing Power Parity basis as of 2015), the 2% drop is a whopping $160 billion4 The projection is that the total power demand would grow at a rate of approximately 10-12% per annum up to 2017 and this is set to widen the loss of GDP due to power shortages unless the country finds a way to bridge the gap between the power demand and power generation See Wikipedia, Demographics of India, https://en.wikipedia.org/wiki/Demographics_of_India , (13.10.2015) See Wikipedia, Indian Power Sector Snapshot, http://www.indianpowermarket.com/2011/05/indian-power-sector-snapshot.html , (13.10.2015) 3|Page Rapid developments in the world of science and technology has resulted in humans relying more and more on electrically powered machines and gadgets In the developed countries of the world power cuts are very rare and even if it happens, it lasts only for a short amount of time On the other hand, developing countries like India are caught between the economic growth and the lack of sufficient energy required to meet the economic growth Barely 25 years ago, only a very small percentage Indian households had a telephone line Today one can see that even a remote village house has one or more mobile phones The electricity demand of these small gadgets is mounting more and more pressure on the grid The government is trying to modernize the existing grids and increase generation to meet the demands One of the other major areas of concern is the transmission and distribution losses which is pegged at approximately 23% A recent study indicates that the losses are as high as 50% in some parts of the country5 Some parts of the country does not even have access to grid electricity Nearly 300 million Indian citizens have no access to grid electricity6 This means that every watt of grid electricity that is not drawn by the existing grid consumer would save more than one watt for the grid and will enable someone else to get access to that saved energy Traditionally India has been an Agricultural society Even today Agriculture is the largest employment sector in India In terms of GDP however, the share of Agriculture sector has been steadily declining while the contribution from Industrial and Services sector is steadily increasing even though in absolute numbers it has grown in the past 65 years See The Energy and Resources Institute (TERI), Transmission and Distribution Losses (Power), www.teriin.org/upfiles/pub/papers/ft33.pdf , (8.09.2015) See Wikipedia, Electricity Sector In India, https://en.wikipedia.org/wiki/Electricity_sector_in_India , (8.09.2015) 4|Page The graph below7 shows that the contribution towards GDP from Services sector has outgrown Agricultural and Industrial sectors Figure Contribution of sectors to the Indian GDP Source: Planning commission The Services sector covers a wide variety of activities such as trade, transportation, financing, Hotels and restaurants etc IT/ITES sectors otherwise known as ICT sector also comes under the services sector ICT Sector in India is one of the fastest growing services sectors as shown in the figure below9 ICT sector has a huge dependency on Human resources and Electricity consuming components such as Computers, Network devices, HVAC equipment etc See National Informatics Center, Year-wise and Sector-wise Contribution of GDP, https://community.data.gov.in/year-wise-and-sector-wise-contribution-of-gdp/ , (08.09.2015) See National Informatics Center, Year-wise and Sector-wise Contribution of GDP, https://community.data.gov.in/year-wise-and-sector-wise-contribution-of-gdp/ , (08.09.2015) See India Brand Equity Foundation, Service Sector In India, http://www.ibef.org/industry/services.aspx , (12.09.2015) 5|Page ... Economic Zones In India, Introduction , http://www.sezindia.nic .in/ aboutintroduction.asp , (28.10.2015) 37 See Business Maps of India, Advantages of SEZ Units in India, http://business.mapsofindia.com/sez/advantages-units -india. html... tremendously in the past 25 years in India and is continuing to grow1 The increasing power consumption due to the increasing population and growing industrial sectors including IT Sector, is... 11, India IT- BPM revenues: USD 118 billion in FY 2014, http://www.slideshare.net/mitul1129/indian-ititesindustry , http://www.slideshare.net/nasscom-emerge/indian-itbpo-industryfy2011performance-future-trends-by-nasscom