Maharashtra, Save Your Bills! Part 4
July 23 2020

Maharashtra, Save Your Bills! Part 4

Subtitle: Opting in for the RESCO Model, the life-vest every business needs today 

This ongoing pandemic has directly affected every industry and business in India today. Revenues have drastically reduced and in some cases, even reached zero. Fixed costs, EMIs, and salaries are increasingly difficult to pay as cash flow is greatly affected. Naturally, every business has its focus on cutting costs and conserving cash. 

This article will be very useful for every business with a roof and electricity bill (I mean this quite literally), as we will explain how they can save on their electricity bills without investing a single rupee!!

In my previous blog, we had showcased how Solar can save up to 50% on electricity costs. Investment in solar is paid back in 2–4 years. Despite these benefits, many consumers do not invest in solar citing the high upfront capital investment and lack of technical expertise. Hence, the RESCO model was invented to promote renewable energy without burdening the consumer with investment and technical know-how. A Renewable Energy Service Company (RESCO) is a company that provides energy to consumers from renewable energy sources.

Under the RESCO or OPEX model, consumers can install a Solar PV System with zero investment of their own. As per Maharashtra Electricity Regulatory Commission (MERC), Grid Interactive Rooftop Renewable Energy Systems Regulations 2019, can install a Solar PV System that is “owned and operated by a consumer or third party.” Many businesses that have been affected by the pandemic and are currently in cash conservation mode will find this to be an incredibly unique option.

Key Facts About the RESCO Model

  • Solar PV Plant is installed, operated, and Owned by the RESCO Company
  • The consumer does not own the plant
  • The consumer must sign a Power Purchase Agreement (PPA) with RESCO Company at mutually agreed tariff and tenure
  • Tariff is at 10–40% discount from the DISCOM Rate
  • The consumer only pays for the electricity generated from the Solar PV Plant
  • The consumer is not responsible for initial investment or maintenance of the Plant
  • RESCO company is responsible for Operations & Maintenance (O&M) of the Plant
  • The ownership of Solar PV Plant is transferred to Consumer at end of PPA tenure

For consumers:

If you are interested in opting for this, we will first understand your financial background and then prepare a formal contract between Artha and the industry owner/ consumer. We call this contract a Power Purchase Agreement (PPA).

  • The PPA dictates the terms under which the power will be sold. It draws out & fixes the responsibilities, benefits, and liabilities for each party.
  • The PPA enables a fixed-rate for the power to be decided upon; this is usually 10–40% lower than the rate the DISCOM charges.

(A table has been provided in appendix II that details key points of the PPA and its impact on the consumer)

And so, without putting in any investment, the consumer enjoys monthly savings on their electricity bills!

Another clear advantage is that the consumer can focus on operating their business while the entire headache of building the plant, operating, maintaining, and ensuring performance is that of Artha. Consumers will need to pay their bills on time every month, just like they pay to the DISCOM. The only support required from the consumer for the solar project is ensuring they provide safe access to the plant, security, and water to clean the panels.

I assure you, there is nothing else required from the consumer!

If you are a consumer and have questions about the OPEX model or would like to get a quote, kindly drop us an email at [email protected], we would be glad to be of assistance!

Appendix I

Case Study of a Hotel: -

(This case study applies to Hotels, Malls, and Commercial building owners)

Background: -

We have a client that runs a boutique mall with theatres, multiple restaurants, and a hotel in a tourist destination in Maharashtra. When we met this client, they were unhappy with the high cost of electricity from MSEDCL.

The Problem: -

The high cost of electricity increases the cost of doing business which in turn is passed on in the form of higher prices to the consumer. This puts them at a disadvantage to tourist destinations in Gujarat and Madhya Pradesh where the electricity tariff is 50% cheaper than that of Maharashtra. The annual billing for this mall was approximately ₹ 1 crores with an average monthly consumption of 40,000 units.

The Solution: -

Artha installed a 100KW Solar plant on the OPEX model and offered a 50% discount to the consumer on their MSEDCL tariff.

Rooftop: Panels are installed, the client opted to go for the RESCO model and did not pay for the installation

Building front view: The Solar Panels on the roof-top aren’t visible and don’t spoil the look of the propert

Outcome: -

Since the Solar installation, the monthly consumption of the client from MSEDCL has dropped to an average of 25000 units with an annual billing of ₹50 lakhs. They saved ₹50 lakhs in MSEDCL bills while investing nothing towards the project. Artha billed them ₹12.75 Lakhs annually for the balance monthly consumption of 12,500 units. Our client was able to save ₹38 Lakhs on their annual bill without investing a single rupee!!

Moreover, due to the solar installation, the temperature inside the Mall has reduced as solar acts as another layer on the roof protecting against direct sunlight. This has reduced the cooling requirements for the client which in turn has reduced their electricity consumption further.

What about less consumption during Lockdown?

During the lock-down months of April, May & June the client bill from MSEDCL has been ₹15,000 per month as the Solar project is almost supplying the entire power requirement. Moreover, due to the low consumption, there has been excess Solar Power generation. This has been exported to MSEDCL under the Net-metering rules and the client has a credit registered more than 15,000 units which will be adjusted against their future consumption from MSEDCL. This has helped keep costs low during the pandemic. Moreover, their cost of doing business will be lower than every other competitor once operations resume. A real cost-saver and shot in the arm for this client.

The below table summarizes the key points of this PPA and its impact on the consumer.