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Unclear skies: how Indian solar projects face revenue pressure from air pollution

By Tom Kenning
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Adani Green Energy project in Khavda
According to Solargis, a reduction of 30-50% in irradiance would lower the annual revenue of a solar project by 2%. Image: Adani Green Energy

Rising pollution in India, as well as one-off, rare polluting events are impacting the annual revenue of solar power plants and putting particular pressure on projects won in competitive auctions with aggressively low tariff bids, industry analysts tell PV Tech Premium.

The issue of pollution came into the limelight last month when Slovakian firm Solargis released figures revealing that increasing levels of aerosols in the air had seen India’s solar irradiance levels drop 30-50% lower than historical averages across the country in January this year.

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Driven primarily by heavier-than-normal human activities, such as crop burning in Northern India over the winter period causing persistent fog or smog, the pollution reduced solar irradiance in India, and contributed to a decline in the country’s solar power output.

When a solar PV system is designed, one of the primary considerations is the amount of solar irradiation at the project’s location because irradiance has a linear relation to PV electricity output, says Avik Mitra, business account manager at Solargis.

Mitra summarises three key effects on PV output when irradiation is reduced. These include reduced power generation, as lower irradiance means the total energy available for conversion decreases, leading to a lower power output from the PV system. This reduction can vary depending on the severity and duration of reduced irradiation.

Second is variability in performance, as areas with low irradiation tend to have more variable weather, with cloud cover and rainy conditions that block or diffuse sunlight. This leads to fluctuations in PV output, and while some days might still produce high levels of energy, overall production is less consistent, impacting long-term energy planning.

Finally, lower irradiance can affect system efficiency, as direct sunlight contributes to a higher energy output, while diffuse light from clouds and other obstructions results in reduced efficiency. As a result, systems in areas with lower irradiance often operate at lower efficiency levels, requiring more panels to achieve the same output as areas with higher irradiance.

Significant financial impacts

With a significant drop in irradiance in January due to the rare pollution event, the analysts reported there would be a significant impact on finances compared to a month where levels of irradiation were as expected.

Solargis made calculations of financial losses by considering a PV project’s maximum energy produced versus the actual energy produced, multiplied by the price of electricity.

Using the example of a PV power plant in Northern India, the analysts calculated that a reduction of 30-50% in irradiance, the same range of figures seen in January, would lower the annual revenue of the project by 2%.

The issue remains a problem beyond one-off climate events, as pollution becomes worse around the world. According to the Solargis report, Indian solar operators have seen below-average performances in all of the past five winters due to pollution.

Moving in the right direction

When projects are developed, energy yield assessments are calculated to assess the project’s energy output. 

Pranav Master, senior practice leader and director of energy at Indian analyst firm Crisil Consulting says: “An analysis of a few portfolios and assets has found most projects in India to be performing at P90 levels, which means that the plant load factor (PLF) will hit that level with a 90% probability.”

Some of the large PV developers in India are either doing engineering, procurement and construction (EPC) and operations and maintenance (O&M) work in-house or have a very reputable party completing it on their behalf. Master believes that this could be one reason for healthy operational performance of projects.

Considering the potential impacts of pollution, Master points to several initiatives from corporates and the government aiming to offset this damage. There is a thrust towards energy-from-waste projects, including waste-to-electricity, co-firing within coal-fired power plants and compressed biogas projects.

These initiatives will partly utilise the waste that until now was being disposed of in highly polluting manners. Many cities around India are also starting up schemes to help manage pollution, including the proliferation of rooftop solar and electric vehicles, which also points to the possibility of restricting increases in emissions over the long term.

Maintenance practices can, to an extent, manage particulate matter settling on the modules, but where there is air pollution, which will be the case especially in the northern regions of India during winter, then in such periods, there could be a drop in generation.

“Any sort of drop in PLF will definitely affect the project returns and debt serviceability, especially for aggressively bid projects,” says Master.

Solutions to an unstoppable problem

The winter phenomenon of crop burning in North India comes about when farmers have leftover plant debris after harvests. The quickest method to remove it is to burn the debris before the farmers plant for the subsequent harvests, which leads to significant pollution across the skies.

As the Solargis report has shown, last winter was particularly polluted leading to a major drop in irradiance in the north and notable reductions in irradiance in parts of central India too, and considering this crop burning takes place each year, alternative investments could be required to minimise the impacts of pollution.

“We cannot stop this phenomenon from occurring again due to man-made activities but what we need is more robust performance monitoring in these areas of high aerosol zones to avoid and reduce risks associated with the rare event and to be prepared beforehand,” says Mitra.

“Also, if we look into the historical data, developers, independent power producers (IPPs), assets owners or operators would be able to identify these trends and this will help to make more informed investment decisions for future projects and revise expectations for already operational projects.”

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