How Indian solar projects face revenue pressure from air pollution

Pollution, mainly caused by heavier-than-usual human activities such as crop burning in northern India during winter causing persistent fog or smog, has reduced solar radiation intensity in India and contributed to a decline in solar energy production in the country.

When we design a photovoltaic system, one of the main factors taken into account is the amount of solar radiation at the project location, because the irradiance has a linear relationship with the electricity produced from photovoltaics, says Avik Mitra, business account manager at Solargis.

Mitra summarizes three key effects of reducing irradiation on photovoltaic power. These include reduced power generation, as lower irradiance means a reduction in the total energy available for conversion, leading to lower power output from the photovoltaic system. This reduction may vary depending on the severity and duration of the reduced irradiation.

Second, performance variability, because in low-irradiation areas the weather tends to be more variable, with cloud cover and rain blocking or scattering sunlight. This leads to fluctuations in PV energy production, and while it may still produce high levels of energy on some days, overall production is less consistent, impacting long-term energy planning.

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

Significant financial impact

Analysts said the significant drop in irradiance in January due to a rare pollution event would have a significant financial impact compared to a month when irradiation levels were in line with expectations.

Solargis calculated the financial losses by taking into account the maximum amount of energy produced by the photovoltaic project compared to the energy actually produced, multiplied by the price of electricity.

Using the example of a photovoltaic plant in northern India, analysts calculated that a 30-50% reduction in irradiance – the same range of values ​​as in January – would reduce the project’s annual revenues by 2%.

This issue remains an issue beyond one-off climate events as pollution becomes more severe around the world. According to a Solargis report, Indian solar operators have recorded below-average performance in all the last five winters due to pollution.

We are going in the right direction

When projects are developed, energy performance ratings are calculated to assess the project’s energy production.

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

Some of the large solar developers in India either handle the engineering, procurement and construction (EPC) and operations and maintenance (O&M) in-house or outsource it to a reputable company that carries it out on their behalf. Master believes this may be one of the reasons for the projects’ good operational performance.

Given the potential impacts of pollution, Master points to several corporate and government initiatives to offset these harms. There is a trend towards energy-from-waste projects, including waste-to-electricity, co-firing in coal-fired power plants and compressed biogas projects.

These initiatives will make it possible to partially use waste that has so far been disposed of in a highly polluting manner. Many cities across India are also launching programs to help manage pollution, including the spread of rooftop solar and electric vehicles, which also shows the potential to reduce emissions growth in the long term.

Maintenance practices can prevent particulate deposition on the modules to some extent, but if there is air pollution, which will be the case especially in the northern regions of India in winter, then a drop in generation may occur during such periods.

“Any decline in PLF will certainly impact project returns and debt sustainability, especially for projects with aggressive bids,” says Master.

Solutions to problems that cannot be stopped

The winter phenomenon of crop burning in northern India occurs when farmers leave plant residues after harvesting. The quickest method of removing it is to burn the debris before planting the crops before the next harvest, which leads to significant sky pollution.

As the Solargis report showed, last winter was particularly polluted, leading to significant declines in irradiance in the north and significant reductions in irradiance also in parts of central India, and given that crop burning occurs every year, alternative investments in to minimize the effects of pollution.

“We cannot prevent this phenomenon from happening again due to human activities, but we need more robust monitoring of performance in areas with high aerosol zones to avoid and reduce the risks associated with a rare event and to be prepared in advance,” says Mitra.

“Furthermore, if we look at historical data, developers, independent power producers (IPPs), asset owners or operators will be able to identify these trends, which will help make more informed investment decisions for future projects and revise expectations for already operating projects.”