SOLAR ENERGY BUSINESS INFORMATION
Business Models
2.1. Introduction and Significance Business Models
A business model is a plan, implemented by a DRISHYAA or an
organization, to deliver a value based proposition (product or a
service or a combination of the two) to a Customer with the
objective of earning revenues and profit. The business model
formulates and communicates the logic behind the value
created and delivered to the Consumers. In essence, a business
model is a conceptual, rather than financial, model of a
business. The company or the organization could be a Utility,
Developer, financial institution or even the Consumer.
Design of appropriate business models assumes a greater
significance in the case of solar PV rooftop systems due to their
relatively high cost of energy generation/ high upfront
investments coupled with distributed implementation and
generation which in turn offer a number of benefits to society
and the economy like high economic returns, energy security,
ability to address climate change, reduced transmission and
distribution losses, low gestation periods for development, and
enhanced employment generation.
Hence, appropriate packaging of a rooftop solar deployment program in terms of a viable business models is key to its
success, and should be the basis of any policy or regulation
formulation.
2.2. Components and Design of Rooftop Solar Business Models a. Building blocks for a rooftop solar business model The solar PV value chain extends from the production of poly silicon to final system installation and deployment of systems under specific commercial and technical conditions. This Best Practices Manual focuses on the downstream portion of the value chain, i.e. activities related to the sale of the systems in the marketplace and their installation on rooftops, and the underlying arrangements related to these activities. This segment of the value chain is seeing one of the most innovative periods with a number of permutations and combinations of ownership structures, revenue models and risk mitigation measures emerging with the main of reducing costs, reducing risks and mainstreaming installations While a business model may be simple or complex, the key variables for rooftop solar are very limited as shown in Figure 2-1.
The key determinants of any business model in the solar space are the ownership structure as well as the revenue structure, i.e. how the energy generated by the solar plant is paid for. These two factors are the key variables across the design of solar rooftop business model the world over. Besides the owner of the rooftop PV system and the user or purchaser of the energy, there are also some additional stakeholders who provide inputs, services, regulations and incentives. These stakeholder also play an important role in the development of such projects.
b. Evolution of rooftop solar business models The solar rooftop business model has evolved overtime based on ownership of the systems and external stakeholder participation as highlighted in Figure 2-2. The first generation model is the most commonly found one globally. This business model was the default business model used for the launch and scale-up of the German and Japanese solar programmes. The ownership of the systems under this generation of solar rooftop business model lay with the Rooftop Owners or the end-users (i.e. Consumers). The second generation evolved based on packaging a large number of smaller rooftop solar projects by a single Project Developer, known as a ‘Third Party’ (wherein the Utility and the Consumer are the first two parties). As this Third Party makes the investments, the Consumer could avoid the burden of high upfront capital cost, and still benefit from the rooftop PV system by procuring that power and/ or even leasing the roof.
At present, the first two generations dominate the market
but a small shift is being seen in the way Utilities are
entering this market. As the Utility is already in the business
of supplying power and are seeing Solar Developers
(Consumers or Third Parties) starting to take their share,
there is perfectly justifiable case for Utilities themselves to
own the rooftop PV systems and supply the generated
power.
With the evolution of the market, more innovation can be
expected in the market as a number of intermediaries will
enter the market and bring with them greater efficiency and
ability to leverage scale.
