Nov282021
Posted by:admin
Caspian Climate Conversations | Episode 8
Featuring Rajesh Peddu, Director, Argo Solar
Rajesh is a renewable energy entrepreneur with 16 years of experience in the power sector. He started his career with NTPC Limited as a planning engineer for the construction of a 500 MW Thermal Power Plant. He completed his post-graduation from ISB in 2009 and joined Punj Lloyd and later Welspun Energy. At Welspun Energy, he led the Business Development activity for Solar Projects.
Rajesh started Argo Solar in the year 2013. The company focuses on providing Solar Rooftop solutions to various commercial and industrial customers across India. Argo Solar is consistently ranked among one of the Top 20 Rooftop Solar EPC companies in the country in the survey done by Bridge to India.
To tune into the recording, please use the available link here: https://on.mentza.com/circles/6260
Please find below a summarized transcript of this interesting conversation:
Rajesh, can you tell us briefly about the business of your company?
At Argo Solar, we are focused on providing rooftop solar solutions and supplying solar pumps. We specifically chose these two products because solar is primarily a distributed product, and the solutions involving solar energy can be provided at any place where the sun is available.
Can you talk a little bit about your customers for solar rooftop solutions?
The basic idea behind the solar rooftop solution is that it will reduce dependence on the grid- consume less power from the grid and generate electricity in-house. So, whatever is the end-use, if any establishment is a consumer of electricity, the solar roof-top solution is useful for them. We have served customers across segments- commercial, industrial and residential. Predominantly, our focus has been commercial and industrial space and our customer segments range from hospitals, schools, colleges, industries, and other commercial buildings.
Warehousing, especially cold chains, involves very high electricity consumption. Can you describe any such installation that helped in the reduction of power dependence from distribution companies?
We have done a cold chain solution for Gati in Dharuhera, Haryana. Their consumption was 3000 units a day. We installed a solar roof-top project that generates 1100-1200 units a day, thereby reducing the dependence on the grid by a third of the total power requirement.
India has a lot of warehouses and cold chains. Do you think the penetration of solar rooftops in this sector has been good?
Currently, the penetration isn’t much, but it is improving. Solar roof-top is a relatively new sector (6-7 years old) and at this stage, the adoption is usually driven by the more forward-looking and tech savvy companies in the ecosystem which also resource rich. We are currently seeing adoption by this top layer of companies. Big FMCG companies have already converted, or are converting their warehouses to solar-powered ones. E.g. ITC has a strong focus on ESG scores and they are working to get their vendor partners to adopt solar and other renewable energy sources and bring down their carbon footprint. We are currently doing a 2.3 MW project, just outside Hyderabad, for one of their vendors, who supplies them with packaging material.
However, to achieve meaningful scale, the adoption has to percolate down to Tier-2 and Tier-3 cities.
We know that often customers do not want to invest their own money in an expensive solar rooftop setup. Can you help us understand the financing bundles that you provide to overcome this challenge?
Financing is a huge challenge faced by the solar roof-top industry. Typical bank financing doesn’t come easy because of mortgage collateral requirements. To solve this problem, we have tied up with a few NBFCs who are interested in specifically lending for the solar rooftops, collateral-free up to a certain limit, and with some collateral beyond that. We use these resources for our MSME clients who may not have very good cash flows to pay upfront. We arrange up to 70-75% financing through this channel which can be repaid over a period of 3-4 years.
A recent example of this arrangement is a 120 kW project for a poultry farm near Tirupathi. We offered this kind of financing solution where the customer has borne only 25% of the project cost and the remaining 75% was financed by an NBFC, to be repaid in 4 years. Interestingly, the EMI which the customer has to pay to the NBFC is equal to the amount of saving they are able to generate from the solar plant. So, at 25% investment, they can own the asset, repay the NBFC and start generating savings on power from the 5th year onwards.
What would be your value proposition to our clients in the agricultural sector, like the ones in organic food, cotton, farm to fork companies, coffee, dairy, etc, to consider solar rooftops?
My advice to them would be this:
- This is the opportune time to adopt solar solutions because the technology has matured quite a bit and there are enough satisfactory experiences to give the comfort in adopting it.
- In today’s context, a lot of value is attached to net-zero emissions and the reduction of carbon footprint. So, if you are a consumer of electricity, then shifting to renewable energy like solar will increase your value proposition to your customers.
Tell us a little bit about the kind of installations you have done in solar pumps.
We have done solar pumps mainly as part of government subsidy schemes, primarily in the state of Andhra Pradesh and a few in Telangana. A typical 5hp solar pump costs INR 2.7-2.8 lakhs, which is expensive for a single farmer to afford. In our project, there was a government scheme where the farmers were required to pay only INR 55,000 and the remaining was funded by the power distribution companies (discoms). The business case for discoms to support this program was that they anyway gave free power to farmers to the tune of INR 50,000- 60,000, and by providing a solar pump set to the farmer, they were able to reduce their own subsidy burden.
If we have a company that is working with small-holder farmers, in places where there isn’t sufficient electricity from the grid, and the farmers have to use diesel, could the company work with you to provide these 2.5-3 lakh pumps, and how would it be beneficial for the company and the farmers?
The company can create a pool of farmers, say 10, and then provide a couple of pumps on sharing basis to them, depending on the acreage and other requirements in the area. Some part of it can be financed from the farmers as their contribution and the remaining can be adjusted against the payments this agricultural company has to pay them. The farmer can now plan his crop production schedule better because he is completely independent of the grid or the rain patterns for water requirements. This has the potential to increase the yields as well as farmers’ income and is a win-win situation for both- the company and the farmer.
How did your journey begin and how were the initial days?
Before starting Argo Solar, I was leading the business development activity for the biggest solar utility company in India at that time and we had signed PPAs for 300 MW of solar parks. However, I always felt that solar energy is a distributed product unlike centralized resources like coal or hydel power. Therefore, solar energy solutions must be developed in a distributed fashion, something that can reach the masses directly, like on their roof-tops. When we studied the other countries, most were adopting solar predominantly through the rooftop. Germany was the leader in solar energy and almost 75% of their capacity was in the roof-top. Argo Solar was thus born. When we started in 2013, some of the key challenges that we faced:
- The solar rooftop was mostly unknown, all the companies were new, there was no vintage, experience, or differentiation to talk about. It was difficult to justify economics for such a product.
- Capital availability was another challenge that we faced, more so in the initial years.
A lot of that has been changing now and we hope to see a brighter future going forward.