Economics of solar power in spinning mills

Since wind power generation and consumption centre (i.e., mills) are at different places, a mill has to use State grid for transmission of power for which wheeling charges are to be paid to Electricity Board (EB), says S Mariappan.

An abundance of raw materials such as cotton, wool, silk and jute as well as skilled workforce have made India not just a sourcing hub, but also one of the world’s largest producers of textiles and garments. Analysis of cost structure of yarn in a spinning mill reveals that next to raw material, power cost is the highest component accounting for about 14 per cent of sales. Since raw material cost depends upon the weather condition, (cotton production), government policy, international production/price, etc., a mill cannot have much control over price. Very limited choices are available in yarn realisation and invisible loss to control the raw material cost. Hence if a mill want to increase profit margin, reduction of power cost is one of the proposition to be considered.

Power cost depends upon unit cost and power consumption. The awareness for energy conservation have been increasing and mills are taking all efforts to conserve the power. A mill could purchase third party power or purchase power in the energy exchange and it is possible to reduce the unit cost by about 15 to 20 per cent. For any significant reduction in power cost, the mill should have its own captive sources like wind, solar, etc. It was observed that good mills are able to control power cost (unit cost) by installing unconventional energy like wind mill, solar power, etc., Today mills which are achieving high profit margin are having own captive power and getting a higher operating profit margin of about 3 to 4 per cent due to lower power cost alone. Due to higher cost of fuel like diesel, HFO etc., the generated power cost is higher than EB cost and hence mills are presently not using generators even during power failure.

Since wind power generation and consumption centre (i.e., mills) are at different places, a mill has to use state grid for transmission of power for which wheeling charges are to be paid to Electricity Board (EB). Wheeling charges have been increasing over a period of time. Moreover, Electricity Board is also frequently facing problems in evacuating power generated due to bottleneck in their transformer capacity. Mills have to depend upon state grid for transmitting power and also for drawing it. On the contrary, solar power can be directly used in the mill (and there is no need for routing through EB grid). 

A mill could also supply the generated power to EB at a fixed cost per unit if it is excess than its requirement. Normally EB purchases generated power at very low price (less than 50 per cent of the EB power cost). However if a mill consume the power for its own consumption, it is replacing EB power and hence better realisation in power cost. Though initially power cost is equivalent to EB cost, after repayment of loan it is getting almost at free of cost for a minimum of 20 years with solar power. Hence a mill should include the investment for producing unconventional energy like solar in its modernisation so that power cost could be reduced. 

Working of solar power plant

Solar power plant comprises a bank of solar panels receiving sun’s energy which is converted into DC electric power by photovoltaic (PV) effect produced by the PV cells in the panels. This DC power is converted to AC power by means of an inverter and the AC output of the inverter feeds the mains from where various applications draw electric power. 

Types of solar power

Three types of solar panels are available on the market which are monocrystalline, polycrystalline and thin film amorphous. However, in the recent past, polycrystalline solar panels have become the most commonly used mainly due to lower cost. Solar system supplies power directly from the solar power plant during day time and if the supply is insufficient it allows supply from the grid. This system is called as ‘on grid’. The off-grid system is independent of the grid supply. This is useful when grid supply is erratic or when there is no grid supply at all. 

Racking and mounting systems: Solar panels could be affixed either to roof or to the ground. There are two types of mounts: fixed mounts, in which the panels remain stationary, and track mounts, which allow panels to “follow” the sun as it moves across the sky during the day (single-axis track mounts) and during the changing seasons (dual- axis track mounts). Track mounts are only suitable for panels installed on ground.

Advantages of solar energy

Solar energy isn’t only economically viable, it’s the dominant form of energy used on this planet. Solar is a safe alternative which can replace current fossil fuels like coal and gas for generation of electricity that produce air, water, and land pollution. Solar energy will eliminate these unsafe, unclean consequences from using conventional fossil fuels.

