Once upon a time, an IITian worked in the power and utility sector selling US corporate bonds; basically selling something he had never seen. That sparked the yearning in Raghav Mittal to take a three-month sabbatical to go on trips, hike and clean the slate to figure out his next career move. He wanted to do something that was tactile and made socio-economic impact.
The now-famous US solar companies owned by the likes of Elon Musk were not the household names back in the day. Although Raghav had worked in the power sector, he had very little experience working in renewable energy space. “Solar always intrigued me and the way the Indian solar story took off in 2010 was utterly fascinating,” recalls Raghav. His first real introduction to solar as a business was on a project his cousin was working on in Delhi. This cousin was Sam Goyal, the greentrepreneur behind Solar Horizon Pvt. Ltd., a name to reckon with in Singapore.
“What was interesting was that they were selling solar power instead of solar panels, to their customers. And that was it,” Raghav says. He went back home to Jaipur and did a smart-start market survey to see if people would be interested in purchasing solar power when a discount is offered on their existing utility bills.
“It was obvious that everyone was concerned about rising electricity cost which has a direct impact on the bottomline of managing any property, be it a hotel, hospital, mall or factory,”he adds.
So why wasn’t everybody going proverbially‘yellow’?
The main deterrent that surfaced in his research was the investment required. Even though solar panels last a couple of decades and provide long-term energy security, the upfront capital investment was heavy.
“This was the problem I wanted to solve, leveraging the capital markets experience I had at Deutsche,” says Raghav.
The first challenge was the product-market misfit when he first started out, since the cost of electricity in Rajasthan was relatively cheaper compared to other States like Delhi and Maharashtra. “So I decided to pack my bags and moved to Delhi.”
Along the way, he met co-founder Rikhav Parikh, and together they christened their company SunAlpha aimed to be the solar power champion that bears the complete cost of the expensive mechanism. The company does so by bearing the burden of designing, building, installation, operation and maintenance of the entire solar power plant on the client’s rooftop.
"We work on the BOOT (Build, Own, Operate, Transfer) model where we sell solar power to customers who don't want to purchase the panels by investing upfront in a solar plant, and provide them with a cheaper and cleaner alternate energy source. We take the cost and risk of solar PV and the customer enjoys energy cost savings while enhancing their sustainability profile," explains Raghav.
"Financial innovation and tailor-made solar leasing offerings make our projects commercially viable for both the end-consumer - through cost savings - and the investor," he adds.
The client enters into a power purchase agreement of 20-25 years, thereby committing to buy power from their plant alone for this tenure.
"We sell power to clients at a rate decided as of 'today' so basically, they are saving money from day one as our solar tariff is always priced below the grid tariff. We also act as a hedge against future electricity price increases as their solar tariff is fixed for the next 25 years,”says Rikhav.
In simple terms, you know today what you need to pay in Year 25. And given where the cost of solar stood back then, it made great commercial sense for businesses there to switch to solar and make hay while the sun shines, quite literally.
Since the company would have to incur recurring expenses for clients while they simply pay for the power they consume, it is a long road to break-even.
"Many corporates don't invest in projects having a break-even of more than five years.
And these long break-even periods are the same reason why people don't want to go solar with their own money, too. That's where we come in," says Rikhav.
Once you make the decision to go solar with service providers like SunAlpha, the reduction in the weight of your bill could be anywhere between Rs two and Rs nine per unit. "In India, commercial tariffs are the highest and residential tariffs are subsidised. Solar, today, stands at Rs 6.5 - 7.5 per unit depending on the size of your plant. So if you are a commercial client paying Rs 15 per unit, or an industrial client paying Rs 8.5 per unit, you can go solar with zero investment and have an upfront saving," Rikhav adds.
SunAlpha invests in select projects to build a high-quality portfolio of rooftop solar projects. "Together with our operations in Singapore (sister concern Solar Horizon), we now have an operating portfolio of 700 kWp of solar PV assets, expecting to close this year at two MW of shovel-ready projects," says Raghav.
Its first projects were self-funded by promoters' equity and bank debt for solar project financing. With the sudden growth in the sector leading to a significant demand pull, the company has revised targets for the next year upwards and will be raising project financing to support targets.
Moreover, with what they are offering, the quality and efficacy of their machinery is of paramount importance.
"Tying up with Tier-1 equipment manufacturers, attending global conferences to identifying the suitable partners and vendors, price negotiations and strategic alliances were all the part of the build-up to our launch. We generally use SMA inverters and Candadian Solar, Jinko Solar or Trina Solar modules. Quality is imperative to us as we invest in the plant ourselves. If the plant doesn't perform, we don't get our money back," says Rikhav. The company’s projects have a performance ratio of more than 80 per cent across projects.
The market size is huge and ever-increasing. India is targeting 100 GW of solar installations over the next five years, of which, rooftop solar, which is SunAlpha's terrain, is about 40 GW.
"There are rumors that these targets will be revised to 280 GW in five years. You put things in perspective, considering every GW of installation requires about Rs 6000 crores of capital," he adds.
Solar makes sense economically and its environmental benefits are stellar. "Customers are getting more conscious and feeling responsible for their environment. And why not go ahead with this when you can also save some money in the process," asks Rikhav.
The milestones in the company’s journey have been strong indicators that they have entered the market at a raw yet opportune time.
"Most recently, we commissioned a project for TERI -The Energy and Resources Institute - headed by Dr. RK Pachauri, ex-chair IPCC United Nations, which shared the Nobel Peace Prize in 2007. And winning the TiE Mumbai Smasher 2015 was just another indicator that there is a significant problem that we stand to solve," Rikhav adds.