• Solar power helpful in reducing electricity bills
• Solar plants are having low maintenance costs
• Solar power plants can last more than 25 years

Solar energy is a renewable free source of energy that is sustainable and totally inexhaustible,  unlike fossil fuels that are finite. It is also a non-polluting source of energy and it does not emit any greenhouse gases when producing electricity.

China is having the highest installed capacity of solar PV power followed by USA, Germany and India (Table 1).                                          

In India, a lot of potential is available for solar energy due to favourable climatic conditions. The awareness in the people should be increased about the solar energy and all the industries should install solar power plants utilising the solar energy. This would indirectly reduce the consumption of other fossil fuels like coal and gas. Because of more and more industries/residences are going for solar energy globally, the solar panel cost has come down by more than 90 per cent in the recent past.

Solar power project

solar power plant setup suitable for a spinning mill needs to be planned taking account total power consumption (units) of the mill and % of solar power required, etc.,(Existing source of other captive energy available, if any, also should be taken into consideration). It has to keep in mind that solar power is produced in day only.

A spinning mill having a capacity of 30,000 spindles, the solar capacity in the range of 1 MW could be installed on the rooftop. This solar plant is capable of producing about 4,500 units per day. More than this capacity (1 MW), the mill should go in for ground mounted solar energy for which land is required. It has been estimated that about 3 to 4 acres of land is required for installing 1 MW solar energy.

Project cost and first year savings

Case 1: Roof top solar plant: The project cost for solar energy installation would vary depending upon selection of the equipment.  It has been assumed that the standard equipment are used and project cost for installing 1 MW roof top solar plant would be about Rs 360 lakh. It has been assumed that the mill could avail 80 per cent of the project cost as term loan from bank at an interest rate of 12 per cent per annum. The first year net savings is expected to be Rs 58 lakh per annum as given in Table 2. It has been estimated that the loan amount with interest will be paid back to the bank in 4.2 years. After repayment of the term loan, power produced from solar energy is almost free of cost for a minimum period of 20 years. 

Case 2: Ground-mounted solar plant: For higher than 1 MW solar power, the mill has to go in for ground mounted solar panels provided space is available in the campus or nearby. The project cost for solar energy installation would vary depending upon selection of the equipment and land cost. It has been estimated that the project cost including land and other accessories for ground mounted solar plant for 2 MW would be Rs 800 lakh. It is assumed that term loan from bank would be available for 80 per cent of the project cost at an interest rate of 12 per cent per annum. It has been estimated that the first year net savings would be Rs 109 lakh per annum in the first year (Table 2).              

 Table 2   Economics of Rooftop and Ground mounted Solar Plant

It has been estimated that the loan amount with interest will be paid back to the bank in about 4 to 5 years. After repayment of the term loan, power produced from solar energy is almost free of cost for a minimum period of 20 years.

Besides, the mill has got additional advantage like faster depreciation for solar plant (40 per cent in first and second year), GST refund for plant cost, etc., which have not been taken in payback calculation. For a spinning mill having 30,000 spindles, the solar energy accounts for about 10 per cent of total power consumption for rooftop plant (1 MW) and 20 per cent of total power consumption of the mill for ground mounted solar plant (2 MW).

Even if a mill do not want to get a loan from the bank, lot of entrepreneurs are available in the market to put up a solar project on BOOT/BOT basis for the spinning mill. (Build, Own, Operate, Transfer or Build, Operate and Transfer).

Conclusion

A mill should reduce the power cost for increasing profit margin for which captive power generation is a must. Considering the good potential for solar power, it is strongly recommended that mill should go in for solar plant.

The author, S Mariappan, M.Tech. (Textiles) has worked for a few years in spinning mills and has got about 33 years’ experience in Liasion & Consultancy department in The South India Textile Research Association (SITRA), Coimbatore. He had visited more than 400 mills for consultancy assignments in both India and foreign countries. He has retired from SITRA recently as Research Associate. Presently a freelance textile consultant and is undertaking various consultancy studies in reputed mills.